The modernising project

Towards the end of the John Major era a group emerged in the Conservative party who called themselves modernisers. My initial reaction was favourable, as I too thought we needed to modernise, to generate a new agenda for a new century. Some of what they wanted us to do made sense. They promoted a new tolerance, an enthusiasm for civil liberties, and a less restrictive attitude to people’s individual lifestyles. During the Labour years they sought to ensure that a future Conservative government would not wish to change Labour’s legislation on these matters. Many of us agreed we would not repeal Labour’s social legislation, though we also came to see that Labour in office was too authoritarian, permitting new attacks on the government where it took away our lliberties.

Modernising  came with a price, however. It was often  factional, seeking to caricature or write off people who held different views or who were more socially conservative.  It was also based upon a love of the EU, so that advocates of true modernising decided few Eurosceptics who wanted powers back or wished to leave the EU could be seen as modernisers, whatever their views on other matters. Modernising  usually included an interventionist military strategy leading to UK engagement in Iraq, Libya, Afghanistan and Syria, despite the growing opposition to this on b0th Conservative and Labour backbenches.  Some of its adherents wanted to see a realignment of UK politics. They wished to see a new party emerge of modernising Conservatives with Blairite Labour, flanked on the right by a Eurosceptic Conservative grouping and on the left by a true socialist grouping. They saw themselves as centrist. Others thought their military interventions were far  from centrist,and many Eurosceptic resented the idea that wanting to stop the transfer of more powers to Brussels was either right or left.

As things worked out, they found themselves liking coalition between the Lib Dems and the Conservatives, as that restrained some Conservative policies and produced a government happy to recommend the transfer of more powers to the EU through the continuous drip drip of new EU laws and decisions. Quite often the Conservative /Lib Dem coalition had to rely on Labour votes or Labour abstention to carry its EU and Middle Eastern policies through.

In the referendum the Blairites and the modernisers came together as the core of the Remain campaign. The central axis of Peter Mandelson/George Osborne was backed by  leading personnel of the modernisers and Blairites.

Today it looks very unlikely that the Conservative party will split as its enemies might wish. The new Leader has united it by accepting the verdict of the UK voters on Brexit and by  promising to implement it. There were always far more Leavers and Eurosceptics than remain supporters or believers in the EU project in the unwhipped Conservative party. However, a split in Labour does look more likely. Mr Corbyn may well win his leadership election, whilst a large majority of Labour MPs may still refuse to serve him in Opposition jobs. Maybe the one  part of the modernising plans that will come to fruition will be the detachment of the Blairite Labour supporters and their attachment loosely or more directly  to the unashamedly pro EU Lib Dem party.

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The UK’s nuclear deterrent

Some people have written to me asking me to oppose the orders for four new submarines to carry the UK’s nuclear deterrent.

Last night I voted with the government to approve the purchase of the vessels. I did so because I campaigned on the Conservative Manifesto without signalling my dispute with this measure in it. I did so because I agree with the government that a submarine force is the best means of retaining an independent deterrent, with at least one submarine always at sea in waters unknown.

Some object because they believe in unilateral nuclear disarmament. The UK has gone a long in way in reducing warheads and  missiles as part of the multilateral disarmament undertaken in the post Cold War world. There is no evidence that a single country unilaterally disarming would achieve any reduction in the armaments of other states, but plenty of evidence to show that multilateral agreements do cut the numbers of weapons held by existing nuclear powers.

There is the ever present threat that more states will develop effective nuclear weapons. There is also the outside risk of some such weapons falling into dangerous hands in badly run or strife torn parts of the world.  In such a world it does add to our security that we have our own capability.

Some argue there is no point in having them as we will never use them. That is to misunderstand their role as a deterrent. We use them every day by deploying the submarines with them. Everyday they are at sea and we are not threatened by a nuclear power or weapon, the deterrent has worked.

Yesterday’s debate was most unusual. It is not uncommon for groups of backbench MPs to stick to long held principles and express views different to their front bench. It is not easy to go against the party line, but I certainly found it necessary when we were battling to get an EU referendum, and trying to stop the transfer of more powers to the EU. It is almost unprecedented to see the Leader of the Opposition defending his long held view on something  as important as nuclear weapons, with most of his party in disagreement. They demanded time and again that he followed the party policy he had inherited. There was something magnificent about his determination to change the policy and stick to his principles when he had so many votes and voices against him, even though I disagree with his viewpoint.

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Tragedy in Turkey and Nice

The UK media seems to apply differing approaches to 84 dead in Nice and 200  plus  dead in Turkey. I mourn them all and send my condolences to their families and loved ones. That is so much human grief and sadness, so many ruined dreams and wrenched lives. 202 remain injured in Nice, and 1440 in Turkey. That is a lot of pain and suffering.

