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Yesterday we debated the Energy Bill. This piece of legislation has support from the main Opposition parties and is more to do with the road to net zero than how to have plentiful good value energy for homes and businesses. It proposes additional complex regulations to seek faster movement to a decarbonised future.

It raises a number of questions which I have been posing to Ministers and the wider public in my words on energy. They include

Why does it require a 140% increase in our interconnector capacity to be able to import more energy from the continent? If the aim is energy self sufficiency and more domestic production we should not need that extra spending on connectors.

How will a £20 bn spend on carbon capture and storage be paid for? The Secretary of State says the Uk has storage for £5 trillion of saved carbon costs, but as the saved carbon costs are presumably at least in part UK tax revenues foregone from emissions trading and carbon taxes, it is not obvious to see how the money is raised to purchase the facilities or how the costs of running them are defrayed, other than through other additional tax payments.

What impact will the higher standards for the energy performance of buildings have on the supply of rented accommodation? Isn’t there a danger more landlords will decide they cannot afford the extra costs of installation of energy saving measures and will withdraw their properties from the rented market? What will be the rent increase where they do put in the new measures?

The Bill talks about the need for more smart machines and more time switching to ration available electricity. People will not be able to come home from work, put an electric car on charge and turn on a series of home appliances all at the same time but will need persuading or requiring to run some machines and rechargers overnight when there is less electricity demand. What will the likely balance be between discounted night rates, penalty day rates and cut outs or bans on smart machine use and via smart meters?

The Bill perpetuates a complex system of managed prices, price controls, bidding competitions for rights to supply, windfall taxes, company subsidies and government interventions to try to ensure sufficient power. What impact does this wide ranging and frequently changing set of interventions have on private sector willingness to invest in future energy provision?

The government says it wants nuclear to play an important part of reliable domestic electricity supply, yet on current plans nuclear output reduces substantially this decade with various closures and only one opening of a new station. When will firm orders be placed for small nuclear installations?

Why is grid expansion proposed at only a doubling when if most people had electric cars and heat pumps and industry had gone largely electric we would need considerably more capacity than that?

The ever growing population of the UK means more to feed and clothe, more utilities needed, more to house and more needing school places and medical care. The UK needs to do more to promote extra capacity to meet these needs.

Instead tax and regulation is getting in the way of producing more. This decade we have lost 700,000 self employed when we need more to set up in business. The government should revert to IR 35 rules used prior to 2017. It should be easier to get started as self employed.

The Treasury should raise the VAT registration threshold from £85,000 to £250,000. Too many small businesses turn down business to avoid the need to register.

The government should remove the 31% hike to corporation tax. If it was really serious about more investment and getting the deficit down it would cut the rate to 15% to attract more large companies.

The government should lift the planned ban on making and selling new diesel and petrol cars in 2030. The ban is putting car companies off investing here.

DEFRA should stop offering grants to farmers to prevent them farming. The money for wilding should be switched to supporting growing food.

The Business Department should suspend the emissions trading and carbon tax system. This is imposing the highest taxes on UK steel, ceramics, glass and other intensive industries of the advanced world. It is leading to closures.

We need to foster enterprise and promote home production. That would bring prices under control.

The UK, Euroland and the USA all have “independent” Central Banks, all are charged with keeping inflation around 2% and all presided over inflation surging to around five times target. They all blamed energy prices that were driven up by the Ukraine war, ignoring inflation well above target before the invasion. They do not ask how Chinese inflation stayed around 2% and Japanese around 3% despite importing a lot of energy. Nor do they tell us why inflation has stayed high long after the oil price subsided.

All three printed large sums of money and deliberately paid very high prices for bonds in 2021 during recovery , driving interest rates to very low levels. They stubbornly refuse to even accept the inflation in assets they created let alone the more general inflation these irresponsible policies were bound to cause.

Now they have lurched too far the other way. Cutting the money supply, selling bonds off or accepting maturity repayments at big losses they are trying to bring on downturns. The Bank of England’s rate rising announcement of large bond sales undermined the pension fund/LDI market so they temporarily had to reverse the bond sale policy and buy up some more. The Fed has helped undermine some large US regional banks with bond price drops and had to tip an extra $400 bn of money into markets to stop a wider collapse.

All 3 Banks should invite in some new people and new thinking. They have done damage through inflation and slowdown policies. They need to monitor and understand the path of money and credit growth to avoid these big errors.

The government faces grave difficulties in securing a pro growth economic policy from both the OBR and Bank. The OBR regularly makes large errors in its forecasts of the future deficit yet the whole fiscal stance is based around the OBR five year forecast. The truth is no one including the OBR can get to within £50 bn of accuracy for that figure with any reliability given the huge number of variables that will affect it over a 5 year period.

Indeed, the OBR has been unable to forecast the one year figure in recent years with any accuracy. In March 2022 the budget forecast for that year was a deficit of £99 bn. Some of us said that was too low at the time. In November that was hiked to £177 bn. The current view of the outcome was just £132 bn. So since the budget of November 2022 with no further policy change the OBR has been £45 bn out! In 2021-2 the budget forecast overstated that year’s deficit by £131 bn.

