Category: Blog

Yesterday I wrote about the scope to save billions on the capital budget. A few wrote in to say it was not enough. Of course it isn’t enough. I am writing another series of pieces on the actions a new government could take to get us out of huge deficit. Just read it day by day to build up the full picture of the billions needed to plug the gap.

Today we need to think about what assets we could sell – things the state owns that would be better owned by private individuals and companies. Selling assets off brings three benefits. Firstly, the state gets a receipt. In the next couple of years, whilst we are waiting for the benefits of efficiency gains, changed policies, staff freezes and pay freezes to come through, we need some help from asset sales. Secondly, selling the silver back to the family often will lead to it being better looked after and run. Thirdly, the state will start to benefit from more rax revenue once trading enterprises are returned to private hands and more profit is made.

We should start by selling the banks. Substantial sums can be raised from selling Northern Rock, RBS and Lloyds shares. First we need to restructure them, to create more competing banks to improve the flow of finance in the UK economy and the cut the risk of too large to fail. We may not make a profit ovcerall after allowing for the insurance of dodgy loans and the other aid granted, but current conditions are ideal for banks to make profits and this will enable the government to get better proceeds for the sharesales and the better results come through in the market.

We should move on to selling the Student Loan portfolio, whilst protecting the repayment terms. The government could sell Railtrack, offer the Queen Elizabeth Conference Centre, sell more surplus land and buildings from the central estates, and sell the minority shareholdings in companies Labour has already started to privatise.

Promoted by Christine Hill on behalf of John Redwood, both of 30 Rose Street Wokingham RG40 1XU

In the next few days I am going to seek to fill the blackhole in Labour and Lib Dem spending plans by reviewing again what needs to be done to bring public spending more into line with revenue.

There is one area were Labour has proposed large cuts in public spending where I agree – in capital spending.We might be able in the next couple of years to go further and faster than they are suggesting.

In recent years Labour has undetaken five different kinds of capital spending. There has been spending on new accommodation and equipment to expand their growing bureaucratic army. There has been spending on IT and other centralised equipment and replacement accommodation for their existing central services. They have spent on additional facilities in the main service areas like railways, schools and hospitals. They have spent on replaement facilities in the main service areas. They have spent on defence hardware, which I have partly discussed in previous blogs and will not discuss again in this one.

Any company facing a financial crisis brought on by borrowing too much and earning too little stops all but essential capital spending at an early stage in trying to control costs and cash outflow. So should any government.

All projects to expand the bureaucracy should be cancelled straight away. We need to live with what we have got- we need no more government or local government offices, no more quango computer systems to control new parts of our lives, no more new Ministerial and official cars for additional posts.

Many of the projects designed to raise efficiency and to replace existing bureaucratic back up should also be deferred or cancelled. If a project has a pay back of two years of less – if it can save more than its own cost in less than two years – then let it go ahead. If something needs replacing because it is about to cease to function or about to incur very high repair bills, then let it be replaced. Otherwise nice to have or usual cycle replacements need to be put off for better times.

All projects to increase service provision outside hospitals, surgeries and schools also need to be cancelled or deferred. There should be a Mnisterial review mechanism to allow through special cases.

We do need more road and rail space as part of our programme to make the UK a more competitive economy. This is going to have to be financed privately, and paid for by user charges, as this government did with the M6 toll road in the Midlands. There also needs to be a maintenance programme for major public assets to avoid the build up of even dearer and mor fundamental repair.

Promoted by Christine Hill on behalf of John Redwood, both at 30 Rose Street Wokingham RG40 1XU

In the three debates Mr Clegg made much of the need for fairness. I agree.

In British General Elections fairness is at the heart of the rules and the aproach of the main broadcasters. That is why all MPs lose their jobs at the start of the Election proper, why no former MP is allowed to go around claiming to be an MP, and why all seeking election become candidates. Correctly ex MPs are banned from using Parliamentary facilities, from adopting the logo or using Commons notepaper, as that would give an unfair advantage over the other candidates.

Mr Clegg must know this, yet throughout the 3 debates he referred to himself as an MP, talked of his MP’s salary and behaved as if the rule did not exist.

