Wokingham’s CAB

On Friday I attended the CAB event which followed their AGM in St Paul’s Parish rooms. I talked to the Chief Executive and some of the volunteers who provide such good help and assistance to those in need in our community.
Over the last year the biggest demand has been for help with benefits and tax credits, followed by debt, employment and housing. The friendly and wise advice that the CAB can provide is often important in helping people manage the problems in their daily lives, whether it be about money or disputes, jobs or homes. I am grateful to all of them for what they do.

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Sir Michael Fallon is too late to veto the European army

I found Sir Michael’s statement that he will continue to veto a European army all the time the UK remains in the EU perplexing. Now we are leaving I do not see it is any business of ours to veto what they are going to do when we leave. It just annoys the very countries we wish to be friends with as we depart.
I do wish we would just get on and leave and stop paying our contributions. If we rightly do not go to conferences like Bratislava why do we help pay the bills?
Nor do I understand how Sir Michael can veto something that already exists and the UK has accepted. The EU has established eighteen battle groups, each at battalion strength, with a rota so that any two of them can be deployed at any time by the European Council. As the EU’s own website sets out “The battlegroup concept provides the EU with a specific tool in the range of rapid response capabilities.”
The UK has played its part on the multinational rota to provide forces. None are currently deployed but they could be.
There is also already a Eurocorps, mainly French and German, stationed in Strasbourg with 1000 soldiers.
In parallel the EU does have naval forces in theatre today. Again the UK is signed up to this. Two of the 7 ships on Operation Sophia in the Mediterranean are UK vessels according to the EU website. There is a also a 4-6 vessel force off Somalia in Operation Atalanta which receives UK assistance.
Just as many of us pointed out in the referendum campaign, there is a European military capability and they do wish to grow a bigger and more active army. Some Remain spokesmen told us this was all nonsense. The conversation at Bratislava reminds us that there are already EU forces and they do wish to strengthen them and make them more active.
The UK should leave well alone and ask itself whether it wishes to carry on contributing after it has left. 4 non EU countries are involved in these forces at the moment. Perhaps our defence Secretary could give us some guidance on this more interesting issue, which will be his call along with the PM.

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A vision for the EU?

As the 27 meet at Bratislava I thought I should offer the opportunity to all EU lovers to write in with what they would like the 27 to agree as their new “vision” for the EU. All the main players going to the meeting tell us they will pause for serious and honest reflection about the growing gulf between popular wishes and what the EU elites are serving up. It is also a chance for those of us who decided to leave to offer friendly advice to our former partners if we wish.

I must say I much prefer writing about the EU now I know it is no longer going to be our problem or partly our fault. I have long believed that as a good European the best contribution the UK can make is to depart from the monetary and political union. We never wanted either. We have been lied to by some in the UK debate that that is not the EU’s preferred destination. You feel the clearing of the air now the 27 can sit down and discuss the pace and scale of their integration without the UK trying to slow them down or pretending it is not happening.

Mrs Merkel has expressly called for some speeding up of integration. Germany of course wants quota systems for others to help to take the refugees, and more integrated approaches to economic policy so the other states accept more readily firm economic disciplines. France wants to re establish its influence over Germany and to be the main force behind more military union, working on the common EU forces they already have to make them larger and more effective. The Commission as always sees Brexit like all other democratic checks to the EU as a chance to increase Commission power and the range of matters it controls. Mr Tusk makes the most sombre and realistic assessment, as he has to deal with elected officials and the national Parliaments. He wants answers to the growing popularity of Eurosceptic challenger parties of right and left.

My advice to them is to understand that the Euro is the centrepiece of their union, the main achievement of their pressure to integrate so far. The main actions they take must be ones that make the Euro more like a national currency in a major country. These actions are required to tackle mass unemployment in the south and west of the zone. to strengthen weak banks across the zone, and to provide the free movement of capital labour and people that a currency zone needs. Trying to do this without a single official language is always going to be difficult.

To make the Euro more secure and the project more popular, the first need is to set up proper transfer systems so the richer areas can help the poorer areas on a much bigger scale than today. Regional transfers in the UK or US are many times the level of such transfers in the Eurozone, taking place through national benefit rates and schemes, through local authority financing and through large scale regional and sectoral programmes. German, Dutch, Austrian and other richer country taxpayers have to be persuaded that poverty in Greece and unemployment in Spain is their problem too, and they need to make a financial contribution to alleviating it.