What should be done?

The OBR should be asked to revise its models. They should provide an honest account of why their deficit forecasting has gone so wrong. Whilst there have been some in year policy changes, the main problem seems to be the revenue forecasts on unchanged policies. Their model wrongly thinks lower tax rates raise less money and higher tax rates more, without putting in a factor for behavioural change and for the rate of underlying growth to correct. Tax revenues are very sensitive to the rate of economic growth, as a marginal pound of extra output or income is taxed highly. Recessions lower profits and incomes cutting tax inflows. The OBR’s ability to forecast spend on unchanged policies is also impaired where they need to work on estimates of take up of subsidy and benefit schemes.
The government should remain committed to getting debt as a percentage of GDP and deficits down in future. It needs to explain how sensitive deficits are to growth, and explain how adopting a better pro growth strategy would assist deficit reduction. It needs to adopt a pro growth strategy and draw on past experience to show how and why faster growth will prove OBR deficit forecasts wrong if they persist with high deficit estimates.
The government needs to make the case for lower tax rates bringing in more revenue. The Thatcher cuts in income tax brought in much more revenue from higher earners. The Osborne cuts in corporation tax brought in more business tax. Above all modern Ireland shows that you can collect four times as much from business proportionate to the size of the economy by setting a 12.5% tax rate.

The Coronation is based on ancient ceremony from a time when monarchs had executive power as head of government. Our service also reflects the complex relationship with the Christian Church that emerged as the established Church of England from the Reformation.
Last century coronations evolved into grand spectacles, to create a holiday mood for the public and to engage people in the change of Head of State. The great show became a celebration of our country, a projection of our country to the rest of the world, and a search for what unites us. Prime Minister and Leader of the Opposition sit down together, smile on the proceedings and affirm God save the King. In return the monarch promises to serve us all and to stay above political controversy.
I trust today’s event will proceed faultlessly and be enjoyed by all who participate, in person or at home. In a free society we are all at liberty to have our own views on both the individual monarch and the institution of monarchy. We can join in and enjoy or do something else today. For our country’s sake it is good if all goes well, foreign guests are welcomed, and diplomacy advanced in the margins of the varied programme. The new King will use his influence both to accept his role as Head of the Anglican Church and his interest in including all the faiths in the service.

However the results pan out the Conservative leadership has to agree Conservatives need to do better. The polls show we have lost the support at least in the short term of many people who voted Conservative in the 2019 election. There is an argument over why they have moved, and over what has to be done to win them back.

My advice to the leader is to understand these were Conservative voters. It is unlikely adopting more Labour or Lib Dem policies will win them back. The political market for those who want a faster drive to net zero, who want higher taxes, who want more subsidies and interventions in business, who want rent controls and more migrants, who want to import more and make less here is highly congested. Labour, Lib Dem, SNP, Plaid and others are all jostling to offer a bigger state, more money taken from those who work hard and who save, more directions over how we should travel, what we should eat and how we should pass our time. There is no point in Conservatives trying to compete for that part of the electorate.

There are some Conservative advisers who tell the leadership not to lurch to the right, not to adopt more Conservative policies. It is high time Conservatives moved on from right/left as a method of analysis of politics. The current divides are not traditional left/right ones. Brexit appealed to people from all shades of political opinion, as the issue was could we make our own laws and set our own budgets or should these be done by Brussels? Wanting to restore more personal freedoms is not right/left. Wanting to take control of our money, our borders and our laws is not right wing, but a passionate wish by people with widely ranging views of how these freedoms should be used.

What Conservatives need to do is to put through policies that are both on the side of greater freedom, and are popular. There is a majority to be had amongst people who want to be left to get on with their own lives, who want to spend their own money in ways of their choosing, and want to keep enough of the proceeds of their work and savings. The five themes of the present PM are fine. The public want success around them. So when will the small boats stop? When will taxes be cut and growth accelerate? When will more capacity be put in to help bring price rises under control?

There are 36,000 managers in the NHS. They should be asking themselves why the patients are unhappy, struggling to get a GP appointment, and why so many of their staff are unhappy, with thousands on strike. The well paid Chief Executives and senior managers have been largely invisible to the public over the strikes. They have in their rare interviews told us the disputes are between Ministers and Unions. They claim to be neutral.

It is difficult to see how managers can be neutral. They hire and fire the staff. They promote some and not others. They grade the jobs, they award increments and decide how many people to employ. They have big powers over huge budgets.They can make an employee’s life better if they handle staff well.

I and others have been urging the NHS to publish a manpower plan. The  Opposition has taken up the cry.  The NHS needs to reassure patients there will be enough staff to look after them, and reassure staff there will be enough colleagues for the workload. I find it bizarre that they do not have a public plan already and that it has taken so long to prepare one. The main NHS cost is staff.

The NHS top managers also need to tell taxpayers they want to look after them as well. Productivity has been falling in the last three years when record extra sums have been put into NHS budgets. Managers spent a lot of money on Nightingale hospitals which were then little used and closed down whilst non covid waiting lists soared. They spent a lot on taking over private health capacity during the pandemic yet underused the facilities there. Test and trace costs went very high, with limited positive results. Now the pandemic has subsided clearing the backlogs has been impeded by poor labour relations.

