Author: johnredwood

                The unelected President of the Ukraine is not in control of the country he took over with his supporters. He looks weak because he is weak. He is unable to govern the east of his country. He threatens strong action to evict  armed people taking over police buildings and other parts of the administration in the Eastern cities, then fails to carry out his threats. On Monday he was not even able to stop a further occupation. Why can’t he control his forces? Why do so many people in the East of his country wish to disobey him? The interim government of the Ukraine clearly lacks authority in substantial areas of the country.

               The European Union is also weak. It was keen to extend its influence by pushing Ukraine into stronger Association agreements with it in a way bound to provoke Russia, but feeble when it comes to responding to the problems it has helped create as a result. The idea that the Ukraine should become a western looking country which could join the EU’s Common Foreign and Security policy was always going to upset the Russian influenced part of the Ukraine. Mercifully still without a large army, the EU is not proposing to use its Rapid Reaction Force to intervene in the Ukraine, and still awaits the drones it seeks.

               The President of the USA commands strong forces, yet he too is playing his hand in a way which is weak. He condemns Russia’s actions. He demands his allies in Europe intensify their sanctions, only to find Germany and others reluctant to do so. Germany has a lot more at risk – including its fuel supply – if sanctions get too lively. He has rightly ruled out the use of US force in the Ukraine, but the public announcement of this has removed all doubt or fear from Russia.

              The result is a dreadful mess. Russian people in Eastern Ukraine fear the westward looking Ukrainian regime, and seek guarantees of their lifestyle, or seek improvements which they think might come from more Russian influence. The Ukrainian regime is unable to police the whole country and keep law and order. Russia is able to offer succour to Russian speakers, whilst denying western charges about an explicit Russian military intervention in East Ukraine. The West accuses Russia of bad faith but lacks a plan to sort it out.

               The UK should stay out of this. The West does not have the military power to take on Russia without US leadership and whole hearted commitment, which is clearly lacking. The EU has done damage to the Ukraine and has jeopardised what were stable relations with Russia by its actions so far. It is more evidence of why the UK should not be part of the EU, and why we should reject the Common Foreign and Security Policy. NATO has not offered a guarantee to the Ukraine. NATO needs to make sure its credibility is not undermined by this crisis. It needs to check its defences elsewhere where it has offered a guarantee, to make sure NATO’s security pledges mean something. Russia has behaved badly, but the EU has behaved irresponsibly, and is hitched to a weak and unelected President who cannot run or unite his own country.

The Chancellor believes in the Laffer curve. He accepts that when a tax gets to a certain level, if you raise the rate further you will suffer a loss of revenue, not a gain. He has been trying to get the Treasury to include this effect in their models, as  they have now conceded that you can raise a tax too high to maximise revenues.

Labour still find this a difficult idea to grasp. When I last explained it again in the  Commons recently a triumphant Labour MP asked me why as I wanted lower rates for CGT and top rate  income tax, I  did not ask for a lower rate for VAT as well. The answer is obvious. I want rates of Income Tax and CGT that maximise the revenues, not diminish them.  At 17.5% or even at 20% if you raise the VAT rate higher you get more revenue. If you raise the Top rate of Income Tax above 45% you get less revenue, as the government has now proven in its latest figures. The easier it is for people to avoid a tax, the lower the rate has to be to maximise the revenue. The higher the rate of the tax, the more likely it is to be at or above its revenue maximising rate.

This week we are hearing reports in the news that the Treasury has admitted cutting Fuel Duty as this government has done has beneficial effects on output and incomes. Of course it does. Thank heavens the Treasury has tried to redo its sums whilst  recognising this. They have come to conclusion that over the long run (20 years) the Fuel Duty tax cuts will only lose the Treasury 44%-63% of the alleged revenue lost in the first full year of the  cuts.

This study comes up with a laboured and very long term answer to a different question to the Laffer question – what is the tax maximising rate?  We can see the difference starkly if we look at a similar study of the effects of Corporation Tax cuts which the Treasury published with less media interest in December last year. That study, like the Fuel Duty one, concluded that over a 20 year period there would be a boost to GDP from the Corporation Tax cuts. This would recoup 45-60% of the revenue they say the Treasury loses in the first full year of the cumulative tax cuts. This again is a poor long term answer to a different question.

