Author: johnredwood

Yesterday we had an important debate on removing the deficit that has dogged UK public finances for more than a decade. Labour switched sides again, opposing the idea that in normal times there should be no deficit.

The present government plans to cut the deficit from around £70 billion this year to £6bn in 2018-19, and to move into surplus in each of the two subsequent years. This will end a long period of huge build up in public sector debt, which will exceed £1.6tn by 2017-18 (excluding the capitalised value of future unfunded liabilities and without imputing a value to future tax receipts to pay for them). Net debt as a percentage of GDP hit a high of 80.8% of GDP last year and is planned to fall this year and over the next five years, down to 68.5% by 2020-21.

The government assumes the economy will be operating at full capacity by the end of this decade, so the cyclically adjusted borrowing or repayment is the same as the actual one planned. The reduction in deficit comes about through a large increase in tax revenue. The plan is to raise £210 billion a year more in 2020-21 than last financial year. This will both remove the deficit and allow an increase of £109 billion a year in total public spending over the same time period.

It is curious that Labour have decided to ignore the deficit again and to argue for more borrowing. As the debt and deficit fall later this decade so the interest burden reduces, giving more scope to spend on public sector services with less going on interest charges.

UK state debt was £380 bn in 2001-2. It soared to £1080bn by the time Labour left office, and has risen to around £1600 bn since. It is currently falling as a proportion of GDP but still rising in cash terms.

Yesterday the House gave a second reading to the Immigration Bill. This bill strengthens the powers of the authorities to remove illegal migrants. It introduces a deport first appeal later policy to prevent an individual deemed illegal using appeal rights to remain in the UK. It requires all public sector workers dealing with the public to speak fluent English. It makes it a crime for an illegal migrant to open a bank account, obtain a driving licence, rent a home or take a job.

The new law will help the authorities in detecting illegal migrants who have got through the border controls. Many illegals enter the country legally as visitors or students, only to outstay their visa. Anyone offering a job, renting a property, handling a bank account for an illegal migrant will be assisting a crime. Illegal migrants may be located and apprehended if they try to carry out any of the usual tasks of daily life requiring them to drive, to use a bank account or live in a house or flat. Some will object to private landlords and banks having a role in enforcing our border controls, whilst others will welcome this use of intelligence from the community. Immigration officers will gain additional powers to help them require illegal migrants to leave the country.

I made the point to Mrs May in the debate that it is best if illegals are detected at the port of attempted entry and not allowed in. She agreed, but reminded me of the numbers who enter legally only to become illegal later.

There will be a new Director of labour market enforcement. Exploitation of illegal migrants by bad employers is already against the law. The new regime will make it more likely employers of illegal labour will be found and prosecuted. The employment of illegal labour often leads to other abuses, with low pay, long hours, and lack of many of the normal terms of an employment contract.

Marrying the needs of a free society with the wish to control illegal migration is not easy. We want students to come to study at UK universities, investors to come and set up businesses here, visitors to come and enjoy our facilities and friends and family from abroad to be able to visit their contacts in the UK. We want these normal exchanges and movements to happen freely and as easily as possible. At the same time we wish to stop illegal migrants coming here, or visitors turning into illegal migrants, as there needs to be a control on how many additional permanent residents and workers the economy can absorb.

Mr Burnham for Labour showed some evolution in their thinking. They did not oppose all parts of the Bill, and he did say he wishes to place limits on the free movement of labour from the rest of the EU. Labour now recognises that large scale migration can depress wages and place undue strains on public services in places receiving substantial numbers of new residents.

The unexpected reform in the Chancellor’s speech to the Conservative conference was his proposal on business rates. He has offered to local government the transfer of all business rate revenue. This £26 billion a year would replace all the current grant income Councils receive from central government.

The reform will be complex. In order to make it work the Treasury will need to identify additional spending areas to transfer to local government, as business rate revenue exceeds grants. These will need to be agreed with Councils and the necessary arrangements put in place for them to run this extra spending.

The Treasury will wish to keep an overall limit on the level of business rates. They were transferred to central government for that very reason, to prevent local Councils trying to extract too much from business, which can work in the short term but creates longer term problems as business leaves a high tax area or fails to come to invest there.

The Treasury will also need to provide a means of sending some of the business rate money collected in a successful and prosperous area to poorer parts of the country. The City of London is the most extreme example, with a huge business rate income but few overnight residents to spend the tax on. As now there will need to be some formula for evening out the money, and a  new mechanism to claw it back from Councils in receipt of it.

Areas with elected Mayors will be able to increase the tax for better infrastructure. This power will need careful use, as business is more worried in the short term by the level of the tax than by what the tax will be spent on.

Andy Burnham says the government is wrong to tell landlords not to let property to illegal immigrants.  He thinks landlords should let property to whoever asks to rent, for fear of showing discrimination.

I have owned my own home for most of my adult lifetime, and I do not have a property to let out. I wish to see property to rent, at sensible prices, kept in good repair and made available to any UK legal resident who needs it. By the same reasoning I want to see tenants look after the property they rent, pay their rent on time, and stick to tenancy agreements. It takes a decent landlord and a co-operative tenant to have a good relationship.

Problems arise if either side violates these principles. Bad landlords overcharge on the rent and service charges. They may  fail to maintain the property, might  allow in other tenants who interfere with the neighbours’ peaceful enjoyment of their rented home, could  overcrowd properties, and sometimes terminate tenancy agreements unreasonably or pressurise tenants into leaving. Bad tenants fail to pay their rent on time, may build up arrears, can leave without notice, some damage the property, and or prove to be bad neighbours.

MPs often   receive more complaints and problems to sort out with the minority of properties that are rented  than the majority that are owner occupied. Parliament provides a legal framework to try to regulate the conduct of b0th parties to a tenancy agreement. The state often stands behind the tenant with Housing benefit and other financial support to make it possible for them to afford the rents. The law tries to protect tenants from bad landlords who fail to maintain their properties or to offer the security of tenure the law requires.

Landlords are currently unhappy about tax changes affecting the eligibility of interest on rental properties they have bought with borrowed money. Asking landlords to help police our borders by requiring them to ensure a tenant is a legal resident in the UK to many makes sense. Some will worry with Andy Burnham about discrimination. Others will worry that it is another imposition on landlords that makes  it less worthwhile at the margin to invest in rental property. What is your view?