Author: johnredwood

I am all in favour of better transport links to speed faster growth in the northern cities. I look forward to reading an appraisal of the various options for the Leeds/Manchester routes that we hear about this morning. We need a good business appraisal of capacity requirements and the cost of  various options to improve journey times.

We should remember that today the train journey time between Leeds and Manchester is 50 minutes, for a distance of  45 miles ( by road). The train time for the 18 mile journey across London from Ealing to Stratford is also 50 minutes.

The Ealing to Stratford time will be  reduced by Crossrail.  London badly needs both more capacity and faster journey times east to west. The trains are currently very crowded for long periods of the day and evening. The idea behind the exploration of northern options is to offer  improvement to the north similar to  the extra capacity and speedier journeys that Crossrail will bring to London.

In London the 50 minutes from Ealing to Stratford is as good as it gets, as it is a journey on a single tube line. Ealing to Upminster, at 33 miles still less far than  Leeds-Manchester, takes 1 hour 22 minutes by train and at least that time by road.

The growth of London was spurred by the construction of tube lines into the centre. These offered relatively slow trains taking direct routes into the heart of the city and meant people could live further out from the centre but still have a reasonable journey time into the business, shopping  and entertainment districts at the heart of London. Cross London travel prior to Crossrail has never been great. The northern needs are different, as they have  a pattern of segregated cities and the Pennines  in between which has to be taken into account when working out what best transport links can promote their growth. It is good to see some positive thinking on this topic.

Yesterday’s elections in Ukraine did not apparently take place at all in at least 27 seats. The Crimea of course did not go to the polls as it was annexed by Russia. Parts of the Russian speaking east did not vote either, where rebels hold sway and where it was thought too difficult to open polling stations.

Where a country is split badly between a majority and minority, it is most important for the majority to proceed in ways which the minority think are fair, even if they do not agree with some of the policies being pursued and want a different political answer. Holding an election when the most unhappy part of the country is  unable to participate in it is far from helpful.

The loss of the Crimea tipped the odds further against the pro Russia part of the country  by removing pro Russian voters. This has now been compounded by the Kiev government’s inability to restore law and order in Donetz and Luhansk and reassure its eastern citizens that it will operate in the interests of the whole country and take their needs into account.

The Ukrainian government needs to build bridges with the pro Russian minority if it wishes to reunite the country. Democracy does allow the majority to have its way, but democracy also entails the majority being reasonable towards the minority.

Parliament in the UK established its power  by insisting that it should approve taxation before it was imposed by the King or Queen. When the Crown needed more money it had to summons Parliament. Parliament insisted on the redress of its grievances before voting the monarch the money he wanted. The fact that Kings and Queens  had to ask Parliament for new taxes made them wary of asking for too much too o0ften.

The Crown also accepted Parliament’s role as a legislator and used Parliament to pass new laws. A crucial series of Acts in the 1530s established UK supremacy over the clergy and the Church. In England the Reformation was largely a peaceful Parliamentary process, where Parliament asserted the Crown’s sovereignty. The Pope’s power was extinguished by Act of Parliament, and individuals lost their right to appeal to Rome for ultimate judgements of their cases.

In the 1630s the King attempted to rule without Parliament and experimented with new taxes that he wished to impose without Parliamentary authority.  Parliament’s challenge to this presumption by Charles I was an important part of the outbreak of the civil war. During the Protectorate and in  the 1660 Restoration Parliament’s control over taxes was firmly re-established.

Today the threat to Parliament’s power to tax comes not from the monarch but from the EU. The reason so many of us object to the EU’s retrospective recalculation of our tax bill to the EU is that we, the UK electorate and Parliament, have no control or say over this. Defenders of the EU say the UK should just pay up. They claim it is like a change of calculation for an individual’s income tax, or like an increased subscription from a club we belong to. I disagree.

The EU’s £1.7 bn tax is not a simple change to a bill we owe, something the UK government can easily provide for. At a time when the UK government is already borrowing too much and has imposed high taxes, this is an unaffordable new imposition. It is not a tax on the UK government, but a new direct tax on all UK taxpayers who are expected by the EU to consume and spend less so the EU can spend more or give more to other countries.

