No deal is better than a bad deal

Various people are spreading the lie that they were not told No deal is better than a bad deal  before the 2017 election. Not only did Mrs May often say it but it was  on p36 of the Conservative  Manifesto.

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How does the Prime Minister break free from his Parliamentary captors?

The Prime Minister has been taken hostage by Parliament. This Parliament has decided to oppose the people by denying us the result of our people’s vote. The Prime Minister threatened to implement the people’s view, so they decided to strip him of the power of his office to stop him. Revealing their true anti democratic nature they stopped him holding a general election to let the people reassert their will. This is surely the worst chapter in Parliament’s usually democratic story. It is quite wrong of Parliament to both prevent a government governing and to refuse an election to choose a new government. It is Parliament against the people.

It is something worse than this. It is deliberately placing UK government entirely under the control of EU government. The PM is hostage to stop him taking us out of the EU. He is hostage to stop him negotiating from a position of strength with the EU. He is hostage so the EU can pass any law, make any legal judgement, make any financial demand it wishes and a weak UK will have  to obey and pay.

So what are the Prime Minister’s options from here?

He should obey the law, but he should expect Parliament to pass laws according to our rules and conventions and not to abuse the legislative powers it holds.

He should not resign. Resigning would give the EU faction what they want, control of the executive as well as of Parliament. They would delay an election and seek to make it even more difficult for us to leave the EU.

He should mount the case that Parliament legislated to keep us in unreasonably.  It overturned the need for a Money resolution and Queens consent. It is seeking to make a law out of a political instruction to a Prime Minister it refuses to remove from office by voting him out. If Parliament does not like the government’s use of its powers, then it has to vote it out of office. It has refused to even consider a No confidence vote followed by an election if the opposition wins. The PM should not back down from his refusal to ask for another extension to our membership for no obvious helpful purpose.

The Prime Minister needs to seek an early election. He could on Monday try to amend the Fixed Term Parliament Act as that would only require a simple majority, not a two thirds majority.There could then be sufficient decent individual Opposition MPs who would support, seeing the damage delay is doing to Parliament and to their parties reputation with voters other than those wedded to the EU. There is the issue of whether that could invite worse amendments. It would need to have very narrow scope to avoid amendments that seek to change the franchise or undertake other constitutional changes, so once again lawyers and arguments over procedure would need to precede tabling  anything.

He should rally the country against those MPs and parties who have created this mess. He should urge other member states to deny any move to delay the UK’s exit further, making clear that the UK forced to stay in the EU against the will of the people is not in their interests any more than ours. How can the EU proceed when one of its largest members has no intention of joining the Euro, no intention of helping pay for the Euro scheme  and no wish to support any of the necessary moves to greater political union?

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Government should obey the law. Parliament should follow the rules and conventions when passing laws,

Government should obey the law.

Parliament should obey the rules when legislating.

The law Parliament is seeking to pass is an unusual law seeking to control the conduct of the Prime Minister in an international negotiation.

It is not a criminal law creating a new crime. There are no proposed penalties, fines or prison sentences in it should the PM not obey it. It is not  a general law applying equally to all of us, nor even a law always applying to government.  It is a Parliamentary instruction  or political opinion on one issue at one time  passed as  a law.

This Bill has passed this  far without a  Money Resolution to approve the large extra spending entailed in delaying our exit, and without Queens Consent to Parliament taking over the power vested in government to negotiate treaties.

The law courts wisely decided not to back the government’s  Parliamentary critics over prorogation. Recent events have shown, as the government argued,  the prorogation did not prevent Parliament returning to the issue of Brexit and making its views clear anyway. Parliament will have yet more time to debate Brexit in October after the conference break.

The attempt to control the PM’s conduct of an international negotiation through the courts is also unwise. It is Parliament’s job to control the PM in his international negotiations.  It does this, as with Mrs May, by ratifying  or refusing to ratify the results of the talks. It does it  if it wishes by endless debate and pressure during the course of the negotiations,  often with unhelpful effects on them.  If enough MPs in  Parliament strongly disapprove of the PM’s negotiating stance  then they need to remove him from office by voting  him down in a motion of no confidence and triggering an election.

