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The Chancellor should abandon Labour’s idea of various windfall taxes. In the end consumers have to pay higher taxes levied on business. These extra taxes put inflation up, not down. The Chancellor should also abandon his proposal to hike corporation tax next year. All these extra taxes on business may poll well, but the slow growth  or no growth, cancelled investment and lost jobs they will likely  bring will not look so good to voters in the next election if he insists on damaging the economy Labour’s way.

I read that he is pressing on with trying to construct a windfall levy on electricity companies. The ones that are closest to the consumer have already had their finances demolished by badly chosen price controls, with one of the biggest now a problem for the Treasury as it demands subsidies and sits there nationalised. He is finding that if we want to tax windfall profits by the power generators the ones that make the most are the renewable owners when the wind does blow and the sun does shine. Their generating costs have  not shot up but their power prices have. The ones we rely on much of the time using gas to keep the lights on are not making much windfall profit as the cost of their gas is one of the main inflationary problems.

The Chancellor thinks if he offers businesses tax breaks when they make a new investment they will carry on happily under his high and unpredictable business tax regime.  Why? An investor looks at the lifetime  cashflows and tax burden, not just at the first couple of years when you are putting in the buildings and equipment. They all look a lot worse with the higher taxes the Chancellor has in mind.

The Jubilee is a time to look back and to recognise our own personal journeys and how they are interwoven with the evolving life of the nation.  Like most people I  have never know another monarch. Queen Elizabeth has always been there. Her accent, way of doing the job and attitudes have evolved as the nation has changed.The nation expects complete political neutrality, visibility, but a little reserve and mystery.

I remember as a young child asking my parents to explain the rubble and overgrown weeds of a bomb site that still survived  in my home city of Canterbury. We had a new shopping centre that had emerged from the rubble. I had never asked why the shopping centre was new. It never occurred to my child mind it could have been  blown up by enemies. Beyond the city walls there was still a little lingering evidence of war that I had not understood.  I remember the sense of shock I felt when my parents gave me a sanitised short simplified explanation of bombing. My naivety that adults were protective of children was dented by this new information as I saw it meant everyone had been bombed.

As the war receded in the rear view mirror prosperity spread more widely through the country as we picked the fruits of peace.  The  1960s and 1980s for all their struggles were years of great progress in advancing a consumer revolution. The revelation of the Mini brought small cars to many more families. The mass production of affordable fridges, washing machines and driers greatly improved meal preparation and transformed washday. Cheaper package holidays allowed many more to go abroad for sun and sights. Central heating delivered new standards of winter comfort banishing the frozen windows and cold bedrooms. Tvs made their way into most homes and were adapted to coloured photography. Later the ubiquitous home computers and mobile phones morphed us into a digital age, providing us each with computing power that the state alone had developed and owned to help win the world war.

I remember as a young child having to visit an ageing old man. He lived in a Victorian terrace house which was little changed from how it must have been all those years before when first constructed. The house was still lit by gas lamps. The water for the tea slow boiled on a coal fired range. Just the one room  was  properly heated by the coal burner. The front room was forbidden territory only used for funerals or other unexplained and infrequent important functions. I was not allowed in it. We were entertained in the all purpose back dark living room . There was a large general purpose table and hard chairs to sit on. Like all adult chairs I had to mountaineer to get on one. As an only child in a world of adults I got used to living in rooms furnished for giants.  There were heavy brocade cloths and house plants as decoration.  I was delighted when we returned home to a more modern world. Much has got a lot better over the last seventy years.

When I talk to my young grandsons I think how the generations can stretch understandings of time. I can try to tell them what the world must have been like in the early twentieth  century from relatives who told me and they may in due course be able to look back from the early years of the twenty second century on how we live now.If a new generation will stand on the shoulders of an older generation it will see further and understand more.

