An important month

The forces of Pessimism and defeat want the U.K. to seek an extension to the negotiating year with the EU. It is most important that the Prime Minister and Mr Frost refuse to countenance such a dreadful idea. There is nothing we could negotiate next year that we cannot negotiate this year. The U.K. made a mess of the negotiations under Mrs May who trusted the Official Civil service and liked advice that always meant the U.K. giving in on issue after issue.

The present government has so far been as clear as Mrs May was muddled over what the U.K wants. It has rightly refused to accept the EU’s wish to settle fish first before anything else and make our fish a further payment to them. It has proposed a free trade agreement as the base of the future relationship but said no agreement would also work fine.

There is no point in negotiating through June unless the EU changes its approach and understands we are not giving away powers over our fish, our laws or our money. The EU pretends we want to stay in the single market and customs Union, which we voted to leave.

The U.K. just has to stay calm, be pleasant but show great resolve. We are not going to give in again and do not want some kind of Association Agreement putting has back under the EU Court and laws.

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Liquidity and solvency

Offering money to companies to see them through a couple of months when they are not by law allowed to trade was necessary. It was right for the government to pay the wages of staff who have jobs but are not allowed to do them, so that the workforce is available to start up again as soon as the lockdown is lifted. It was right to offer money to the self employed who were also banned from earning a living.

Government now needs to handle the return to work well. The state cannot afford to carry on paying out large sums to companies that do not have enough turnover. The only way to sustain our living standards is to get everyone back to work. There are will  be some businesses that were declining before the shut downs. They may need to make a bigger adjustment now as the shut down probably accelerated their decline.

There will be other businesses that had a great business model prior to the lock down that will now  be damaged by the changed conditions created by the anti virus policies. Travel and hospitality will have to change the way they work for as long as social distancing remains, and plan for reduced workloads for sometime after lifting of the shut down.

There are then a range of businesses which gained market share out of the shut downs and who may continue to grow well even after the  end of the exceptional times for on line retail, internet conferencing, remote working service and supplies, home entertainments and other technology winners.

What we do not want is to search for some top down government led model of backing winners, interfering with customer choices and deciding who to subsidise and what changes to lifestyle they require.

The danger is some companies that were short of cash owing to lock down end up insolvent because they do not experience a surge of returning business once the lock down is lifted. The government does not have the resources to keep all companies going that lack a strong business offer for the new conditions post shutdown. The private sector has the means to lend money and to buy shares. Large companies have access to low interest rates on bank finance and bonds, and can raise additional capital from shareholders. They can and are conserving cash by not paying dividends or buying back shares where they need to be careful with the money.

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Big business and government

The government should not want to bail out big business or take share stakes in large companies. It should be helping and encouraging them to get more money from customers so they do not need bail outs. The policy is meant to be getting many more people back to work, preferably working from home. Taxpayers do not want shares in companies that are losing so much money they cannot finance themselves commercially from banks and the markets.

It is rumoured that Jaguar Land Rover might need government money. Yet this is a company with good products, that needs to sell more  cars to generate the cash it needs. The government should be asking any car business that thinks it might want taxpayer aid the following questions:

Will its dealerships soon be open to sell cars observing social distancing assuming that gets the go ahead?

Meanwhile is the  sales force available during normal business hours to sell on line and through email and Zoom/Teams meetings with customers?

Have they  tried contacting their customer and customer enquiry lists to see if people will buy a new vehicle? Are they offering any special promotions to get the market moving again? Given the reported growing interest in people buying cheaper second hand cars as an alternative to public transport to get to work, isn’t this a good time to encourage switching to a newer vehicle for people who are already owners?

The Bank of England and the commercial  banks are making plenty of money available to those who need a car loan to buy or upgrade  a vehicle.

The Treasury were right to offer short term generous assistance for the lock down period. Now we need to move on and find ways to get people back to work safely and wean companies off government life support.

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The price of solidarity

For years Germany and the Netherlands have resisted any idea that the EU should borrow money together and spend it in the poorer areas of its territory. They wanted a currency union but not a benefits union, a monetary union but not a transfer union.

