Author: johnredwood

 

           Martin Luther King’s great speech 50 years ago still reverberates across the decades. It is good that the nasty aparteid in South Africa and the unpleasant racial divide in the USA has now gone. The world is a better place for their passing.

          All of us in politics need a dream to keep us going. My dream is that one day we will live again in a self governing democracy here in the UK. I look forward to the day when UK electors can influence a UK government, free from overriding EU laws that we disagree with.

          I was brought up in a free country. One Parliament could not bind its successors. People could demand new laws and changes of government, and get them through the ballot box. It is still the best system.  6 European Treaties later, much of our independence and liberty has been replaced by EU controls, and rules we cannot ourselves change or amend in the light of experience.

 

I am Wokingham’s chief lobbyist. One of an MP’s main roles is to lobby government on behalf of their constituents. MPs lobby for  changes and improvements in laws, public spending and administration, in the name of their constituents generally. They lobby for individual constituents, usually in private, when they need help to sort out their tax or benefit disputes with the government, or need better treatment  or redress from various public services.

A new Bill to regulate lobbyists is therefore  of special interest to MPs. There are already clear rules and conventions about how and when an MP or anyone else can lobby, and  when it is wrong to do so. An MP, for example, should not lobby on behalf of a private interest he or she has. A business can set out its case for a change to the law, or a charity can make its case for more public spending in its chosen area, but they must not seek to buy access to Ministers or splash cash in any way which looks like or is  a bribe.

The combination of Parliamentary convention, tighter modern Election law on donations to parties and individual MPs, the need for MPs to place every financial interest on a public register and the confrontational style of politics designed to tease out malpractice by the other side constitutes the current framework for controlling or regulating lobbying and access. The government now wishes to amend this framework with additional legislation.

As an MP I encourage my constituents to lobby me directly. There is no need to pay a penny for access to an MP. Every constituent has a right of free access by email, letter or in person, when they have a legitimate grievance or concern. Similarly,  access to Ministers is free access. Ministers will meet groups or even individuals with important things  to say about the conduct of government or future improvements, without a paid for lobbyist being  involved.

Lobbying firms may well have an important role to play. They are not buying people access to Parliament. They can be useful in helping a person or company marshall its case, understand the policy context, explain how decisions are made and laws enacted to busy people who may not have made a study of it themselves. Good lobbyists want you to comply with the law on influencing government, not break it, just as good accountants and lawyers offer specialist advice to individuals which keeps them compliant. Good lobbyists know the topic, tell you what ay or may not be achievable, and help the individual or company explain its issue to government.

As with all walks of life, there will be on occasions bad lobbyists who break existing conventions and laws, and who doubtless will break any new law as well if they think they can get away with it to advantage. Democratic politics cannot survive without lots of good and well informed lobbying. Another way of describing that is “democratic debate”.

 

 

 

I do not like coalitions. I campaigned for a Conservative majority government in 2010, and will do so again in 2015.  I have heard most of Mr Cameron’s speeches to Conservative MPs. I can assure you he always tells us his aim is a majority government next time. He does not prepare us for the idea that we might need another coalition. Recent rumours in the papers have probably been mischief put around by others when there is not so much going on.

One of the reasons I do not like coalitions is the electorate do not get what the different parties have promised in the election. The Coalition Agreement, and the subsequent brokered compromises issue by issue, determine policy. It may be quite unlike what either party to the Coalition wants or said they would deliver if granted a majority. Coalitions put politicians more in the driving seat, decisive elections put electors more in the driving seat. They also undermine public confidence in political parties, who have to reverse some of the things they promised.

An even bigger reason why I do not like coalitions is the EU. No UK government can now govern the UK as it wishes. So many things are now determined by EU legislation, regulation and controls. The other two main parties in the Commons are federalist parties. It is extremely difficult to reach a sensible agreement with parties that do not want the UK government to be in charge, and meekly accept whatever line comes from Brussels on so many topics.

A main part of the Conservative Manifesto for 2015 will be the promise of a renegotiation of our relationship with the EU followed by a referendum. All the time the other parties refuse to countenance a major change to our relationship and refuse to vote for a referendum, they are saying they could not and should not enter a coalition with the Conservatives. Conservatives cannot compromise on the EU issue. All the speculation about a further Conservative/Lib Dem coalition looks unrealistic given the big divisions between the two parties over the EU.

 

 

           Those who think the UK arming the rebels is a good idea need to persuade a reluctant country. It seems the government is no longer testing out  this idea so strongly.  Those who think missile attacks on Assad’s government are a good approach  need to explain how they could do this without causing more deaths of civilians, bystanders, human shields and others that the west should not wish to harm.

