Budget speech

My budget intervention and speech are available as text in the “Debates” section of this site. Videos of each are available below:

My intervention: https://www.youtube.com/watch?v=iaMHh8PYalc

My speech: https://www.youtube.com/watch?v=CAvGP_vdy0s

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Budget numbers

So the Chancellor shot a few of Labour’s foxes.

First to go was the idea that the Conservatives will take the UK back to 1930s levels of spending. This is Labour’s favourite lie, based on confusing spending as a percentage of the economy with real levels of spending, which are currently nine times the 1930s! As explaining all that is difficult, the Chancellor has raised planned spending for 2019-20 so the percentage of the economy will be 36%, the same level as Mr Brown and Mr Blair chose in 2000. No return to the 1930s guaranteed.

Second to go was the idea that a further raid on the pension funds of the better off, and an increase in taxes on banks would pay for Labour’s programme. The Chancellor has done both those things, and the money is absorbed into the budget figures to help pay for the tax cuts the government offered.

Third to go was the idea that living standards had fallen this Parliament. The Chancellor gave us numbers to show they have gone up modestly, and are now rising at a better rate. GDP per capita is 5% higher, and real household income per capita is also up over the Parliament.

Fourth to go was the idea that the new jobs are all part time, zero hours or low skilled. The Chancellor assured us 80% are full time, and most are skilled.

So what is the underlying strategy? Mr Osborne has set out five years spending and taxing plans, so all know what they will get from a Conservative government. Other parties in the election will have to work from those figures and explain how they will pay for extra spending or how much extra they will borrow.

His plans are to get the budget into balance by 2018-19. Debt as a percentage of GDP will be falling from next year, 2015-16. Public spending is forecast to go up by £60 bn in cash terms in 2019-20 compared to 2014-15, with the largest increase in the final year. In 2016-17 there is a planned small cut in cash public spending.

Savers will benefit from £1000 tax free savings income on standard rate tax, and from more flexible ISAs.

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Russia, Nato and Ukraine

There are some who seem to think we are back in a new cold war. They highlight aggressive actions by Russia. They respond with aggressive words, and with some sanctions. They see NATO as able to limit Russia’s aggression.

They should remember how bad the Cold War was, and remember that in those days the West knew the limits to its power. NATO spent much more of its income on defence, had larger forces than today, but decided it could do nothing about Russian aggression in any part of Eastern Europe. We watched as Russia invaded and subjugated an unhappy Hungary, Poland and Czechoslovakia. The NATO defensive umbrella, backed by the formidable nuclear arsenal of the USA, ensured Russian expansion would stop at the East German border.

Today things are not as bad as in the Cold War days. The main countries that wished to leave Russian control have done so. There are many more free states and peoples in Eastern Europe. Russia herself has changed a bit, with more free enterprise. At times Russia wishes to be a more mature power in the world, but in other ways behaves badly towards neighbours. Russia understands the NATO pledge to support all its members, and has concentrated on gaining influence or control in non NATO members close to its borders.

The west rightly condemns aggression to take territory and control people who do not wish to be ruled under Russian influence. The West also rightly has not made the position of people in East Ukraine or Georgia worse by intervening in the local wars. The aim of Western policy should be by diplomacy and economic action to limit Russian expansion, without wanting to extend the EU and NATO in turn. I see no reason to extend a NATO guarantee wider than has already been granted, and no need to expand the EU ever eastwards.

All those who currently enjoy the NATO umbrella should also be expected to spend more of their money on maintaining good defences at home. The UK and US are the only two NATO countries to presently meet all the requirements on a NATO state. Those who want our protection should also spend 2% of national income on defence, and spend 20% of their defence budget on equipment.

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As we await the final version of each party’s 2015 Manifesto, I thought it a good idea to re read the Conservative 2010 version.

That Manifesto placed most emphasis on the need for economic recovery. Most of the policy proposals for the economy were geared to helping generate many more jobs. Much of what was promised has been delivered, and much of that delivery has produced the desired results in terms of jobs.

