Author: johnredwood

In recent weeks we have seen the old truths reassert themselves in international economics. Countries that are running large balance of payments deficits in the emerging world have suffered substantial falls in their currencies. This has of course made imports dearer, which may cut their deficit a bit, but it reflects the doubts some in markets share about how they will be able to borrow enough to carry on living beyond their means.

When the currency falls too far too fast for comfort, inflation starts to accelerate in  the country affected. The authorities then respond by putting up interest rates. They also sometimes reach for controls, seeking to stop people in their country taking so much money abroad, or preventing them from buying foreign products. Quite often it is the most socialist of governments that resorts to the highest interest rates and the most draconian controls. They clearly do not do this wanting  to hit the living standards of the poor, though that is what it does. They do it because they feel they have no alternative.

If their country is at the same time heavily in debt and the state os overspending, it adds to the agony. Argentina has suffered a large devalaution, and there are worries over when and how she will repay her debts. Argentina defaulted on her debts in 2002. Now the government has doubled public spending over the last 11 years, only to set up another debt and inflation crisis. Far from being kind to the poor, the new squeeze is unpleasant. It includes curbs on internet purchases.  Inflation is around 30%.

Venezuela is also in deep trouble. Turkey now has had to increase interest rates by 400 basis points – an extra 4% on a loan – to try to buttress its position. The Argentinian peso has fallen almost 20% this year, the Turkish lira 5% and the South African rand 7%.

So to all thsoe who say a country can carry on borrowing, spending more in the public sector  and printing as much as it likes, I just ask why isn’t that magic formula working in emerging market countries these days? If socialist policies of spending much more in  the public sector worked, Argentina would have one of the most successful economies, along with Venezuela.

It is difficult to believe that there is so much fuss over Mr Gove’s decision not to reappoint a Labour peeress to a Quango on expiry of her contract.  It is even more bizarre to complain that he is trying to politicise these appointments, when the outgoing person is a Labour politician.

As we have now read, Labour made many more Labour appointments to quangos than the Coalition has made Conservative appointments, adjusted for the periods of time involved so far. I saw nothing wrong in principle with Labour Ministers appointing Labour supporters to these important jobs. Doubtless they wanted people running these arms of the state who shared their general world view and aims. Of course they needed to undertake fair recruitment process and ensure that if someone was a known Labour supporter they had the qualifications and experience to justify the appointment. So why then do they dare to complain if occasionally Conservative Ministers take the same view about their supporters? Should a known Conservative who is qualified now be banned from a quango appointment because he or she is a Conservative?

This row raises some wider issues. Why is so much power concentrated in the hands of these quangos, when Ministers maybe should take more control and accept more responsibility for what is going on.  There is no evidence that so called independent bodies are better at judging matters than elected Ministers acting on good professional advice. Just look at the mess the independent Bank of England and the FSA made of banking regulation, bringing on the worse crash in more than century. Previous Chancellors who had more direct control did better. Or look at the Environment Agency’s decision to allow  floods in  large parts of the country.

Can we really believe there are truly independent people in areas of great contention? The global warming theory supporters would not regard an appointee to the job of Environment Agency Head  as properly qualified if they   did not believe in global warming theory . Anti global warming theorists regard the appointment of a pro theory person as  folly or treachery. These are political minefields, and no-one is in this case “independent”. A School Inpsector who believes comprehensives are best might set different standards from one who thinks the best grammars and private sector schools are the ones to match. This again is political territory.

I favour bringing more powers back from quangos to Ministers. Better still let’s find more powers quangos have which we could return to people and  businesses, leaving them freer to do as they see fit. And let Mr Gove choose who he will. It will be his results that we judge in 2015, so he should have the helpers he needs to do the job.

          Yesterday morning I heard a patsy interview of a senior manager of the Environment Agency. It started with sympathy for the difficult time they are experiencing, went on to ask them if they needed more money to do their job, and ended with the usual invitation to express the helplessness of the Agency before the force of climate change.  I can only assume the BBC are  colluding with this body, as I know they can give tough interviews if they wish. You would have thought they would pick up the public anger. Don’t they think it unacceptable that people have flooded homes and businesses?  Isn’t the main point of the Agency to do what it takes to protect us from floods and ensure we are supplied with clean water and a good waste water service? Where did the £1200 million spent last year go?

          What should they have asked?

          They should first have explored the issue of whether it is a deliberate policy of the Agency to allow large parts of the country to be flooded, as they seem to wish to restore old landscape prior to the draining of the land to create homes and farms for people. It appears from various EA statements that they do hanker after more wetlands and fewer farms and homes in certain areas. It also appears from the Chairman’s recent article that they think they can only protect urban areas, and will sacrifice rural ones. Clearly it is government policy to protect people and farms from flooding wherever possible. The Agency may be at variance with this aim.

          They should have asked where all the £1200 million spent last year went. Why was only £20 m spent on maintaining ditches and culverts? Why so little on dredging? Have dredging machines been sold off for scrap or allowed to rust without use in some places as has been alleged?  Why did the INCREASE in the staff budget, £30m, exceed the total spend on essential maintenance?

           They should have asked why the Agency seems to think it is sufficient to warn people of impending floods, rather than putting in place the bunds, barriers, pumps and other methods to divert the water from homes and businesses?

             I want Ministers to bring  this quango to account. It will probably need a new Chairman to give it a sense of urgency, to sharpen its priorities in the way most people want, and get value out of the huge sums its spends.

The French have often briefed against the Anglo Saxon way. They dislike our success at banking and financial services, disagree with policies that allow more freedom and flexibility to set up in business, to take a job or find a new employee, to encourage enterprise. President George Bush was not completely wrong if  he did famously say the French have no word for entrepreneur!

