Shop prices fall again

In the year to March 2018 UK shop prices fell by 1% according to the British Retail Consortium. They tell us that “shop prices have been deflationary for 59 months now, and this is the deepest deflation since February 2017”. I haven’t heard the usual voices scrambling to tell us this is all because of Brexit. There has been far less comment on this than the rush to get it wrong when general prices were briefly going up a bit faster last year, when many came forward to tell us it was the result of sterling which in turn they thought was related to Brexit. I explained then that their forecasts of much higher inflation to come were likely to prove wrong, and explained how they had misunderstood the movements of sterling and their likely impact on prices.

Sterling has been rising gently for some time as we move closer to Brexit, and shop prices have fallen again. Sterling fell a lot in the year and a half before the vote for unrelated reasons. It had fallen from $1.71 to $1.42 before the referendum. This did not stop shop prices falling. It is around $1.40 today. The Euro was strong last year against all comers. Shop prices have always had more to do with world output, internet competition to retailers and the hugely competitive market for things like clothing and electrical appliances that the world market has provided. The Retail Price Index has been more volatile thanks to rising international energy prices and domestic price pressures like Council Tax and the EU/UK move to dearer electricity for policy reasons.

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European health costs

I have been asking questions about how much it costs the UK to pay for health treatment for our citizens seeking treatment on the continent, and how much we charge people from other EEA countries for their treatment here.

In 2016/17 the UK received just £66m from charges imposed on the other member states for treatment of their nationals in the UK, whilst they charged us £630 m for the treatment UK citizens received. It is difficult to believe it should be that one sided. It is true a considerable number of UK citizens live in Spain, which charges us £200m for the health treatment they supply, but we also act as host to many people from the continent who also need to visit surgeries or receive treatment. The UK only received £5m from France for the whole year, compared to the £154 m they charged us.

The NHS in 2016/17 identified just £81 m of treatment carried out for people from the rest of the world, and recovered £30.4m in cash.

It does appear that despite the policy that EEA nationals health costs should be recharged to their governments, and non EEA people should be expected to pay for non emergency treatment, there is still some way to go for the system to identify the full amounts and to collect the cash from those who should pay.

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Innovations to like, and innovations that disappoint

I am all in favour of new technology. It can deliver more to us for less. It can help us in ways we did not imagine. It drives good change in the corporate world, forcing businesses to adjust to new competitors and to rethink their goods and services. It often produces a product or service which becomes a must.

There are also times when innovation produces a product or service which is little or no improvement on what it seeks to replace. Change makers can become mesmerised by the technology and think less about the customer. Much change is healthy, but some change can be expensive, disruptive or simply unnecessary.

I was an early adopter of mobile phones, as it was a big leap forward to be able to contact people from wherever you are. Many of the improvements made to cars, to their safety and comfort, are most welcome. Modern computers enable us to find information without going to the library and to send out material without having to persuade an editor or publisher.

I ask myself which innovations that are currently being discussed would do most to improve my life? Clearly a self driving car that took responsibility for my travel would provide a big increase in freedom and give me back the hours I spend in traffic jams studying the safety of the road ahead. I would like a self controlled hoover that could clean a room whilst I was doing something else in another room. More automation of other cleaning routines would also be good news.

There are some changes which have not brought obvious benefits. As a taxpayer I get my share of the big bills for switching trains to electric drive, but as a passenger I do not see any improvement of an electric train over a diesel. All the time we generate electricity from coal and gas it is difficult to see the environmental case as well. Electricity as a secondary fuel incurs energy losses at the power station and in transmission as well as in turning the energy into drive power in the engine.

I have given up on my digital radio at home and gone back to the old analogue one, despite the poor BBC signal. The digital radios are difficult to tune in, slow to warm up and often provide a poor quality output. The one I have to have to have in the car regularly cuts out in busy places.

Quite a few of the digital control systems are far less effective than old fashioned switches and dials. Fiddling about with a light display operated by applying finger pressure to a pad is not as quick or easy as setting a dial to a required setting.

I would be interested to hear your list of good and bad new ideas.

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The role of the civil service in Brexit

Last Wednesday night I spoke to the Bruges Group about Brexit at their request. There was widespread concern about the role of the civil service in the Brexit negotiations.

