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The Remain campaign latched  on to a flimsy fifteen year forecast put out by the OBR of the possible impact  of Brexit. They said our trade with the EU would contract, so our productivity would  decline by 0.25% a year for 15 years because of this. It would mean a lower overall increase  in productivity of 4% fifteen years out, as productivity overall would continue to increase.

This has now become the simple lie, retailed by Ministers of the government and Remain/Rejoin commentators that we have lost 4% of GDP from Brexit! There is of course no sign of our GDP falling 4% from leaving the EU and that is  not what the forecast said.

Forecasting for  fifteen years is a bizarre over reach, given the OBR’s usual inability  even to forecast current year revenues and the deficit accurately. I would not try to offer a single figure forecast for GDP  15 years hence.

We do now know the results of the Brexit vote over nearly nine years. Far from our trade contracting, it has boomed. Our exports of services, the largest part of our  total exports have boomed. Exports overall are well up in real terms . There is no sign of the export hit the OBR forecast.

It is true the weakest part of our growing  exports is goods to the EU.That is  because the big items included oil, gas, refined oil products and petrol and diesel cars. All of these are being deliberately cut back by bans and high energy costs and taxes as part of the net zero policy.

Meanwhile the OBR in its review of its productivity forecast has confessed service exports have done so much better than they assumed without formally revising the forecast. Why?

The truth is the UK has a productivity problem   with its collapse  in the public sector  after covid which results from bad management. The government is busily forcing closure of some of our most productive capital intensive activities in its drive  to stop fossil use.

These have nothing to do with Brexit, so stop the lie about a 4%Brexit  hit to GDP which never happened.

 

The government sounds as if it thinks it can do the same again as last year. Now it has a report of a large black hole or bigger deficit to tackle it can put up taxes on the rich.

It won an election saying it would keep taxes down, apart from VAT on school fees. It put  them up by £40 bn last year saying it was a one off to get rid of an exaggerated  inherited black hole. It gave a revised promise of  one and done for tax raising budgets.

At the same time it put up spending by £70 bn, creating its own new black hole. It pencilled  in £5.5 bn of cuts which its MPs refused to vote for, making things worse.

Now it is allowing the same confidence busting  conversations about which taxes to raise to dominate the media in the long run up to the budget. All the discussion is about surrogate wealth taxes as if they were not numerous enough and high enough already.  She does seem to have got it that more general business and jobs taxes are counter productive. That may not stretch to the gambling and banking industry.

She should note that CGT revenues have been falling for 2 years thanks to her changes and Hunt’s.

She should worry that cash receipts from spirits duty are down this year following her big hike.

She should see the queue of rich people and young talent leaving the country , reducing future savings and higher income tax receipts.

She should confess her tax on jobs slowed growth and put up unemployment.

She should work out what was the true net gain from VAT on school fees after allowing for costs of extra state school pupils. Why has the number of teachers gone down when state schools were promised more from the extra  VAT.

Maybe she should have the courage to  tell her colleagues No more Tax. We are at the point where in many cases a tax rise will deliver less money.

 

You would think getting the UK public sector back to 2019 levels three years after the end of covid lockdowns and disruption would be easy. After all the public sector knew how to work at that level 6 years ago. There has been plenty of Ministerial enthusiasm and instruction to do that, under the last government and this one. The UK private sector is back above 2019 levels, showing recovery is more than possible. The public sector instead of struggling to get back to 2019 levels should be aiming to be at least 5% higher than then to allow for missed  improvements in subsequent years.

Instead officials have offered to get the government overhead down by 2029, after spending  more in the meantime. The central government overhead is in the budget at £14.08bn this year, rising to £16.23 bn next (up 14%) , down to £14.89 bn in 2027-8, still 4% above this year. That is all because they have put in an extra budget line called a Transformation fund, with an eye popping £2 bn next year on technology and a further £1bn the following year. The pay off for this extra spend is only fully apparent in 2029-30 after the election when we see a better reduction in the costs of the overhead.

