Author: johnredwood

Following a request I have now reminded myself of the so called Bradbury pounds.  It is a very similar device to creating money and buying gilts through the Bank of England, a nationalised bank which is therefore backed by and working with the Treasury. The authorities do not think it would be a good idea to print more money now, as it could prove inflationary. When they did choose to print they did so by a different route, which did not make a lot of difference to the idea. Buying up government bonds allowed them to spend more in the public sector without facing a debt or interest rate constraint on their spending.

One of the reasons the Bank of England is slow to raise interest rates is the strength of sterling. As sterling rises against the dollar and the Euro, the two largest counter-party currencies for our trade, so prices of imports are kept down. Its acts as a constraint on our exporters raising their costs and prices, as they seek to compete in the world market against the background of a rising currency.  Most of the effects are benign.

A rising currency can also mean UK customers want to buy more imports, which get cheaper, and  more can afford foreign holidays. It means there is an added incentive for foreign investors to buy UK property and other assets, as they benefit from a currency gain as well.  A rising currency acts a bit like a rising interest rate, putting downwards pressure on domestic costs.

So why is this happening, and will it continue? For the moment it looks as if it might, as so far it is creating a virtu0us circle – lower RPI and CPI inflation, better growth, a higher currency. It is happening at a time when the UK has finished its Quantitative Easing money -0r money printing programmes. The USA is still continuing with its programme of money creation, though it is now reducing the extra amounts printed month by month. The Euro area is talking about taking more monetary loosening measures. If all else is equal those who print most of their currency should expect it to fall in value against those who do not.

Markets expect an earlier move to higher interest rates in the UK than in the USA, and are not even thinking about rises in Euro rates. There the last recent move was a further cut. Currencies tend to strengthen when expectations are of an increase in rates, unless there is a  underlying crisis forcing the increases.

It is good news that retail inflation is low, and even energy inflation has come down. The problem for the Bank is that asset inflation may continue even against a low general inflationary background. There remains the issue of fairness between savers and borrowers to consider as well. It is likely they will bring forward the first rate rise from the middle of 2015 as originally planned or hinted at.

England has 16 times as many people to choose a football team from as Uruguay

England has a GDP 45 times the size of Uruguay

England has three times as many top clubs in its league as Uruguay.

Result: Uruguay 2, England 1.

Any comments?

As we watch fledgling democracies struggling to survive, facing coups or demands for government change between elections, we need to remind ourselves of the characteristics of successful democratic government.

In  mature democracies the sensible elected officials understand they have to represent all their constituents, not just those who agreed with them and voted for them. Any constituent deserves honest and independent representation in a just cause. Any constituent has a right to their view to be heard and considered, even where it clearly disagrees with the ruling party or the local MP.

A successful democratic government understands that it cannot just govern in the interests of the majority or the largest minority that happened to vote for it. There are times when an elected government has to do things its own supporters do not like, and times when it has to adapt to moods and shifts in opinion that it did not wish to see or had not been  able to forecast. Successful  democratic leaders draw support more widely than from their own party, and succeed in  persuading the opposition to alter its approach and not repeal or alter what they do in power when eventually the government changes.

Mr Miliband’s approach of returning  to his left of centre comfort zone and support base is causing difficulties for him and his party as they seek the 40% plus in the polls that opposition parties usually need to offer a hope of winning an election outright. His latest proposal on JSA and young people in need of work is a sign that he is now looking for headlines that are different from his normal Guardian road tested policies, though the detail is disappointing and adds little to what the coalition is already trying to do to help the young into work by assisting them find apprenticeships and pick up the skills they need. Labour are finding it difficult to frame policies on welfare and migration that appeal and assist in tackling these big problems.

The UK has battled to keep its banking and financial system out of EU regulation and taxation. We have been assured that the EU will not impose taxes on us against our will. We have been assured the UK will not have to be part of any future Euroland bail out. The UK government negotiated an opt out for UK banks from some of the regulations the EU requires of others. So far so good.

11 member states of the EU plan to press ahead with a Financial Transactions Tax despite the opposition of the UK and a majority of the member states. They will seek to impose this on some business in London as well as on business in Paris and Frankfurt. This week we read of legal advice concerning the UK’s partial opt out from banking regulations. The EU is  now claiming that banking is part of the single market, so the UK cannot opt out.

The federal ECB and ECJ continue in  their quest to harmonise and control most of EU life. The ECJ is often unhelpful to carefully crafted exemptions and opt outs which UK governments have successfully negotiated. It should make us doubly wary of what the EU might offer when the renegotiation gets underway. One of the issues in the negotiation must be the issue of trust, and how to avoid the Court overruling us when it suits them to do so.

The City has been a longstanding friend of the EU, believing it will increase its business reach. Now the City is increasingly in the front line in dispute with its new regulators and masters. The EU has taken a different view on remuneration, proprietary trading, short selling, the Financial Transaction Tax and banking regulation than many in the City wish. Will this start to change City enthusiasm for continued membership on current terms. The City will not disagree with the EU on the things that matter to more voters, but if the City ceases to be such a cheerleader for the EU it might make a difference to others in the debate.

