At the Conservative conference last year I called for fair rules to limit benefit, healthcare and legal aid services to people recently arrived in the UK and those coming as visitors, in line with some other EU countries and the USA. (This website October 12th posting; Mailonline 8th October) Today the government has confirmed that it is working on proposals to introduce sensible rules to do just that.
This work was underway before last Thursday, so please spare me the contrbutions saying this has only happened thanks to the voters of Eastleigh!
Author: johnredwood
Save the savers
The falling pound will mean more inflation. Savers are finding it very difficult to protect the value of their savings, let alone to get any real return on it. The government no longer issues index linked National Savings to give people a low risk way of protecting the value of their money. Index linked gilts offer a negative real return at current prices.
The UK spends one third of its national income on imports. It also exports a lot. As we have witnessed a 6% plus fall in the value of the pound in recent weeks, that would imply over a period of time a further increase of 2% in the price level, applying the 6% dearer prices to one third of our purchases.
It might turn out to be less than that. The aim of the lower pound policy is clearly to encourage import substitution. We might be able to buy more from home sources at lower prices, and save ouselves some of the dearer imports. The exporters to the Uk might decide to delay putting up their prices in line with the weaker currency. They might be able to become more efficient to spare us part of the price increase altogether.
The problem remains that ultra low official interest rates are bad news for savers. This bad news is compunded if the value of money falls more. The government needs to do more to help savers. There are many more small savers than there are people with mortgages. Mending the banks would ensure more of the newly created money got through to the private sector to finance recovery. It would also enable the UK to set more realistic interest rates to provide a better return to savers, and provide some defence for the value of the currency.
Congratulations to the President on cutting spending
President Obama has done the right thing in signing approval for $85 billion of cuts in US public spending. He is still playing a blame game with the Republicans over who is responsible, but it is his signature on the order. Maybe the only way a democracy can order any cuts in public spending is by blaming someone else for them. It takes a real borrowing crisis in the markets otherwise to create the conditions for real cuts, as in Sweden and Canada in the past. Apparently Mr Obama would rather increase taxes a bit as well as cutting spending. Both reduce demand in their first round effects, so I can’t see how his preferred option is better.
Whilst cutting spending, the President claims that the cuts will be damaging to growth and jobs. He forecasts half a percent off the US economy as a result. It will be interesting to see what happens. I suspect the US economy will keep on growing this year, despite the cuts or because of the cuts. The cuts have clearly got the support of the markets. The many individuals and companies who have expressed their view this week by buying or selling securities approve of the cuts. The US Stock market has gone up, and US bonds have been fine.
The US economy is growing again because they have mended their banks. The commercial banks can lend on the money being created by the Fed. It is growing thanks to shale gas and cheap energy. It is growing thanks to its strong enterprise sector and its good technology. The lost public sector output should be replaced by private sector output in these conditions. More importantly, the fact that the US is seen to be tackling its deficit and future debts is good for confidence, the magic ingredient in any recovery.
This site-II
I have talked today to the webmaster. He says it should be easy to place a comment, and argues that all you have to do is to log on with your name and email. The system does not permit you to log in with a simpler method as a regular, as he says that could impose more barriers through the need to verify.
It is quite true more than one person can use the same identifier as a blogger – e.g. Chris. I do have to ask for people to use unique identifiers, so could the various Chris bloggers use Chris 1 and Chris 2 etc perhaps?
He is following up on one complaint I have had by email. If you could kindly explain particular problems here in response to this post, he will look at the issues for us.
This site
I have now been able to catch up with back postings. I have been very busy this week, giving four main speeches on different topics, one in Parliament and three outside. I appreciate your frustration if there is delay in posting a comment. The comments that get delayed tend to be long ones, ones with references to unknown outside sites, and ones with personal allegations against people or institutions that need checking, toning down or eliminating. I often just eliminate them as I do not have time to research them to make sure they stand up. I do not eliminate comments because I disagree with them. When I get time to post, the comments that come up first for me to deal with are the most recent.
I have asked the webmaster to see if he can make changes to make it easier to log on, and to keep your unique identity for future postings.I myself do not know how to make changes like this to the site.
RBS and Lloyds HBOS
Hard on the heels of a £5bn loss by RBS came news of a £570 million loss at Lloyds HBOS. It all goes to preserve Gordon Brown’s reputation as the nation’s worst investment manager. He sold gold just before a huge bull run in the metal. He bought bank shares in time for a long run of losses. The taxpayers are still waiting for the share prices to return to the higher price Mr Brown paid for them.