Broadcasters have a rule that they must refer to all the candidates in an election if interviewing one or more of the candidates, and must seek to provide balanced coverage. Anyone of us invited on to put our party’s national case on national media knows that we should not mention our own campaign by naming our own constituency or referring to its special issues, as that would be seeking advantage not open to the other people seeking election in the same place. Yet Mr Clegg regularly referred to his home area of Sheffield.

Mr Brown and Mr Cameron did not refer to themselves as MPs and did not mention the names of the seats they are contesting.

Some may think this a minor quibble or a mere detail. I think it shows a cavalier approach to the fairness that is central to our elections.

Mr Clegg also spoke much of honesty. Yet he repeatedly referred to a tax cut he wished to offer us all, without fairly pointing out that all of this tax cut had to be recouped by tax increases, and without spelling out how all this money would be raised. He claimed the Lib Dems had set out detailed and costed plans to cut the deficit, yet the IFS study stated that around three quarters of the deficit reduction needed was not covered in the Lib Dem package.

If you wish to claim truth and fairness as uniquely your own, you need to live the brand.

Promoted by Christine Hill on behalf of John Redwood, both of 30 Rose Street Wokingham RG40 1XU

Let me share a secret with you. I have heard a number of politicians in private say disobliging things about constituents and even about members of their own political party. These same MPs or candidates have been civil to the very same person when meeting them in public. Yesterday I heard the authentic voice of the Gordon Brown I know. He is often tough on dissent and unsympathetic to the causes of dissent. It should have been less of a surprise than the media claim it to be.

Far worse than Mr Brown’s refusal to understand the concerns of even his own supporters has been his disastrous conduct of economic policy. On the eve of the big debate, the one he vaingloriously boasts is there to allow his further coronation, let us remind ourselves of the outcomes of the 13 long Brown years in charge of the UK economy.

1. Almost 6 million people of working age not in employment but on benefit.
2. 13 years of manufacturing output and employment falling – we were promised a manufacturing revivial. Manufacturing output rose under Margaret Thatcher when Mr Brown said the Tories were “cutting it”. Manufacturing has fallen to a new low as a proportion of our economy under him.
3. The biggest recession since the 1930s after being told there would be “No more boom and bust”.
4. Falling living standards, as Labour furiously devalues our currency to try to stave off a worse crisis. Living standards may fall by a large 3% in a year.
5. Inflation high by world standards despite the economy being flat on its back.The failure of Mr Brown’s so called indepenent Bank to keep inflation to 2%, owing to the bad fiscal and monetary policy he is following.
6. A banking crisis which included the first run on a British deposit taking bank for more than 100 years. This was an entirely British bank regulated by British regulators and lending money to British people, so the government blamed the Americans.
7. The UK economy was the last of the major economies to stagger out of recession. Growth in the last quarter has remained pitifully slow.
8. He has built up record levels of debt which we will all have to pay for years ahead, and now wants to double it again over the next Parliament.
9. He sold much of our gold holdings at rock bottom prices.
10. He has presided over a massive expansion of the surveillance state and the bureaucratic society, with an unaffordable increase in spin, form filling, regulation and box ticking.
11. He taxed and regulated many pension funds to death, so most people now cannot join a final salary pension fund.

There’s eleven good reasons why we need a change of government. The economy is not the reason to re-elect Mr Brown. The economy is not Mr Brown’s strong suit or success story. It is a far bigger reason than Mr Brown’s recent conversations why we need to a change of PM and a change of course.

Promoted by Christine Hill on behalf of John Redwood, both of 30 Rose Street Wokingham RG40 1XU

There are two sensible answers to the Euro crisis. Greece could leave the Euro, devalue its currency, and come to an accommodation with the markets over what it needs to do to enable it to borrow again. That would be the best answer for the Euro, and would enable Greece to take part of the cuts in its living standards through devaluation, as the UK is under its own version of an unsuccessful economic policy based on too much state borrowing. Alternatively, Greece could cut its public spending more substantially, until the markets believe it can then afford the debt it needs and already has.

Instead, the governments debate two dangerous answers. They take seriously the idea that Greece should fail to make payments on its debt – a form of government theft from the savers who have in the past supported Greece and believed its promises. They discuss lending Greece more money on easy terms, based on the absurd idea that the way to sober a drunkard is to give them another drink.