The monarch provides such a living thread through our national story. Monarchs no longer make the laws, impose the taxes or spend the public money, but they are in regular contact with those who do. They are part of the public memory of things in history, part of the continuities of national life. The street parties taking place are very similar to those of long gone royal events in centuries past. The royal family itself has within it the tragedies, conflicts and disasters that befall others played out for all to see. It reminds us regularly of the strength of some family ties and the problems they can bring as the royal family has its share of divorces, family feuds, and inappropriate behaviours.

 

One of the more absurd common truths is the one that says the Uk lost an empire and now lacks a role. It is allied to the dangerous notion that the UK has to place itself under EU or US control to be a main player or to “have influence”.

The UK rightly gave away the empire. It had  no wish to hang on to it after 1945, fighting battles against independence movements in the way some did. Nor does it  lack influence or a role. As the world’s fifth largest economy with one of the most powerful militaries after the big two of the USA and China, the UK has a seat on the UN Security Council, and is an important voice again in a range of world bodies from the World Trade Organisation to the environmental conferences to the World Health organisation. When the UK has world class research and confidence in its own views and beliefs it can achieve a great deal through its soft power. As a leading member of NATO it belongs to the world’s most powerful military organisation, where it can bring force to bear with allies for a good cause if it agrees to do so. The UK has in recent decades a good record at protecting or liberating smaller countries from bullying invasions. Alone we evicted Argentina from the Falklands, and led by our US allies we freed Kuwait.

From my study of English and UK history our past underlines the kind of people we are and the role in the world that we wish to define and refine. We have always looked outwards, favouring free trade with as many parts of the world as will reciprocate. We have been on a long march to representative democracy, and have always been hungry for liberty. There are strong strands of anticlericalism in our roots that manifest today as sensible scepticism about some of the fashionable nostra of world tyrants and global bureaucracies. There is in us that respect for the rule of law and the form of the constitutions, tempered by a tough strain of protest if our liberties are too pinched by authority or if the rules are bent too far by government. Failure to understand that lost a King his head, cost later sovereigns power, and lost some Prime Ministers their jobs. It led us to Brexit when the public told their elites that they were promised a common market and ended up with a powerful international body making many of our  laws and deciding some of our taxes.

Slow to anger as a democratic people, preferring the paths of peace, we as a nation fight doggedly and accept sacrifice if an aggressive autocrat seeks to take over independent countries. In the sixteenth century England and Wales stood almost alone against the might of superpower Spain, helping the Netherlands in revolt against Spanish autocracy. In the seventeenth and eighteenth centuries Great Britain organised Europe against the French superpower’s attempts to take over much of the continent by conquest. In the twentieth century twice we  had to fight against German aggression and German attempts to create a united Europe against the will and freedoms of many of Europe’s countries.

It would be good if we can now avoid damaging European entanglements as we wish the EU success in creating a peaceful resolution of the various tensions and disputes between continental countries. There is no need for us to lead the questions of how the EU defines and defends its eastern borders. The USA and ourselves in NATO need to define limits to those who would threaten us through eastern Europe but should not get involved in the Balkans and former Soviet Union issues which currently preoccupy the EU. We may independently decide to help a country in distress from Russian invasion as we do with Ukraine.

One of the worst features of the governing elite in my lifetime has been the pessimism and lack of belief in our abilities as a country to influence the world for good and to prosper without being controlled by a larger power from outside. This has been allied to their dreadful run of boom/bust and austerity advice since the early 1970s, leading to an underperformance of our economy. Their poor economic policy feeds their wish to impose greater international strictures and controls on us. Why do they forget this is the country that not so long ago designed the first large working computer to break codes, developed the jet engine, built the world’s first civil nuclear power plant and with France produced the only supersonic passenger aircraft? The UK can achieve a lot, and would achieve a lot more if more of its governing elite had confidence in us.