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The art of the deal

Life requires  a series of negotiations. If you are buying a good or service the negotiation with the provider may be over price, quality, specification or other matters. You may start as a buyer with an idea of the service you want and an idea of a low price. The provider may have to explain that the available service is different and dearer.

Sometimes you the  buyer recognise that what you thought was on offer is not. You could decide to  buy what is on offer, and accept it is dearer, but you are more likely to decide that as what you want is not available it’s better to save your money or buy something else.

Other times you reach agreement over the style and quantity of service, and have to strike a compromise over the price. The buyer has to weigh up how much the provider needs the  business, and the provider needs to guess how much you want the service. More often than not a bargain is struck, but one or  both sides may miscalculate and end up with  no deal. If one or other side is unable to walk away from  the deal, then they will usually get a bad deal. The other party will exploit their weakness to a greater or lesser extent.

Most people understand this. Many people have bought a house, bought a car, or negotiated with a builder or some other domestic service provider. They have also often walked away from a house or a car as they turned out not to be good deals.  They know you walk away unless you really want something, and that you have to be willing to walk away if you want to keep pressure on for good quality and good value. This makes people all the more frustrated when they see how the UK has not done this in negotiating with the EU. We have seen time and again how the opposition to Brexit in Parliament and in  the establishment have constantly been undermining efforts by the UK to pursue a firm line in the negotiations. Mrs May refused to walk away when the EU came up with a very damaging sequencing to the negotiation, giving them all they wanted in the first part, the Withdrawal treaty, and leaving everything  the UK might want open until after the first part was signed. She then refused to walk away when the draft Withdrawal Agreement took shape with a huge move to keep our money, keep us under the EU control for longer, and to invent an Irish backstop as a possible means to keep us indefinitely in the customs union and following single market laws. Now some of these same people have decided to cripple the UK’s attempt at a renegotiation by ruling out walking away, our best card to get the attention of EU  negotiators.

The big advantages we have are manifest. We pay them money, they don’t pay us money (net). They sell us far more imports than we sell them. Much more of their trade faces tariffs if we leave with no agreement than we face. We can trade quite successfully under WTO rules, with lower tariffs on fewer  products out than in. We can regain control of our money, our laws, our borders and our fish. If only the opposition would let the government negotiate against the possibility of No deal.   Armed with such formidable advantages we would have a decent chance of getting them to agree to free trade talks and no  new barriers on exit. As it is the EU sniffs weakness and continues to offer nothing in the hope that the opposition will do their work for them. As Mrs May used rightly to say, no deal is better than a bad deal. In this  case a lot better as what is on offer is a very bad deal.

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Who wants an election?

It was curious to see how practically no Opposition MPs wanted a General election when offered the opportunity on Wednesday night.

The SNP probably do want an early election. They think they can improve their current position at Westminster.

Change UK and the Independents do not want an early election. They see from the polls that they are all likely to lose their seats. Of course many of the Independents recently created by their expulsion from the Conservative party will decide to take retirement. Most would probably like this Parliament to last a bit longer before they retire.

The Lib Dems probably think they could make some gains in an election, where they came a good second last time with a Labour vote to squeeze. Yet they  have decided to resist the offer so far as they are more wedded to keeping us in the EU than anything else. They are clearly conscious of the weakness of other Remain parties, the ambiguity of the Labour position and the opportunity to annoy the Prime Minister more by refusing an immediate election. They have  now said they wish to wait until the October 31 deadline has  passed before facing voters. They want the PM to have to ask for a new extension against his wishes, and they may well want a longer extension than the suggested one until the end of January.

The Greens May have a similar position to the Lib Dems. As they do best in similar seats they have a difficult decision to make about whether both should fight all the most likely seats or whether they do a deal over which to contest.