If the senior managers thought the pay review bodies decisions on pay were wrong they should have pressed for an early additional cost of living supplement or override. If they thought the system was still correct they could have given more support to Ministers in making the case, and helped more staff with increments, gradings and promotions. Doctors say a lot of their unease is about work patterns, shifts and availability of support staff. These are matters managers can manage better.They have of course kept the Pay  Review body system implying their support for it.

It is not just senior management in the NHS that can help more. There  has been a very poor productivity performance in many parts of the public sector at a time of big rises in budgets. There are many examples of public services making choices that annoy many members of the public. In highways Councils have plenty of money to narrow roads, complicate junctions, reduce access for vans and cars, paint more lines and erect more signs. Meanwhile potholes go unmended  and bypasses are delayed. In Housing illegal  migrants get hotel places as a priority whilst legal residents are on waiting lists for homes for years. The state struggles to carry out Ministerial wishes to end the small boats trade across the Channel.

The public sector performs many administrative tasks. Computing power can assist, streamline and improve much of this. The public sector spends a lot on new computers, so where are the savings from automation? Where are the civil service proposals to simplify, reduce cost and raise quality that the digital revolution allows? What is the future for applying artificial intelligence in everything from health to education , where it could assist valued professionals with diagnosis, prescribing and tutoring?

Ministers have allocated lots of extra money to key services, especially health. They have set out what the public would like to see, including easier access to a GP, shorter waiting times and more hospital beds. It is time we heard from managers about how these services can deliver more and serve the public better. Getting on  well with the staff would be a good starting point.



Sent from my iPad

John Redwood (Wokingham) (Con):
What actions are the UN and neighbouring states taking to make provision for the refugees? Is there an up-to-date statement on how big a problem we think that is, given the current state?

Mr Mitchell, Minister of State for Development and Africa:
If there is no ceasefire, the problem will be enormous. I can tell my right hon. Friend that the head of the UN Office for the Co-ordination of Humanitarian Affairs, Martin Griffiths, is in the region and is looking at precisely those issues. I will keep my right hon. Friend and the House informed of the answer to that question as it develops.

The Opposition parties in Parliament think the UK needs to spend more in the public sector. They think better off people and  businesses should pay more in tax. They think business should be made to use less fossil fuel, import many more things that need high energy inputs, charge lower prices and be more controlled by the state.

They support the steps the present government has taken to  make it more difficult to be self employed, to impose windfall taxes on sectors enjoying a temporary period of high profits, to impose EU regulations on Northern Ireland, to make our Corporation Tax rate less competitive, to introduce price controls on energy. Their complaint is these measures do not go far enough. They want to do more of the same. Taxes must all be higher for longer.

They do not ask themselves why people and companies with money should come to the UK to invest and to create jobs if they are to face higher taxes on success, with price controls and nationalisation threats whether you succeed or not.  They never side with the self employed though they often individually rely on them to provide the services they need at home for their own lives. They do not offer anything by way of encouragement or support for small businesses, struggling with a low EU designed VAT threshold. They do not see how rent controls, higher costs imposed on landlords and higher taxes will cut the number of homes for private rentals just when we are already short of properties.

Opposition parties running Councils are particularly keen to stop people going to work, taking children to school or going to the shops by  car. Extra taxes for congestion and emission zones, bans on certain types of vehicle, reduction of road space, high parking charges and the rest whittle away at the number of self employed and small businesses that remain to serve the public and keep town centres alive. Self employment  has fallen 700,000 this decade before all these measures have been put in place .

The UK needs to be much friendlier to business and to those who will  venture and work hard to serve others.The last thing we need is more interference from politicians claiming to help consumers but ending up with too little capacity and a general decline in the UK’s capacity to earn a living.

Thec ONS says “In the year ending June 2022 long term immigration into the UK  was estimated at around 1.1 million . This is an estimated  increase of 435,000 compared  to the year end June 2021. (628,000).”

The net figure after allowing for people who left the UK was 504,000.  This included 89,000 from Ukraine, 21,000 from Afghanistan, 35,000 illegally via small boats and 224,000 from  the EU.

You would have thought given these huge numbers the Remain  supporters would be thrilled that so many were still coming  from the EU and Ukraine, and business would be delighted that so many came legally on work visas. Instead both these groups complain that  1.1 million is not enough and we should be making it even easier for people to come here to work.

They need to tell us how we are going to offer all these new arrivals decent housing, and set out how much all this costs established taxpayers resident here.  Certainly the net increase of 504,000 needs a large number of additional homes to be added to the housing stock. Arguably the 1.1 million need extra homes as the homes vacated by those leaving may not be in  the right places or at the right price for the incomers. The incomers tend to want cheaper housing in the hot jobs areas in London and the southeast  where property is dear.

I favour more realistic controls on numbers as we used to have. We are well behind on providing sufficient homes. Now the Bank of England has driven long interest rates up so much to bring the housing market down there will be a bigger shortfall in housing provision.