President Hollande set out on an interesting economic experiment. He was cheered on by socialists and bien pensant commentators on both sides of the Channel. Where the UK cut the top rate of tax he would increase it. Where the UK cut the tax rate on business, he would squeeze them harder to get them to pay their fair amount. Where the UK would curb the rate of increase in public spending, he would promote growth through a bigger public sector. Mr Miliband was egging him on, and used to refer favourably to the French experiment. Though he no longer is so keen on the French model as an example to us, he seems keen to copy parts of the policy  nonetheless.

So how has the French leader got on? He is now  very unpopular. The French economy hovers around another recession. Unemployment stays stubbornly above 11% compared to 7% for the UK. Youth unemployment is especially high. France has many areas of high deprivation in the big cities. The gap between Paris and the rest remains very large. 400,000 talented and hardworking French people are now working in London. Those recently interviewed by the BBC have told us they love the greater freedom, flexibility and positive environment London gives them to start up and grow a business.

It would be wrong to write Paris off. It is the only other great city in Europe besides London in terms of scale and prosperity levels. It still has many fine businesses and brands and many talented people who have not left. Similarly, it would be wrong to be complacent about London’s current success. Hidden in the figures is a decline in London as a financial centre relative to New York, thanks to tax and regulatory policies followed by the EU which are having more and more influence on the UK. Paris has lost a lot to London, London has lost high earning business activities to Switzerland, Hong Kong and Shanghai.

However, today France has deeper social and economic problems than the UK. Mr Hollande says he does not want fundamental reform of the EU or any Treaty change. The UK is pressing for it. If Paris wins this battle, as some expect, then that might merely hasten the UK’s exit when the people vote. Outside the EU the UK could pursue an agenda more friendly to business, jobs, success than we currently can achieve inside the EU. Then the gap between London and Paris would grow much greater in London’s favour. Does Paris want that outcome?

The Environment Agency last year received a £723m grant from the taxpayer and spent in total £1207m, the rest paid for by charges.

The staff costs of the Agency rose by £30m or 8% compared to the previous year, reaching a total of £395.3 million. The Agency employed 12,252 people including  temps and contractor personnel.  Pension contributions cost £56 m , with a loss on the fund recognised that year in the accounts bringing the total pension cost to £197.4 million.  The total cost of pensions was almost as high as the capital works, where they spent £219million during the year.

Within the capital works just £20.3 million was spent on improving or maintaining culverts and channels to ensure free flow of water. That is a mere 1.7% of their total budget, or 3.4% of their staff and pension costs. A further £69.6m was spent on improving embankments.

It looks as if the Agency has got the balance of its budget wrong. It clearly needs to spend more on keeping culverts, ditches and rivers in a good state to be able to handle large quantities of water when we have heavy rains.  The Agency spends a lot on people to warn us of approaching hazards, and to map and discuss the problems as they arise. It needs to do more and spend more of its large budget on works on the ground, probably using contractors not on its own payroll, to keep the water flowing.

It is an interesting to note that under the Coalition this quango has continued to be chaired by a senior Labour person. There does not seem to have been any attempt to remove the Labour Chairman, and he has clearly not made sufficient attempt to get value for money nor to ensure the Agency’s priorities are our priorities – keeping people and property safe from floods, and ensuring a good supply of clean fresh water for households and businesses. There is no evidence here to support Labour Lady Morgan’s claims.

Labour and Liberal Democrat MPs mainly stayed away form the Referendum Bill in the Commons. They clearly recognised that a referendum is popular with their electors and they did  not want to be seen opposing it and voting it down. In the Lords Labour and Liberal democrat peers did vote it down by refusing it the extra time last evening it needed, and refusing to speed up consideration of their many needless amendments.

It is strange world where two parties love the EU and all its works, want us to stay in, yet are determined to deny the rest of us a say in a  referendum. The stealthy way they killed the Referendum Bill tells us a lot about their approach to this most important of issues. Mr Cameron intends to try again in the next session, and may also use  the Parliament Act.

I welcome the Conservative decision to have more free votes. Far from creating a split party, this encourages better debate and more thought by individual MPs. The Conservatives offered a free vote on the Raab Amendment to the Immigration Bill and will be offering another on the issue of smoking in cars carrying children.

I see the mythmakers are back saying that a  divided party cannot be elected to government. This is complete nonsense. Margaret Thatcher led a very split party. She was constantly subject to attacks from the group of MPs who disagreed strongly with her economic and social policies. Called the wets, they briefed against her, ran rebellions against her in Parliament, and encouraged Michael Heseltine as an alternative leader or challenger. She won three election victories in a  row despite this strong internal opposition.

Tony Blair led a  very disunited Labour party. A group of left wing Labour MPs were never reconciled to his leadership, regularly rebelled against it and made clear their general displeasure. More importantly, that government was riven with a huge split right at the top. The Brown and Blair factions fought each other over many issues, and regularly briefed the press against each other. This did not stop them winning three elections in a row.

It is true there were splits against John Major from the Eurosceptics, and against Gordon Brown from a  range of ambitious people who wanted to bring his leadership to an end, and these 2 leaders did lose heavily in subsequent General Elections. Most sensible commentators should surely recognise that John Major was  defeated  by the recession and crisis brought on by his decision to enter and stay in the Exchange Rate Mechanism. Gordon Brown was brought down primarily by presiding over the debt , borrowing and banking crisis of 2008.

Spare us the nonsense that independent thought by MPs leads to election loss. I do not expect the polls for the Conservatives to move downwards because Mr Raab dared to move an amendment. The polls under John Major did not move much with acts of rebellion, and when they did it was not always down. They slumped on exit from the ERM and on the economic problems that caused.