Our constitutional theory is clear. Ministers decide, civil servants advise. Civil servants can warn and restrain Ministers to make sure Ministers obey the law and operate within their powers, but they are not there to write Manifestos or to decide the direction of travel. Many individual civil servants may have voted Remain, but they must all be Brexiteers now in their professional lives, as they are working for a people who have decided to leave and a government which is seeking to do so. Ministers are meant to lead, identifying the issues government needs to address and recommending solutions and decisions which they think will improve things as people and Parliament wish. Ministers are entirely responsible for keeping Parliament onside and getting the necessary Parliamentary consents, and should conduct the public dialogue about government policy and performance.

It does appear that the Cabinet Secretary Jeremy Heyward, and the Chief Official negotiator Mr Robbins have considerable influence. I happen to disagree with the advice that the UK needs to keep on offering concessions, and needs a long additional Transition period following on from the 2 years 9 months wait to get out which should be the transition period. Many Eurosceptic MPs offer different advice. We advise against a Transition period, especially before we know what we might be in transit to. We advise against offering money and other concessions, as the UK is a very generous partner even without such offers. A free trade Agreement is clearly good news for the rest of the EU and will happen unless they wish to self harm. If they wish to do that no amount of concession might change their mind.

The fact is the Prime Minister is in charge. She decides which advice she likes best, and she decides who her advisers will be. She has chosen Mr Robbins to lead many of the talks with the EU, and we must assume he keeps her fully informed. Those of us who wish to see the UK now withdraw some of its very generous offer if the EU does not start to offer us a worthwhile future deal need to ensure the Prime Minister herself is aware of this view. She probably did learn on her recent whistle stop tour of the UK that many people do now just want to get on with it. Many of us do not share Whitehall’s worries about what might go wrong if we do not end up replicating the EU in all but name.

It is true that the Treasury officials produced some very poor work ahead of the Referendum, where they were clearly under political instruction to do so by the Chancellor. They would be well advised to redeem themselves by producing some more realistically optimistic work now they are under a government which says it is pro Brexit. The whole civil service needs to ensure all is ready to leave on March 29 2019, and should help Ministers speed up the necessary work on new fishing, farming, borders and spending policies for the UK. This surely is a very exciting prospect for those interested in the work of government. After years of having to conform, from March 2019 – unless we sign it away again – we will be free to do as we wish. We do not need any more mapping of Project Fear. We need some practical answers to a series of detailed matters, all of which can be resolved. Ministers should enthusiastically lead their officials in getting on with this task. Ministers should send back for changes any document which just repeats the endless false rumours of the Project Fear campaign which we have heard all too often and are one by one being proved wrong.

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Good Friday service

I attended the social gathering and service at the Salvation Army Church in Sturges Road on Good Friday. I am grateful to the Salvation Army for hosting the event this year and making us all feel welcome.

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The EU gets it, and decides to become more giving and forgiving

April 1

I hear that in a timely way EU leaders meeting in private have become alarmed. They are getting reports of a growing revolt in the UK against the long and unhelpful Brexit talks and have decided they need to take it seriously. After all, what would it achieve if they beat the UK government into submission only to find that UK voters were once again insistent that they just want to leave. Last time they succeeded in crushing a UK PM in negotiations it led directly to the vote to leave. This time it could lead to an early exit without any deal.

Germany is very worried they will not be able to export all those cars and manufactured goods tariff free. All countries are worried they wont get the £40bn leaving present which will so ease the financial pain of the UK’s departure. They are concerned that the UK may not be such a willing strategic partner, carrying a disproportionate share of the defence and Intelligence burden for the continent. The UK might become even less willing to take unemployed people from the continent and welcome them into jobs with benefit top ups.

As a result sources close on this special day tell me they are now resolving to let the UK have all it wants in terms of a future trade and economic partnership in the hope that will be enough to assuage the growing concern in the UK about the extent of the give aways. There is even discussion that as the EU thinks you need to pay to trade maybe they should do the paying, as they are the ones with the big surplus and with most to lose. Perhaps all those Remain commentators and politicians who have been telling us how the EU will be nasty, keen to give us a lousy deal, were wrong after all. Maybe the rest of the EU is learning that democracy is a fine thing and the UK has made a democratic decision. Maybe they see the advantages for them. Mr Macron can wield more power without the UK there, and Mrs Merkel can help complete her political union without the Uk trying to hold her back. As a result it is possible the UK will be allowed to eat cake, indeed encouraged to eat cake. Then all the rest of EU all can eat cake as well.