EU environmental and dear energy prices led to the closure of two of the last three surviving aluminium plants in the UK. Wylfa closed in 2009, and Lynemouth in 2012. The UK  now has to import much of its aluminium requirement.

Dear energy is now eating into our ability to make our own cement. With a strong recovery underway in construction, the UK is being forced to import more of this bulky commodity to keep up with demand. In 2001 the Uk produced 11 million tonnes of cement. At the peak of the boom in 2007 it reached an output of 11.9 million tonnes, only to collapse to 7.5 million in 2009. Last year the industry managed just 8.2 million, with imports increasing then and this year to make up. The high costs of energy are cited as a major impediment to UK production.

In 1997 when Labour came to power the UK produced 18.5 million tonnes of steel domestically. This had slumped to just 10.1 million tonnes by 2009. Whilst the deep recession is part of the reason, the rise in energy costs over the last decade also led to a structural decline. Last year steel output had risen back to 11.9 million tonnes, way below the 1997 levels.

Dear energy has also hit glass making, ceramics, bricks and plastics. Many energy intensive processes are now too dear in the UK, especially at a time when the US is busily exploiting more and more cheap domestic energy. Now Germany is also struggling with dear and scarce energy, and even  the EU is worried about the unreliability of Russian gas supplies, it is high time for a radical change to EU and UK energy policies. The UK should press on for domestic self sufficiency. This is feasible given the large reserves of gas, oil, and coal which we have and the plentiful supply of water for hydro power schemes.

The government says it wishes to press ahead with more domestically produced oil and gas. It is also planning a capacity auction to see if that will bring forward more investment in gas fired electricity stations. The EU renewables requirement means we end up subsidising  both the dear energy from windfarms, and the cheaper energy from gas stations needed as stand by. Mr Davey is also offering incentives to industry to avoid using energy at peak times to try to balance the system.

I agree with the Prime Minister that Magna Carta is seen to be a seminal document of English history. I am happy that it should be honoured and remembered next year, its 800th birthday. It has come to represent the important assertion of the right to a free trial, an early statement of an Englishman’s liberties, and part of the long process to control the powers of the King or the executive government.

I disagree with those, including some who write into this site, who see Magna Carta as a timeless document setting out our liberties in a way which we can never amend or alienate. Magna Carta was a staging post on a long journey to liberty. It was a step forward in curbing the power of the Crown, but it can tell us nothing about our rights vis a vis the EU or the ECJ.

Magna Carta was a peace treaty between the barons and the Crown. It set up a group of 25 elected peers to try to ensure good conduct on the part of the King after signing. At its best it set out eternal truths and freedoms which we still value. At its worst it was unkind and partial. Often it now strikes us as being archaic and irrelevant, as many of the grievances it sought to tackle were rooted in a feudal system which no longer applies.

Few today would want to see its clause about women and justice enforced. “No one shall be arrested or imprisoned on the appeal of a woman for the death of any person except her husband”.  Nor would the right to give heirs in marriage “but  not to someone of lower social standing” pass muster.

Its comments on foreigners might be more popular with the UKIP tendency: “As soon as peace is restored we will remove from the kingdom all foreign knights, bowmen, their attendants and the mercenaries”, but difficult and contentious  to enforce today.

Removing all fish weirs on rivers is not such a central preoccupation as in 1215, as we have gone for windmills rather than  for water wheels on rivers and rely more on sea fishing that river fishing.

The first requirement  that the “English Church shall be free and its liberties unimpaired” has less relevance in a multi faith UK.  The second embedded a “fair” rate of Inheritance Tax which might  be to modern liking as it now  now seems low owing to inflation and only applied to Earls and Knights.

We still like the emphasis on fair trial for those accused, and the system of fines proportionate to the offence.

So to those who worship Magna Carta and dislike what successive Parliaments have done to it, I suggest you first read it in full. Then write in and tell me what first attracted you to it, and whether there are on reflection some parts you think may no longer be appropriate.

I am glad Boris has come out today with regret for voting for the war in Iraq. Those who believed in it then do have to explain what they thought so  at the time, and what can be learned from the mistake. If only more Labour figures would do so, as they were in government, they sustained Tony Blair as PM, and they provided the necessary support for the war. How do senior Labour figures today respond to Mr Blair’s new  long essay of self justification? Conservative support made no difference to the outcome and had no impact on the decision.

I remember well arguing with Iain Duncan Smith not to support the war. I wanted the Conservatives to be whipped to oppose it, as I thought it was likely to miscarry at the time. I did not think the PM would spin  about weapons of mass destruction given the seriousness of the issues at stake, so I could see why so many thought we should do something.  I was concerned about how we would settle Iraq once victorious and how we would secure the weaponry without accident.

My mistake was to vote with the party whip once I had lost the battle within the party to change its view. I have learned that you can be too loyal.