The British monarchy got the idea of using female talent much sooner than many other institutions in our country. In the last 500 years we have been ruled by Queens for 202 years or 40% of the time. This  includes the second Mary  ruling jointly with husband William, as their tenure  was based on her prime claim to the throne . Queens have not proved very different to their male counterparts in the way they have done the job. We have  seen one woman try to usurp the throne in 1554, with various men also trying something similar. In the era of executive monarchs Queens like their male counterparts used executions to deal with rivals and threats. Queen Mary I earned herself the title of Bloody Mary for executing Protestant dissenters from her Catholicism, burning many at the stake including a former Archbishop of Canterbury and a Bishop of Gloucester.

Three women share three of the top four slots for longest reigns, showing their political skills as well as their good health. Of the men only  George III had a reign of 60 years , in third place after  Elizabeth II’s 70 years so far and Victoria’s 64 years, though his reign was troubled by mental illness and entailed a Regency for part of it.  Elizabeth I managed to survive and flourish for 45 years on the throne despite many attempts to assassinate her. She also successfully confronted  a major planned Spanish invasion to remove her from office by foreign force when Spain was the contemporary superpower seeking  to unite Europe on Spanish terms.  She faced enemies at home plotting with enemies abroad to kill her and change the government. No other King managed more than 40 years. Charles I was executed after fighting a civil war against Parliament. James II was removed from office in the Glorious Revolution of 1688. Edward VIII abdicated over a  dispute with Parliament about his marriage.

Elizabeth II’s success in gradually modernising the monarchy whilst staying very popular for most of the time rests on one simple foundation. She has avoided expressing political views and has not tried to interfere with what her governments have been wishing to do. Her son needs to grasp the crucial importance of this before he in due course takes the throne. Pursuing contentious causes does not mix with neutral monarchy.

Today there is a small minority of republicans who want the institution abolished and who will not be celebrating the Platinum landmark. Most people from Mirror readers to Express fans, from Brexiteers to  Remain supporters will celebrate the anniversary in some way or will look in on the national events of the four days on their televisions with a friendly eye. That is in itself the one tribute to the Queen that matters. 70 years on, in a world of Republics and with a global enthusiasm for greater equalities this monarchy is still relevant.

The Queen has carved out an important role as the UK’s first diplomat. On the whole successive governments have used her wisely in that role, as she has been the uniting figure for the nation that foreign heads of government and of  state can relate to whatever their politics. Some foreign leaders might not have wanted a photo op with some of our Prime Ministers owing to big political divides, but all seem to want the photo with The Queen, a person known worldwide for her decades of meeting and greeting.

One of the advantages the UK has in the world of international diplomacy is the monarchy. Heads of State visiting here get something different from the five star hotel and luxury limo experience. They may dine in  a castle, ride in an open carriage and meet a Queen they have no political issues with who is an internationally recognised global celebrity.

Sometimes sensible proposals get through. This will bring more tax revenue, more jobs, and less CO2.

Today we give thanks to the Queen for her sterling service to our nation for more than 70 years as monarch. Over those years she has gently nudged change in the way the monarchy and court work and how they reach out to the public they serve. She has reigned from days of  food rationing and bomb sites after the World War to the days of the digital revolution when so many enjoy a mobile phone and many appliances in their homes that were beyond the imagination or the pockets of the many 70 years ago. She has seen us move on from open coal fires to central heating, from very few going on to A levels and degrees to a much more widely educated society and from most walking or going by bus to many having a family car and a foreign holiday.

The Queen throughout has been the UK’s first diplomat. At times her state visits and Commonwealth interventions have made an important contribution to peace and greater world harmony. Her early reaching out to Nelson Mandela led to him riding in a state coach with her in London and a very successful state visit to South Africa. Her official  visit to the Republic of Ireland after the troubles was well received by all sides and helped the peace process. Her warmth towards Michelle Obama helped in a difficult phase of the UK/US long relationship.

She has kept her position as constitutional monarch by understanding exactly how she must  not be seen to be interfering in contentious matters that divide the parties and Parliament. She has avoided over hasty action when Parliament itself fails to deliver a reliable majority for the Prime Minister, understanding that at such times of dispute the elected politicians have to find their own way through. Over the Jubilee holiday we can relax a little, celebrate all that is good about the modern UK, and thank the Queen for her service.