So what has happened with the progressive cut in Corporation Tax from 28% for larger companies and 21% for smaller companies to 20% by 2015-16?  In Budget 2013 Onshore Corporation Tax was scheduled to fall from £35.5bn in 2012-13 to £33.5bn in 2015-16, a decline of 5.5%. (“Is it wise, Chancellor, to “give away” so much to big business when we have such a large deficit?” you could hear the mandarins ask).

In Budget 2014 the Treasury tells us Onshore Corporation Tax rose from the original £35.5bn in 2012-13 to £36.6bn in 2013-14, and is now forecast to rise to £42.3bn by 2015-16. Instead of a 5.5% fall there is now to be a 19% increase.

Of course these figures are sensitive to changes in growth forecasts for the economy, but the changes are so stark you have to conclude the Treasury model  is still unable to handle the Laffer effect. Clearly the  CT rate has fallen and is falling a long way – a fall of 28% in the rate for large companies over the full period, taking it down from 28% to 20%. Far from leading to a loss of revenue as the long term Treasury model now tells us , the actual Treasury forecast is for  a gain of revenue over that time period. Why the difference?

I think the Treasury needs to do some more work on Laffer. I am sure from my own work that the current CGT rate is above the level to maximise revenue. That means if you cut the rate you will collect more money for the Treasury.  I think we can all agree VAT is still below it, as probably is fuel duty. That does not mean I want to raise them.

Corporation Tax is more difficult to gauge. Given the huge swings in Treasury forecasts of Corporation Tax revenue in recent years, the Treasury clearly  find it impossible to predict reliably. These latest studies are far from convincing, and laden with warnings that they are not predictions of revenue for the next few years, which is what we really need to know. I suspect the Treasury still does not want to admit that you can cut a tax rate and get more revenue in, though the evidence shows that is the case.

This item about exam reform has been sent out by Michael Gove. I would be interested in your views on it:

…..”The last Government utterly failed to provide an exams system that was fit for purpose. Exams were so afflicted by grade inflation and dumbing down that, even though official results soared, our performance in international tests stagnated. Every year, Labour ministers would point to constantly rising exam results and boast that this proved their policies were working. In fact employers and universities lost confidence, parents became disillusioned, and students were at best misled and at worst lied to about the value of the qualifications they were taking.

That is why this government is determined to restore integrity to the exams system, with new GCSEs and A levels which are inoculated against grade inflation and pegged to world’s best.

GCSEs

(Recently) we published revised content for GCSEs in science, history, geography and languages, which will be taught in schools from September 2016. This set out that:

• In science, the level of detail and scientific knowledge required will increase significantly, and there will be clearer mathematical requirements for each topic. Content will be added on topics including the study of the human genome, gene technology, life cycle analysis, nanoparticles and space physics.
• In history, every student will be able to cover medieval, early modern and modern history – rather than focusing only on modern world history, as too many students do now. British history will in future account for 40% of a GCSE, rather than 25% as now. There will also be an increase in the number of geographical areas pupils must study.
• In geography, the balance between physical and human geography will be improved – so that students will learn more about the world’s continents, countries and regions – alongside a requirement that all students study the geography of the UK in depth. Students will also need to use a wide range of investigative skills and approaches, including mathematics and statistics, and we have introduced a requirement for at least 2 examples of fieldwork outside school.
• In modern languages, greater emphasis has been placed on speaking and writing in the foreign language, thorough understanding of grammar, and translation from English into the foreign language. Most exam questions will be set in the language itself, rather than in English.
• Finally, ancient languages have been given a separate set of criteria for the first time, reflecting their specific requirements. Students will now need to translate unseen passages into English, and will have the option to translate short English sentences into the ancient language.

A levels

We also published revised content for A levels in English literature, English language, English literature and language, biology, chemistry, physics, psychology, history, economics, business, computer science, art and design and sociology, for first teaching from September 2015.

The content for these A levels was reviewed and recommended by Professor Mark E. Smith, vice-chancellor of Lancaster University, drawing on advice from subject experts from universities and elsewhere. We hope this input from higher education will mean these new A levels better prepare young people for progression to undergraduate study. The new content set out that:

• Mathematical and quantitative content has been strengthened in each of the sciences, computer science, economics and business: for example, understanding standard deviation in biology and the concepts underlying calculus in physics.
• In computer science, basic ICT content has been removed and emphasis has been placed instead on programming and far more detailed content on algorithms.
• In the sciences, there will also be a new requirement that students must carry out at least 12 practical activities, ensuring that they develop vital scientific techniques and become comfortable using key apparatus. At the moment, some students can take a science A level without having any practical work assessed at all.
• In history, as well as covering the history of more than one country or state beyond the British Isles, students will also now be required to study topics across a chronological range of at least 200 years, up from 100 years presently.
• In English literature, specified texts will include three works from before 1900 – including at least one play by Shakespeare – and at least one work from after 2000. We have also reintroduced the requirement for A level students to be examined on an ‘unseen’ literary text, to encourage wide and critical reading.
• Finally, in economics, content has been updated to include the latest issues, such as financial regulation and the role of central banks.