I find it suprising that so many governments, Euro commentators and so called experts expected the Euro scheme to work when they put several economies into it that had not come into line with the performance and costs of the core countries. I and a few others warned strongly about the dangers of the debt and the starting exchange rates when we made the case against the UK establishment, arguing that the UK should never enter such a scheme. In “Just say No: 100 arguments against the Euro” I pointed out the destabilising effects of the countries having different levels of debt and different levels of new borrowing. I said “Controlling budget deficits is central to this task” of creating a decent currency. It was quite obvious that for the scheme to work member states had to surrender domestic budgetary control to the EU, to avoid free riding on average interest rates or to avoid Greek style disasters. Indeed, in the founding paperwork of the Euro it was spelt out that member states had to keep their stock of debt to 60% of GDP and their extra borrowing each year to no more than 3%. The decision to allow relaxation of these necessary rules has led directly to the Greek crisis.

It was also clear that a country had to bring its private sector costs into line with the zone as a whole as well as control its state deficit. “If you cannot devalue your currency when your costs are too high, you have to sack people and close factories” – exactly what has happened to the olive belt economies.

It does no-one any favours to imply there is a quick fix, or to suggest lending Greece billions this year will solve the problem. The underlying problem is fundamental. The Euro can only work and be a decent currency if there is in effect one state budget for the Euro area. Germany needs to reinforce the rules over how individual members do borrow, not grant an easy loan and watch as Greece still fails to sort out her borrowing habit.

Promoted by Christine Hill on behalf of John Redwood, both of 30 Rose Street Wokingham RG40 1XU

Much of the money lent to governments can be bought and sold daily in the markets in the form of government bonds. This government borrowing usually has the highest rating from credit agencies, or AAA, because investors often believe that money lent to governments is as safe as you can get. Governments, they argue, will pay all the interest owing on time, and will be able to repay the loan at the end of its life without difficulty.

They take this optimistic view for a couple of good reasons. Most governments control their own currencies, so they can always print enough to pay back the money if all else fails. Governments have draconian taxation powers, so they normally lay their hands on large sums from people and businesses resident in their areas to meet the bills. These powers mean governments can normally borrow to pay interest and borrow again to repay expiring loans.

History tells us, however, that from time to time despite these advantages governments do default – they do not pay all the interest or they fail to repay the capital on time. Yesterday rumours about the Greek governent’s excessive borrowing and financial difficulties culminated in a Ratings Agency downgrading Greek government bonds to the lowest grade, or junk bond status. This followed a period when investors sold or stayed away from Greek government bonds, driving their price down and demanding ever higher interest rates to reward any new loans to the Greek authorities. Greece is having to offer 21% per annum to borrow money for two years.

Greece as a Euro member does not control her own currency, so one of the two reasons why investors often think a government will always be able to repay does not apply. Euro zone countries have the added hazard that they can only print the money needed if the Euro authorities agree. Although Greece does have strong taxing powers, her electors seem to be in no mood to either pay more tax or to watch their public spending being cut. As a result the markets are telling the Greeks that they are being unrealistic. This is producing an accelerated crisis where Greece cannot borrow enough money at any sensible rate of interest to be able to carry on as she has been doing. She has run out of money to pay the state wages and benefits. She needs an emergency loan. As readers of this site will know, borrowing ever larger sums, and borrowing to pay the interest, is not a sustainable option for a government any more than for an individual. Cutting spending earlier is not only less painful but is the only realistic option.

Why does all this mater to Britain, some ask? Because the UK government is seeking to borrow a similar sum relative to the size of its economy this year as the Greek government is doing. If you adjust the UK understated official figures for the debts and obligations of the state the UK, like Greece, is already a heavily indebted country. The UK has just prevented a Greek style public finance crisis by printing the huge sum of £200 billion to cover all its borrowing needs for the last year. Most experts and even the government now believe it cannot do this again next year. Money printing has delayed a Greek style crisis but cannot be relied on to do so again.

