Author: johnredwood

 I understand the critics of the current government Help to buy scheme, who think more needs to be done to lower home prices. Yesterday I was seeking to explain the thinking behind the government’s policy, which is enabling more younger people to buy their first home.  Sometimes it pays to understand where people are coming from when you disagree with them. The recent buyers  then, of course, have an interest in prices staying up. It is a difficult cycle to break into, and all too easy from an armchair to assert you want home prices to halve without thinking about how many people would be put out of work or into bankruptcy by such a move.

 One of the reasons homes are less affordable today than twenty years ago is the much costs of purchase. Successive governments have seen house buying as an easy means of collecting more tax revenue, by increasing Stamp Duties. It is another case of government taxing something they believe is a  good, with perverse consequences. If government wanted to do more about affordability, a cut in Stamp Duty would help.

At the very least they could consider only charging the higher rates on the amount over each threshold. So the 3% duty would not be charged on the whole transaction of a £300,000 property, but just on the £50,000 above the threshold. The problem with the current system is it creates a series of prices just above a duty rate threshold that cannot function as market prices, because people refuse to pay so much extra tax for a modest change in the price of the property.  If you move from a £250,000 to a £251,000 property you face a bill of an extra £5000  in duty, five times the price rise. If you are nearer the top end and move from a £2m property to a property just over £2m you face a total duty bill of £140,000 instead of £100,000.

Another reason is the fast rate of migration into the country, placing considerable pressure on the available housing stock. Under Labour the build rates were below the rates needed to keep up with the rapid rate of migration. The Coalition has brought net migration down by a third and plans further cuts, which should help ease the housing situation.

The build rate for new homes has been disappointing over the last decade. The government has taken action to allow more housing development. In hard pressed Lodnon, where considerably more space is required, there is a more permissive regime to allow high rise blocks of flats for private rent and purchase. There is also considerable work putting in basement and roof floors into the typical terraced housing in  many a London  Street, which allows more flats and maisonettes in each property. As someone who works some of the time in London and has a bedsit there, I am all in favour of more development in the popular parts of the city. Next to my flat they have just knocked down the old building of the government  offices of London – a good sign in itself – and are replacing it with a taller block containing  flats. That is good news.

        I was delighted to learn this morning that Conservatives will be offered a free vote on any intervention in Syria. Many Conservative MPs are apprehensive about any plan to arm and train rebel fighters, or to contemplate western military action in this deeply damaging regional war.

Some people say we could solve our economic problems if the authorities engineered a house price collapse. They argue that current house prices, especially in London and the South-east, are too high for many to afford a home of their own. Those that do afford the rents and mortgages are left with too little money to sustain demand elsewhere in the economy and to enjoy a decent lifestyle.

We have just lived through a period of falling house prices in most of the UK as a result of the Credit Crunch and mortgage famine. Far from stimulating demand on other things, this just added to the lack of confidence in the economy, and removed income from the system as the housing market contracted. Whilst high home prices undoubtedly make  families struggle to afford a home of their own, they can also stimulate the income of others in the housing market. For every  new buyer suffering from the high price, there is a seller who may be trading down, taking a profit or benefitting from an inheritance, who should have more money to spend. Most especially they swell the government coffers from higher tax revenue on the transactions that do take place.

We have very high home prices in parts of the UK thanks primarily to the very easy credit conditions of the Great bubble prior to 2007. Banks lent ever higher multiples of earnings to purchasers. Banks willingly extended credit to property developers and housing companies. We also have high home  prices in the expanding parts of the country because demand from new migrants into these areas has outstripped the increase in supply of homes. This has been most pronounced in London, where the street pattern and dense existing development limits the scope for extra building. Some of the overseas demand in the centre has driven up  prices to levels UK taxpayers are unable to afford, both thanks to the devaluation of sterling and to Non Dom tax status.

I agree there is a problem of affordability for potential new homeowners. The average age of buying a first home has risen a lot in the last decade. The government is responding by making more money available to banks to on lend as mortgages at low interest rates, and by launching its Help to Buy scheme. Critics say this is stoking the bubble. I do not think deliberately engineering a further crash in home prices would be helpful. It is not just the mortgage banks it would disrupt who have lent against higher values, but also the many individuals who have bought at high pirces in recent years. Their confidence and even their solvency could be undermined by such a move.

          The US and UK government passion to intervene in the Middle East was spurred by the murderous  events of 9/11. The US decided to hunt down their enemies, concentrating on Afghanistan. It was only much later that they realised their main adversary had moved to Pakistan.

           A theory sprung up from neo Con circles that NATO could influence the Middle East for the better, toppling a bad regime here, supporting rebels there, to nudge or force more Middle Eastern countries to adopt western style democratic governments. Mr Bush was keen on this approach, persuading many in the UK establishment including Mr Blair to back him. The UK, ever mindful of the need for the “special relationship” with the US, went along with these developments.

           The arrival of President Obama in office promised something different.  He announced his wish to change the US position and image in the world. He said he would close down Guantanamo Bay, as a symbol of what for some had gone wrong with the west’s wish to export its values. Instead Mr Obama increased the forces in Afghanistan and kept Guantanamo open. He did, however, show a marked reluctance to get involved in Libya, is stalling over Syria, and has now set a timetable for withdrawal from Afghanistan.

            The west has discovered that aiding and stabilising democratic regimes in various Middle Eastern countries is difficult. The Syria case has also brought the west into confrontation with Russia, who backs the Assad regime.  The west would be wise to withdraw from Afghanistan and return to diplomacy, trade and cultural links. There is no evidence that further m ilitary interventions can create happy and stable countries by the use of force from without.  It is difficult to see how the UK’s national interest would be served by intervention in Syria.