There has been some discussion here of what should be done with the shares in RBS, with some contributors asking for my view. Assuming the government keeps RBS together in more or less its current form, there are four main options.
1. The government could give the shares to UK taxpayers or citizens, an equal number to each. We could then individually decide whether to hold or to sell. The bank would no longer sit on the state’s balance sheet or have recourse to the taxpayer from the day the shares were transferred.
This proposal has two major drawbacks. The first is the state spent £45 billion of our money on buying bank shares. On this model the state gets no money back for its largest holding, leaving a hole in the public accounts. The second is a large number of people might want to cash in their shares as soon as they could, depressing the share price badly and leaving them feeling cheated if they got very little for the shares in a disorderly market. It has the great benefit of privatising the bank quickly, and giving some prospect of some money to every family in the land.
2. The government could transfer the shares now to taxpayers as above, but say we cannot sell them until the RBS share price has risen above the government’s sale price. On sale we would have to surrender the government’s acquisition price of those shares to the government – or a large proportion of it. We would gain any profit above the reserved price. This model removes the objection to 1 that the state does not get any money back, and helps somewhat to create a more orderly market, by getting people used to the idea that they have to hold the shares for a time period.
3. The government could sell the shares in the market like the 1980s large privatisations. Some shares could be offered more cheaply to employees, and there could be a discount offer of a limited number of shares for each taxpayer interested. The state would get money back from the operation, and the bank would be transferred to the private sector.
4. The government could offer tranches of shares to control the impact of the large sales on the market. It could sell some tranches to strategic investors prepared to take minority stakes in a large global bank.
There is another approach which I tend to favour. The government could require the further break up of RBS. Individual assets and companies, like Citizens Bank, their US bank can be sold off individually. This route has several advantages. It reduces the scale of any individual sale. It creates more manageable units. It could create more competitive banks for the UK market if the main clearing operations were split up.
The Eastleigh by election
Once again a Eurosceptic majority has managed to engineer the election of a Lib Dem Eurofederalist to Parliament. The EU federalists must be laughing all the way to Brussels.
It is remarkable that the Lib Dems at 8% in the national polls, and following their worst three weeks of news I can remember, should emerge as victors. No wonder we find it so difficult to get the new relationship with the EU we want.
Both the Conservative and the UKIP candidate made clear they find our current relationship with the EU unacceptable. They both wanted a referendum to allow the British people to vote No to staying in the EU. Between them they got 53% of the vote. Instead Eastleigh has a Liberal Democrat MP who opposes giving us that vote. We need more MPs in Parliament who will join those of us who have voted for an immediate referendum. Instead we have another anti referendum federalist elected with under one third of the votes.
RBS loses £5bn
The taxpayers’ bank is still struggling to make money. We are told that if you regard the losses as special items relating to the past the underlying bank is now profitable. The problem is we the taxpayers have to pay for the total losses. More radical approaches to the structure and sale of this banking group are needed.
Mr Redwood’s contribution to the Opposition Day Debate on Housing Benefit (Under-occupancy Penalty), 28 Feb
Mr John Redwood (Wokingham) (Con): This issue is creating a lot of passion, which I can understand. People’s homes are very important to them, and none of us wants to feel that the possession of our home is threatened or is subject to high-handed control from above. The morality of the argument, however, is not all on one side as the Opposition seem to suggest it is. Indeed, I would find their moral outrage more convincing if their Front-Bench team firmly pledged to repeal this measure if they were ever returned to office. I would also find it more convincing if when they were in office they had not taken the steps they did on private sector rented accommodation, probably as a prelude to going further.
On the basis of what the more moderate Opposition Members have said, they accept that there is a problem of under-occupation where free or subsidised accommodation is made available through the public sector. The morality on the Government side of the case is to say that we have obligations to all those people who want that subsidised or free accommodation but who cannot get it on the size and scale they need. There are two different groups here, and we need to look after the interests of both groups as best we can.
Of course there are visionaries on the Opposition side who say that the answer is easy: we just need to build hundreds of thousands of more homes at public expense so that everybody can have the accommodation they want. The issue then becomes why that did not happen when we had a Labour Government who knew how to do those things. The truth is that for anyone who sits on the Government Benches, such housing will always be a scarcer resource than people would like. If we offer something free or subsidised, there will be more demand than provision, even when we are trying to be very generous, so we must have rationing and allocation. All Governments, in good times and bad times, have had to allocate and ration public housing.