So now getting the UK through without a Greek collapse relies on the UK following stricter and more responsible public spending policies than the Greeks have been prepared to do. The markets so far have been kind to the UK. They have assumed that after the election any government will get on with substantial cuts in spending to prevent a bond market collapse. Yesterday a leading think tank asked the important question of all the political parties – how will they each make the cuts needed on the scale and within the timeframe required to avoid a Greek outcome? This Thursday’s debate provides the ideal platform for a response. How the public react to each party’s programme, and how the leaders respond to that challenge, are now important to the future cost of borrowing for UK taxpayers. On current policies we are too similar to the Greek situation. The next few days matter for our financial solvency and success.

The wider ramifications of the Greek collapse will be measured in slower Euroland growth, more market fears about other highly borrowed Euroland countries like Portugal and Spain, and worries about European banks. Banks above all rely on government paper as “reliable assets”. European banks will not have dumped all their Greek government bonds, and have plenty of government bonds outstanding to other high borrowing countries. The governments that helped prop up banks with dodgy private sector paper could now become part of the problem for the banks with their own overextended credits. The bonds fall sharply in value in a Greek style meltdown, leaving banks that own too many of them yet again with damaged capital and reserves.

Promoted by Christine Hill on behalf of John Redwood, both of 30 Rose Street Wokingham RG40 1XU

I once wrote that whilst the left in the media and politics endlessly run their scissors over the defence budget to look as if they wish to curb spending, the far larger social security budget gets ignored. Social security costs around five times as much as national security. The simple truth is the UK cannot afford to keep almost six million people of working age on benefit and out of work.

I would like there to be more debate about this issue in this eleciton. Last night in my public meeting in Burghfield I set out a five point plan for dealing with unacceptably high levels fo worklessness. I will repeat it here for a wider audience:

1. Control our borders, to stop illegal immigration and cut the numbers of economic migrants with the Conservative’s quota and cap system. More of the jobs we do create need to go to the unemployed already here.

2. Cut taxes on jobs. The Conservative plan to cut Labour’s National Insurance Tax hike, to cut the rate of Corporation Tax and small business tax, and to get rid of the damaging effects of tax legislation like IR 35 is a start. The more that can be done to make the UK tax competitive, the more firms will stay here, come here and grow here, with the benefit of more jobs.

3. Cut needless regulation. The box ticking form filling cultutre has gone too far. I am all in favour of controlling the solvency of financial institutions and demanding high standards of health and safety, but the UK is now regulated in a costly and unhelpful way, which puts people off creating jobs here. The Conservatives have adopted my proposal of setting regulatory budgets and requiring cuts each year in the costs government imposes.

4. Split up the banks the taxpayers own, and make them compete more for our busienss. Change the current regulatory requirements so the main banks can lend a bit more to UK business to kick start the private sector recovery we need.

5. Reform welfare, so it is more worthwhile to work, and so fit and able people cannot live on benefit if jobs are offered to them.

I am all in favouir of being as generous as possible to those with bad disabilities who cannot work. They are the minority within the 6 million of working age without a job. We need to get serious about creating mroe jobs. Labour’s pathetic recovery is jobless. Under Labour the private sector has been badly squeezed in the last three years. We need to change things.

Promoted by Christine Hill on behalf of John Redwood, both of 30 Rose Street Wokingham RG40 1XU

Some Labour and Lib dem figures are talking of a “progressive alliance” to prevent a Conservative government. This alliance seems to mean

1. Spending well beyond our means and borrowing huge sums – why is it progressive to borrow money from poorer Chinese to pursue an unsustainable level of spending? Why is it caring to ignore the warning signs and to court a Greek style market led change of policy? Why is putting us all, rich and poor, into debt a good thing to do?

2. Telling people cutting Trident will save us £100 billion and thus take care of the deficit. The truth is that there are no plans to spend anything on missile and warhead renewal in the next Parliament, even assuming a 5 year one. The decision on warheads can be taken near to or even after the election after this one. The earlier decision is over whether to replace the current four submarines. No-one has yet even decided whether three or four are needed. If new boats are ordered, the serious spending only begins from 2014. Trident is not a pot of gold which we can save any time soon. The Lib Dem vague alternative of cruise missile launched or aircraft delivered nuclear weapons would cost substantial sums as it would be an entirely new system for the UK,but that too would fall after the current deficit crisis has been played out.