        Before Parliament broke up many Conservative MPs made clear in the Chamber and by signing a letter that no such actions should be taken before a proper Parliamentary debate and vote on the subject. The government agreed to this. That remains the view of many Conservative MPs. We do not like the brutal events in Syria any more than the government. We do need persuading that there is any military intervention which the UK could make which would make it better. The first instruction should be to do no harm, in a situation fraught with danger and with all too many armed groups in conflict.

 

          I do not like Stamp Duty. Houses are dear enough, without imposing an extra tax on people trying to buy a home.

          I am also a realist. This Coalition government, and any likely successor, will need revenue from taxing property transactions. They are not about to abolish the tax and give up the money. We need to find a fairer way of charging the tax, and set rates which are more affordable so there can be more transactions. That way homes can be cheaper, and the taxman can still raise substantial sums of  money in a more buoyant economy.

        One of the worst features of the current Stamp Duty is the cliff edge approach to the rising tax rates. Buy a home for £125,000 and you pay no tax. But a home for £125,001 and you pay £1250 of tax.

        The increases in tax at threshold points become very high as the price of the property rises. Pay £1 over £250,000 and your Stamp Duty bill shoots up from £2,500 to £7,500, a 200% increase, or an extra £5,000 on your purchase.  Pay £1 over £500,000 and your Stamp Duty bill surges from £15,000 to £20,000, another £5,000 increase, though a smaller percentage.

        Pay £1 over £1million and your Stamp Duty bill is a hefty £10,000 more, rising from £40,000 to £50,000. That’s £50,000 tax to buy a one bed flat in central London, for example.  Be in the fortunate enough position to be able to buy a 2  or 3 bed flat in the best parts of London and you would have to pay £100,000 of Stamp Duty at £2m. Pay £1 more and the tax bill climbs to a giddy £140,000, a £40,000 increase.   Just the increase in the Stamp duty is considerably higher than average annual earnings.

        The £1250 tax rise at £125,000 and the  £5,000 tax rise at £250,000 are  particularly onerous on many people trying to buy a family  home in many parts of the country. It can be the last straw, that stops people buying the home they need and want.

         The cliff edge thresholds of course distort the market. Homes for sale cluster just below the threshold points. There are large tracts of pricing territory but sparsely populated with homes for sale. £250,000-£260,000, £500,000 to £525,000, £1m to £1.1 million are not popular. The tax intervention creates a lumpy and jumpy market, where there are gaps in price availability, with vendors either holding down the price or leapfrogging it upwards, clear of the danger zone.

          So my main recommendation for reform would be to make the Stamp Duty levy progressive like Income Tax. A home priced at £300,000 should pay no Stamp duty  on the first £125,000, 1% on the next £125,000, and 3% on the last £50,000 of the price. Total Stamp Duty under this system would be £2,750 on a £300,000 house, instead of £9,000 today.

       This would make homes more affordable. Could there be a loss in revenue?  There may not be. Transactions would increase. The loss of revenue at the top end, where much of the duty is raised, would be very slight. The London market with its £10m plus transactions at the top end would still see such buyers paying  nearly £700000 as today on a £10m purchase. The higher the price, the lower the loss of revenue as a proportion of the tax  from the system I have described.

       Given the political dislike of rich people and high property prices in modern UK, the government could introduce a hybrid system, where anything over £2m still had to pay 7% on the lot.

 

 

 Labour have been deeply divided over the EU for many years. In Labour older MPs and more socialist ones are anti the EU. The younger ones tend to be more Euro friendly. It is the opposite of the Conservatives, where the Ken Clarke generation contains a few Euro enthusiasts, but more recent generations are Eurosceptic.  

Labour sees that it is losing some of its votes to UKIP over the EU and migration matters. It sees that the Conservatives  are more in tune with the mood of the country by offering a referendum and seeking Parliamentary support for one. Some in Labour are suggesting that their party propose an early In/Out referendum. It could be before or at the time of the 2015 election, or shortly afterwards should Labour win.

 

There is no doubt that the Labour high command want to stay in the EU. They were a pro EU party for 13 years in government. They gave away 138 vetoes when in office, and have remained pro transfers of power and new European laws in the last three years  of opposition. The only reason the leadership would even think of holding a referendum is if they thought they could win it for staying in the EU. Lord Mandelson has already warned them this could prove difficult.

