Author: johnredwood

Sensible people want to hear from their politicians during an election about the plans and intentions they have for the next five years, if chosen to govern. People are quite interested in examining the record of leading parties in power, so there does have to be some discussion of the past to help form impressions of whether a party in government is broadly helpful, reliable and good at handling crises. The main preoccupation is what will happen next? Will we be better off? Will things that currently annoy us be improved or changed?That requires an intelligent examination of what parties say they wish to do, and probing to make sure they have thought through their plans and are resolved to carry them out.

There is a danger that too much knocking copy and too many fights over Westminster issues distracts from what really matters to individual voters. Labour’s decision to make “dodgy donors” the issue was always going to cause trouble, and may help put more people off politics. Any named Conservative donor was going to deny the dodgy label and maybe sue if Labour pursued the charge. What does dodgy mean? How do you prove dodgy? Is it aggressive tax avoidance, or does it have to be tax evasion? Presumably it’s more than having a large pension fund or a few ISAs. It also meant that some in the press and in other political parties would start the trawl for Labour dodgy donors. If there are dodgy donors, they will not all support the same party.

Relying on private donors has its difficulties for all political parties. They have to show the donors cannot “buy policy”. The donor may give because he or she likes what the party is saying, but should not give to get the party to change what it is saying. They do have to obey the law and turn down donations from people who do not qualify as donors. For the party’s sake, they also need to satisfy themselves that a large donor can withstand any unfriendly enquiries from jealous party rivals.

However, the main alternative, of requiring taxpayers money to finance parties seems to me to be far worse. Why should I as a taxpayer help finance parties I disagree with? How do you prevent taxpayer funding acting as a buttress to old parties who are well established and stifling new or challenger parties? What is a fair way of giving out the money? Should today money be given out based on how many seats parties won in 2010? Or how many votes they won then? Or should modern opinion polls have some role? The difficulty in defining who should join a leaders’ debate would b e mild in comparison to the squabbles over how much state finance each is due.

The donor battles will be damaging to all involved. There can be no winners. The best answer to limit the damage would be to reform the current system in two ways. The first would be to drop the long campaign, and to limit the election campaign to the last month. The second would be to impose a lower limit on how much any party can spend, so limiting the number of rich donors or the amounts parties need to take from any one source. That seems to me to be the least bad control.

Greece said she could not proceed with a new version of the loan agreement, but seems now to be negotiating over its terms. She has conceded she accepts 70% of the old conditions. Greece refused to sit down with the troika of the EU, the ECB and the IMF, but Greek officials have held exploratory talks with each of those bodies apparently. It appears that Homer nods.

Meanwhile Germany and her allies in the rest of the Eurozone have allowed the European Central Bank to lend more money to Greece. It is being done by the Emergency liquidity assistance scheme, where Greece has now run up a bill of Euro 65 billion. The money has been needed to pay for deposit flight from Greek banks. Those same Greek banks have been buying Greek state Treasury Bills, to allow the Greek state to spend more than it collects in taxes, something it was not meant to do under the rules of the loans. It appears that Germany has given way on the hugely important issue of no more borrowings. Germany bows.

The outgoing Greek government was pleased to announce that after many cuts it was only spending day by day what it was raising in tax revenue, leaving aside debt service. This government seemed to think that would continue and placed it in a stronger position, as it did not need new loans for current spending. Instead in January tax revenues fell, leaving the accounts back in deficit.

There can be no winners in a compromise. The two sides started so far apart that both sides will have to surrender a lot if there is to be an agreement. Greece will have to accept some creditor imposed discipline and controls over both her spending and revenue collection in return for new loans. She will not like all the policies this requires. The rest of Euroland will have to lend Greece yet more money, and probably agree to a cut in the money they will get back for past loans by some new debt deal. Such a compromise will not be the end to the saga, as it is likely to leave Greek finances still precariously placed. All may agree new language about growth and an end to austerity, but when a state is spending more than it earns, and has outlived its creditors’ patience, there do have to be cuts in spending it does not want, and creditors have to come up with more money or demand less back. There is no third way, no win win.

Those who want the UK to stay in the current EU at all costs argue either that there is no alternative, or argue that any kind of trade based relationship outside would be worse. They say we would have no influence over the rest of the EU from outside. They say we would have to accept whatever rules and regulations they set for trade within their area. They conflate this with wider influence in the world.

Most of this is silly nonsense. The UK will never have the same relationship as Switzerland or Norway, the two cases usually trotted out. The UK is a much larger country, a much more important market for the rest of the EU, and above all a global power as a leading member of NATO, the Commonwealth and the UN security Council. The UK is in many global networks. The UK from these positions can both seek to influence and persuade others, and in turn is courted for her support.

The UK should begin its renegotiations with the rest of the EU with two simple propositions. The first is that the UK fully accepts the logic of the single currency. The UK will not stand in the way of Eurozone members completing a political union to complete their currency union, as long as the rest of the EU understands this necessitates a new and looser relationship for the UK. As the one large country that can never join the currency union for democratic and economic reasons, we need an honest analysis and new deal based on that obvious truth.

The second is that the UK wishes to remain or become again a national democracy, where the main decisions are taken by Parliament, and where the voters can change government, policy and the law at a General Election when they cease to please. This means the UK cannot sign up to irreversible EU laws. The UK may by agreement accept joint laws, but it must in important cases reserve the right to change its mind.

Once these two simple propositions are grasped, the rest falls into place. The UK may agree to common foreign policy actions, but we will always have a veto on whether to join in or not. The UK can discuss and see if there can be common cause on laws governing business, energy or whatever, but they will only be common all the time both sides still consent. UK exporters will of course meet EU requirements on all goods and services exported to the rest of the EU, just as they observe all US requirements on exports to the US. In some cases the UK will find it easier and better to have exactly the same rules for EU exports to us. In other cases we will have our own rules. They will all be compliant with World Trade obligations and be designed to promote freer trade.