It may well be that spending more on bought in AI can enhance quality and raise productivity. This should be on top of getting back to 2019 levels of productivity based on pre AI technology. We should not have to spend £3.25bn to reclaim those losses, but should expect much more of a gain from such spending. After £250 m this year  it is a suspiciously round £2bn next year as a budget. What projects are assumed? Why are these costs said to be one offs? Isn’t most AI a service provided by large US corporations where there will be running costs all the time you use it?

What questions did Ministers ask about this budget line? How much of it is truly capital and how much service contracts that may continue? How much of it can be done in house? What action is being taken to secure the old tech productivity  recoveries before adding in new AI gains?

The truth of course is the poor productivity reflects recruiting too many people to do the same work and recruiting people to do work that is not strictly necessary to providing a good service. Some of us work from home when we are more productive there, but do all those who spend days away from the office achieve as much or more than when they came in? Is there proper supervision of homeworking?

To raise productivity and to keep the overhead under control means fewer people and smarter working. I am amazed they are still recruiting and adding to numbers. The first easy thing to do is to impose a complete ban on recruiting more from outside, other than where a good specialist case can be made to a Minister, excluding trained medics, teachers and  uniformed personnel. I see no need for expensive and unpleasant compulsory redundancies but plenty of scope to manage down and amalgamate some of the jobs  as people leave or as they can be persuaded to move within the service.

Instead the government blames Brexit and Nigel Farage for their productivity failings. That’s a great way for Labour to lose more votes, as people are not that stupid.

Margaret Thatcher is 100 years young. He memory lives on. Many of the battles she fought need refighting today. Her vision of individual liberty under the rule of impartial law is much needed again. Her belief that lower taxes bring faster growth and more revenue should be adopted by the current government to the nation’s benefit.  Her views that  people should be given a hand up not a hand out, and that if you can work you should take a job not benefits is said to be the belief of the current government as well. The differences are over the ability to implement it.  She held that  the first duty of the state is to protect its citizens against crime from within and military threat from without. This is something  the current government needs to work on.

I was only 21 when I was elected a County Councillor and first met Cabinet Minister Keith Joseph, 33 years older than me, as we were both fellows of All Souls College Oxford. I developed an active dialogue with him. This led to me advising him and the Shadow Cabinet from 1975 on public spending and the economy, and to working in my spare time for  Margaret Thatcher via the Centre for Policy Studies which she and Keith had set up. In  her middle period as Prime Minister I was her Chief Policy Adviser in Downing Street . I usually had  a weekly one to one for half an hour to discuss the agenda and forward look. I  spent many hours in conversation with her over every government issue as one of her speech writers and Policy Adviser. She devoted so much time to the big speeches so they became sessions  to influence and develop policy for the future and to get her to consider criticisms and problems with what the government was doing.

She liked new ideas if they were well backed up with evidence, and she looked for people who could turn her general wishes into working policy that would carry the message to every corner of the kingdom. She liked a good argument and could come across as forbidding or tough as she wanted to win any discussion she was in. If the purpose  of a meeting we had arranged for her was to reassure or persuade  the individual invited in we had to guide her to her other style, which could be charming and was based on a deep concern for the individuals she met or needed to help. She would sometimes in meetings deeply involved with other issues ask us to take immediate action to relieve someone’s suffering or see what the UK government could do given  news of some disaster. She wrote many individual notes to people she knew who had family or personal problems.

For the rest of her life I refrained from talking or writing about her, whilst occasionally arranging dinners or meetings involving her. I have always sought to live in the present focused on the future, as the world moved on from the Trade Union and privatisation battles of the 1980s. In the last couple of years I have found myself in demand to tell a new generation what she was like and how she carried the torch for Conservatism, which I am now happy to do.

Her great strengths were her wish to get to the truth, the wish to base policy on plenty of data and clear analysis, and her willingness to do what was right even if it did not poll well. She took a long time to make up her mind on an issue, testing out on others whatever  had been recommended  to see if  it made sense and might work. She was very reluctant to change her mind once she had gone public, seeing U turns as weakness.