Julie Hilling (Bolton West) (Lab): Does the right hon. Gentleman not realise that there was a period—certainly in Wigan—when we could not let council houses and they were knocked down, because people were buying houses? Our biggest problem now is that people who want to buy houses cannot get mortgages. They do not go into social housing because it is subsidised; they go there because they have nowhere else to live.
Mr Redwood: It is a bit of both. I entirely agree with the hon. Lady if she is urging the Government to do even more than they are currently doing to make more mortgages available so that more people can afford to buy homes. Members on both sides of the House would welcome that. I happen to know that Ministers are desperate to ensure that more mortgages are available than were available during the last few Labour years, and are working away with the banks to try to make it happen. That is very much part of the solution to the housing problem. [Laughter.] It is all very well for Labour Members to go into fits of hysterics, but they really should try to take a serious interest in the problem. Believe it or not, quite a lot of us Conservatives want better housing solutions for many of our constituents, and for people in other parts of the country.
Katy Clark (North Ayrshire and Arran) (Lab): Does the right hon. Gentleman not accept that there was a very different view of social housing in the past? Council housing used not to be seen as a precious resource. For example, at the time of the 1951 general election the Conservatives pledged to build 300,000 new homes. There was a view across the political divide that we should build council housing to improve social conditions. Is that not the vision that we should have now?
Mr Redwood: I seem to remember that the Conservative Government did indeed honour their pledge—and that was many more homes than the Labour Government were building each year—but, even in those days, why did they need to do it? They needed to do it because we were short of homes. It was the post-war period, the Germans had remodelled many of our housing estates, and trying to create the homes that people needed was a big problem.
I think that under-occupation is a problem, and I think that the Government have come up with one part of the answer, but I urge Ministers to listen carefully to all those who are saying that the positive way of proceeding is through incentive, encouragement, persuasion, and giving people a better answer than the one they currently have, which may be a larger property that may not be suitable.
The Government have excluded everyone of pension age from the proposals, and I welcome that. I think that it is smart politics, and very sensitive to the elderly population. However, in my constituency, where most people own their homes—elderly people tend to own them without mortgages, and younger people tend to own them with rather big and difficult mortgages—a good many elderly residents decide to sell the family home because it has become too big and unmanageable, and to buy a smaller property such as a flat or bungalow. Many then sell again when they are becoming more frail, and move to semi-sheltered or supported accommodation.
That is a natural process of trading down in the private sector, but there is sometimes too much of an obstacle for elderly people in social housing to be able to do the same. Perhaps not enough of the right properties are available; perhaps they are not offered in the right way; perhaps there should be some incentive. I think it perfectly acceptable to try to create an atmosphere in which there can be the same sensible mobility in public sector housing as occurs naturally in areas with rather more private sector housing, so that elderly people can have housing more suited to their needs.
I hope that Ministers will consider the question of elderly under-occupation, which I think is very much part of the story, but will do so in a positive way that encourages, promotes and helps, rather than removing benefit or imposing a tax. I wish that the Opposition understood the meaning of the word “tax”. Imposing a tax means taking money from people who are earning it for themselves; it does not mean paying them less benefit. I hope that Ministers will work out an answer to that soundbite. I have heard soundbite arguments before, but I congratulate the Labour party on thinking up a brilliant and misleading one. I am afraid that it is better than the soundbites we have heard so far from this side of the House, and I urge my hon. Friends to come up with a soundbite that represents the truth. This is not a bedroom tax, but a reduction in the amount of benefit paid, which is very different.
Several hon. Members rose-
Mr Redwood: I am afraid that I cannot give way again. I am running out of time, and if I give way I will not be given any injury time.
We need to look at the issue of under-occupation among the elderly, and we need then to look at the issue of the disabled. That was why I approached this debate with considerable nervousness. As I think my hon. Friends know, I wish us to be more generous to the disabled, not less generous, and I think we all feel a little nervous about how far we should go. I was somewhat reassured to see that there are different definitions of disability and a rather wider definition is being used than would, perhaps, be normal. I am interested in the people who are seriously disabled, as recognised through the receipt of disability benefit.
I urge my ministerial friends to be as generous as possible. We must not presume that there is an easy solution, however. Again, if there are issues that need to be sorted out, the best way to do that is through support and persuasion and offering people something better. That must be the aim. Why would somebody move if their new home is going to be worse than their current one? If it can be shown that there would be better, more appropriate and better supported accommodation, however, I might be more willing to accept that we should follow the proposed course of action. I urge my ministerial friends to be extremely careful about the definition of the disability category, however.
One Opposition Member argued that this is a cynical policy and there might not be many savings if it works. That is a misunderstanding of the true nature of the policy. It is not primarily a public spending-cut policy; it is a policy designed to try to get more people into public sector housing that is suitable for them. That is the bigger picture.