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Brexit lecture – including the impact of the EU on our economy over 45 years

The lecture I gave in Speaker’s House will be shown again on BBC Parliament Channel at 15.10 on the afternoon of Monday 2nd April, for those interested.

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Easter ideals?

This week end Christians remember the brutal execution of Christ and the resurrection.

We read of him as a great figure. The Son of God to Christians, a great prophet or teacher to non believers. His words echo down the centuries. They are as fresh and relevant today as they were when uttered.

Some wrestle with difficulty with the great gap between the peace loving messages of Christ seeking to improve relations between people and to calm tensions and conflicts on the one hand , and the deeds of the Churches in their centuries of power and wealth on the other.

Sixteenth and seventeenth century Europe was ravaged by religious conflict as rival views of the Christian message were used to fight for money and political control. The Church Militant often struck a political pose, supported warring powers, and provided some of the most influential people and arguments to progress the conflicts and hatred.

Gradually the policy of toleration spread, though it took until the last century to arrive at proper religious toleration in most western countries. I welcome the way today in the UK the Christian Churches respect each other and seek to avoid conflict. Today politics in the UK is not primarily about religion. Mr Blair was strongly advised not to do God as PM.

In today’s world there are still religious wars, and still too many incidents of religious persecution affecting several faiths. Sometimes the western allies intervene in these conflicts, with very mixed results.

In the UK we are left with an Established Church that does make forays into domestic politics, with some of its leaders urging their anti Brexit views on anyone who will listen. Often their main idea is that the state should provide a solution for every economic and moral problem. The private sector is usually something to tax and regulate to prevent or alleviate the alleged harm it does.

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The Monetary Policy Committee wants more monetary tightening

The MPC has a pessimistic view of the future of the UK economy. They think we can only grow at 1.5% per annum in future. It is true that like other advanced countries our growth rate since the Banking crash and Great recession has been a bit slower than the previous trend, but this figure looks unreasonably low given the scope for technology to carry on transforming our lives and the way we do business. It also offers us nothing for the extra spending at home once we cancel the EU subs, nor for the possible recovery of sectors damaged by common EU policies. They also need to take into account the continued expansion of jobs and the workforce. We have confirmation that the economy grew at 1.8 % in both 2016 and 2017, with the referendum vote making no difference.

Because it is pessimistic about the future, it therefore says it will need to slow our growth to avoid inflation. It’s a circular argument. They say  we think growth should be slow. If it turns out to be a bit faster they say we will need to slow it, because it will not be sustainable without inflation. That’s a gloomy doctrine that does not allow for the possibility that our future trend growth rate may be higher than they think.

They stated in their latest report “Given the prospect of excess demand over the forecast period (i.e the economy doing better) the ongoing tightening monetary policy over the forecast period will be appropriate”. The Bank did relax monetary policy a couple of months after the referendum vote, which helped demand and also pushed the pound down a bit more. More recently the Bank has tightened money by putting up interest rates again, taking action to reduce car loans, mortgages and consumer credit, and withdrawing special facilities for commercial banks. As a result the pound has gone back up against the dollar to where it was before the referendum vote and has even strengthened a little against a strong Euro. The Bank thinks a weaker pound caused inflation, so presumably they think this stronger pound will do the opposite, which should reduce their concerns. They don’t say much about that.

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Get on with it

There is still a long year to wait before we leave the EU. This is quite enough time to make any changes that are needed. The government assures us we will be ready to leave with No Deal if necessary.

I want the government to get on with the new borders, fishing, farming and trade policies we can enjoy once outside. I also want to hear how we will spend all the money we save. If we are going to delay our effective exit and give them more money in a prolonged transition there will need to be a very good deal to justify the delay. The message from many of us is Get on with it. Brexit will bring substantial benefits and opportunities.

We have a borders and trade system which works for the rest of the world at the moment, so we know how to live outside the EU.

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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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