She made big changes to  her views in government. Her first two years were too dependent on Treasury and Bank orthodoxy to the cost of the country’s economy. She switched to the policies we had hammered out in opposition. She moved from been an enthusiastic European in the 1970s to being sceptical as she came to understand the power grab and the dangers of the Euro. She adopted the wider ownership, share and business  owning democracy ideas I took to her, having thought the larger privatisations would prove impossible when I had first discussed them with her in Opposition days.

She always put defence and public safety first. She never wavered in support for a free at the point of need NHS with regular increases in money whilst favouring tax relief so people could choose to go private if they wished. She helped the US win the cold war, she led the liberation of the Falkland Islands from the Argentine invaders, she conquered inflation, ushered in many good years of growth, and championed home ownership and savings for the many.

She was brought down by Cabinet Ministers insisting on putting the UK into the European Exchange Rate Mechanism system which was bound to wreck the economy. She agreed  with my analysis, but told me she was forced into acceptance with a promise from the plotters that we could get out again if it did misfire. The truth came to hit her successor John Major, keen architect of the UK going in the European  monetary system. When  the UK was forced out there was the predictable enormous cost to jobs, growth, inflation and to taxpayers . The  country made big losses from its foreign exchange interventions required by the scheme.  We had lost a great Prime Minister for no good reason.

There is more enthusiasm to talk about Opposition party policies than I have this early before an election when parties are or should be researching and developing their positions. People have written in with criticisms of Conservative net zero policy so I set out here in a neutral way what three Opposition parties think about this.

Reform has a page on their website. It says they would impose £10 bn of taxes on renewable energy to recoup the £10 bn of subsidy . It says they would get £30 bn of cuts in spending from NZ without specifying where.

It says they will licence more extraction of oil and gas from the North Sea. They will allow one or two onshore new trial wells with compensation.

Nigel Farage has made clear he does not believe in man made climate change.

Not on the website it has been reported they would cut energy bills by £1000, more than the average bill. It has not been explained how.

Conservatives have said they will repeal the Climate Change Act and abolish all the targets.

They will issues licences to drill for all the oil and gas available in the North Sea.

They will stop pressing people to buy heat pumps and battery cars, leaving it to the market to design affordable popular products.

They will abolish carbon taxes on power generation

They will cut subsidies for wind farms. They will cut average bills by £165.

They are against using thousands of acres  for wind and solar farms.

The Lib Dems have just revised their net zero policy, delaying hitting net zero to 2050 from the election pledge of 2045.

They back no fossil fuel generation by 2030

They back small modular  reactors, as do Labour, Conservative and Reform

They claim that changing  electricity pricing and building  more renewables will halve bills over ten years. As new renewables cost more than current power this looks impossible.

The government bans new oil and gas, claims to be 90% carbon free from UK based power generation by 2030 ( down from 100% in Manifesto),is banning new petrol cars from 2030, and pushing heat pumps and battery cars.

 

 

The PM rushed to pay the bills at Scunthorpe to keep the last two UK blast furnaces working when the Chinese owners moved to close them. They said they were losing £700,000 a day. Taxpayers are now paying, but the government so far refuses to publish a plan for loss reduction there or even to tell us how much it is costing. We also know the government’s net zero plan requires the steel industry to close all coal burning blast furnaces and put in electric arc steel recycling plants instead.

The government pledged to keep all the blast furnace jobs, though electric  arc works require much less labour. In the middle of this muddle the EU has decided to impose a 25% tariff on UK steel exports despite the tariff free Brexit Agreement and  the PM ‘s re set to get friendlier relations.

The EU sells us more steel than we sell them, so the PM could at the very least  immediately threaten high steel tariffs in return. He could work urgently  with the UK industry to substitute UK steel for imported EU steel. He could take back our fish which he has foolishly offered to give away for 12 years for the re set. He could  decline  free movement for younger people  which the EU wants.