I am disappointed but not surprised that the EU is still trying to impede and damage Brexit. There is not a shred of democracy in them as they look at several strategies to undermine the clearly expressed wishes of UK electors to be self governing again.

Their preferred route is to try to turn the ambiguous and scarcely agreed Northern Irish Protocol into a device to keep the whole of the UK under EU rules and regulations. They forget their signature to Clause 13.8 of the Protocol which makes clear it can be clarified, superseded or dropped. That was put in there because the Protocol as drafted is contradictory and did  not represent a final settlement of the issues it tried to cover. They want to bury Clause 16 which allows the UK to make unilateral changes to enforce the parts of the Protocol the EU does not like – the measures to prevent diversion of GB trade and the measures to ensure the freedom of the UK internal market including NI. The EU refuses to adopt any negotiating mandate which could produce an answer or compromise. Instead they deliver idle threats and seem to delight in the damage they have done to  Northern Ireland politics and the Good Friday Agreement. The UK has tabled proposals which protect the EU’s single market, their alleged worry, whilst restoring UK trade to NI. The EU refuses to budge.

The EU sought to disrupt the UK’s independent vaccine policy when early investment and great research reached a good answer. They regularly threaten retaliation if we adopt any policy that they do not like which deviates from EU practice. They have allies and friends in the UK civil service and on the Opposition benches in Parliament who are looking for ways to thwart the government when it wants to change regulations, remove taxes or make other changes that could help UK prosperity and growth. The Treasury fights against any proposed VAT cut and delights in accepting the very dubious EU view that we could not cut VAT in Northern Ireland. All the time we were in the EU we were allowed to set different VAT impositions from the Republic and to fix different excise arrangements. The sums owing were not settled at a border post but by electronic transfers away from the borders.

The EU’s little helpers try to stop any repeal or amendment of EU laws and would like to smuggle  some of the latest efforts of the EU legislative machine into UK law by arguing they are necessary or desirable in their own right. The EU doubtless want to invent a new circle of EU control for states falling short of being full members, or it may just wish to lock the UK back in via an Association Agreement.

Ministers who want to get on with improving the UK economy tell me they encounter plenty of official resistance as they seek to amend and repeal. They need to overrule and get on with it. The pro EU forces say we have to accept when we leave there will be downsides, and accept we need to follow EU rules to trade with them. I say there can be plenty of upsides if we cut free properly. You can always trade with them as many other countries do that are not members, through the World Trade Organisation’s most favoured nations rules. There is so much to win if we get on with setting our own laws and taxes. It is a strange institution that shows more flexibility towards Mr Putin over buying and paying for Russian gas than it does to the UK, a friend and ally, over internal trade within our own country.

I reproduce below my recent Conservative Home article

 

When I asked the Chancellor following his statement what advice he had received about the possible inflationary consequences of printing lots of money last year, he did not answer. He asserted yet again that the Bank of England is independent.

The Treasury regularly tells us the Bank of England is responsible for controlling inflation. They need to ask themselves why inflation has hit nine per cent, against a two per cent target, and why they think it could even go higher this autumn before falling away.

I cannot understand why Rishi Sunak claims the Bank is independent. The Chancellor chooses the Governor and has influence directly and indirectly over forecasts and policy at the Bank through joint official working and contacts with the Treasury.

Successive governments, with the backing of Parliament, have made substantial changes to the laws, rules and objectives and powers of the Bank over the last thirty years. When George Osborne selected Mark Carney he chose someone who was willing to use the Bank and its forecasts to support the Remain campaign in the referendum, in line with the Chancellor’s thinking.

Gordon Brown changed the inflation target to direct the Bank,and Alastair Darling forced an interest rate cut during the banking crisis on a reluctant Bank to implement an agreed international Finance Ministers’ strategy.