Labour is not in much of a condition to fight an election. It is low in the polls, and deeply divided about what its best course of action would be. What will a Labour Manifesto say about the EU issue? Will it repeat the previous one promising to take us out, with new added language about a deal which only amounts to changing the Political declaration and accepting the Withdrawal Agreement? Will they sketch a possible Agreement which the EU of course may well reject? Will they demand that whatever deal is agreed is subject to a referendum vote on a Remain or deal choice? Will they just ask for a second referendum to try to get the public to change their minds? It seems likely that they will avoid anything too precise, with language that permits some to believe they will try to  do a deal and others to think they will concentrate on a  second vote. This will still leave a lot of their Midlands and Northern pro Leave seats vulnerable to parties that believe in Brexit.

Some on the Remain side think all these parties need an understanding to put together some kind of Remain platform and avoid too many contests where they oppose each other. It seems unlikely this will work. Labour will be very reluctant to come out clearly for Remain given the voting base in many of their current seats and given the studied ambiguity of the leadership for some time. Without Labour as part of any understanding an important part of this vote base would not be part of any deal. In Scotland it would be especially difficult to arrange an SNP/Labour agreement, just as Greens and Lib Dems are too close for comfort making a deal difficult.

 

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A useless Parliament

The absence of a majority for any governing party or parties, and the lack of unity over any positive proposal makes this a useless Parliament. The government’s decision to remove the whip from 21 Conservatives comes after the defections of Heidi Allen, Nick Boles, Anna Soubry, Philip Lee, Sarah Wollaston to Change, the Liberal democrats and Independence. The Conservative party is now down to 289 in the Commons, with 10 DUP, leaving the two parties short of the 318 needed for a majority.

A pro EU coalition did have the necessary votes to push through a fundamental constitutional bill effectively overturning the referendum result in just four hours yesterday. They could agree to stop us leaving without a deal ,but were unable to agree what a deal would look like that they could accept and which would be negotiable with the EU. The truth is the EU has negotiated the deal it wants, and the UK Parliament and people have decisively rejected that same deal.

The Bill went through with just a handful of amendments rushed to the chamber at the last minute, with no proper time for consideration or for external advice. The Bill now goes onto the Lords where the proposers wish to limit debate, limit the number of amendments and rush it through again without full consideration of its many important implications for our democracy, our economy and our society. The Remain side claims anything the government does is undemocratic, yet pushes and shoves our constitution in ways designed to curtail debate and thwart the wishes of the majority in the referendum.

The Commons then refused to vote for a new Parliament. A Remain Parliament wishes to disagree with the referendum majority and deny voters the opportunity to do anything about it.

I will post my remarks in the Commons debate yesterday.

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How do you want the government to proceed?

This Parliament has argued and voted itself into an impossible position. 82% of the votes were cast in the General election for two main parties promising to deliver Brexit. Now one of those is doing everything to prevent it, and some Conservative MPs have also assisted them or have joined the Lib Dems. The Lib Dems make a mockery of their name  by insisting on not implementing the referendum, saying they want a second vote and finishing off their anti democratic credentials by telling us if that went the wrong way they might  ignore that too.  We have a Leader of the Opposition who has gone on and on about the need for an early election. Now he is faced with the opportunity of one he looks as if he might  instruct his party not to vote for it.

Today the Commons will seek to drive a dangerous Bill through all its stages in one short sitting. Its purpose will be to  deliver the UK into the power and control of the EU. The PM will be required to ask for an extension of our membership, and to accept any terms the EU wishes to dictate. No sensible Remain voter, let alone a Leave voter, can think that a good idea. The Commons procedures have been changed to allow this to happen. An urgent debate which was always on a neutral  motion has been attached to a detailed Timetable motion not of the government’s choosing, binding the Commons and changing Standing Orders. This teems with irony. The MPs who have done this claim to be the true democrats and the defenders of the constitution. Instead they warp the constitution to seek to pass a Bill which would  bind the UK into EU servitude against the express wishes of the electors in  the referendum and in the 2017 General election.

