Author: johnredwood

Free enterprise capitalism is the parent of higher living standards and better lives for the many. The luxuries of the few of the previous generation can become the norm for most in the next. Today we can enjoy service and facilities that we could not even dream about twenty years ago.

In the 1950s, many homes  had no tv, no fridge, no car, no telephone.  These middle class luxuries arrived gradually in the 1960s as people  got pay rises and as these luxury products became cheaper relative to wages. The financial system also found new ways to help people of modest means to buy them. Many tvs were rented. Car finance took some of the waiting out of wanting. More mortgages became available, so  many  could buy their first home.

The progress of many in the UK from blue collar to white collar work, from working for someone else to running your own business, from renting to owning a home,from living without phone or tv or fridge to having those former luxuries which became necessities reminds us just how much free enterprise has delivered. It also reminds us that sensible borrowing by individuals and families was an important part of the road to owning property and having better equipped homes.

Today many take for granted the fridge and tv. Most expect a mobile phone and a home or hand held computer with more power than many company computers enjoyed in  the last century. These advances are good news. As technology expands, so our idea of the good life and of what is possible expands. The world I wish to live in recognises that allowing sensible borrowing in the private sector,cutting taxes to allow people to spend more of what they earn, and always making it worthwhile to work are the central policies to banish austerity. There is a new generation to help into home  and car ownership. There has been too much private austerity thanks to the banking crash. We now need a stable banking system capable of allowing and financing growth, and a tax system which leaves people with enough money to buy goods and services from each other in a growing economy.

We have had too much austerity in this country – in the private sector in the period 2007-9. I opposed it at the time. I now support policies to give us private sector prosperity again. That’s more prosperity for every individual and family. I want to see more jobs, more better paid jobs, lower taxes and better living standards  for the many.

The absurd political debate between the parties of the left argues about austerity in the public sector. Look at the figures. Total managed public spending was just£629 billion in 2008-9, and was £732 billion in 2014-15. The severe cuts, the reductions in income and spending power, took place in the private sector, mainly between 2007 and 2010, thanks to Labour’s great recession. Real incomes fell, many people were thrown out of work and lost all their earned income, there were pay cuts, the end of bonuses and reduced overtime.

Why did this happen? Because a Labour government helped by the FSA, the banking regulator it set up, and by the Bank of England, put interest rates up too high, starved the banking system of cash, and forced the banks to lend less and slim their balance sheets. They did  this because in the preivous period they had allowed the banks to expand too much, lend too much, and had not required them to hold sufficient cash and capital. Their asterity policy was too extreme and too fast acting, so it brought several banks down, and with it private sector credit, jobs and incomes.

I urged them not to overexpand bank balance sheets and not to allow mega mergers on the way up, and urged them to be less severe and allow longer for adjustment on the way down. When the coaltion came into power they caried on for a bit with the extreme bank slimming policies for RBS andLloyds/HBos they inherited from Labour, which  kept the economy from growing. The economy started to perform much better when the government changed its approach to RBS after a couple of years, and started to build a decent UK bank that could help finance a good recovery.

The UK had too much austerity inflicted on it by Labiour at the end of the last decade. For the last couple of years we have seen growth resume, with many more people in jobs and with some growth in pay, overtime and bonuses. That is what we need. Tax cuts for the many will also help drive a rise in living standards and more jobs and activity.

Can the debate please concentrate on where we have suffered from austerity, and what are the best policies to banish austerity from the homes of the UK?Higher taxes and more public sector borrowing will not promote greater individual wealth and income.

This week Mr Hollande assured Mrs Merkel that the French local election results would make no difference to France’s economic policy despite the poor showing for his party. He confirmed that France would try to  stick to the Euro disciplines. In practice France is finding it too difficult to hit the deficit target, but apparently wants to.  Meanwhile France and Germany signed up to further joint projects to reinforce the merging of their two economies within the Eurozone and its common framework. Both of them played down the threat to the Euro from Greece, saying they wanted the experts to make more rapid progress assessing Greece’s latest policy offering, and claiming  to be relaxed about the Greek visit to Moscow.

Stories circulate  that Greece may face capital controls and suspension of bank account convertibility if things get worse, or that Greece is even planning to nationalise the Greek commercial banks and issue a parallel or new Greek currency to pay the bills. The Greek government denies these rumours and has just tabled new proposals to try to comply with some of the requests of their creditors.  It seems to me more likely that Greece and the rest of the Eurozone will cobble together a compromise, as it seems clear Mrs Merkel and Mr Hollande do not wish to see an exit of Greece from the currency. Meanwhile the ECB lend more to Greece to keep the banks going.