The EU is not a a set of binding obligations like income tax on an individual, It is a series of opaque and often ambiguous and contradictory international agreements between states within  the EU. There is a legal structure, but there is also a political structure, so that from time to time countries avoid or amend their apparent legal obligations when the politics of them is unacceptable. Just look at the way the obligation to bring balance of payments accounts into balance has been ignored throughout most of the life of the EU, or the way the need to keep budget deficits to 3% or below has been breached for long periods by many states. Is the UK now to comply with the budget deficit reduction requirement, which means not paying the extra impost, or with the tax bill?

The UK Parliament is still sovereign in the UK for one very good reason. Parliament , and Parliament  alone, can decide to repeal or amend the European Communities Act 1972 which remains the origin and fount of all EU power in the UK. If we continue in the EU for a long period without ever using Parliament’s sovereign power, this may change. If we accept a European army and police force we might reach the position where disagreeing with an EU measure becomes law breaking  or an act of rebellion. Today we have  not reached that position. If Parliament does not agree with this new tax, then it should simply amend the 1972 Act to legalise non payment. I doubt they would try to end our membership, as it remains a great deal for the EU.  I also expect they would find all sorts of changes to our budget deal are possible, if we moved to do this, as they would see the dangers to them of the UK visibly reasserting Parliamentary sovereignty.

In the EU everything is renegotiable to those with the political will when they are paying for the organisation. It is not yet a centralised state with the power to tax UK citizens as if it were the UK Parliament imposing Income Tax.

The explanations of the purpose of QE and its method working have changed over the years of its use. In the second quarter of 2009, explaining why it had embarked on a large £200 bn programme of QE, the Bank said:

“The introduction of large scale asset purchase using central bank money or QE shifted the focus toward the quantity of money as well as the price of money. Injecting more money into the economy should boost spending….the more that households and companies  use the new money to buy goods and services or other assets, the more it will raise spending. If banks use the additional reserves to expand their lending, the impact could be even stronger. ”

This explanation was altered by July 2012 when the Bank published a further explanation of  QE:

“the objective remained unchanged – to meet the inflation target of 2%…without that extra spending in the economy, the MPC thought that inflation would be more likely in the medium term, to undershoot the target….It does not involved printing more banknotes. Furthermore the asset purchase programme is not about giving money to the banks. Rather the policy is designed to circumvent the banking system”.. to “stimulate spending and keep inflation on track”

Inflation rose above 3% early in 2010 and stayed above 3% until early 2012, rising above 5% at one point. The MPC would presumably say their timing of asset purchase was related to their forecasts of inflation post 2012. Clearly if their use of QE in 2009, and in 2011 and 2012 was about inflation it was not about accurate forecasts of 2010-12 inflation but must have been about something  longer term. Perhaps they “looked through” the higher inflation brought on by the devaluation of sterling.

Today more people say the aim was merely to bring down longer term rates of interest, to make it cheaper to borrow long term. They see QE as an elaborate way of altering the price of long term money compared to short term loans. Perhaps the Bank’s first explanation that it was to try to inject cash into the economy to be spent is nearer the mark.

What is more interesting is the change of stance on unwinding the position. In the early days it seemed likely that first the Bank would stop new purchases, then allow repayments of debt to cancel the outstanding gilts as they matured, and then sell back the remainder before raising interest rates. Now the agreed policy is to raise the official short term rate before taking any steps to reduce the amount of bonds held. This has the perverse consequence of losing money on the bond holdings at market prices, if the Bank raises the official rate and that has the normal impact on the value of gilts.

The answer is No.

We do not impose extra tax on people for past years after the year is settled.

Nor do we intend to pay them.

We are being reminded that members of the EU have to obey the four freedoms, the freedom of movement of capital, people, goods and service provision.