3. Whipping up fear amongst users of current health and education services that they will be cut damagingly if a Conservative government were elected, despite the clear denials of the Conservative leadership. Is it progressive to create worry amongst the most vulnerable, whose services are not at threat?

Promoted by Christine HIll on behalf of John Redwood, both of 30 Rose Street Wokingham RG40 1XU

Last night I was proud of Wokingham. Churches Together organised an open election platform for all the candidates in the General Election. More than 200 people attended, and asked a series of searching and good questions of us all for two and a half hours. We were each allowed equal and short time to explain our positions and to rebut any allegations on every issue. Collectively we avoided the noisy and repititious exchanges of soundbites and the endless interruptions that so often passes for political debate on the media. It was one of the best election meetings I have ever attended and I would like to repeat my thanks to the organisers and audience who turned up on a Sunday night.

Although it was a meeting organised by the Churches they did not use it to concentrate on the moral and free vote issues like abortion, freedom of religious expression, family and adoption. It was a meeting primarily about the general topics of the election – the debt and deficit, the problems of a hung Parliament, the state of public services, and the kind of society we would like to see. At the end I was presented with an open letter to David Cameron written on behalf of 76 people from the Wokingham and neighbouring constituencies.

I would like to reproduce the summary of their views and my reply here, as the quickest means of responding to them and sharing it more widely as they invited me to do by making it an open letter. They concluded:

“We need an assurance that you (David Cameron) will represent our views, which may be summarised as follows; that our human rights must be protected, that minority views will not be legislated and used against majority views, that true democracy will prevail, that immigration will be examined and curbed;that all immigrants coming here will have to respect British views and not vice versa….That the Christian faith and Judaeo Christian ethic will not be maligned whilst other minority religions are continually promoted in preference. That Europe’s creeping influence will be stopped….We believe it is vital that human rights legislation must be altered or stopped and that political correctness must be eliminated in Britain before it is too late…There should not be any Parliametary privilege to exempt MPs from legal scrutiny…”

I agree that we need to roll back the surveillance society and Labour’s politically correct administration reaching into so many facets of our lives. . I and former colleagues fought to preserve rights of free speech against a couple of Labour’s more restrictve politically correct laws, with the Christian community at the forefront of our minds. We did get some concessions from the government.

David Cameron has made clear his wish to roll back the surveillance society and the politically correct state. In the Conservative Manifesto it says:

“Labour have subjected Britain’s historic freedoms to unprecedented attack. They have trampled on liberties, and in their place compiled huge databases to track the activities of millions of perfectly innocent people, giving public bodies extraordinary powers to interfere in the way we live our lives. …We will scrap ID cards, the National Identity Register, and the Contactpoint database. To protect our freedoms from state encroachment and encourage greater social responsibility we will replace the Human Rights Act with a UK Bill of Rights.”

The Manifesto also promises stricter control of immigration, the end of Parliamentary priviliege for MPs charged with fiddling their expenses, a British sovereignty Act and the negotiation of powers back from Brussels.

I am grateful to the signatories for their kind words about how I have acted as their MP in the past.

Promoted by Christine Hill on behalf of John Redwood, both of 30 Rose Street Wokingham RG40 1XU

If anyone ever thought Mr Brown was good at economics his latest statements that the Conservatives want to take £6 billion out of the economy and that would wreck the recovery ought to change their mind.

Reducing the public sector deficit by £6 billion does not take money out. Public spending is either financed by taking money out of the private sector through taxes, or out of the private sector by borrowing it from them. Borrowing less from the UK private sector leaves that sector with more money to spend on what it chooses.

£6 billion is a small sum in a £1.4 trillion economy: less than 0.5%. Mr Brown instead should be asked to explain why RBS, the bank he bought for taxpayers, has slashed its balance sheet by £700 billion over 2009 and plans to slash it by another £300 billion in 2010. That is significant money, even allowing for the global reach of the business. That does have an impact on the UK. Mr Brown’s banking policy is the main reason the UK economy is scarcely growing. His large public sector deficit remains a threat to stability and a cause of a damaged private sector.

Promoted by Christine Hill on behalf of John Redwood, both of 30 Rose Street Wokingham RG40 1XU