The Manifesto promised keeping interest rates lower for longer, which has happened. It promised a reduction in youth unemployment which has occurred, and an improvement in UK competitiveness in world league tables, which has also been achieved. The pledge to cut Corporation tax has been met,the banks have been reformed and strengthened as proposed, the OBR was set up, and Ministers’ pay was cut. The new government did reduce the National Insurance bills it inherited, has ended the annuity rule for pensions and increased the focus on STEM subjects at school and university. The IHT promise has not been delivered, falling foul of coalition agreements. Council Tax was frozen for two years as promised and then kept down. We have discussed immigration before, where the target was not met.

On Europe the Manifesto said

“We believe Britain’s interests are best served by membership of an EU that is an association of its member states. We will never allow Britain to slide into a federal Europe. Labour’s ratification of the Lisbon treaty without the consent of the British people has been a betrayal of this country’s democratic traditions. In government we will put in place a number of measures to make sure this shameful episode cannot happen again”. The government did enact legislait5on requiring a referendum for a future transfer of power or if any government wished to join the Euro. Conservatives ruled out joining the Euro, then and now. As the Manifesto made clear there was no promise of a referendum on Treaties which had already been ratified, including Lisbon.

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Why does the IMF lend lots of money to Ukraine?

The IMF is busy lending to a European country in deep difficulties – and this time it is not Greece. It looks as if current IMF lending has just got more political, with the IMF acting as some banking arm of European Union expansionism and centralisation. It is lending to Ukraine.

The good news is that this lending, unlike the loans to Greece , is to a country with its own currency. It can devalue, and just has undergone a massive devaluation. The Hryvania has fallen from 23 to the £1 in November last, to 32 to £1 now.

The bad news is that the loans are to country which just like Greece has a government which wishes to write off or renegotiate its past debts. Lending to countries which say themselves they already have too much debt and need to cut them, if necessary without the agreement of creditors, is a very risky and arguably unhelpful thing to do.

On top of that bad news, just as Greece has experienced economic collapse with large falls in output thanks to the Euro scheme, so Ukraine has suffered a sharp fall in output owing to a civil war and to the loss of some of the industrial parts of the country’s economy.

In Ukraine national income and output fell 6.9% last year, and the IMF thinks it will fall another 5.5% this year. The Finance Minister is seeking $15 billion of debt relief, saying she intends to carry through a mixture of offering a lower interest rate on past debts, extending the date before the money is repaid, and simply cancelling some of the value of the debt owing.

Ukrainian debt currently trades at around 40 cents for each dollar owed. The country has very high inflation, weak banks, and a large shopping list for weapons.

All this bodes ill for the success of the debt programme. It also should raise questions in people’s minds about the kind of Europe which the EU is creating. The slaughter has been extreme, the country has failed to keep its people friendly to Russia onside, and it has been outwitted by Russia herself with the annexation of Crimea. I of course condemn any Russian military interference in Ukraine, and condemn the deaths of UKrainian citizens by the rebel forces. I also dislike some of the actions of the present Ukrainian government, which has not found a way to stabilise its country and protect its own citizens, and condemn violence by the Ukrainian state against its own people. The EU has had no answer to this. The Ukrainians that look to the EU for their future should ask why they are now so much worse off, and why their lives have been endangered by recent events.

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Why do so many pro EU advocates treat their fellow Europeans so badly?

If you believe in a united Europe, as many of our EU advocates clearly do, you should feel as strongly about unemployed young people in Spain or poverty in Greece as you do about hardship in the UK. Labour and the Lib Dems say they like everything about our current level of EU integration, and like the EU as it is. If they ever remember to make a critical comment, it is not because they wish to change anything or intend to vote against any of its measures. This soon to expire Parliament has seen a complete absence of Labour opposition to any new laws or powers for the EU, just as they gave away so much power in 3 great Treaties when in government.

If the UK today had 50% youth unemployment as the south of Euroland currently suffers, Labour would never let us hear the end of it – and rightly so. If the UK had Greek levels of unemployment, and a Greek cost of living crisis which has depressed average real incomes by almost a quarter since 2007, again we would not hear the end of it, as Labour would rightly think it completely unacceptable. So why is it that these people who believe in pan European solidarity have nothing to say about the scandal of poverty and joblessness in large chunks of Euroland? Why are they not insisting on new policies for the EU?