There are usually constraints on MPs other than the government legislating. Only a Minister can move a Money Order, so any new legislation entailing substantial expenditure requires government agreement. This proposed Bill involves spending £1bn or more extra a month for however long we have to stay in the EU. Yet we are told the Speaker is unlikely to agree it needs a Money resolution.  This Bill affects royal prerogative. It therefore should require Queen’s Consent – usually offered by the PM on her behalf- before its third reading. It will be interesting to see if this convention is observed. The government would wish to use Queen’s consent to stop the debate on this Bill to prevent its passage.   In recent times Queen’s Consent has been witheld from Bills the government did not favour. As this is a fundamental constitutional Bill of great significance, it would usually get substantial debating time in both houses, yet yesterday’s timetable motion tramples over this normal protection.

Issues being debated include would an early election help? Should  Conservative MPs  who back this legislation lose the whip? The danger of that is then there are fewer MPs to whom the government can look to get any aspect of its programme through, making it even more difficult to govern.

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A general election?

The media is awash with election speculation. The PM confirmed in his remarks yesterday evening to his MPs that he does not want an early election.

It is by no means clear that the Leader of the Opposition wants one either. His party lags badly in the polls. It cannot say what policy it would offer on Brexit, with some  wanting revocation of our notice to leave, some wanting a second referendum and some wanting some unspecified renegotiation with the EU that the EU might reject anyway. Of course he  has to say he wants one, but he seems happier proposing rebel legislation to delay our exit.

It is quite likely an early election before we had left the EU would be an acrimonious re run of the referendum, with parties wanting to do well having to be clearly leave or remain. There is no guarantee the voters would create a good majority for one single view of Brexit in any new Parliament. Politics is only likely to return to some sense once this so far hopeless Parliament has  fulfilled its main task, to get us out of the EU, as promised by both Labour and Conservatives in the last election.

Our main problem is not too few elections. Our problem is the inability so far of this Parliament to implement the decision of the referendum. Until that is done there will be anger about those MPs who have failed to vote and speak on Brexit as promised in the last election, and an inability to move on to discuss how an independent UK will use its new freedoms. Those MPs have to decide today and tomorrow if they will after all uphold the view of voters in the referendum. If they pass legislation to undermine the government they may just be ensuring the end of their time as MPs as they show disdain for the views of the majority on Brexit.

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Austerity economics comes directly from EU policy and the Maastricht requirements

Sometimes important things are hidden in plain sight. The contentious requirements of getting the Uk budget deficit down below 3%, and getting state debt to fall as a percentage of GDP which have guided policy since the crash under Labour, Coalition and Conservative governments were made in Brussels. I supported the Labour and Coalition governments from 2009 saying annual borrowing was too high and needed curbing to avoid a crisis of confidence in the UK as a borrower, but have not agreed in recent years with the anti growth stance that the Maastricht state debt rules has encouraged in much Establishment thinking. These rules have been the background to low and no growth in several countries on the continent and to mass unemployment in much of the south and west of the Euro area. In the Euro area countries are threatened with fines if they do not comply.

Once a year the UK has a Parliamentary debate around a Treasury Statement on how we have got on in complying with the Masastricht rules. In the last three years the government has been able to report they are below the annual deficit ceiling, but have not until recently started the bigger task of getting state debt down to 60% of GDP. It is this latter rule which encouraged first Mr Osborne then Mr Hammond to resist tax cuts and spending increases that could have boosted the growth rate and improved our investment in transport or improved performance in education and training . Mr Osborne said he wanted to go further and faster than the outgoing Labour government in meeting the Maastricht requirements from 2010 onwards, inheriting big cuts in spending and tax rises from Labour who were also wedded to the policy. In practice he ended up by 2015 in achieving the extent of deficit reduction Labour were planning. He wisely alleviated the extreme cuts on capital spending Labour put into their forward budgets.