The Treasury respond by saying that what they mean by the Bank is independent is the narrower claim that it has sole control over money policy.

They accept that the Bank has been buffeted by political change. They lost control over managing the state debts and regulating the commercial banks, once thought to be important parts of central banking that were taken away from them.

Even this narrower claim is wrong. Over the last 14 years the main tool of monetary policy has been the creation of billions of pounds of new money by the Bank to buy up state debt. This has kept interest rates very low and would in normal circumstances be inflationary. Every pound of the £895bn created has been formally approved by successive chancellors.

Going further, every pound of bonds the Bank has bought has been underwritten by the Treasury. Chancellors have signed off to indemnify the Bank against all losses on this pile of assets. The Bank has an agreement from the Treasury that will top up its capital to a minimum level whatever happens.

That does not sound very independent and means chancellors need to watch carefully the liabilities the Bank is piling up.

I found it odd the current Chancellor seemed unwilling to talk about this. It has been on his watch that the Bank has bought £450bn of bonds, more than chancellors Darling, Osborne and Philip Hammond combined. Whilst he has also proposed and approved substantial increases in public spending and borrowing, the £450bn dwarfs everything else he has done.

Prior to the banking crash, people in advanced countries said that printing money and keeping interest rates artificially low was the kind of thing inflation-prone emerging market economies would do. The special circumstances of the banking collapse in 2008 did need these special measures to compensate for the destruction of money and credit taking place in the private sector.

There was also a good case for doing some more in 2020 to offset the collapse of activity brought on by lockdowns. I supported the money creation they proposed.

Continuing this policy throughout the whole of 2021, a year of fast growth and good recovery in the UK, was altogether more questionable.

Some people say inflation results from cost pressures and supply shocks. They blame current inflation on sky-high energy costs and surging food prices brought on by the Ukraine war.

It is true we are living through nasty hits from these forces. It is also true that British inflation was rising well before Russia invaded her neighbour.

China and Japan both rely on a lot of imports of energy but they still have inflation around two per cent, not near ten per cent. They did not allow a surge in money growth in 2020-2021, whereas the UK along with the US and EU did decide on a bulge in money growth, resulting in part from the money creation undertaken by the Bank.

Some people say inflation results from excess demand. If people have too much spending power for the capacity in the economy then prices rise quickly.

We can see some of this at work, as hospitality, travel and leisure businesses struggle to recruit enough labour to meet rising demand and need to pay higher wages and more for supplies.

The Bank points out in its defence to the charge that it has dropped the ball on inflation that there is little it can do if Russia disrupts energy and food markets. The only thing it can do if the economy is running too hot is to jack up interest rates to slow everything down.

There is some truth in these defences. It shows that countering inflation cannot be left to the Bank alone.

We need a supply side strategy from the whole of government to produce more energy, food, and other goods and services here at home to bring demand and supply into better balance. The Chancellor needs to produce policies which promote growth. Constantly hiking taxes and inventing new taxes will stifle investment, not encourage it.

Meanwhile the Bank does need to ask itself some tough questions about money. Why does it not have a target for money growth? Why does it ignore the impact of more created pounds and more credit on demand and prices?

It will be the Chancellor who has to tell us how the huge bond portfolio is doing, now bond prices have fallen markedly.

I met leading Councillors and Planning Officers on Friday at the Wokingham Borough Council offices. I explained why I would  like the next local Plan to confirm lower new housing numbers given the past pressures on green spaces, local infrastructure and  public services from the rate of development.

The Council said it too would like to slow the growth rate. I suggested that the Council

1. Maximises identified land that should be kept free of development through the various designations of green space, sites of special scientific interest, green belt, green gaps between settlements, recreation space, good quality  agricultural land and others

2. Do not identify a large number of marginal or unsuitable sites  as possibly suitable for housing as that might make defending decisions later more difficult.