Why did they die? The murderer in Nice is said to be a loner. ISIL has claimed  the dismal and violent credit for the deeds, though the security forces have no clear linkage of the dead lorry driver to the terrorist movement. The murderers in Turkey appear to be senior military commanders and the troops and pilots loyal to them who turned their fire on civilians and the buildings of their own state. It is almost beyond belief that trusted very senior state servants can in 2016 in a  close ally and neighbour of the EU and NATO use the terrible power of a modern government against its own people.

It is possible that  both these violent crime scenes arise in part  from the struggles in Syria and the wider Middle East.  The Turkish President and Parliament are hostile to the Kurds and working with some of the Islamist forces in Syria. The loner in France may have been recently radicalised by ISIL propaganda as they wish us to think. Turkey’s complex relationship with the struggling factions in Syria and Iraq is part of her present story. The armed forces who abused their weaponry to fire on their own Parliament and Presidential forces may well have acted to wrestle Turkey away to a more secular stance, though they certainly did not act on behalf of western democracy by doing so.

The position of Turley is said to be pivotal and central to the west’s own security. It is true Turkey is a large buffer state between the eastern EU countries and the Middle East. The EU’s approach of drawing Turkey into ever closer alliance has led to the recent EU/Turkey Association Agreement and to the acceptance of visa free access to the wider EU Schengen area for Turkish citizens. The EU is meant to stand for democratic principles, for settling political disagreements by arguments and votes, not by bombs. Where does this policy rest today?

The picture of the bombed Turkish Parliament building should be a warning to the west. By all means let us be in diplomatic contact with Turkey, trade with Turkey, be friends when we can. But let us have sufficient reserve in our relationship so we can protect ourselves from any lapse in democratic standards and any turning to violence as a way of proceeding politically. The EU has been too trusting, and has once again been overtaken by dangerous events. Just as with Ukraine, the EU lacks a convincing policy to deal with civil wars on its eastern doorstep. What will the EU do if the Turkish government reaction to these dreadful crimes is to erode liberty and democracy?

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Getting out of the EU can be quick and easy – the UK holds most of the cards in any negotiation

I want the full English Brexit. More accurately, without the word play, I want the full  UK  Brexit.

Too many people in government and the professions seem to think the UK is a weak petitioner which has to be very careful in case we are expelled from the single market. They talk of bartering free movement and payments in against some kind of maintained membership of the so called single market. This bedevilled the Referendum debate and still pops up in much of the mainstream media as if true.

The facts are very different. Getting our contributions back, deciding our own laws  and having our own migration policy were the three biggest points of the Leave campaign. These are all non negotiable. We should just get on and do them.

There then remains the issue of what access we have to their market, and what access they have to ours. We do not wish to be members of the single market, as that does mean accepting their future control over things we wish to control for ourselves.

We should offer no new tariffs or barriers on their exports to us. We should  accept we will comply with all their rules and regulations when selling things to them, as they are in those cases the customer. In turn they should offer us no new tariffs and barriers on our exports to them.

If they perversely want to place barriers and tariffs they are limited to an average tariff of around 3.5% by WTO rules. We should retaliate within the framework of WTO rules. Fortunately we can place a 10% tariff on cars and high tariffs on agricultural products, two areas where they are big suppliers to us. That should make it very unlikely they will in practice want to place barriers on our exports, to avoid such a response. Half of WTO trade is tariff free. Business and farmers on the continent will be lobbying strenuously against any such stupid action.

Some then say we cannot simply pull out owing to the law of Treaties! This is absurd. If they read Article 50 they would find it expressly says we can withdraw using our own constitutional procedures, which means in our case an Act of Parliament. They seem to be saying the EU is so ghastly that they will force us to remain in a Treaty we have voted down. I thought the EU was about democracy and human rights!

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An end to austerity?

I am glad the new government wishes to end the use of the “a” word.  It has been much used and abused over the last six years. It has been a rallying cry for the Opposition. It has been a misleading spin line used by the Cameron/Osborne government.  As a policy it has been lop sided and ineffectual. The last Chancellor did not succeed in bringing new borrowing levels down as promised. He relied on tax rises rather than on overall spending cuts. Within spending he did  make some cuts in welfare and defence many urged him not to make, whilst presiding over large increases elsewhere. I spent much of the last six years trying to explain what was really going on from the published figures, fighting against political lines from both Opposition and government which did not reflect the reality of the spending and tax plans.