He must do something if he has any sincere wish  to save our industry, cut the losses at Scunthorpe and avoid looking even weaker in his relations with an aggressive and unfriendly  EU. They often used to damage our  industries when we were members. Outside the EU we can retaliate.

There are several ways of looking at the Rachel Reeves likely black hole of £20-40 bn in the next budget, the sum she will be told to raise in extra taxes assuming she is unable to restrain extra spending. Very simply it is the direct result of her overspending since coming to office and deciding on major increases, especially over public sector employee numbers and wage settlements.

More helpful ways of looking at it  include identifying some of the areas of spending over run that would be easiest to rein in without cutting disability or pensioner benefits, which was never a great idea.

According to the March OBR forecast the Treasury will have to give £23.1bn to the Bank of England in 2026-7 to cover its losses, and another £22.3 bn in 2027-8 . I have often commented on how these numbers could be brought down by stopping bond sales and taking other measures to stem the costs.

There is an estimated £40 bn black hole created by loss of productivity in the public sector since 2019. £22bn of this is NHS losses as set out in ONS estimates of lower productivity in this large service. I have provided some commentary on how Ministers could get back some of these losses, and will provide more in future blogs.

There is the good news that the UK now no longer pays in a net £15 bn to the EU since we have at last terminated membership and further contributions under the bad Withdrawal Agreement. Better still, the UK now retains all of the tariff revenue levied on our imports, where 75-80% of that passed to the EU before when we were members. This has given us a boost of £5bn of tax revenue instead of just £1bn before. We also now collect and can spend the £1bn of Plastics tax, where  this all  goes  to the EU from  member states.

If the UK is stupid enough to impose a carbon tax or tariff on imports in line with the EU next year, all this revenue will help reduce the UK deficit whereas it will pass to the EU from member states.  If you take the likely gross contribution of the UK to the EU had we stayed as a member, and add in the lost revenues, we will be around £30bn better off next year out of the Union. Just think how bad our finances would be if still inside, at a time when the EU is increasing its spending, borrowing and tax raising substantially.

 

 

When I was 21 I was elected as a County Councillor for the new Oxfordshire  serving the newly enlarged area taking in Oxford City and parts of North Berkshire. I became Chairman (equivalent to today’s Executive member) of the land, buildings, procurement, Architects, Surveyors departments giving me a cross Council remit.

I was keen to get spending under better control and limit increases in local taxes. It was agreed in the majority Group meeting that I could lead a move to cut the large and fast growing bus subsidies.

I was drawing public attention to the  bizarre theory of bus subsidies. This said you offered subsidy to buses tackling social need, defining social need by the size of the loss on the bus route. This idiotically meant that if a bus company ran a bus service no one used that would make the biggest losses and could then claim it therefore had the greatest social need! Instead of incentivising bus companies to maximise fare revenue and passenger numbers this gave a perverse incentive to lose more to get more grant.

I asked the officers and bus companies to draw up a plan for an unsubsidised route network to get a feel for what was possible. They invited me to chair a meeting to present their conclusions. The paper presented very large cuts in services with particularly  large cuts in the town I represented.

I thanked them for their work and told them we would go for the no subsidy option. They remonstrated volubly and asked if I had read the bit about my town, knowing I was always most attentive as a local member.

I said I had of course read  it. I did not believe a word of it. There was no way the bus companies would  destroy their businesses by removing so many services. That would mean unaffordable sackings and mothballing of buses, Their harsh treatment of my area had swayed me, underlining the fact that the whole paper was a silly try on.

They went away and developed a pattern of services  capable of carrying more passengers. Taxpayers were spared large subsidies for bus services people did not want. Councillors have to overrule the defence of bad performance and extra spending.They have to see when the waste and stupidity of the worse parts of the public sector need  to be changed.

Even then some of the environmental/ roads officers were anti car. The annoying ones drove to the central offices to their reserved parking places to design anti car and anti parking schemes for others. I told them we did not want these schemes and if they persisted I would require them first to surrender their special car spaces and come to work by some other means as an example to others. That stopped the anti van and car strand of work.