Closer to home, Labour signed us up to a common energy policy. This energy policy with its dependence on renewables has locked us into much dearer electricity than competitor economies in the Americas and Asia. It is leading to the loss of industry in the UK and elsewhere in the EU. It is making it more difficult for people to afford their fuel bills. Again, why is there no criticism of the EU’s dear energy as Labour rightly condemns what they call fuel poverty, and dislike any impact from dearer energy on the cost and standard of living.

If you are a true supporter of a more united Europe, you should regard the loss of a job in Athens as seriously as you regard the loss of a job in a UK city. If you are an enthusiast for European solidarity and common working, you should be as aggressive in condemning poverty and unemployment on the continent as at home. If EU government through its energy scheme and through its common currency on the continent lies behind joblessness and poverty, why is it not criticised? Why is there no radical campaign for change? What socialist thinks Greek or Spanish economic policy is acceptable? Who would exchange our policy for theirs?

I will not believe UK politicians really understand a united Europe until they do raise the plight of the unemployed and unfortunate in Athens or Madrid as strongly as they would the plight of people in the UK.

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The Budget – a time for optimism and building confidence.

So far so good. Many extra jobs have been created. The economy is growing at a reasonable pace. Inflation is low. On average real wages are going up. The deficit is coming down.

The critics were proved wrong. The UK did not go back into recession. There was no treble dip. We avoided the sorry course of economic development in most Euroland economies which stayed in recession or went back into recession after the 2008 crisis. UK Unemployment came down, despite the predictions of rising unemployment. The private sector more than made up for the reduction in public sector headcount. Critics were even proved wrong about the cost of living crisis, highlighting energy bills just before the price of oil and gas collapsed.

However, we still wish to see stronger rises in living standards, in real wages, and more people getting good jobs with decent prospects. No-one should be happy with current average income levels, nor relaxed all the time there are people without jobs or in jobs that are poorly paid.There are still many young people to educate, many people who need better skills and qualifications. More people can work for themselves and set up businesses. The next few years should be about real pay rises, as the UK works smarter and better. They also have to be about continued progress in removing the public sector deficit, which by general agreement remains too high.

The budget should explain how far we have come from the crisis, and how much more there is to do. I would like to hear a vision of a UK with more people running their own businesses, with more people owning a home, with more people gaining qualifications and getting the rewards for higher skills. I want to hear of tax cuts to come, so people can keep more of their own money and make better provision for their own families. I want to hear and see more measures to allow enterprise to flourish, including tax measures that allow the successful at establishing new businesses to keep more of their returns.

As this is the last budget of this coalition, doubtless any Income Tax cut will have to be in the form of a further increase in the Tax threshold. I do not mind, as Conservatives want tax cuts and will accept whatever ones the Lib Dems allow.

What would you like the Budget to include?

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A debate about Parliamentary sovereignty

On Tuesday I made the following speech in the House during a debate on the EU and national Parliaments. The crucial question I raised is how can our democracy flourish if the electors want changes that are illegal under EU rules? How can we claim to have a proper democracy, if on major issues like welfare, borders, migration and energy we have to accept what the EU has already decided? What we have seen in Greece owing to the damaging and inflexible rules of the Euro could soon sweep through other Euro countries. Outside the Euro the UK is better placed, but we too need to be able to override EU rules when our democratic imperative requires us to do so.


Watch the Video here: https://www.youtube.com/watch?v=gU067H7aOU0

Text of the Speech ( with a few amendments to turn a speech made without notes or text into written prose):

Mr John Redwood (Wokingham) (Con): This debate is central to what we do here in Parliament and to the promises that various parties will make to their electors as we leave this place shortly and go into a general election.

It used to be a fundamental principle of the House of Commons that no House of Commons properly elected could bind a successor House of Commons. That was a fundamental part of the British people’s liberties. They have to trust a House of Commons for up to five years to legislate and govern on their behalf. They can do so safe in the knowledge that if we—those in government—do not please, they can dismiss us at the following general election. They can elect a new group of people who can change all that they did not like about the laws and conduct of the Government whom they have just removed.