 

Indeed, if Labour got into government and then held a referendum which they lost, the government would be effectively ended. A pro EU government, wedded to the idea of ever closer union and  reliance on the EU for much of our law and administration, would be bereft of its main purpose and have no working plan to turn the UK into a self governing democracy again. One of the things former Labour Ministers and many Labour MPs like about the EU is the EU decides for us and stops UK people preventing new laws and new government obligations which the EU manufactures in profusion.

 

For this reason Labour may well continue to decide that a referendum is too big a risk. They may also see that a pro EU party offering a  referendum is a poisoned chalice to the majority  of British voters who either want out of the EU altogether or want a new relationship based on trade and co-operation rather than full Treaty based government. Labour would not be seeking  to negotiate a new relationship. They would be using the full force of government to spin and argue that the UK must stay in the EU. Eurosceptics would fear that with the weight of government spin behind the pro case it would be more difficult to get the change we want.

Of course if Labour came out for a referendum Eurosceptics would welcome it. It helps build momentum. It would not, however, be a reason for people to vote Labour if they are Eurosceptics, as they would understandably fear any referendum under a Labour government would be posed to seek the answer Yes to staying in. An earlier referendum would of course be more attractive as an option.

 

        In the run up to the Labour conference I want to look at a few ideas that might be “game changers” for them. Today let us consider what might happen if they opposed HS2.

         At first sight this does not look likely or sensible. After all Labour started this project off when in government. They represent many of the northern city seats that are said to benefit from it. Traditionally Labour has been pro train and anti car. Their union backers tend to favour the railways, and the engineering unions like the idea of such a large project. Their Transport Shadow  Secretary soon got behind  the party line and has been a supporter.

          However, some of the Labour Big Beasts no longer back this scheme. Lord Mandelson has revealed that it was a  back of the envelope political calculation, partly to ensnare the Conservatives. Alistair Darling has looked again at the numbers and thinks that what might have been sensible at the old costings is unaffordable now the price has gone up so much. Maybe his old Treasury official contacts are also quietly lobbying him, as Treasury spending officials are clearly alarmed by the rise in prospective costs.

         Alistair Darling has some weight with the Miliband group. He has also proposed a neat way of u turning or climbing down. They can say that a project which made sense at £30bn does not make sense at £50bn or £73 bn. It could, they can argue, pre-empt too much of the budget.

          Mr Balls has always been sceptical about the costs. What better for him than to announce the cancellation or postponement of HS2 for the next Parliament. It would free a large sum of money which Labour could claim would pay for all the extra items they might wish to buy, without changing the spending totals from the Coalition plans.  HS2 could be a very flexible friend, the credit card that kept on giving, the source of funding for just about everything they might want to offer the electors at no extra tax or borrowing cost.

          Some of this might be a sleight of hand. No doubt they could exaggerate the true costs of HS2 next Parliament. But it would also make it more difficult for the Coalition, keen to keep Labour’s budgets tied to Coalition ideas of affordable.

         It would still be quite a  u turn. It would still leave Labour with some very bruised supporters who love trains and like this particular train.  You cannot, however, entirely rule it out. The Coalition needs to be careful, as it would be vulnerable if it is left supporting such an expensive project at a time when Prudence is meant to be back in fashion. Labour could even use some of the “savings” to offer a lower borrowing figure than the Coalition whilst being able to boost spending as well. That would be a cheeky move.

           Politicians often worry too much about u turns. U turns in opposition are exactly what the public wants, as they rejected the Opposition party’s approach at a previous election. Even in government  U turns  are no bad thing if you turn away from a very unpopular or unwise policy.

 

It is fashionable now for people with money to spend  to pull  down their homes and build new larger ones on the same plots. That counts as investment in the national accounts. Good luck to most of  them, I say. If that is how they wish to spend their money and enjoy the product of their labours they should be free to do so unless their aims violate planning laws or  upset the neighbours because the new structure is unreasonable. In London it is common for people to tear a house down from behind the terraced front wall, and build as big a new home as the planners will allow.

But is this an investment? Some will say we spend too much on our homes in the UK. Some argue that this type of investment is unproductive. After all, at the end of the rebuilding the same family lives in the same place. In accounting  terms, however, something real has occurred. A less valuable home has been replaced by a more valuable one. Lots of people have earned money out of the process of construction and demolition. The country is a bit richer as a result. The government has collected more tax revenue on the project. The bigger better home is there for future use, and may be used later by a larger family who need the extra space when they buy it off the owner who paid for its construction.

It is difficult to see this is less productive than the state’s investment in a new school building on the site of an existing school. The same considerations apply. The users would like something more modern, with better facilities and maybe more space. The same people may receive the same education after the rebuild as before.  Lots of jobs are created by the process of construction. The state ends up with a building with greater ascribed value, though selling it on might be as difficult as it would be unlikely.