So what will a prosperity driven policy look like? The government will examine how it can borrow money  very cheaply in today’s markets to invest in major infrastructure. There will be two constraints. The first is the difficulty the UK experiences in reaching agreement and in progressing plans for much visible large scale development. Sometimes we have too much delay to discuss, with endless consultations and arguments over whether a road or railway line or airport can be built. If the government wishes to cut through and shorten times for such debates, the best way would be much more generous compensation schemes so anyone adversely affected in their homes has the money to move or improve their property  if they wish. The second is the need to ensure we build infrastructure which generates a proper return. In the case of water or energy or telecoms there remains a market test to see if the investment pays. In the case of roads and heavily subsidised railway lines there is no such direct test, so government needs to make honest  study of need and economic impact.

The government will pursue its life chances agenda. This will be a package of policies designed to improve schooling, mentoring, training and access for all, so that more people can develop the skills needed for better paid employment. There is no more important task to raise productivity than to help each individual find a good place in our economy, with emphasis on more small businesses, more entrepreneurship and better rewards for success. Tax policy is also important. The outgoing government was more generous to large corporations with cuts to Corporation Tax than to individuals risking all in their own business with CGT and Income Tax. A very large company pays tax at 20% and a successful individual at 45%.

The government needs to worry about the balance of payments. The first and easy way to cut the outflows is to repatriate our EU contributions, slicing £12 bn off the balance of payments deficit. Spending the £10bn net public sector contribution here at home would give a welcome boost to jobs and output. I would bring that forward even if there is delay in cancelling the payments. Let’s have the removal of VAT on domestic fuel, and the extra spending o n the NHS with more nurses and doctors as identified in the Brexit  budget first published here.

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Glimmers of hope in economic policy

Yesterday the Governor of the Bank of England thought better of the much touted idea that he would cut interest rates by a further 0.25%.

I am glad he made this decision. I had argued here before the event  that another cut at these tiny levels could undermine  the value of sterling further without doing much positive.

We have got used to Mr Carney’s chronic inability to forecast anything accurately including his own conduct.We had three separate pieces of guidance  from him heralding increases in rates, only for him to change his mind and  ignore his own triggers for raising them. This time he changed his mind on cutting them.

 

It looks as if Mr Carney decided  better of it thanks to the removal of Mr Osborne from office. The  appointment of a new Chancellor less wedded to Project fear and less associated with the absurd gloomy forecast of the pre referendum Treasury may have persuaded him to be more cautious.

The UK economy has just received a monetary stimulus from the devaluation and loosening. It would be an odd time to add to that stimulus by further unusual monetary relaxation.

I am expecting the property market to improve after the strange attempted shake out from open ended commercial property funds. I also expect consumer spending to pick up after a summer and weather induced lull. I see no need for panic measures.

 

The new Chancellor seems to have dumped the world”austerity” and seems to want to promote prosperity. That is exactly  the right approach. Meanwhile share and bond markets continue to prosper. Let’s go for Prosperity, not austerity. Let’s get our contributions back form the EU quickly and spend them on things we want.

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Good Europeans want an early Brexit

As I expected, the rhetoric on the continent is changing. Yesterday the President of the European  Parliament challenged the pre vote rhetoric of the Commission by saying ” The UK should not be treated as a deserter but as a family member who is still loved but has decided to go in another direction”. The EU leaders are urging Mrs May to speed up the UK’s plans for exit, and saying they want to get on with it.

I agree with them. It is in the EU’s interest to sort this out quickly, and definitely in the UK’s interests.  It need not be a difficult negotiation. We have no wish to negotiate over our borders, our money or our laws with 27 other countries. We just need to take back control. They want to integrate their economies and political systems more, to sort out their banking troubles and tackle slow growth in the Eurozone.

There remains one prime outstanding issue. Will the rest of the EU want to carry on exporting to us tariff free, or do they wish to go over to the relatively low average tariffs under WTO rules? The UK will be quite happy not to impose new tariffs, and to continue to accept the rules and regulations over products and services for our trade with the rest of the EU, so we are not seeking any changes to all that despite being in substantial deficit with them.

There is a good case for early exit, early legislation on borders, and early cancellation of our subscription to spend at home. Any changes the other states want to their trade arrangements with us could be debated after we have retaken control of all these other important matters. The UK could live with MFN status as the USA and China do in their very successful trade with the EU, though of course  we think it is in their interest even more than in ours if we continue with current tariff free arrangements.

The EU naturally  would like us to carry on paying money in and accepting free movement. Once they realise this is not on offer, they then have a simple decision to make. How many barriers do they want to trade, up to WTO permitted levels. The sooner they decide that the sooner we can decide whether to accept their proposals or simply walk away. We do not want the Foreign Office telling us the negotiation is difficult, will take time, and requires us to give in over free movement.

