Category: Uncategorized

As Rachel Reeves shifts her ground and worries how to pay all the bills without economic growth, a simple answer is staring her in the face. Cut out wasteful  spending and huge public sector losses.

Start with the Bank of England, predicted by the OBR to lose an astonishing £240 bn between end 2022 and the full wind down of its expensive bond portfolio. Losses to December in the current financial year have been over £30 bn, all paid for by taxpayers. Why?  They could copy the ECB policy and greatly reduce these current losses.

Move on to nationalised railways, costing taxpayers over £30 bn last year for losses, subsidies and capital spend. Demand a new plan that boosts efficiency and sells more tickets, with a much reduced taxpayer cost.

Require the highly paid Post Office managers to end their losses, cutting off revenue subsidies. If they cannot, change managers.

Set out clear and urgent plans to recapture the £20 bn plus of lost productivity in public sector administration. Start with a staff recruitment freeze for admin posts.

Stop Councils buying up commercial properties and investing in utilities. Some Councils are already losing millions on bad purchases.

Have a moratorium on new road schemes that reduce highway available for cars and vans and or impede flows at junctions.Too many businesses are made inefficient by traffic congestion.

One of the first votes I cast as a young man was a vote in the 1975 referendum on staying in the Common market. I read the literature of the two campaigns, and the Treaty of Rome. It was obvious the government Remain side was misrepresenting a Treaty for a future Union as a so called common market so I voted to leave.

I felt cheated by the result, based as it was on assurances we would never lose our veto and it was just about trade. As a good democrat I nonetheless accepted the verdict. For the next 20 years I did my best to limit our commitment to a free trade one, which became increasingly impossible as a series of Union treaties were put through and the Union went on a  ruthless power grab .Every time it got a majority of member states to agree another legal text it “occupied” that field of law so its laws overrode national laws.

As single market Minister I could see most of the laws did not make trading easier. They embedded the ways of doing things adopted by leading  companies- usually German and French – banning competitor methods and discouraging innovation. Where I could I blocked, delayed or diluted these would be laws. Many senior officials wanted us to give in or to strike a deal, however bad or worthless the legal proposal.

The big battle came over Maastricht. No one could claim a single currency was part of a free market. It was clearly a big step on the road to Union.

 

Channel 4 account of Walden interviews of Margaret Thatcher and the ERM split.

 

The re enactment of the Thatcher/Lawson/Howe split was poor. It missed the main point that Margaret was right to resist their wish to go into the ERM. When she was finally forced to do so by the replacement Chancellor, John Major, it proved ruinous for the UK economy.

The drama was so inaccurate in lots of annoying detailed ways . She did not talk to senior colleagues from behind a desk and did not make them stand. There were twin armchairs in her drawing room /study with other comfortable chairs in a semi circle. Bernard Ingham was her press Secretary. He did not see people in and out. Advisers did not speak at political events or gatherings of Cabinet colleagues. Alan Walters did add to tensions with Nigel Lawson at the end and was wrong to get into the press with his views. He did not cause the fissure over the ERM which started years earlier when the Treasury and Nigel started shadowing the DM as if we were in the ERM without permission.

I advised her of this and set out how ERM membership would lead to inflation when the pound was rising as you then needed to print too many pounds to sell, and to recession when the pound wanted to go down and you needed to buy. The scheme gave us both, a nasty inflation followed by a worse recession. She understood this and had to fend off the ill judged and dangerous joint Treasury/Foreign Office line. My paper setting out the problem is I am told now released with other government papers for those interested.

Happy anniversary. We gave enjoyed some big wins from Brexit despite a Uk establishment resentful of the decision to leave and keen  to blame any mistake they make on Brexit.

1. We are now an independent country. We can make our own laws  and set our own taxes. We now need a government that will do that.

2. We are now saving £17 bn a year of taxes we had to pay to the EU, after paying them too much to get out owing to feeble UK negotiating.

3. We can control our own borders. Large scale migration from the EU has stopped. Governments have angered many voters by not controlling legal and illegal migration from the rest of the world, as we can do.

4. The UK has greatly boosted its trade since the 2016 vote, leaping ahead in services to second place  in the world after the US. We can now sign trade treaties like the TPP which contain helpful service sector clauses. The EU did not help us with that.

5. The UK is no longer liable for EU debts. The EU is currently increasing borrowings by a massive Euro 800 bn.We have enough state debt of  our own  without adding that burden

6. The UK was able to go it alone and produce the first vaccine against covid.The EU programme did not produce its own .

7. The UK has taken VAT off some green products and is now free to cut other unhelpful VAT impositions,

8. The Uk has cancelled a lot of import tariffs, helping UK consumers.

9. The UK is free to cut the gross  burden of EU laws. Time  to get on with that.

10.EU technology policy is to regulate and tax US companies whilst failing to innovate and grow tec businesses itself. The UK can have a better regime to promote home tec and work well with the US majors.

11. We can now take control our fishery, give more permits to UK vessels, and ban the ultra large EU industrial vessels to conserve more fish.

 

Our last year charged as a member of the EU meant we paid them £17 bn in tax revenues. We got £4.4 bn back , making a net contribution of £12.6 bn. In practice UK taxpayers had to pay the £17 bn. The money back was meant to be for things the UK government would not normally pay for, directed by EU policies.

We are no longer making these large contributions. Every year that passes saves us more money, as the EU put the  membership fees up.

More importantly since covid the EU has gone on a borrowing binge. By 2026 it will have added Euro  806 bn of extra debt, to be guaranteed by the member states. Our share of that assuming all members pay their way would have been around £110 bn. The EU is also borrowing to lend on to Ukraine, again with member states standing behind the debts.

