Image courtesy of Kevin Butler. Picture of the Rt Hon John Redwood MP laying a wreath in Burghfield, before attending the morning service at St. Mary’s. In the afternoon, Mr Redwood attended All Saints Church in Wokingham and laid a wreath at the Town Hall War Memorial.
Some of you write in to say it would be better if we had a nationalised railway. I have good news for you. Network Rail is effectively a nationalised industry, taxpayer owned and financed. East coast mainline is a nationalised company running a mainline railway. The remaining private sector franchise train companies run under strictly controlled requirements and conditions set out by the Rail Regulator, effectively a branch of government.
Under Labour the successful privatised industry which boosted traveller numbers and freight activity was gradually renationalised by the backdoor. So much so, that the latest 5 year plan has all the wit and wisdom of the old Soviet five year tractor production plans. It weighs in with a massive 958 pages. It proposes a spend of £38.3 billion over 5 years. Network Rail will receive only 30% of its income from its customers, the train companies, with 60% coming from government grants.
Over the five years the borrowings of Network Rail will shoot up from £31.7bn to £49.6bn. This will include financing for £12bn of “enhancements to Britain’s rail network to ease congestion and improve performance” (not including HS2). We are told that within this “projects totalling more than £7bn do not yet have clear delivery costs or plans.”
Within that programme electrification accounts for the biggest item. Why? We are asked to accept “Electrifying the railway will bring many more benefits for both passengers and freight users, most notably the ability to run more frequent trains with shorter journey times and less environmental impact…”
This is a curious proposition. Electricity is a secondary fuel, so the energy losses are usually greater than with a primary fuel like diesel. There are substantial energy losses in the power station, there are transmission losses, and then losses with the inefficiency of the electric engine. A diesel train only has one of these energy losses. If the underlying electricity is primarily generated from gas and coal there is no great Co2 advantage either.
When I last tried to use the East coast mainline, which has been electrified, the train I was booked on was unable to depart owing to break down. I was told this was quite a common problem with the electric trains on that line, and the staff knew the routine when it happened. Electric train systems are also more vulnerable to bad weather than diesel lines, as the overhead gantries and power cables are especially prone to damage in bad conditions.
There is investment we need on our nationalised railway. We need investment on busy lines like Great Western to improve signalling and throughput of trains, to lengthen trains and some platforms, to replace dangerous level crossings with road bridges, and to increase track availability at bottlenecks and over busy sections into main cities. Surely these should be priorities over electrification, and surely these should be the ones they identify if they are going to spend another £7 bn on as yet unapproved projects.
On a British banknote the Queen’s face looks out as a symbol that the country stands behind its currency. The Chief Cashier of the Bank of England signs a promise to “pay the bearer on demand the sum of ….”. On the other side our banknotes have pictures of well known figures from our country’s past. No-one can be in any doubt. Buy sterling, and you get a currency backed by the UK state. The state’s power to tax and to intervene in banking and currency affairs stands behind those pieces of paper.
When they came to design the Euro they had problems. There was no shared uncontentious history on which they could draw with figures and scenes from the past. There was no sovereign figure. There was no named Chief Cashier willing to sign the notes. They came up with something different.
On one side is a map of Europe, including non Euro countries as well as Euro countries, and including non members of the EU. So clearly whilst they wish to give the impression that Europe stands behind this currency, the detail lets down that idea. There are also drawings of stylised bridges. These are similar to styles of bridges in Europe, but are not meant to represent any particular place for fear of disputes about which should appear. On the other side are drawings of differing styles of European architecture, again without a specific building or place in mind. The twelve stars symbol of the EU appears on both sides. There is no symbol of the Euro area or ECB.
In one sense all this is relatively unimportant. In due course when they have completed their union more fully they may be able to reach agreement on popular symbols of it. They may unite around Charlemagne despite his often violent approach to human rights, or some other sufficiently distant person to be relatively uncontentious. More recent advocates of European unity prior to 1945 have gone about it in ways that still cause distress.
In another sense the symbols or lack of them sum up the key problem of the current Euro. No-one can be sure of who or what does stand behind it. When it came to Cyprus, the answer was the rest of the EU did not stand behind the Cypriot Euro if you held it in one of the wrong banks. The Euro countries are in the process of providing a better answer to this question. We need to know who stands behind the banks of the system? Who stands behind the member states borrowings? Does a Euro note have the backing of all Euro area taxpayers in the way a sterling note has the backing of the taxable capacity of the UK state?