The dollar area or the sterling area are currency unions backed by self governing states. In each there are large transfers of money from the richer parts of the area to the poorer parts. These take the form of grants to local government from central taxation, grants to individuals through the benefits system based on need, and common taxation raising m ore from the places where incomes are higher. As a city or county that suffers relatively low incomes cannot devalue against the richer places, it needs to the grants to get its living standards closer to the national average.

Last week Germany and France came to an Agreement. They propose a Euro 500bn fund for the EU, to spend on recovery from the pandemic.  The money will be borrowed by the EU as a whole, where each state stands behind the loans in proportion to the size of tis economy.  If the EU decides to spend proportionately more in the distressed areas of its territory, then it would have some mild element of redistribution about it.

Time will tell whether this is the first step on the full road to a transfer union, or whether this is a one off gesture soon to be watered down by delays in getting the money and by an approach that all states should have prizes in the lottery draw for the funds.

I have always thought those in the EU who argue they need a transfer union to complete their monetary union are right. The problem is the true price of solidarity and more equal standards will be very high for German and Dutch taxpayers. Is this a saleable proposition to them?

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Promoting jobs

We now have the opportunity to get rid of regulations, taxes and charges imposed on  us by the EU as we leave fully at the end of December. We need to use these freedoms to promote faster growth and more employment.

The government could begin by repealing the Ports Regulations. These were strongly opposed by our port industry when they were in negotiation, and are not relevant to the UK where our ports are mainly private sector owned competing businesses.

It could go on to make the Data Protection legislation less bureaucratic and more effective. The EU system has set off an avalanche of box ticking exercises, often impeding legitimate communication with groups of people who wish to be on mailing lists. Of course we need high standards of protecting sensitive data, but we do not  need a system which stops legitimate sales promotion or information flows  to people who want to be in touch.

We need to remove VAT from a variety of items often mentioned here.

We need to tear up the fishing regulations and replace them with UK based ones that are kinder to our fish and to our fishing industry.

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Getting people back to work

It is time for government to come out with proposals that can make it easier to start or re start a  business and to keep or create new jobs. Unemployment is already far too high thanks to the anti virus policies adopted, and is set to go higher as we limp out of lock down.

It is quite clear that there will need to be accelerated change in our economy to cope with the social distancing rules and the other changes that the pandemic has brought on. There will be more on line shopping and less shopping in physical stores. There will be more remote technology working in  health and education, in leisure and office work. These big changes will require large companies to be adaptive, and will require many more new and smaller businesses to offer new models and services and provide the flexibility fast change needs.

Let’s start with cutting into those great lists of the unemployed. Why not let any self employed person take on an employee or assistant, with the first year based on them being self employed. It is often the hassle of National Insurance, pensions and other paperwork that puts the self employed off expanding a successful business  by taking on additional staff. Give them up to a year to work with someone to see how good it can be and to guide them into the idea of accepting full employer responsibilities. Alternatively it might lead them to adopt a partnership or franchise model with the new person. We need more self employed to expand their often successful businesses.

End the threat of IR35 changes. We are losing business to foreign companies, as large groups here worry about carrying on or taking on a UK self employed contractor for fear that their tax status will be queried at a later date.

Raise the VAT threshold to allow small business more activity before they need to go through the complex process of registering for VAT.

There were around 5 million self employed when the pandemic struck. We need to see them as an important part of our future, and give them every help to get going again and to grow their activities. Sometimes the Treasury seems to see them as a nuisance, seeking ways to tax them into working for a large employer or not working at all. It is a prejudice we cannot afford.

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Public spending

It is right for the government to cushion individuals and businesses temporarily losing their incomes owing to the lock downs. It is right for the government to provide a fiscal boost to offset some of the massive deflationary forces unleashed by the global anti virus policies. It is not right to waste public money or add to the burden of the debt with marginal or unwise spending.

So I renew my list of spending reductions that are even more needed now, given the state of public finances.