The second task is to put in a comprehensive system of bank deposit guarantees that operate across frontiers, and to have a scheme for getting all major banks up to satisfactory levels of capital adequacy more quickly. The EU sovereign and the ECB must jointly stand behind all major banks in the system and be seen to do so. In practice member states customers and investors are on risk, but so also the taxpayers ultimately have to be on risk or be prepared to bridge or prop the parts of major banks that are essential to keep the cash points open. Of course I favour the investors being more at risk than in 2008, with better protection of the taxpayers interests than we then enjoyed. The EU itself needs a broader tax base.

The third task is promote an EU budget large enough and helpful to growth and enterprise. The extreme austerity visited on Greece and some other problem countries in the zone has been a social and economic failure. This needs to be sensibly reformed. Now the ECB has bought up large quantities of member states debts, the overall net borrowing position of many member states is more acceptable.

If the single currency cannot be managed in a way which gets down high unemployment, and spreads better paid jobs more widely around the union, it will be increasingly difficult to get political support for the project. If the richer countries and reigons are not prepared to pay more for the union then it would be best to abolish the Euro.

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The Bank edges its economic forecast up! Hinkley goes ahead

Just as I predicted, the Bank of England has to admit it has been too pessimistic. Yesterday the small increase in the Q3 forecast was the bare minimum they had to do, as many of the numbers for Q3 are now in and their forecast was looking silly. Retail sales were up a thumping 6.2% in August 2016 compared to a year earlier, giving the lie to the idea of a sharp post vote recession which the Bank implied in May and got into headlines from their news conference.

Meanwhile the government has reflected and decided to press on with Hinkley nuclear power station. Their renegotiation or pause produced some control over EDF selling the investment on and a statement that other measures will be taken over national security for future investments. There was no change to the very high strike price for the power built into the contracts, and no change to the fact that foreign interests will finance it and will therefore take all the spare cashflows as interest and dividends once the station is producing.

When I asked about this the Minister rightly stated that the £18bn inward investment is a positive balance of payments flow during build. He stressed that all the construction risk – risk of cost and time overruns – rests with the French and Chinese investors. I was making a different point. I want the government to find ways for any future power station investment to get them financed in the UK with UK capital. It should be possible for a power station like Hinkley to find UK investors who would put up bond capital, where they did not take any construction and project risk, but would get decent interest payments and eventual repayment of capital when the plant is running. It might also be the case that some UK investors would want riskier capital investments where they did take some project and construction risk in return for higher possible rewards.

The danger of the Hinkley model is a weak balance of payments position for many years to come once the plant is producing revenues. Overseas investors will expect a decent reward in the form of interest and dividends. It’s but a step away from importing our power through the interconnectors, where the whole cost of the power is negative on the balance of payments. With Hinkley a proportion of the very large revenues it generates will flow abroad. We need to put in place some UK power where the plant is here and the investors are here. When the government can borrow at 1.5% for 50 years we could even consider putting some state cash to work for say 3.0% on a low risk priority capital basis and make a turn on the money, though I prefer private sector investment and think it is available for the right bond instruments.

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Wrong forecasts and good jobs figures

Before the referendum campaign Remain advocates told us the uncertainty generated by the referendum vote would hit our economy. It didn’t. During the referendum campaign proper, the Remain campaign aided by the Treasury and the Bank of England, the IMF and many investment banks, told us the economy would be badly damaged by the vote if it went the “wrong” way. They said there would be short term damage from the shock to confidence. There wasn’t.

So what are these unsuccessful forecasters saying now? Some of them are busily revising up their forecasts for 2016-17 for the UK, though still believing there will be a slowdown. Most have cancelled any thoughts of recession. Now they tell us what they meant all along was it would be the sending of the Article 50 letter that brings on the bad news.

Why so? Surely markets have discounted the sending of the letter by now, as the government has made clear it does intend to implement the views of the people, just as the previous government made it clear it was the duty of Parliament and government to carry out the decision of the voters. Why is sending a letter more of a shock than the UK voters deciding?

I guess they will go on telling us there is some new milestone in our exit which will trigger the bad news they forecast and seem to crave. If you wait long enough there might be bad news for some unrelated reason which they could doubtless cling on to. Over the last week, for example, government borrowing rates have risen sharply here as elsewhere in the world. They are still below pre referendum levels, and they have risen because of remarks of the Fed and the Bank of Japan. The Fed is likely to have more impact on our economic future than the Brexit vote this year and into next.

Yesterday saw more good economic news. Employment continued to increase in July after the vote. Employment now stands at a new high of 74.5% of the possible workforce. There are 750,000 vacancies available, with 31.77 million people in work. There are no signs of the threatened job losses that would follow a vote to leave.

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A question of trust

I do not have a vote or a voice in the US election, and am not on anyone’s side. The contest is, however, more than usually interesting and important as Presidential elections go, because the US faces a choice between two such very different candidates. This result will have a measurable impact on our economy and on the state of world politics. My comments are by way of independent analysis, not partisan intervention.