As we leave the EU it is time to rethink our economic guidelines. Of course we need to control annual deficits, but we should be less concerned about the debt as percentage of GDP at current levels, and less concerned about borrowing to invest where the public sector has genuinely worthwhile projects that can earn a decent return. As proof that our economic policy has been dominated by Maastricht, I reproduce below a few sentences from the ONS who have set out at length our dependence on the EU rules and our efforts to meet them.

ONS :
“•General government gross debt was £1,821.3 billion at the end of the financial year ending March 2019, equivalent to 85.2% of gross domestic product (GDP) and 25.2 percentage points above the reference value of 60% set out in the Protocol on the Excessive Deficit Procedure.

•General government gross debt first exceeded the 60% Maastricht reference value at the end of the financial year ending March 2010, when it was 69.6% of GDP.

•General government deficit (or net borrowing) was £25.5 billion in the financial year ending March 2019, equivalent to 1.2% of GDP and 1.8 percentage points below the reference value of 3.0% set out in the Protocol on the Excessive Deficit Procedure.

•This is the third consecutive financial year in which general government deficit has been below the 3.0% Maastricht reference value.  

The EU government debt and deficit statistical bulletin is published quarterly in January, April, July and October each year. This is to coincide with when the UK and other EU member states are required to report on their deficit (or net borrowing) and debt to the European Commission.

Article 126 of the Treaty on the Functioning of the EU obliges member states to avoid excessive budgetary deficits. The Protocol on the Excessive Deficit Procedure, annexed to the Maastricht Treaty, defines two criteria and reference values with which member states’ governments should comply. “

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The Chancellor’s Autumn Spending Statement – we need a new fiscal framework

We are promised a Statement on Wednesday, and now know some of its contents from pledges made by the Prime Minister and Chancellor. We know that they will ensure every secondary school receives a minimum of £5000 per pupil per year of grant, and every primary school £4000. I have been pressing for this for some time as Wokingham and West Berkshire schools are at the bottom end of the English spending league tables, and need more cash. This was apparent in an unflattering tv account of a Wokingham School this week. The government will increase money for all schools, but see that the lowest funded get a larger increase to take them up to the new higher minimum. This is only fair, as it does not cost less to employ a teacher or buy some books in Wokingham than in a large city.

We know that the government will pay for an extra 20,000 police to be recruited and employed, and will increase money for Further Education Colleges. It has also announced an additional £1.8bn for the NHS, targeted particularly on 20 different hospitals in need of extra investment and revenue.

I assume this will be a prelude to an early budget this autumn which needs also to cut taxes. The UK economy is slowing too much, in line with the slowdowns in the Euro area but more than in the USA. The US economy has enjoyed faster growth thanks to big tax cuts, a spending boost and an easier money policy. The UK needs the same treatment, at a time of Euro slowdown. Most forecasters expect the UK to grow a bit faster than Germany or Italy, but we need to do better than current forecasts and that requires policy stimulus.

Some worry about the present level of state debt, and wish to follow the EU policy of cutting state debt from its current stated gross level of 85% to the 60% Maastricht target. The actual level of UK state debt is currently 65% of GDP, if you eliminate from the calculation the £435bn of gilts owned by the Bank of England who in turn are owned by the taxpayers. The annual deficit is now well under 2%, which in turn is well below the rate of investment by the state sector. These figures allow scope for some fiscal relaxation. A suitable new rule might be that we keep the idea of a ceiling of 3% on the budget deficit from the current rules, and aim to be at zero or below when the economy is growing at more than 2.5% with more risk of inflation. When the growth rate falls below 1% the government should go closer to a 3% deficit ceiling, with the deficit being borrowing to finance capital investment. This would be compatible with a normal current budget surplus, and with no current deficit in low growth periods. We can of course spend more and cut taxes more once we have stopped making large payments to the EU, which I wish to see from November.

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  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

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