3. Make a proposal for changing the way housing need is calculated, as this is central to calculating how much land needs to be identified for housing.  The  Secretary of State is currently considering whether and how to change national planning law. I would be happy to put a good working proposal to the Secretary of State.

The Council needs to get on with a new local Plan to cover the period up to 2037. The  current Plan is near its end and is too permissive.

This is the article the Telegraph asked me for on Friday:

 

I was happy to vote in support of the government opposing Labour’s windfall tax plans when they put them to Parliament. Ministers were right to say then that windfall taxes make the UK a less attractive place for business to invest. They introduce a more  unpredictable element into planning a long term business investment.

 

            It is particularly strange to single out the production of oil and gas from domestic sources for such a tax. After all surely the government  want to cut carbon dioxide output which we do by collecting and using our gas instead of importing foreign gas  in LNG tankers from abroad. LNG imports means twice as  much carbon dioxide for each unit burned.  We already tax producing energy at home at double the rate of other business activities  so it has an inbuilt windfall tax for the government. That should be another reason why we want to maximise home production and cut out imports. Why pay all that production tax away to Russia or Qatar when we could have it to pay for the NHS? If we produce more energy here we also have more better paid jobs, a further source of extra ` tax revenue as the Treasury taxes the salaries and then taxes the spending of those who earn the money. The government should actively be speeding and licencing more North Sea output and new fields to replace imports for green reasons, to raise more revenue and create more good jobs.

 

           There is a wider point of political importance. Conservatives believe that free enterprise and the market place are the right answer for the supply of many of our needs from bread and water to energy and clothes. The private sector innovates, offers great customer service, gets rid of unsuccessful or poor quality ventures and finances itself without recourse to tax revenue. In 2020 the large oil companies lost huge sums as demand for their products collapsed with lockdown. None of us thought the taxpayer should subsidise them. Shareholders took the hit. Two years later those same oil companies are making high profits on oil and gas production in the UK which will smooth the shareholder returns a bit after the bad year. The Treasury will take 40% of those profits. Those same companies like BP that also had big interests in Russia have just lost far more on their Russian write offs than they are making on the North Sea output. BP’s first quarter figures were a huge reported loss overall. It’s a reminder of what a risky business it is.

 

            I urged the Chancellor to have a second package of measures this spring. I am glad he came to the view that he had not done enough to offset the recessionary forces unleashed by such a large hit to real incomes. I urged him to give back the extra tax revenue he is collecting on oil, gas and electricity. His Vat receipts on energy bills will rise 50%, his taxes at the petrol and diesel pumps are well up, and his North Sea oil corporate tax is surging. This windfall tax rise should be given back to help people afford the dearer food and energy. I also urged him to give it back by a combination of increased Universal credit to help those hardest hit, and to offer some tax cuts. If he had cut the taxes we pay on domestic energy and at the pumps his measures would have nudged inflation down a bit. The higher inflation goes, the bigger the future costs to the government as they index payments to the new rate. Instead he chose to give it back through one off payments which will not reduce the cost of living at all.  

 

           The  more of the money he claws back in extra tax payments elsewhere the less impact the givebacks will have on helping growth and avoiding too sharp a slowdown. The Bank of England expected the economy to stall next year before the measures based on the impact of the income squeeze and their own monetary tightening  with dearer mortgages. The Chancellor needs to bear down on inflation more whilst at the same time assisting growth. Growth means  revenue grows faster and the deficit comes down. Past governments that have caused or allowed recessions have had ballooning deficits as revenue falls and public spending rises in a slump. There needs to be a big investment led boost to the economy as we need more capacity of many kinds – more home produced energy, more home growth food, more home landed fish, more home manufactured technology. This requires low corporate taxes, a stable approach to  taxing profits, and government regulatory, procurement  and licensing policies which assist capacity building at home. Putting in better first year allowances for making an investment does not offset the damage of higher rates of tax on all the years the investment is working, and does not compensate for the threat of windfall taxes if you are successful. The Chancellor should live his brand as the low tax enthusiast.