 

Reform took control on a platform of eliminating  waste and undesirable spending. With a budget advertised as £2.6 bn a year serving 1.6 million people it is an important responsibility and a good challenge. Reform implied they could avoid the annual maximum permitted Council tax rises which hit householders.

Reform took over near the start of the 2025-6 financial year, inheriting a budget from their predecessors. They also inherited a forward look budget for the following two years and a capital spending budget of £1419 m over ten years.

They chose not to submit a revised 2025-6 budget. They could  have cut spending in year whilst keeping the tax rise, cutting the deficit. For 2026-7 they have put out a Consultation document asking voters for ideas on cuts in spending and on acceptable tax levels without offering a proposal of their own. They are working from their predecessor’s forward look budget. Their draft budget shows a further maximum tax rise and big rise in spending even after the £50 m unspecified cuts they consult on.

The 2025-6 budget they are spending saw  a gross increase of £322 m on the 2024-5 total of £3015m. (11%)The cost net of grants and income was £1531 m, an increase of £102m. (7%).  Net spending growth of £207 m was brought down by offsetting  savings and spending of reserves worth £105 m.

Arguably Councillors should be concerned about the way grants and reserves are spent and how much is spent before just knocking them off the total to fund.They should seek to control gross spend, not  just net. 11% increase was surely too high.

The previous Council claimed large  efficiency savings and said it offered good value for money by Council standards. 48% of the total spend is on adults and children’s social care with rising demand  and rising care costs per person.

I wish all Councils well that are looking for savings, eliminating waste and concentrating resources on essential services. This year saw a maximum permitted  Kent increase in Council Tax and the Social care levy approved by the outgoing Council. This year’s Consultation assumes another maximum tax rise and says they still need to find £50 m of spending cuts to live within budget and available funds. When will we know how they will find the £50 m? Will they find more to avoid another maximum tax rise? Have they given up all idea of how to cut spending or even to control the rise?

 

When I was a Minister I understood that I had been appointed to office but that did not mean I was as many say “ in power” . The change from being an Executive Chairman of a large quoted industrial company to being a “junior” Minister was an even bigger jolt than I had been expecting.

My world changed from having to be very careful with everything I said because my word was writ in my company, to having to plot and plan every change I wanted to make to get anything I said incorporated as departmental practice and government policy.I had to ensure I had cleared my lines with the Secretary of State, who did trust me to take command of my specified  Ministerial responsibilities. I had to get across to officials  it was vexatious and pointless going behind my back to the  S of S to change or undermine  my decisions.

I had to battle to stop officials trying to  turn departmental decisions into matters of debate with other departments, as a few were up to trying to stop things by an external intervention. I had to follow up everything we had agreed to make sure it happened in a timely way, as delay was always a good means to block a Minister.

In some cases I had to persuade the Permanent Secretary to take action, as much was about the training, motivation and deployment of staff. Councillors have more power over the selection, deployment and remuneration of their officials than Ministers have. Councillors can sack CEOs but effectively Ministers cannot sack Permanent Secretaries without the support of the PM who will usually be advised anyway by the Cabinet Secretary. Truss’s sacking of the Permanent  Secretary to the Treasury was one  of her worst blunders and added to the force of  the establishment push back  to her policy.

I found there were some very good officials. Key to success was getting the Permanent Secretary to allow some  talent to work on your Ministerial priorities. It was crucial to success to know exactly  you wanted to do and to have thought through the detail of how it could  be done. I  always  wrote my own speeches and drafted crucial parts of documents central to a policy I wanted to avoid confusion or dilution.

I found that if you were always polite and thoughtful about your officials you could persuade enough of them that things could  be done better.The civil service does more with much more money  as its mantra. My mantra is faster, better cheaper. You could get a success by showing them how. Most people do prefer being associated with success than with failure, A Minister has to be good enough to cut through a failing culture of poor quality and more money, to deliver some success for the department he is meant  to lead .