We have an inadequate amount of housing stock, and some people have more of it than they strictly need, whereas others do not have as much of it as they strictly, technically need on the needs definition. We are arguing here about the balance between those two groups, and whether it would be feasible to solve the overall shortage by producing more housing. Even the Labour party must understand that if we were to go for the big build answer, that would take several years to come through. Ministers are feeling very frustrated at present that they have identified places for building and the means of financing that building, but it is taking a very long time to get the building to come through so we can start to tackle this problem.
My next topic is how to tackle the problems of insufficient housing and excess welfare spending. The issue of eligibility is key. My constituents tell me that they feel much more inclined to pay taxes to make sure that people who have been settled in this country for many years, or who have been born and brought up here, can get access to proper housing than to provide housing for people who have only just arrived and seem to know how to work the system to get access to housing. The Government could productively focus on that. I am sure there will be European Union rules, but we need to negotiate on this with our European partners, and make a stand if necessary, because there is a strong feeling in our country that public housing will be limited—more limited than some would like—and if we are to make choices, the priority must be those who have been here for some time and who have made a contribution and are part of our settled community. That does not always seem to be the case. I hope Ministers will see the issue of eligibility as a proper avenue for addressing both excess benefit expenditure and the shortage of available property.
These are difficult waters. Anyone who looks at the situation rationally will agree that there is under-occupation and we need to tackle it sensitively. They will also agree that we need more housing provision overall, and we need to do what we can to tackle that. I hope we can all agree that the best answer is to find a way to enable more people to enjoy what every MP takes for granted. We take it for granted that we have a well-paid job and that we can afford to buy a house. I think that every MP owns a property. Indeed, some of them own rather more than one property, I believe, and that has sometimes become a matter of comment. It is normal for an MP to own a property—to be an owner-occupier—and to enjoy a good income, and I am sure most MPs own a spare room or two.
I do not think there is anything wrong with people striving, getting a better job, earning more money and having spare rooms. I am personally very much in favour of spare rooms when people can afford to have them. We also need to make sure we have a fair tax system so that we are all making a decent contribution to those who cannot afford spare rooms.
Jim McGovern (Dundee West) (Lab): May I ask the right hon. Gentleman how many spare rooms he has in his house—or has he not got round to counting them yet?
Mr Redwood: My spare rooms are a matter for me because I paid for them myself, and I am sure the hon. Gentleman has spare rooms and I dare say he paid for them himself. That is exactly the kind of society we all want to live in, I would have thought. I do not know of any Labour MPs who could stand up and say that they are at the minimum accommodation level—I invite them to do so, but I do not see anyone rushing to stand up.
Mr Russell Brown rose—
Mr Redwood: The hon. Gentleman stands up but he has no voice. I think that means he does not want to say that he has the minimum accommodation available or thought specific to certain people.
I want to live in an aspiration society. We want to promote better jobs, better paid jobs and more people owning their own home. Where that is not possible, we need a fair distribution; we need to provide more and to distribute it more fairly. I just hope that Opposition parties, if they have serious aims to be in power one day, will think more carefully before pledging to repeal things, or will come up with better ideas on how we can promote that better use of the housing stock that must make sense.
Cheaper energy?
The Coalition’s inheritance on energy was a poor one. The previous government signed up to renewable obligations, to coal fired station retirement and carbon policies at EU level without accelerating the investment necessary to provide alternative energy outputs. They spent many years asking for a debate on nuclear, without getting round to building replacement power stations for the old nuclear about to retire. This government now needs to accelerate progress, not just to try to get fuel prices under some control, but to keep the lights on and ensure enough power for business requirements.
What are the options?
1. Negotiate with the EU an extension to the life of coal stations pending the construction of alternatives
2. Accelerate the building of new gas powered generating stations
3. Press on with nuclear replacement build
4. Accept that the large amount of renewables now in build will require almost 100% back up by conventional power stations, as so much of the alternative energy depends on the wind blowing
5. Expedite shale gas extraction onshore
6. Continue or strengthen a favourable tax regime for offshore oil and gas, to raise the investment and exploration rate further in the North Sea and other offshore waters.
7. Improve import facilities and contract arrangements for gas
All or any of these approaches requires stability in the framework which will now require firm contractual commitments or clear promises which all political parties will keep to reassure investors. Government has to allow energy producers the opportunity to make a fair profit. It also needs to ensure enough competition in the market to avoid monopoly exploitation of customers.