Our membership of the European Economic Community, now the Union, has increasingly damaged, undermined and overwhelmed that essential precept, which was the guarantee of our liberties as the British people. Now there are huge areas of work that are under European law and European control. Those parties that go out from this House into the general election and, for example, offer a better deal on energy, may well come back and discover that what they have offered is quite impossible under the strict and far-reaching rules on energy that now come from the European Union.

Yesterday, we did not have time to debate in the House the EU energy package. Within the proposals we were being asked to approve in the Commission’s work programme was a strategic framework for energy policy.In turn, that will spawn an enormous amount of detailed regulation and legislation, making energy a European competence almost completely. More or less anything that the main political parties say about what they wish to do on energy policy during the next five years will be possible only if it just happens that what they wish to do is legal under this massive amount of law and regulation. Much of it is in place already. More will come forward in ever-increasing volumes under the strategic framework and further legal policy.That is but one area.

A couple of other big concerns that will be much debated in the election are welfare and border and migration policy. Again, anything that parties say in our general election has to go through the European test. Will changes in benefits that parties wish to see be legal or possible under the European Union? May we not find that we are completely bound by predecessor Parliaments because they have signed up to legal requirements under European law that make it impossible for the House any longer to control our own welfare policy?

Yesterday, my right hon. Friend the Minister for Europe encouraged me with his optimism because he said that welfare remained a national UK matter, but there is plenty of evidence that it already is not in many respects. All sorts of policies have been looked at that I am told would fall foul of European law and regulation. It is quite obvious, again, looking at the European Union’s work programme, that it will intensify its activity in this area and make it even more difficult for a national Parliament to express the wish that it wants in its laws on welfare. The same is true of border controls, where we are signed up to the free movement of peoples.That is now being ever more generously interpreted as giving the EU carte blanche and substantial control over border and migration policy throughout the EU.

We find ourselves in the position of debating today yellow cards and red cards to try to assert the will of national Parliaments, but it comes nowhere near the task that we need to undertake as we seek to reshape our relationship with the EU. Even having a red card, where national Parliaments collectively can block a new proposal, does nothing to tackle the problem that we have this vast panoply of law already agreed, sometimes many years ago, which may prevent a national Parliament from reflecting the will of its people. If could prove very difficult to get all member states to agree to block a measure. An individual member state, which had an overwhelmingly strong national view on the subject, might be thwarted because it just did not happen to be something that worried the other member states.

We need to pause over this. I remember the excellent words of my right hon. Friend the Prime Minister in his Bloomberg speech. The Bloomberg speech wisely said that the fount of political authority in any European member state, but certainly in the United Kingdom, rests from the national electorate through the national Parliament.That is still right. We see that in the recent conflicts and rows in a country such as Greece, which is under even more European control than we are by being part of the euro. The Prime Minister reasoned that this country needs to negotiate a new relationship with the EU that recognises that on really important things—I would have thought that welfare, borders and energy were really important things—if necessary, the national Parliament can assert and interpret the will of the British people. There should be some mechanism by which we can then do as we wish, reflecting the will of the people.

We see at the moment the tragedy of Greece, where these conflicts are much further advanced because the European Union is much more intrusive on a euro member than on the United Kingdom. We have witnessed some very worrying things. Those on both Front Benches need to listen to and study this very carefully, because their futures, as well as the future of our country, are very much at stake. The first remarkable thing is that in the most recent Greek general election the two former traditional main parties—the equivalents of Labour and Conservative—polled 33% between them. Those parties, until recently, alternated in government. They had got into that parlous state because whatever they wanted to do in the interests of Greece was blocked, modified or amended by the EU. In practice, decisions were made by the euro group, the European Central Bank and the troika they came to hate. So the Greek people said, “It doesn’t make any difference which of you two we have. The socialists can’t be socialists and the capitalists can’t be capitalists. You all end up with the same euro policy that is driving the Greek economy into the mire.” The poor Greeks have lost almost a quarter of their national output since 2007. That this can happen in an advanced western country is mind blowing. Half their young people are out of work as a result of these policies.