Time was when we intervened militarily we were defending a trade route to India or seeking to keep open the Suez Canal. Those interventions had mixed outcomes, but at least there was a defined UK purpose for them. Today we intervene because we think we should back some factions in a civil war, or because we do not like the autocrat in charge, without there being any express UK interest in change, and without any guarantee that the replacement will be better than what has gone before.

The Foreign Office seems to believe that we need to operate alongside the US for fear of losing the special relationship. The relationship has always been more special to the UK than to the US. After all, the US did not rush to our side during the 1939-40 crsis, when the future of democratic self government in these islands was directly threatened. It took Pearl Harbour to make us brothers in arms.

Nor did the UK’s sensible refusal to join the Viet Nam War end all military and diplomatic co-operation between the UK and the US thereafter. The US came to accept that Viet Nam was a war too far for us, and in due course for the US as well.

The Foreign Office also seems to think that to keep our place on the UN Security Council we need to be seen to be fighting wars on a regular basis. Yet Russia keeps her seat on the Security Council when she takes a very different view to the majority or to the US view. The only threat to the UK’s seat on the UN is the EU, not our war fighting practices. There has been no diplomatic movement within the UN to set the UK a war fighting target to stay on the top table. Many UN countries would be happy if we joined in fewer wars.

The UK’s stature in world diplomacy would surely rise if we did not automatically back the US, and if we fought fewer wars with greater moral purpose and more obvious military success. The Falklands was a successful campaign in a just cause which was worth fighting. Our Middle Eastern activities are altogether more problematic.

PS   There is a move led by Andrew Bridgen MP and Julian Lewis MP to make sure there would be a Parliamentary debate and vote prior to any supply of arms to Syria. There may be around 100 Conservative MPs, and possibly the Labour party, who take this view.

UK foreign policy is not fit for purpose. The Uk does not wish to become part of an integrated European Union with government from Brussels. For too long UK government has pretended we are not being dragged into a federal government, whilst the UK has accepted the Nice, Amsterdam and Lisbon centralising treaties. Let us hope the Prime Minister’s Bloomberg speech is a radical brak with the past, seeking a new relationship that gets us out of the common government.

Nor should   the UK   be involved in a series of wars to settle the future governments of the Middle East.

The Uk public is largely against both these major preoccupations of UK foreign policy under Blair, Brown and in part under the Coalition. The public wants a new relationship with the EU which allows trade and friendship, but gets us out of common government. The public did not want the Treaties of Nice, Amsterdam and Lisbon, but was denied a vote on any of them. The public was not happy about the Iraq war, wants our troops out of Afghanistan as soon as possible, and is strongly against any involvement in Syria.

What is odd about UK foreign policy in recent decades is both its continuity under successive governments, and its perversity in going against the grain of history and commonsense of previous centuries. The two main preoccupations of UK foreign policy prior to 1990 were to avoid any single power dominating the continent of Europe, and to intervene in the rest of the world only in support of  UK interests, especially to keep commercial routes open and free trade flourishing. These two preoccupations have been turned on their head, by a policy which has allowed or furthered EU integration under a single emerging EU sovereign, and encouraging UK military intervention where there is little or no national and free trade interest. I wish to explore the question of UK foreign policy in a series of articles, looking at past and future policy directions.

The policy of not allowing a single power to dominate the continent was  pursued for four centuries. In the sixteenth and early seventeenth centuries Spain was successfully opposed in conjunction with the Netherlands and other Protestant powers. In the eighteenth and nineteenth centuries France was prevented from military dominance, and in the twentieth century Germany was twice defeated by a grand coalition. The UK played a prominent role in each of these conflicts.

Whilst you can argue that the UK spent too much blood and treasure on preventing a single authority emerging In Europe, it does not make it a good idea to switch from such a policy to actively promoting the emergence of a single governing authority. As Europe continues with its relative decline (in population, in eocnomic and military power) the sensible response is to be relaxed about integrating moves some may wish to make on the continent, but to be clearly against forming part of any such single bloc. We should neither want to beat them nor join them.

The Energy Bill going through the Commons is the result of an energy policy in transition – or an energy policy where Conservatives want cheaper energy and the Lib Dem Secretary of State remains wedded to dearer and scarcer energy.

The problem with Mr Davey’s old fashioned approach to global warming is it means visiting on the UK especially expensive energy. Far from cutting total global business demand for energy and therefore cutting global emissions, UK dear energy just makes it likely more and more energy using business will go somewhere else. Mr Davey’s approach will not spare the planet more carbon dioxide, but will cost us jobs and prosperity.

Then there is the problem of fuel poverty. Lib Dems used to worry about this, yet their energy policy stokes it. Recent fuel bills have been doubly damaging to many. Not only has the price of our power gone up a lot as the renewables kick in on the electricity bills, but it has been so unseasonally cold that people have had to have the heating on for longer. It has been around 42 degrees F when I have been getting up in May, and parts of the country had frosts and even snow. If we have to pay global warming prices for power, it would be nice to have global warming temperatures to go with it, so we did not need so much heating.

Dear energy policies leave people colder than they wish, buring more power with much higher bills. That leaves them short of money to buy other things they need. We do not want an energy policy that sends energy using business offshore, nor one which leaves granny shivvering, afraid to turn on the heating. We need to exploit the shale gas beneath our feet, build more combined cycle gas power stations, and go for cheaper energy. Then we could also afford the energy saving investments at home and at work that would help us burn less.