Alongside these announcements on the content of exams, Ofqual has set out how these new GCSEs and A levels should be assessed – with linear assessment rather than modules, and a greater focus on exams rather than controlled assessment.

New A levels and GCSEs in arts subjects from 2016

I also announced yesterday that a number of exams in other subjects will be reformed for first teaching from September 2016.

At GCSE, this includes art and design, music, drama, and dance, as well as five further subjects – citizenship, computer science, design and technology, PE, and religious studies. This means students will be able to access high-quality, rigorous GCSEs in the arts subjects at the same time as reformed GCSEs in languages, history, sciences and geography. Only GCSEs in English and maths will be reformed more quickly. At A level, music, drama, and dance, as well as design and technology, PE, and religious studies, will be reformed.

This announcement has been widely welcomed across the arts world and elsewhere. I am delighted that children will now be able to learn about Britain’s cultural heritage and develop their creativity while striving for qualifications on a par with those in academic subjects.

Overall, our changes will increase the rigour of qualifications, strengthening the respect in which they are held by employers and universities alike. Young people in England deserve world-class qualifications and a world-class education – and I hope you will agree that is what our reforms will deliver.”

The debate about the future of Scotland raises an even bigger debate – what will be the future of England? More and more people in England feel we are getting a raw deal, as the political classes concentrate on improving the offer to Scotland, and burnishing special arrangements for every part of the union of the UK except that of England.

I have tabled questions again asking who speaks for England?  When can we have the policy of English votes for English issues applied in the Commons? Why don’t Labour  MPs for Scottish seats recognise the long term political danger of voting for or against English matters when the same issues about Scotland  are determined by the Scottish Parliament in their own constituencies?

The last General Election saw the Conservatives win a comfortable majority in England. Because Labour MPs for Scottish seats intend to vote on English issues as well as Union issues, the Conservative leadership had to set up a coalition government for England as well as the Union. England now has to accept policies which were defeated in the English part of the General Election as a result. Conversely Scotland gets exactly what it votes for in big areas like education, health, local government, law and order and the environment because these matters are now determined by the Scottish Parliament. Scotland can be on the losing side in a General Election but still get much of the government  it wants through devolution. England can be on the winning side in a General Election, and still end up with a government it does not want thanks to the presence of Scottish MPs at Westminster. (All this of course is subject to the increasingly stifling impact of the EU on all parts of the UK)

England’s sense of grievance is sharpened by the persistent attempts of the EU and its Labour and Liberal Democrat supporters to deny the existence of England and to seek to split us up into a series of meaningless regions. They want Liverpool to accept government from Manchester, Sunderland to accept government from Newcastle, and Exeter to accept government from Bristol, as they seek to steamroller city identities into convenient regional administrative units. In my own case they  cannot make up their mind whether my area is the Thames Valley, the rest of the South-east,  Wessex, the south or some other monstrous bureaucratic birth.

England is the part of the UK least happy with the EU relationship. English voters will want to use any change in the Scottish relationship as further reason to change our subservience to the continent. More English people now want to have a voice, and for us to have more say over our own affairs, if everyone else in our union is allowed such freedom.

The Spanish Parliament with the support of the EU has decided that Catalonia will not get a legal referendum on whether to stay in the Spanish state or become independent. The Crimea has just had a referendum which the EU condemns as illegal, and the Ukrainian state with the support of the EU failed to offer Crimea a legal one. The Crimea has left the Ukrainian union regardless, with the help of the Russian army. The EU is right that this was not done legally or by agreement, but maybe wrong to imply a majority of the Crimean population would have voted NO to the move in any legal referendum.  Maybe Catalonia will now hold its own referendum, creating a clash between the Catalan and Spanish governments.

Scotland has been given a legal referendum on whether to stay in the UK or not. The EU does not seem to approve of that process very much, threatening Scotland if she dared to vote to be independent. All this implies the EU does not believe in the democratic self determination of people. They need to change their mind and be more accommodating, as do the European states who wrongly seek to block the free expression of opinion about identity within their current territories.