Long delay is costly. At £10bn a year net contribution (probably rising)  that would amount to a massive £38bn over the balance of this Parliament which we could spend to good effect at home. Delay in placing sensible controls and a fair system of work permits globally could also lead to substantial additional UK costs to provide the level of housing, transport, health care and education we would want to offer to recently arrived workers on low incomes.

A successful negotiation should be a simple and quick one concentrating on the only area where the EU has a role in future policy, over trade terms.

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How to write a letter using Article 50

There is a debate amongst Brexiteers over the quickest way out of the EU. Most are agreed that exit is secured by repeal of the 1972 Act, with the passage of all EU law into UK law coupled with a new border regime and cancellation of our subscriptions.Some also think that we will need to notify them under Article 50 in accordance with the procedures of the Treaty, even though the whole point is we have just voted to renounce the Treaty. With this in mind, the following is a suggested compromise for an early passage of the Bill and an immediate Article 50 notice:

Dear Sirs

The Uk following a referendum has decided to withdraw from the European Union. In accordance with Article 50 we hereby notify the Council of our intention to leave.

Article 50 of the Treaty states clearly that “any member state may decide to withdraw from the Union in accordance with its own constitutional requirements.” In the case of the UK this means passing an Act of Parliament. The UK government has always confirmed when asked about the loss of sovereignty involved in EU membership that the UK Parliament remains sovereign because it can repeal the 1972 Act. The government is introducing a Bill to effect this change, and to transfer all EU law into UK law to provide immediate continuity.

The UK has voted to withdraw from the Treaty. It does so under the Vienna Convention on the law of Treaties by invoking a “fundamental change of circumstances” compared to those when the UK consented to the Treaty.

Yours faithfully

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Brexit means Brexit

So says our new Prime Minister in her first speech as the new Leader of the Conservative party. In another twist to the incredible plot of the Conservative leadership election, Andrea Leadsom pulled out of the race, allowing Theresa May to inherit the position.

It is curious that all 3 senior Conservatives groomed for prominence in the Vote Leave campaign have now been eliminated from the Leadership contest. Vote Leave chose Boris Johnson, Michael Gove and Andrea LEadsom as their preferred voices and faces from the Conservative side, and gave them the lion’s share of the media to do. Each of them fancied their chances of leadership based on that exposure, but two bowed out of the contest and one was eliminated by MP ballot.

There are now discussions going on about how the new Pm can best keep faith with the UK voter electorate, getting us out of the EU in a timely and successful way. She says she will appoint a Brexiteer as Chief Negotiator. She will also have to make sure the official team are well briefed, confident about the strength of the UK’s negotiating position, and aware that we do not have to do it according to the Treaty rules.

The first main decision the new government has to take is whether to proceed by means of rapid UK Parliamentary legislation, or whether to go for an early notification under Article 50 with a tight timetable for the negotiations. You could even do both together.

The draft Bill is available. It would take back control by repealing the 1972 Act which is the origin of EU power in the UK. It would put into UK law all outstanding EU requirements, to leave in place the tariff free trade and regulations prior to discussions with the rest of the EU about whether they want any changes to that. It would allow early changes to our borders policy and cancellation of our subscriptions.

The negotiation needs to start from the proposition that we are taking back control of our borders and money. These should not be in contention. The only thing the Uk would like is continued tariff free trade. It should not take long to find out if the EU wants to place WTO style low tariffs on us or not. As WTO rules would allow us to place quite high tariffs on French agricultural produce and 10% tariffs on cars it seems unlikely they would want to do that.

Article 50 is not a great basis for the negotiation as it implies all is in the pot for debate and all could take a long time. I would rather trigger it to complete their process after all has been sorted out. If the government refuses to get on with legislating then a poor second would be immediate Article 50 followed by very tough negotiations and a willingness to simply pull out of talks and legislate if they are unrealistic.

Meanwhile, however we do it, the government needs to produce its new migration scheme and tell people coming to our country new rules will apply.

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FTSE 250 rises

When I pointed out that the large company index the FTSE 100 which people use had gone up sharply post the referendum, the Bank of England and the doom mongers on this site said we needed now to look at the FTSE 250 index of smaller companies with a large UK focus.

So I hope they now recognise that this index too is doing better. Today it is at 16 333, well above the February low of 15 178 recorded before the referendum when the City anticipated a Remain vote, and above the August 2015 low of 16 214.

The FTSE 250 is now at the level it reached in the middle of June pre the vote, following its recovery from the February global sell off which brought down all advanced country stock markets.
The doom mongers are finding it is quite difficult talking some markets down.

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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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