Both candidates are divisive and each are unpopular with around half the electorate. Polls to date have shown Mrs Clinton in a winning position, but recently they have narrowed and a win by Mr Trump cannot be ruled out.

Mrs Clinton has a major problem of trust. The email controversy which has dogged her throughout gnaws away at the wider question of can she be trusted? Mr Trump has also questioned her stamina and health. Her recent collapse at an important national event is therefore a double blow. Not only does it give image to exactly what Mr Trump has been saying about her health. It also undermines the line of her campaign team that her cough is unimportant. It turns out it was pneumonia, not some minor irritation of the voice box. It becomes another issue of trust.

Mr Trump has an equally difficult dilemma. He rose to fame by making comments about migrants, borders and the rest that many thought were dreadful, making him unsuited for public office. He now wishes to show he understands the need to be more mellow and statesmanlike, but does not want to lose the aggressive down to earth image that won him so many friends amongst the angry voters he spoke for. His trip to Mexico worked quite well, allowing him to appear side by side with an elected country leader, and stick to his view that he wants a wall or fence on the border. It was a good enough performance to lead directly to the resignation of the Mexican Finance Minister who had invited him! The aim had been for him not to come or for Mexico to portray him and his policy as unacceptable.

The liberals of the west on both sides of the Atlantic have no trouble in condemning Trump’s wall as barbaric, yet these same people seem to accept the policy of building ever more walls and fences around eastern and southern Europe. The Republicans and conservatives unite to condemn Mrs Clinton’s economy with the truth and refusal to reveal all her documents and emails, yet they seem happy that Mr Trump refuses to reveal all his business and tax documentation in the same election.

Beneath these personality probes, health scares and aggressive rhetoric lies some fundamental political issues. Would Mr Trump talk more and bomb less in his world order? Will Mrs Clinton continue with the aggressive military interventions in the Middle East that she initiated or supported as Secretary of State? Will Mr Trump’s tax cutting agenda allied to making US corporations bring their money back onshore yields more growth and a tax bonanza as he hopes? Or will Mrs Clinton’s beefed up public programmes and higher tax rates for the rich create a more prosperous and more equal society?

The US people have a rich choice, even if they do not like either candidate. We will feel the washback from this decision.

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I agree with the TUC

The TUC and the warring Labour party both agree that the UK’s minimum standards for employees, often set out in EU law, should not be watered down. I agree.

I find it curious that both bodies make this their central campaign as we come out of the EU, when as far as I am aware no-one in power or a position of influence over the government thinks these laws should be diluted.

Throughout the Referendum campaign the repeal of EU labour law was the dog which would not bark, because it was the dog that did not exist. I remember well being asked at most of the debates I attended during the referendum which measures I would want to deregulate and repeal if we left and could get rid of EU laws. Some asked me because they thought Leave would stumble and be unable to list anything.Some, including media enquiries, were hoping I would want to get rid of some piece of EU labour law, as they wished to keep it.

I always began my answer that the worst regulations I wanted to remove and replace with better ones were the extensive rules of the Common Fishing Policy. I want sensible rules to preserve our fishing grounds that allow a better deal for UK fishermen. That was not one the Remain faction wanted to discuss. They would press again. I would talk about the compulsory VAT on domestic fuel and green products and ask for that to be repealed. That was another that did not suit their purposes. I would then press to change the procurement rules, as they seem to militate against the UK public sector buying enough British product. This list would usually satiate their wish for regulatory repeal and change. I could go on.

The Leave campaign was united in saying we would keep all EU labour laws for two reasons. One, many of us want there to be decent standards at work. Two, the UK has a long tradition of improving legal minima, often above EU requirements. Leaving will not change that.

I also now have a third reason for wanting to keep these rules. Big businesses are the ones most likely to want to dilute these standards. All too many big businesses, who should have stayed neutral, waded in on the Remain side in the debates. By doing so they lost potential support for any more dubious legal reform they might want once we come out. Why should I think their judgement any wiser or more popular on labour law than it was on membership of the EU?

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Co-operation with Russia

I am no fan or apologist of Russia, but I am pleased that the USA is now trying to work with Russia for a solution in Syria. Russia has projected her power into this troubled country, just as the USA has sought to do, so it is better if they talk to each other about what they are each trying to do there. The people of Syria need to be spared bombing by competing large powers from outside the country.

The West has to get over Crimea. Crimea cannot be prised back by military means, and there is no obvious diplomatic solution to that issue in sight. The West needs to make clear further territorial expansion by occupation will invite a military response wherever there is a NATO guarantee as it has been saying, but we now need to reach understandings with Russia about issues where we have common or conflicting concerns.