The two main parties had nothing to offer because they either had to go along with the euro scheme in all its details or promise to disagree, but only in the full knowledge that they would not be allowed to do anything different. The Greek people elected into government a challenger party, with no experience of government, saying that it intended to break the rules of the euro.It did not want the troika arriving and telling them how to govern their country and did not intend to accept the bank details and loan packages that had been drawn up by the previous regimes. We now see this gripping and gruelling conflict where the euro area and the EU is telling Greece, “Well, we’ve got news for you: these are the rules. We don’t mind that your electorate have just rejected it all. We don’t care that you’ve elected into government a party that completely disagrees with us. You have no power in this. You the Greek people, you the Greek Parliament and you the Greek Government have to accept these rules, because those are the club rules.”

We heard a mild version of that attitude from the shadow spokesman, the right hon. Member for Wolverhampton South East (Mr McFadden), when I asked him whether, on a mighty issue that matters a great deal to the British people, there should be a right for us in this House to reflect their view and legislate accordingly. He said no, there should be no such right, and we have to follow all the rules of the European scheme.

Throughout past years, when those rules related just to trading arrangements or industrial regulation, they could be irritating or vexatious, but they were not going to become game changers that mobilised the whole British people against the whole scheme of the European Union. However, when the European Union rules start to influence things that matter a great deal to people—their welfare system, their benefits system, their borders or their migration—that might start to create a much bigger reaction. When European rules and requirements have a devastating impact on an economy and employment prospects—fortunately not in this country, because we have kept out of that bit—that completely transforms the politics of that country.We see the politics of impotence, the politics of protest and the politics of frustration.

I do not want our country to go down that route. That is why I say that we need to negotiate now, before we get to that stage, an arrangement—not just a yellow card or a red card in conjunction with other member states—for us, the United Kingdom. We must be able to say that we are still a vibrant democracy. We need to be able to say that if something matters a great deal to the British people and if it has been approved in a general election, this House can take action even if it means disagreeing with the rules of the European Union. By all means, we can try to negotiate an arrangement case by case, but where we cannot do that, we need an override. We need the right to say, “This thing matters too much to our democracy.” If we do not have that very simple change, we no longer have in this country a successful and vibrant democracy that can guarantee stability and guarantee to deliver what the British people want.

Graham Stringer (Blackley and Broughton) (Lab): I agree with basic thrust of the right hon. Gentleman’s argument, but is not most of what he is suggesting impossible? Most of the rules governing the European Union are bound up in treaties that require 28 countries to decide to change them, and that is simply not going to happen. Much as I agree with his aspirations, I am afraid that they will not come about, will they?

Mr Redwood: The hon. Gentleman may be right, so I hope that the British people have a referendum in which they may decide that they cannot live under such a regime without change. I would certainly vote to leave if flexibility cannot be built into the system along the lines that I have mentioned. He is a distinguished politician both locally and nationally, and surely he recognises that when we need fundamental change, we have to make the case for it and be optimistic.

I am not completely pessimistic because I do not believe that only Britain needs such a change. If this were just Britain being difficult—the island nation, characterised by its critics as being on the edge of the European Union, whose traditions are “old-fashioned” and whose idea that Parliament really matters is now old hat because we have moved into a new world—I do not think we would win. Fortunately this is not the position. Our democratic traditions are vital and essential today as yesterday. This is also live, desperate politics for very large parts of the euro area.

The issue is live politics for what remains of the governing parties of the euro area because the path trodden by the two leading parties in Greece, whose jobs have been taken by Syriza, could be trodden by the two leading Spanish parties given the rise of Podemos and by the Italian parties given the rise of the Five Star movement and all the other pressure movements in Italy. Those countries are not immune to an insurgency challenge like the one in Greece. That sort of thing can start to concentrate the minds of other member states of the European Union and their Governments. One thing I have learned about Governments over the years is that they quite like staying in power. When they feel that there will be a very strong electoral challenge to them, they may begin by condemning it—saying it is irrational, unpleasant and all those kinds of thing—but if they think it is going to win, they have to do a deal with it, understand why people feel as they do and make some movement.

