Author: johnredwood

There is still intense debate in Whitehall and Westminster about how to reduce the growth in public spending in 2015-16. Groups of Conservative MPs are bubbling with ideas on how to do it.

The most popular ideas remain cutting Overseas aid, cancelling HS2, reducing subsidies to expensive ways of generating electricity, and cutting the overhead of government.

Some are saying the government should cut the number of departments merging Overseas Aid with the Foreign Office and DCMS with a mixture of Business and Education to save Ministerial and official salaries.

The Green Investment Bank proved to be very unpopular on this site. Maybe they should be  asked to raise the money they wish to invest in their fund from the private sector to save the taxpayer the costs.

Conservative MPs are also keen to put welfare onto a contributory basis so recent arrivals in the UK do not receive any taxpayer financed benefits, and to ensure the NHS charges all people for treatment who are not UK citizens or people with an established right of residence here.  They are also keen to send criminals back to their home country for trial or for imprisonment after trial.

It will be interesting to see how many of these more popular cuts get into the final policy. Many Conservative MPs will also vote against sending free weapons and other military assistance to people in Syria.

          I support the Board and Mr Hester’s decision to seek a new CEO now who can see the bank through privatisation. The Labour party is making heavy weather of this development, ignoring the fact that Mr Hester is not seeking to keep the job, and failing to understand the need for continuity of management from a new CEO over what might be several years of privatisation and its aftermath.

 Yesterday I met the Leader of the new anti Euro German party, Professor Bernd Lucke. We had discussions in a small group, followed by a public lecture which he gave at Westminster.

He told us that as a German economics professor he went along with the consensus in the 1990s and argued that the Euro was a good idea. They thought the discipline of the Euro would force other EU nations in the currency to control their budgets and to become more competitive, so they could live side by side with Germany at a fixed exchange rate settled and enforced by the  Euro. He took comfort from the No Bail Out clause, which he thought offered a guarantee that member states in the Euro would have to accpet the fiscal and trade discipline, as they would be unable to resort to excess borrowing.

In 2010 Greece succeeded in establishing the principle that a struggling Euro member could indeed borrow more money from the EU and the IMF. Greece also went on to demonstrate that a Euro member could  renege on parts of its debts.  This changed Bernd Lucke into an opponent of the current Euro scheme. He apologised for misreading it in the 1990s, when some of us were warning what a disaster it could be for countries that had not brought their economies and budgets into line with Germany as required by convergence programmes.

He now thinks the troubled southern members of the Euro area should leave the currency union and devalue, to try to sort themselves out. Thereafter he thinks it may be necessary for Germany to leave the remaining currency union, as he thinks it is also a strain on France and the other members.

 He said that most people in Germany still support both the Euro and wider EU integration. Support for the EU is stronger than support for the Euro, and more Germans are now starting to worry about the social and economic strains the Euro scheme is imposing on some members. In particular many Germans agreee with Professor Lucke that there should be no more  bail outs.

His party currently has just 3% of the vote. If it is to make it to 5% to get representation in Parliament under their PR system, he is going to need to get acrosss vividly and frequently the points that the Euro scheme is miscarrying, and that Germany will be expected to pay more of the bills. German audiences should understand this, as after all they paid huge bills to try to get their own ostmark-DM currency union to work in the 1990s. In that case the area joining was much smaller, and they shared a common language and culture. The same cannot be said of Greece, Spain and Portugal. Professor Lucke is a fan of the approach adopted with Cyprus, making depositors and  bondholders pay more of the losses. This has in effect created two different currencies, the standard Euro and the Cyprus Euro. The Cyprus Euro is not freeely convertible if you hold too much of it in the wrong banks, and may be devalued by the authorities when you try to draw it out of the bank.

 We learn that Labour is to be told to abstain on the Referendum Bill when it comes before the House. It just shows how little Labour cares about whether we have a UK democracy or not. They do not have the decisiveness  to come and try to vote it down, but nor do they have the wisdom to come and support it. The party that denied us a referendum on Nice, Amsterdam and Lisbon when in office, now does not want to help to give us a referendum on a future attempt to sort out  the totally unacceptable relationship we currently have with the EU as a result of their federalising policies.

       China, the USA, Japan, Russia, Canada, India and Brazil refused to sign up to new Kyoto style targets or to join a new Treaty about global warming. It has left the Europeans rather isolated on this issue. Now China is to publish a Chinese translation of large amounts of peer reviewed research which questions global warming  in “Climate Change reconsidered” on June 15th. The Chinese Academy of Sciences wishes to make clear it does not endorse these views. It is good to see these matters being debated.

  Yesterday we were left none the wiser about what Labour would do concerning our right to opt out of a large number of Criminal Justice measures next year. They told us in their debate on the topic that several measures we could opt out from were important, but left it unclear whether they would opt out from all and then opt back in to some, or whether they would allow a large range of Criminal Justice powers to pass under the control of the European Court by opting out of none.

      I made the point that we want to opt out of these measures, as we wish to have control of our criminal law here in the UK, not find we are powerless thanks to future ECJ decisions. The potential opt out was the one good thing in the Lisbon Treaty. It is important the Uk uses its right. It looks as if the government does plan to opt out of all, and are still considering the issue of whether any of them are the best way of co-operating in justice matters with the rest of the EU. I urged the government not to opt back in, but to make a bilateral agreement with the rest of the EU on matters where we need co-operation across borders.

          Yesterday I heard more about the Green Investment Bank. It will have £3 billion of taxpayers money to invest in green projects.

          It is called a bank, but it does not plan to have any deposits. It will not raise money in the wholesale banking markets. Its initial plans are to invest the taxpayers money it receives in green projects with a view to making a profit on the investments. Many  of the investments will take the form of loans to greeen projects and companies.  It will be in effect a Green Investment Fund, not a bank.

                 Its idea of leverage is to be a co investor alongside private sector investors, who will help finance larger schemes. Without that it will not do a great deal with just £3bn of investment money in a £1500 bn economy. The fund has not ruled out borrowing some money later to augment its £3bn of taxpayer capital. It is clearly not envisaging anything like the leverage of a typical bank.

                I would be interested in your views on whether this is a good way to spend £3bn of taxpayers money?  If much of it is routed into green projects by loan finance the rate of return is not going to be that good. There are risks in concentrating investments in one sector. There could also be benefits if the fund managers build up an expertise and are the choice destination for interestign new schemes. Its early choice of schemes including a hospital project and a Council waste disposal project mean some of  the revenues of the investments are secured on tax revenues, as well as the investment coming from taxpayers.