Russia is flexing her diplomatic muscles and is creating a series of alliances across the Middle East and with other oil producing countries worldwide. The politics of oil are an important part of the question, given Russia’s reliance on black gold for her hard currency earnings.

As for Syria, the West needs to understand that its attempt to find moderate rebels against the Assad regime who can both stay moderate and fight their way to a victory against both Assad and ISIL was never a credible policy. Pouring more arms into the country for the good forces just added to the explosive mix and often led to the weapons falling into wrong hands. Selective bombing just killed more people and extended the range of violence and left open the possibility of hitting the wrong people or fuelling anti western propaganda from the opportunity western bombs create for the bad forces to spin the tragedy as they see fit.

There is no easy answer to the long and murderous Syrian civil wars. Those who think the west must do something should perhaps first say the west must avoid doing more harm.Talking to Russia is a first step in trying to explore when the warring factions on the ground will all conclude there is no victory or military solution in sight for any of them.

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Doing well at things

I have had the privilege of meeting numerous successful people in the jobs I have done over the years. Like many I have enjoyed watching sports stars, hearing fine musicians, reading great authors and seeing good entertainers. One silver thread runs through the success of all of them. Hard work.

If you want to write well, first read well. Then try writing, strenuously seeking to improve how you write. If you want to perform in the Olympics, choose your sport and spend every available waking hour practising and building your physique and technique. Take advice on how to compete with the best. Know two things. Being the best may be beyond you, but being very good is well within your abilities. If you really want to reach high standards you can do so. You will not reach high standards without belief and commitment.

I find the debate about academic selection curious. Most in the debate accept academic selection at age 18. No-one suggests sending people to top universities who do not have some GCSEs and A levels to a required standard. Most accept vigorous selection for developing football, cricket, ballet,music and other cultural talent. We start training our top musicians and dancers early, and give them a rigorous regime that the rest of us would not want. In return for a privileged specialist education we expect the best of them, and winnow out those who do not make sufficient effort.

The mistake is in thinking the grammar test is a single life changing event which means if you fail that prevents you having a good future. Some of the best entrepreneurs I know failed at school. Some of the top footballers would probably not have made it to grammar schools. Life is full of challenges, selections, opportunities and disappointments. Some people who were rejected by the Academy or turned down by the publisher eventually publish stunning books that many people want to read.

I love cricket but I never made it to a high standard team because I spent my youth reading books and trying to write better essays rather than practising my bowling. I like to go and watch people who are a lot better at cricket than I am. I am not jealous of them. I do not say we should stop selecting because it discriminates against mediocre cricketers like me. I praise them for their well honed skills, like watching their games and return to my job to do what I have trained myself to do to professional standards. I also enjoy playing cricket myself against people with similar limited levels of skill and competence who like me have not trained themselves to professional levels.

It is high time we accepted that life is riddled with selections. No one of them will prevent us achieving something or having a good life. Our present schooling system is riddled with selection by family income. The better off can afford to send their children to fee paying schools. The bit better offs can buy homes in the catchments of better state schools. Why should this type of selection be preferred to selection by ability?

You have only failed when you give up and have failure in your heart.

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More grammars please?

There are two main arguments made by some against grammar schools. One is it divides children too early and could leave many in bad schools. There is no reason why the non grammars have to be bad.

In my constituency we have no grammar schools. The comprehensives usually produce results well above the national average, with the best schools producing excellent exam results. The most highly motivated academic pupils go on to Russell Group Universities.

This demonstrates that grammar segregation need not diminish the other schools. Whilst there are no grammars in my area, children from the Wokingham constituency can apply for places at the Reading grammars. The Wokingham comprehensives lose some of the most academically gifted and hard working children to the Reading selective schools. This does not impede them from pursuing their own academic excellence within their schools and producing high quality undergraduates for elite universities.

The second argument against grammars is that low income background children find it too difficult to get in against the competition from middle class children whose parents help them or hire tutors to get them through the entrance procedures. This is too wild a generalisation. It is certainly true that the grammars need to have tests and selection procedures that gives weight to varied levels of preparation, or preferably eliminates as much of the advantage from better preparation as possible.

It is also the case that advantage does not always need money to buy it. A child from a low income home may have parents who provide much time and attention to reading to the child, encouraging the child and engaging the child in the world around them. Some higher income households may have parents too busy to provide the one to one encouragement that can help. Whilst the figures show more higher income household children get in, we should not ignore the non financial support which low income families can supply as well. We need to remind people that any adult with good intentions can help educate a child by sparking their interests or taking time to encourage a love of learning.

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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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