The latest European Union economic forecasts for the EU as a whole and the Euro area in particular do not make good reading.
They reckon unemployment will be above 12% in Italy, above 11% in France, above 25% in Spain and above 17% in Portugal for the three years 2013-15. The average rate in Euroland will be around 12%. Only Germany, amongst the majors, has a more respectable rate of a bit over 5%.
Outside the Euro the UK, Denmark and Sweden are forecast to have unemployment below 8% for the same time period. The non Euro countries as a whole reduce the overall rate of European unemployment compared with the bad results in the Eurozone.
They forecast an overall fall in output and incomes of 0.4% this year for the Euro area, to be followed by growth of 1.1% in 2014 (0.7%). Germany is forecast to grow 0.5% and 1.7% (2.2%), France 0.2% and 0.9% (1.1%), Italy to fall 1.8% to be followed by growth of 0.7% ( – 1.1%), with Spain falling by 1.3% followed by growth of 0.5% (-0.8%).
In contrast they expect better results from the non Euro countries. The UK is expected to grow by 1.3% and 2.2% (3.5%), Sweden by 1.1% and 2.8% (3.9%) and Denmark by 0.3% and 1.7%.(2%)
So why do they think it is so much worse in the Euro than outside? They accept that banking problems allied to balance of payments imbalances between the member states have led to poor performance. They think banking problems may continue for longer. They say “Frictions related to the reallocation of resources in the process of internal adjustment is still expected to weight on growth….” They also admit that “Bank balance sheet repair is a pre-c0ndition for the normalisation of credit growth” and “decreasing bank lending volumes appear to be largely explained by low credit demand, but supply is a binding constraint in some member states…”
All this leaden prose and jargon is saying two crucial things about their currency zone. Firtly, they did not create a well regulated commercial banking union, and are now paying the price for overextended banks and credit in too many parts of their zone. Secondly, they did not get the economies into line, so some states built up large trade deficits which they can no longer finance or afford. The result of both these errors is a recession machine. They have to cut bank credit to get balance sheets into shape. They have to slash demand to cut imports to cut trade gaps.
Meanwhile Sweden, Denmark and the UK, the three higher income countries out of the Euro, can follow policies that work better for them. They have 3 years of superior growth to look forward to as a result, according to the EU itself.
Yesterday I was awarded the title Parliamentarian of the Year by the Spectator, along with 14 colleagues. We received this collective award because we were the 15 (all Conservative) who took a different view to the 3 main parties on how to handle press regulation.
This morning on the Today programme and accompanying news bulletins the BBC suggsted that if the UK voted to leave the EU the Nissan jobs could be at risk. Yet listening to the clip of the interview, Nissan made very clear that they have a great factory in Sunderland and have no intention of closing that, whether the UK stays in or leaves the EU. Their comments were about future additional investment, not a threat to what they have.
Of course when planning any future UK investment the UK’s relationship with wider European markets will be a relevant consideration. If the Uk leaves the EU I expect we will have decent arrangements to continue buying and selling cars to each other . The German industry will inists on this. So I expect Nissan would continue to find the UK a great place for new factories, just as it clearly likes its present investment.
Indeed, if we negotiate a new relationship that allows us to cut some of the regulatory and other costs of the EU rules, companies might like the Uk more, not less. Companies will also understand that they want to sell to the important UK market, where consumers are also voters and where those voters want a referendum on the EU.
The BBC should questioning peoples’ jobs, and just report what is actually said, which was carefully nuanced and about future investment.
The USA, Greece, Portugal, Ireland and other Euro area countries have all cut their total public spending by more than the UK since the crisis struck. The USA has grown faster than the UK over the last five years, whilst much of Euroland has remained in a long recession for the same period. What can we deduce from this about austerity policies?
It is true that the spending cuts have been much larger in parts of Euroland than anywhere else. Irish total public spending is down by 15% in cash terms from the 2009 peak. Greek total spending is down by a bit more. In the USA total public spending fell marginally in cash terms in 2010 and in 2013, and was just 2.7% up in cash terms in 2013 over 2009, reflecting a real terms reduction. In comparison UK current public spending has shown real terms increases over each of those years and is up 13% in cash terms, 2013-14 compared to 2009-10. Total UK spending is up by 7.6% in cash terms, reflecting a substantial decline in capital spending resulting from Labour’s cuts at the end of its administration.