All this reinforces a central truth for the UK. The Euro is driving relentlessly the process of political union for its members. They will volunteer for more and more joint projects, investments and shared networks as part of a deliberate policy to blur national distinctions and make more matters truly European.They are edging towards a proper banking union, where the ECB is still financing the Greek commercial banks as they are  under pressure. They will need to make more progress in achieving common welfare and larger transfers of cash from the richer to the poorer areas. The UK wants  no part of this, and will have to battle to stay out or get out of the intrusive features of political union to support the monetary union.

I just hope enough UK people understand the urgency of all this. The Greek drama is driving events at a fast pace. The UK needs a new relationship soon to avoid being sucked into the EU political union. Last night five of the parties present either pretended there is no issue with the EU, or affected to be  relaxed about all its current policies, powers, and direction. On this issue these five parties are out of step with a majority of people in the UK. The UK needs the renegotiation and the referendum which Conservative policy offers. Polls also make clear the public  is not about to elect a government pledged to leave without negotiation and discussion with the rest of the EU.

Voters who care about self  determination and democracy here in the UK need to ask how they can best further that aim in the election.

              There are  two “truths”  retailed today by the media about the debates that need to be challenged.

                The first is that politics has changed irrevocably to a multi party model, because we saw 7 leaders in the debate! Current polls suggest that the 2 main parties now command a better combined share of the vote than they did in 2010 – around 70% compared to 65%.They also suggest that 3 of the 7 parties are likely to win just a single figure number  of seats between them, as they did in 2010. The party likely to come third, the SNP, will not attract a single vote let alone win a single seat outside Scotland which has just 9% of the seats on offer. The UK does not suddenly become a multi party democracy because of a single tv programme. The voters will decide if they want several parties involved in a government, and in recent weeks the polls have been moving more in favour of the 2 largest parties.We have had a Parliament for the last 5 years where neither major party had a majority.

                The second media myth is that the leaders of the Greens, Plaid and the SNP did a great job challenging the “austerity politics” of Labour, Conservative and Lib Dem. This is a bizarre distortion of the debate. The 3 main parties of the 2010 Parliament all clearly want more jobs, higher living standards and a bigger UK economy. The debate is about the politics of growth, and how you best speed and secure it. Based on Labour’s  crash of 2008 and other past experience, all 3 parties agree that excessive public sector debts and deficits can create recession and force spending cuts.  Labour, Lib Dem and the Conservatives are having a debate about the speed of deficit reduction, and the affordability and priorities for spending as they are all persuaded that it would not be a good idea to go the Greek route of spending and borrowing beyond your credit worthiness. They speak for most people in taking this view. All 3 parties wish to boost spending on the NHS.

                    Plaid, SNP and the Greens may well want to spend more of other people’s money, and want to borrow more. They were not put under any serious pressure last night to explain why countries that run up excessive debts usually get into serious financial trouble and end up forced to make spending cuts we have no wish to make. Nor were the parties of the left last night willing to share any work on figures which might have exposed the huge gap between what they think they can raise in extra taxes on the rich and what they wish to spend.  The fact that some Labour voters prefer the Leader of the SNPto their own leader, and some Lib Dems prefer what  the Greens said last night, is not going to make much difference come election day. The former group cannot vote SNP even if they wanted to, and the Lib Dem vote fell off a cliff in the polls a long time ago.

When the Conservatives last left office, in 1996-7, the UK started work on 195,000 new homes that year. Net migration was running at just 50,000 a year. It meant that there were additional homes to allow for new household formation, as young people left their parents’ houses, and as some people divorced.

By 2009/10, the last Labour year in government, new homes started had slumped to just 124,000. Meanwhile net migration surged to well over 250,000. The UK was not building nearly enough new homes to keep pace with the rate of entry into the country by new arrivals, let alone to keep up with the needs of young people and  those wishing to live on their own who were already settled here .

Last year new homes started reached 160,000, still well below the level needed if we are to keep up with current migration levels. Fortunately Mr Cameron has made clear his wish to take further measures to get migration down to more manageable numbers. It will be part of his renegotiation with the rest of the EU if Conservatives win the election. The parties who do not favour limiting migration in the way proposed by Mr Cameron have to explain just how many homes they would need to build, and  where they might be planning to build them. It is also difficult to see how they would be financed.

The last coalition government did take measures to control students coming to bogus colleges. More can be done to limit non EU migration by controlling the issue of permits to come and work here. The EU may well agree to changes to rules concerning the payment of top up benefits to recently arrived migrants who have not paid in to the UK system. It seems to be accepting tightening of the rules about those without work who say they are seeking work. The renegotiation will also need to include discussion of access  to benefits for those seeking unskilled jobs and low skilled jobs which might be needed by people already here.

The measures taken to ease mortgage credit, help with deposits and reward those saving for a home of their own will assist. Some worry that any measure merely fuels further price rises. The main issue rem ains bringing supply and demand for homes into better balance. It is difficult to see how you can do this without some better controls on net migration.