My strong advice to the whole European Union is that it needs to do a deal with the people who disagree with it, because the scheme is not working for all those people in the euro area. It needs to change policy, and it should do so before politics changes it. I do not want our country, which matters most to me, to get anywhere near such a point. I am pleased to have been part of the forces in this country that kept us out of the euro, which meant that we missed the worst—this country has a reasonable economic recovery that is completely unrelated to the continent, with its long recession and deep troubles in the southern territories—but as I see my country sucked into common policies on energy, borders, foreign affairs and welfare, I think that we might be sucked in too far and have exactly the same problems on those issues that the euro area is already experiencing on the central matter of economics.

I urge Ministers to take this seriously and to re-read the words of the Bloomberg speech. I urge the Opposition to join us, because they aspire to govern this country. One day they may come up with really popular policies and be elected on that basis, and what a tragedy it would be if they discovered that they could not enact those policies because they were illegal under European law. That could happen just as much to the Labour party as to the Conservative party.

These are not some private arguments among Conservatives in some secret club of Eurosceptics held in the privacy of the House of Commons; these are mighty arguments about the future of our continent and our country and about the nature of democracy itself. Accountability still rests with a national Parliament, not with the European institutions. If there is to be trust between politicians and the people, the national Parliament must be able to deliver when the people speak. We are in danger of that no longer being true, which is why a yellow card and a red card are not sufficient. It is also why we need to answer the question: how do the British people vote for what they want and how do an elected Government in Britain deliver it if it disagrees with European rules?

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Labour’s arithmetic is way out- Conservative public spending is nine times the 1930s level!

When Labour says Conservatives wish to take spending back to 1930s levels they mean as a percentage of GDP, not in real terms let alone cash terms. However, it comes across as if they think Conservatives want to cut real spending back to 1930s levels. So what are the true figures?

In 1932 the UK public sector cost £1.397 billion. If you translate that into today’s prices, allowing for all the inflation since then, it would mean public spending of just £82.9 bn. Instead public spending this year is £731 billion, or 780% higher than 1932. That’s why we can afford the NHS and much else besides which we did not have in 1932.

Put another way, today’s £731 bn would have cost £12.3bn in 1932, nine times what was actually spent! Incidentally, for much of the 1930s public spending was lower than 35% of GDP, as well as GDP being so much lower in real terms.

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No European army please


One of the two biggest lies which sustains the EU fan club is the statement that the EU prevents wars. I have often explained how wars between western European countries have ceased since 1945, and why this has nothing to do with the EU. The latest outburst that we need an EU army to fight wars for us should help me dismiss this misleading claim about the EU.

The call for a European army does at least show honesty. It recognises that EU policy to date has not been successful in establishing friendly and stable relations with Russia on our borders. EU apologists will claim the latest rows are all Russia’s fault. As I have often made clear, I have no time for Russian aggression or military intervention outside her borders either.Nor do I think the EU has been wise or helpful in managing the Russian relationship. The inclusion of a defence clause in the proposed Association Agreement with Ukraine was bound to provoke Russia for no obviously good purpose.

The call for a European army may be honest, but it is unrealistic and undesirable. These debt soaked countries seeking budget cuts to conform with the discipline of the Euro are in no position to suddenly finance and arm new forces in European uniforms. Most of them fail to spend 2% of GDP on defence to meet their present NATO commitments. They would have  no capacity and little desire to spend more to arm Europe.

It is true they could transfer their current forces to a European force. This too would be unwise. Many people sign up for the armed forces in their country because they are loyal to their homeland, and accept the political control and guidance of their elected government. Fewer would feel allegiance to Europe, and many would ask who is the sovereign, who is the government which would decide when and where these European personnel have to risk their lives and fight their wars?

I am glad a Conservative PM, Foreign Secretary and Defence Secretary have made clear the UK does not wish to participate in a European army. We have the British army. It is part of NATO’s forces should need arise. The NATO system requires the member state government to be the authority over that state’s forces. It does  not have EU like powers to counter command or overrule the member state.

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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.

    Published and promoted by Thomas Puddy for John Redwood, both of 30 Rose Street Wokingham RG40 1XU

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