The Irish economy has just started to grow again after five years of falling output and serious problems. The further recent reduction in public spending has not prevented a small improvement. Meanwhile, in the UK public spending control is now tighter than in the period 2010-12, but output is now expanding much more rapidly.
The poor performance of the peripheral Eurozone economies has not been helped by very large public sector cuts, reducing employment incomes and other spending in the public sector. However, the bigger impact on their output has come in the private sector. The high exchange rate for their cost base has limited their ability to export or to substitute home production for imports. The lack of independent control over money means they have not been able to stimulate demand by monetary means as the USA and UK have. As a result the sharp fall in public sector output has not been offset by rises in private sector output, but reinforced by declines in private activity. High and rising unemployment has added to the misery and subtracted from demand.
Meanwhile, the better performance of the USA with tighter controls on spending, and the better performamnce of the UK now it also has tighter controls on spending, suggests that public sector spending controls do not prevent gr0wth. The private sectors of the USA and UK are able to expand, thanks to easy money policies. The US has also had the added advantage of early exploitation of shale gas, adding directly to output and making US industry more competitive thanks to cheap energy.
I awoke to the sound of a Radio 4 interview concerning CO2 reduction. A poor interview produced no figures, but left listeners with the opinion that China, the USA and others are doing more to cut their CO2 emissions than the UK. The Chancellor was wrong by implication to warn us that the UK is in danger of doing more CO2 reduction (by higher energy prices)than competitors which could just result in more of our industry going elsewhere. The UK was urged to do more.
I have found UN figures which tell us the story of the 20 year period from 1990-2010, the first 20 years of the Kyoto targets and the CO2 campaign. Over that time period US CO2 emissions rose by 20%, China’s by 165%, and the UK cut by 7.6%. Other comparable countries like Australia saw a 42% increase, Japan a 14% increase and France a 0.8% increase. Only Germany of the majors did more than the UK to cut its CO2 output.
In the last 3 years the US had developed a lot of cheaper shale gas which has helped cut its CO2 output. Doing it that way helps competitiveness, as it cuts energy costs. The UK is doing it the dear way, through renewables, which does the opposite. It puts prices up and means fewer industrial jobs in the UK.
I think the Chancellor was right to say the UK should not follow policies which simply divert good business from the UK to other centres. Policies which develop new cheaper sources of energy which also cut CO2 would be a good idea.
Image of the Rt Hon John Redwood MP with James Wharton, MP for Stockton South, who is sponsoring the EU Referendum Bill. Mr Redwood is supporting the ‘Business for Britain’ campaign which is calling for an EU referendum to be held before the end of 2017.
Photograph taken at Old Palace Yard, Westminster on 6th November 2013.
The UK Parliament is continuously evolving. The battle to have power and to use it wisely is a daily one. Constitutional theory may still say Parliament is sovereign, but that is only true if Parliament retains the political will to assert itself.
Parliament gained its supremacy by limiting the power of Kings and then taking over power from the monarch. It retained it by making the institutions of the country bend to its will, reshaping the aristocracy through taxes and changes to the Lords, fashioning regulation and tax for business and the professions, and undertaking a large redistribution of income through the public sector.
In more recent years Parliament has had to rein in the large government it created and sponsored. Even though most government Ministers are also MPs, the Commons has had to use its voices, votes and abilities to prevent the executive using power to excess or taking Parliament for granted under a majoritarian system.
By far and away the largest and as yet unbridled challenge to Parliament’s power has come from the EU. It is true that all the powers the EU possesses were powers that Parliament has granted. A single Act of Parliament could still take back this jurisdiction. However, the longer Parliament leaves a new settlement of powers with the EU the more danger that these powers will eventually be beyond the political power of Parliament to wrestle back. Treaty law is in conflict with Acts of Parliament.
Meanwhile, Parliament has had some successes in recent months and years reminding the executive of its role and supremacy. Ministers’ careers can be broken as well as made in Parliament. The Select Committee system provides a further check on departmental actions and decisions. This Parliament has played a major part in issues like the Syrian war. When no single party has a majority government has to work harder to ensure it has the votes for any measure it wishes to introduce.