  1. Reduce overseas aid spending. It will exceed the 0.7%  of GDP legal requirement this year given the fall in GDP unless it is reduced. Start by taking £1bn off plans.
  2. Improve collection of the charges for use of the NHS by overseas visitors. It is a National, not a Global Health Service. Possible £400 million extra.
  3. Cancel HS2 saving up to £100 bn over a period of years
  4. Toughen enforcement against people trafficking to cut the costs of illegal migrants.
  5. Insist on leaving the EU at the end of the year with no further payments to them. Savings of £1bn a month thereafter.
  6. Stop Councils building property asset portfolios based on low cost public borrowing.
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Billionaire influence?

Some people want me to publish their personal campaigns against a few named billionaires. I tell them repeatedly I will not do so. It is  not the purpose or nature of this site.

Some claim these billionaires lobby governments, setting up lobbying institutes to  seek attention for policies they favour. Indeed , some of them do just that. So do Trade Unions ,raising millions from their members, large charities, spending a fortune on  adverts and lobbying, opposition political parties, every large company that has a government affairs department and many others. All of these people and institutions use money they have earned or raised to sharpen their message and to try to influence Ministers who make decisions and to influence the  officials who help them. Sometimes they want governments to do things that are self serving for them and possible damaging to the rest of us. Ministers need to stay alert and work out who to trust.

One of the  purposes of this site is to examine the quality of the decisions governments and public institutions  make and the consequences of them. As an MP I am also seeking to   influence government on  behalf of my constituents and in line with my and my party’s view of how to proceed in the national interest. Where external lobbies are putting forward damaging or ill judged proposals then I am always willing to give a voice to the counter arguments to their theories and propositions.

I am not willing to publish personal attacks on people who believe they are working for the wider good just because one or you – or I myself – disagree with their advice. I do  not have the capacity to research the truthfulness of claims made about them. Please find somewhere else in the media who do want to run with conspiracy theories if you believe you have a case. Governments do not have to follow these people – sometimes they choose to do so, presumably when  they think they are right.

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In support of Mr Frost’s letter

Mr Frost’s letter to Mr Barnier told him some home truths. Is the EU stupid or wicked in thinking that the UK wants to stay as part of the single market, and therefore needs to make concessions to do so? The UK has made it crystal clear we are leaving both the single market and the customs union. We have also made it clear we would be willing to grant the EU a Free Trade Agreement, which will help them more than us, as an act of friendship which could also be of modest benefit to us as well.

As Mr Frost asks, why is the EU apparently unwilling to offer the UK something similar to the FTAs it signed with Canada and Japan?  They obviously thought those were in their interest.

I at last got a speaking slot yesterday in Parliament. I made clear there must be no UK concessions and no extension to the negotiations. Either they come round to an FTA or they do not. It’s up to them. The UK will be fine either way. We do not need to pay to trade- not  in money,  not in fish nor by sacrificing our freedoms.

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Freer trade outside the EU

Yesterday the government issued an excellent document setting out the basis on which we will trade from 1 January 2021 as an independent state and member of the WTO. We will set out own common tariff for the rest of the world which will apply unless we have a Free Trade Agreement with the counter party.

Our tariff is lower, simpler and easier than the EU one we currently have to offer to non EU countries. It takes tariffs off items we cannot grow or produce for ourselves.  It takes tariffs down to zero for products manufacturers in the UK need to help them make things here. So cotton, and   various engineered tools drop to zero for example.

It takes all tariffs that are under 2% to zero to save all the admin. It takes fiddly tariffs down to the nearest whole number. It takes tariffs off energy saving, recycling and renewables. The tariff on thermostats for  example disappears.

The Secretary of State for Trade confirms two crucial matters. Firstly, she makes it clear this will apply from 1 January 2021, so there are no plans for any delays to our full exit. Secondly, she confirms there will be no tariffs between Northern Ireland and the rest of the UK. The EU will not be allowed to wrestle Northern Ireland into their customs union and out of our common customs system.

Many of us  MPs wanting to implement the referendum  have been pressing for just such an outcome for many  months.

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  • About John Redwood

    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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