Some commentators and bloggers say the UK invests too much in housing, and should go over to the German  model of many more of us renting.  This could only reduce the amount of investment we make as a country in housing if at the same time people accepted they would live in older, or  cheaper, or  meaner homes. We discussed the fallacy yesterday that moving to renting would prevent us “investing too much” in housing.  Shifting to rent merely changes the ownership, but does not reduce the amount invested. As some of you wrote, what people want in the UK is cheaper housing either to buy or to rent. High prices stem from   past monetary policy, and from  the balance of supply and demand for new homes.

Switching to more rented homes  would  remove much of the impulse of people today to undertake lots of work on their own homes for  no pay, as they seek improvement to their lives and to their property values through DIY. How is that progress?

Buying a home is often the largest financial decision an individual makes. In a free society being able to choose your home and improve it as your resources permit is an important part of the lifestyle on offer. People’s passion for their homes is visible in the media’s enthusiasm for home improvement programmes. It generates big industries in supplying the new kitchens, bathrooms, the tiles and paint, the patios and extensions which proud homeowners want. One of the most obvious signs of London’s current buoyancy and economic success is the endless parked skips outside houses, as the continuous and relentless drive for improvement is undertaken.

There are many cheaper houses and flats around the country. The dear homes are in the employment, business and city high spots, especially in London.  The government is going to have to live with some more upward movement in London prices as it wants the economic recovery to fan out to parts of the country with more depressed housing markets and with much cheaper property prices. London prices getting dearer relative to everywhere else is part of the process of adjustment which should encourage more people to take advantage of the cheaper prices elsewhere, setting up businesses, creating jobs and finding jobs outside the capital.

 

Most politicians think investment is a good thing. Indeed, Tony Blair and Gordon Brown thought it was such a good thing the redefined a large amount of current public spending as investment to justify their large increases in spending.

Today politicians urge more investment on the more conventional definition that investment is buying something that can be used for more than a year.  A new railway line, extra equipment for a hospital or a new school is on this definition an investment, as is a new private sector house, a new piece of machinery for a factory and a new business vehicle.

At the same time it is also fashionable amongst many to decry investing too much in property in general, and in houses in particular. Banks have for sometime since the crash been under regulatory constraints to cut the proportion of their lending that finances property.

Some  Commentators and bloggers urge on us the “continental model” of more people renting their own home, to cut the amount we “waste” by investing in property. Presumably they wish by this to have people living in cheaper and meaner properties, as the amount invested in residential property would remain the same if we simply shifted from owning to renting, as someone has to own the homes we would rent. The construction and improvement of the rented homes will still count as investment. I have never understood the  impulse to recreate a nation of tenants dependent on rich landlords or the state as the richest landlord of them all like some medieval King dishing out property favours to his supporters.

If you examine the patterns of investment, you soon discover that investment in new and improved housing, and investment in buildings and structures by business has always comprised a large element of total investment. Those who see the construction of a new hospital or school as a good investment in the public sector should not begrudge the private sector its equivalent investment in a  better home or smarter factory building. Investment in buildings is typically more than a third of total business investment in this country or one fifth of total investment, and investment in housing is another one fifth of total investment as well.

Not all investment is productive. Some investments turn out to be a bad idea, bankrupting their makers. State “investments” are especially difficult to evaluate, as in a free at the point of use or heavily subsidised service there will be no profit on the investment. The case has to be made for the investment on the basis that it will raise the quality, or cut the cost  or increase the capacity of the service in a  way which is needed.

If we wish to see total investment in our economy expand then we need to welcome more new buildings, and be ready to finance a new generation of better homes and more modern business buildings. Our banking system needs to be freed to finance these on a sensible and sustainable basis. The new bias against property is both unrealistic and cramping.

 

The July figures show government current spending up by 3.7% and net investment up by 49%. Borrowing, at £500m, compares to a repayment of £800m  in July 2012. For the four months April-July total borrowing was £36.8bn compared to £35.2bn the previous year. I do hope people will stop talking about the cuts and austerity, given these figures. The public sector is continuing to expand and to borrow substantially to boost demand.

The Treasury has recently released updated figures for past years. These confirm the analysis and forecasts of this site. Between 2009-10 (last Labour year) and 2012-13 total current public spending rose from £604bn to £657.5bn.  In real terms it also rose, by £14bn.  Large increases were seen in social security, up by almost £20bn, tax credits, up by £2.4bn, public sector pensions, up by £3.3bn and EU contributions, up by £2.7bn. Capital spending was cut, but this is also now rising again on the latest figures.