If we take the one issue usually produced as an attempted show stopper, the 10% external tariff on car exports, I would expect both sides to agree not to impose such a tax in either direction. The UK will be a willing partner in measures which cut tariffs and other barriers to mutual trade.

The UK will have enhanced influence in the rest of the world as it will no longer have to submit to common EU positions in global talks on issues ranging from climate change to trade arrangements. With the EU the UK will have the clout of a major trade partner who imports more than she exports from the rest of the EU, and the status that one of Europe’s large and powerful countries will always have when leading European countries sit down to discuss many global and regional issues.

Yesterday I was particularly busy – speaking to a local business seminar in the morning, attending a lunch meeting, then dealing with constituents’ queries and on to the Wokingham Conservative AGM to speak.
If people send in very long submissions, and include allegations about named individuals or companies, there will be a delay in posting. I do not have the time to check out all the allegations about named people and companies and cannot publish them without a clear factual basis to support them. Your contributions will get posted more quickly if you take this into account.
I also delete some which are offensive to others as I do not always have the time to edit them. As you know I do not edit from a party perspective.

A tired Mrs Merkel this week had to fly beyond the eastern borders of the Union she leads to deal with the revolt of Ukraine, and then fly back to the heart of her Europe to deal with the revolt of the Greeks. In a way they are the same problem. In Ukraine the people of Donbas do not wish their country to join the European Union and have rebelled against the pro EU government in Kiev. In Greece the electorate have rejected the usual parties that accept EU control and leadership, and have chosen a new challenger party which rejects the authority of the troika and wishes to renounce EU monetary and economic policy. The European Union looks overstretched.

It is true that the Ukraine problem is exacerbated by Russia. I will repeat again I in agreement with most western commentators condemn any arming of rebels or military intervention by the European Union’s neighbour to the east. The European Union is deluding itself, however, if it thinks the entire Ukrainian revolt is a put up job by Russia. There are many local people in the east of Ukraine who so dislike their government they will take up arms against it. The European Union, as Mrs Merkel showed this week, has to find a way of living with Russia to the east, as Russia will stay there as a geographical certainty and a well armed power that could be friend but might become a worse foe.

Mrs Merkel has rightly decided that a peaceful settlement in Ukraine is the best option. I wish her peace initiative well. The trouble is that for whatever reason the Ukrainian government finds itself in the position where a significant minority of its people will not accept its authority and have taken up arms against it. Now that the Kiev regime in its turn has shelled and bombed those it wishes to be its obedient citizens in the east it will find it very difficult to reassure and resettle the country. Without control of its borders it cannot be sure there are no military personnel and equipment coming in from outside. Without offering guarantees and home rule to its eastern citizens, it will be difficult to control its eastern borders. Meanwhile the European Union has to answer critics who ask why has it given so much support to the Kiev government, without condemning its excessive use of violence?

The Greek financial problems are but the most extreme of a set of problems that have emerged in much of the Eurozone. Ignoring those of us who warned that a single currency could not work well without first creating a single state to back it, Germany with her inner circle of supporting countries rushed into an arrangement which was bound to break. There has to be a transfer union, an agreed system of sending money from rich to poor, from more successful to less successful, in any flourishing currency union. There has to be a banking union where all stand behind the banks of all. Places in deficit have to be easily financed by places in surplus. We do not have cities or counties in England unable to finance their public deficits or their balance of payments deficits with the rest of the country. Nor should they have such problems in Greece or Spain or Ireland.

Could this be mended? Yes it could. The European Union could call a halt to expansion beyond its current borders. It could let the odd country leave as it moves towards political union, with trade and association agreements replacing membership. A smaller Union would have more chance of success. For the core in the currency has to embark rapidly and decisively on moves to full banking and social union, where each country is submerged in the greater whole and each part of the union pays according to its means and receives according to its needs. Germany wants to lead Europe on the cheap. Modern advanced states expect complex and expensive welfare systems, and economic policies which deliver growth and prosperity. The Euro area does neither at the moment.

There has been much discussion about whether government treats benefit cheats relative to tax cheats fairly.

Both set out to worsen the public finances by deception – the one by withholding money due, the other by taking money they are not entitled to. Most of us think they should both be traced and dealt with by the authorities. I see no moral superiority or inferiority in the tax evader over the benefit thief.

For both categories of criminal I think the penalties should usually be financial. Their crime is financial. The reason we do not like their crime is because it leaves the rest of us worse off, as we have to pay for the falsely claimed benefit and make good the shortfall on tax from the evaders. Putting them in prison would mean we will be even worse off, as we will then have to pay to maintain them in prison, and they will not be able to earn to make a contribution. Prison would only be appropriate if there were aggravating factors, like using threats of violence or repeat offences.

There is then the difficult issue of the size of the fine or financial penalty. Clearly the fine a rich tax evader can pay could be a lot larger than the fine a benefit cheat could pay. The benefit cheat should not be expected to pay such a sum that it removed their incentive to go to work and get themselves sorted out financially. The fine a tax evader has to pay should be a penalty rate so that it hurts financially.

The benefit cheat may need assistance to go to work and to pay more of his or her own bills. Getting the balance right is difficult. There should be a penalty for theft, but success surely is getting them to eschew benefit theft in future and to provide more for themselves. We want the taxpayer to pay less for them, not to end up paying more. The tax evader needs a strong warning that cheats do not prosper.Making him pay say twice the amount of tax evaded as a penalty on top of the original bill should hurt. Putting him on to tougher and tighter financial reporting requirements in future would also be a good idea.