There is a paradox about the EU’s approach. In the earlier days of its long journey to superstatedom the EU seemed to encourage regional government and regional identities. It saw this movement as a way of weakening the member states from below, and claiming greater affinity to the people of the EU by identifying the EU more with the regional interests. As the EU has grown in power and taken more control over the member states, its enthusiasm for regional identity has waned where  it looks like becoming a movement for new smaller independent states.

I believe in the democratic self determination of people. I am glad we are about to see what Scotland really wants. We should then accept the verdict and get on with implementing the consequences either way. Allowing a vote when there is a serious question to answer is an important part of democracy which the EU seeks to stifle. Continuous referenda on the same subject until  one side gets its way, having lost in the past, is not such a good idea. Indeed, when the EU is forced into referenda that is their style: to keep on voting until they get the answer they want.

Yesterday we learned that the official figures for inward migration from the EU had been understated in the last decade. An additional 356,000 arrivals have been added to the numbers for the period 2001-10, with 10,000 fewer in 2011. Apparently they undercounted children and people arriving at regional airports.

It is always unfortunate when official figures need substantial revision. Honest mistakes or careless compiling can look like something more sinister to those who worry about the underlying reality the figures seek to capture.  In this case the errors were all ones of understatement, at a time when many people were worrying that the figures were too high anyway.

Similar problems arise if economic figures for growth, jobs and wages have to be revised down, or numbers for unemployment, inflation and other bad news have to be revised up. We learned this week that in an effort to harmonise our economic numbers with the rest of Europe we will witness upwards revisions to our apparent savings rate to reflect those in final salary pension funds, and to our output to credit us with the benefits of R and D being undertaken. It serves as a reminder that all these figures are approximations dependent on assumptions about what you count and what you leave out. All are also prone to understatement as it is difficult in a complex economy capturing all the activity for inclusion in official figures.

What does emerge is the casual way the past  migration figures were compiled, relying on surveys and not on counting people in and counting people when they left. It will come as a surprise to many that when you have a border system with everyone having to show a passport and visa where necessary people have not  not been counted in and logged. The government is trying to remedy this defect so our border control system can have more ability to furnish us with accurate data, and to remind people whose visas expire that they should leave.

Having accurate data is important for a variety of sensible purposes. We need to know how many people need housing, how many children need school places, how many people may need to visit a Dr or hospital. In the last couple of years Wokingham and other places have been playing catch up, trying to add to the school and surgery provision to deal with the extra people we now have in our community. More accurate figures sooner from our border system might have helped make provision earlier, as well as informing a better debate on numbers.

I spent last year ignoring the forthcoming vote on Scotland’s future, as the opinion polls showed strong support for no change to the current position. More recently I have taken an interest, as the polls have narrowed. I  have also commented that the “Better together” campaign is a bit  negative  in some of its content and tone, and might be more successful if it was positive and sought to ally feelings to “facts” about economic matters.

So maybe today I should ask what will happen and what should happen, if the unlikely event occurs and the Yes campaign wins for splitting the UK.

The first thing that should happen is all MPs representing Scottish seats in the House of Commons should withdraw from all business relating to the rest of the UK, especially business relating to the negotiation between the rest of the UK and Scotland. The government should pass a Bill excluding Scottish MPs from rest of the UK business if there is no voluntary agreement to this

The second thing is a negotiating team of senior Ministers should equip themselves to negotiate on a wide range of matters that need settling between the two new countries. This will include splitting the state debts and assets, sorting out responsibility for banks and money, the transition to a new currency for Scotland, the transfer of benefits, pensions and other state liabilities to Scotland for their people, and the trade and border arrangements which will apply following the split.

The third thing is to notify the EU of the need to change our relationship with the EU. Our partners will probably deem the rest of the UK to be the successor state to the UK, but they will want to cut our number of MEPs and our votes around the table. The rest of the UK will need to cut our financial contribution, and may as well regard the exit of Scotland as triggering  a much more fundamental renegotiation of our relationship. There will have to be Treaty changes anyway. It would accelerate the task Mr Cameron has set himself for a future Conservative government, and give rise to an IN/Out referendum on possible rest of the UK membership of the EU. Whilst as a Unionist I would prefer a willing Scotland to stay with us, as an Englishman I can see advantages in being able to sort out this wider EU relationship sooner and from a different bargaining position where England’s view is more central.