The last thing we need is yet more state debt. The UK has been too ready to borrow directly on its own account. It would be bad news for taxpayers if we were also up to our eyes in EU  debt. The side of the bus said we could spend more on the NHS when our EU fees stopped. That is exactly what happened, so the NHS is getting a lot more money and the UK debt is still going up.

The Daily Telegraph had a good article on 11 things the government has done which impede growth. They included the National Insurance tax on jobs, the farm and small business tax, the Non Doms tax and the tax on selling too many petrol cars. There is the Minimum wage, public sector pay and the employee rights law. There is the net zero policy, educational reform, Council tax and migration.

Unfortunately I need to add some more to this useful list. There is the reduction of pensioner spending power from the fuel grant changes. There is the planned introduction of the carbon border adjustment mechanism.This effective tariff will make essential imports dearer so it is a tax on UK consumers. There is VAT on schools which is closing some private schools with loss of jobs. There is the planned give away of the Chagos pushing up public spending and taxes to pay for it. There is government endorsement of huge Bank of England losses from needlessly selling bonds, losses that have to be paid by taxpayers. The selling helps keep longer term interest rates higher.

There are the additional regulatory costs and taxes hitting landlords, leading to a reduction of rented accommodation. There is the ban on new oil and gas wells. There is support for anti car and van traffic management and road reduction schemes which mean service providers book fewer appointments., allowing for the traffic congestion.

The Uk is the fourth largest trading nation in the world.Just 41% of our exports  go to the EU and 59% to the rest of the world. Services makes up 56% of our trade, and goods 44%.

The Uk has attracted £2079 bn of inward investment. Just 31% of that has come from the EU and 69% from the rest of the world. The top three investors in the UK are the USA, Jersey and Luxembourg. Our trade with and investment from the rest of the world is growing more quickly than with the EU, as it did in our later years in the EU.

Our trade with the EU is in heavy deficit, as when we were in it. In the  last year the deficit was £98 bn. We are in good surplus with the rest of the world at £79 bn last year.

Our export growth since Brexit of 64% in cash terms is real growth of more than fifth. There has even been real growth in exports to tge EU despite our slower growth with them continuing. Our fastest growth is in service export’s to non EU. That can be assisted by more trade Treaties with non EU countries that include good Services chapters. The EU never bothered to negotiate good services provisions as France and Germany wanted to favour industrial and food products.

What goods does the UK  government think we could sell more of if we accepted more controls from Brussels?

Three of our past leading exports to the continent have been oil and gas, refined oil products and petrol and diesel cars. The government is busily closing down all three of these industries. They want to stop us making things using gas, so our steel industry closes this year. Sky high energy prices have already throttled back ceramics, glass, aluminium, building materials. There is little left to boost goods exports as net zero policy drives us to import more.

The government says we might export more food if we changed the rules. Surely the easier priority is to grow and sell more food at home, where the Common Agricultural Policy hit Uk market share in milk, beef, fruit, veg and other basics.

We would not benefit from joining the customs union. It would make us impose tariffs against the rest of the world, where our trade is growing faster. It would be another boost to the huge import volumes we already buy and another boost to their huge trade surplus with us.

I read today that the Chancellor is going to take on the ultra greens in Labour and insist on more building. She wants to change planning law so net zero arguments cannot stop new homes, data centres and other developments.

She needs to understand that to get growth the UK also needs a lot more cheaper energy. She needs to explain to Miliband that the more renewable power the UK has added, the higher the price of electricity and the more we rely on imports. The UK will not catch up with the US with electricity four tines the US price. We have not solved the big  problem of storing wind power. On very windy days we pay a fortune to get somec wind farms to shut down. Sone developments cannot  go ahead in this country because they cannot secure an electricity supply.

We need to put in more gas fired plant while we wait for that nuclear we have been promised.

 

The Chancellor yesterday used a Goldmans forecast to propose the Bank cut interest rates six times by the summer of next year. She says she believes in Bank independence, so this was a silly thing to say. She will argue she was quoting someone else but she chose to quote one of the forecasts expecting more cuts because  she wanted to make it clear she wants rates down. She has been damaged by the surge in the ten tear rate to 4.9% recently, well above the short term one day spike in the ten year  at 4.38% which she said crashed the economy in 2022. The knock on to mortgages is not helpful for a  government wanting a 50% plus rise in housebuilding.

Too many MPs misunderstand Bank independence. It is only independent to fix the overnight base rate or MLR. It is otherwise wholly owned by the state, its Governor is appointed by the government and answers to them and to Parliament’s Treasury Committee, and it has a full indemnity against losses on its bonds. It needed Government approval for all its QE bond buying.

In recent years I have not called for it to lose its independence over rates, and I have not provided a running commentary on what rate it should set. I see the theory, that a panel of experts with a main task of keeping inflation  to 2% should be able to do a better job than elected politicians wanting lower rates to help win an election.

We need, however, to see that the practice has not followed the theory. The Bank took us on a wild ride, debauching our money with ultra low rates and massive bond buying, driving inflation up to 11% or 5.5 times target. It then crashed the economy, selling bonds at huge losses and driving rates up.  It blamed the inflation  on war and energy, ignoring the fact that inflation was 3 times target before the war, and ignoring the way Japan, China and Switzerland kept inflation near 2% despite war and dear energy.The Bank has proved hopeless at predicting the inflation  rate it is meant to  control because its economic model is poor.

If the Chancellor really wants growth she needs to change Bank  policy on bonds where they are not independent. The Bank has cut deep into fiscal policy with its losses . Meanwhile Mr Trump will try to lecture  the  Fed into lower rates, after they too have given the US a nasty inflation and are now restricting credit.