These should come as no surprise to us, as they were in the original Treaty of Rome. They are not some new addition from more recent federalising treaties. These later treaties  have added a common foreign and defence policy, economic and monetary union, common citizenship and criminal justice integration amongst others. These features have been opposed by Conservatives, voting against Nice, Amsterdam and Lisbon. The UK has an opt out from the Euro and is not committed to  the criminal justice and defence unions. The four freedoms were effectively approved by the British people in the referendum of 1975, when people ignored voices like mine pointing out the full implications of these radical changes to our constitution.

The reasons we need another referendum include the fact that many voters today were not old enough to vote or were not born in 1975, and the fact that most senior politicians in 1975 assured UK voters that they were just voting for a trade agreement or common market. They could point to the fact that in those days the UK still had a veto over any new proposal. Things have changed a lot since then. Many voters in 1975 failed to read the Treaty of Rome so they did not understand the free movement provisions. They understand them  now, thanks to events.

One of the reasons it was possible for the Labour government in 1975 and other leaders to say it was no more than a common market was the inability of the European Community then to enforce many of the things that were in the original Rome Treaty. The Treaty dealt with balance of payments imbalances and said “recognising that the removal of existing obstacles calls for concerted action in order to guarantee steady expansion, balanced trade and fair competition”. Instead large trade imbalances persisted and the EEC took no action to help the UK, a large deficit country.

The Treaty said it would reduce “the differences existing between various regions and backwardness of the less favoured regions”. Instead the gap between the successful and richer parts of the EEC  and the rest in many cases  grew bigger.

The Treaty began with the aim of laying “the foundations of an ever closer union among the peoples of Europe”. It said it would abolish “the obstacles to the free movement of persons, services, and capital” and would  eliminate customs duties and quantitative restrictions on the movement of goods.

Today the free movement of people needs limiting. The UK wishes to control its own benefits system.There should be no automatic right for new arrivals to qualify for the range of out of work or in work benefits that UK citizens enjoy. The UK wishes to control its own criminal justice system, and be able to send back to their own countries criminals who have broken our laws. The UK also wishes to limit numbers seeking lower paid work in our country, all the time there are UK citizens without jobs who might be better off from such work.

It is no good the rest of the EU saying these changes cannot be made because of the underlying principle. There are several underlying principles of the modern EU which the UK does not accept, including the all important monetary union. If they wish us to stay in they need to change the arrangements so we can control our own borders.

This is a potentially  popular campaign  which need not be the monopoly of the Unions. The main aim of Conservative policy is to encourage and foster an economic recovery which will raise real wages and living standards for the many. I am all in favour of people getting on in the world, being promoted, getting pay awards for their performance and for the value of the work they bring to the company or institution.  I have no wish to live in a low wage country.

The latest average earnings figures still show average earnings rising a little slower than inflation. This is six years after a major cut in living standards in the Great recession under the last government. However, within that average there are a lot more lower paid jobs which are better than being out of work which drive down the average. There are also  more opportunities for advancement thanks to the general growth in the economy. The best way into a better paid job is to have a less well paid job and work your way up. It is more difficult if you have been out of work for a long time. Being in work gives you better access to training and opportunity. The way to command a higher rate of pay is to bring more skill and value to your employer or customers.

The September ASDA income tracker shows an extra £6 a week average discretionary income compared to a year ago. At least the figures are rising, not falling. Wages in manufacturing and construction are now picking up.

Labour says the answer is a higher Minimum wage. They have promised one around the likely levels to be set by the independent quango that fixes these things. The rising Minimum wage does not flow through pound for pound to the earner, because Minimum wages for most people are topped up by income related benefits. What matters more is the minimum income, which is a combination of minimum wage and income top up from the state. The level of the Minimum wage does not look like much of a differentiator between the three main Westminster parties.

There are two important elements to a strategy to give the UK a pay rise that Labour do not mention so much. The first is getting proper  control of our borders, so more of the jobs go to UK citizens, and so there is less downward pressure on wages from many new migrants. The second is government policies which support rising productivity. In the end we can only have higher real wages if we work smarter and better, so that our output is more highly valued. The government’s work on apprenticeships, training and improved educational standards is a vital part of getting the UK a pay rise.