Time to see the UK’s strengths – steady pound since 2012

Amidst all the hyperbole over short term movements in sterling it is worthwhile looking at the longer trend. Today sterling is around the same level against the Euro as it was at the beginning of 2012. It is almost a fifth higher against the yen, and around one fifth down against the dollar. Over this time period the dollar has been strong against all major currencies, running with higher interest rates and expectations of higher rates than elsewhere in the advanced world. The yen has been particularly weak thanks to negative rates and the creation so many extra yen by the authorities.

One of the odd features of the protracted and often repetitious UK debate about Brexit is the wish of so many to look for weaknesses and problems on the UK side, and to fail to analyse the weaknesses and difficulties on the EU side in the forthcoming talks. On Tuesday I pointed out to the PM during the exchanges on her statement about the EU summit that the questions to be asked need to be asked of the 27.

I began by asking how can a group of civilised democracies that are meant to believe in decent values not reassure British citizens living on the continent legally that they can stay there after exit?  I do not for one moment think the Spaniards will want to evict UK pensioners living in their own villas on the Costa Brava, for example. Nor do I see how they could do so legally. However, why is it asking too much of the EU and the Spanish government not to confirm that of course they are welcome to stay. After all, the UK government has been very clear that we would like all EU citizens legally in the UK to stay as long as they wish, but do need similar confirmation for our citizens on the continent.

I also asked for confirmation that it is clearly in the interests of business and governments on the continent to carry on trading tariff free, with no more barriers than they currently face, once the UK has left. The UK will willingly offer continental countries tariff free access to our market as long as we have the same to theirs. The choice rests with them, as the UK would recommend tariff free but can live with WTO most favoured nation terms.

Whilst we are about it, we should ask the rest of the EU how they intend to implement their Treaty obligation to have good relations with neighbouring states and to promote trade with them. As the EU is always keen to ensure we follow the letter as well as the spirit of the Treaty I assume the same applies on this important issue.

The UK voted to take back control of our laws, our money and our borders. We are doing so based on the referendum of the UK voters, and now also on the back of a Commons vote with a majority of 372 to leave. Under the Treaty we do not owe them any money apart from our regular contributions.

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No rise in National Insurance for the self employed

I am pleased the Chancellor has changed his mind on National Insurance. It is true the previous Chancellor defined the Manifesto promise as relating to NI for just  the employed when he legislated to implement the promise, but there was no such limitation in the Manifesto or in the election speeches and broadcasts to warn the self employed they were not covered. It is always a good idea to keep the spirit and the letter of promises made.

I did speak in favour of not taxing the self employed and small business more, and put in representations from constituents against the Budget proposal. Removing this tax increase removes £325 m extra tax from 2018-19, and around £600 m in each of the next two years. I see no need to replace this “lost” revenue, as I expect the economy to grow a little faster than the official forecasts, which will generate more extra revenue than this policy change. Fortunately the sums involved are  small against a total revenue of around £800 bn annually  in the relevant years, so this item is under 0.1% of the total.

 

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The future of Scotland

I was pleased Mr Cameron gave the Scots a referendum on the future of Scotland in the UK. I sought assurances in the Commons that the SNP would accept the result, just as I and others who supported the Union agreed willingly to accept the result. The SNP made clear they thought it was a once in a generation opportunity. They said of course they would accept the verdict of the people.  It is therefore disappointing that their Leader now thinks they need a second referendum in less than five years from the first one which they lost.

Her argument is that leaving the EU represents a major change in circumstances. Apparently leaving the EU single market would be bad news, yet leaving the UK single market which is four times bigger for Scotland’s trade  would be good news. She wants a referendum before the UK has left the EU, based on a guess as to the final terms of any Agreement on our future relationship. It is difficult to see why this makes any sense. Surely if the departure from the EU is important, the SNP would wish to see it completed and see how the new Agreement works out before asking Scottish voters again to express their wishes on membership of the UK.

I trust the PM will explain that the Union Parliament will not grant a referendum all the time we are seeking to implement the results of the last on  the EU. Polls indicate there is little demand in Scotland for a second referendum. There is more demand for the SNP to use the substantial powers they already have to govern Scotland better. A referendum on the future of Scotland in the Union is a matter for the Westminster Parliament. I would think it would be wise to review the matter after the next Scottish election. If the SNP have done well in that standing on a ticket of wanting a second referendum then the UK will have to consider the request carefully.

I only want volunteers in our Union, and am glad we settle these things by referendum votes. I also think we need reasonable periods of constitutional stability between major referenda, so governments can use the powers they have got for the purpose intended-  the improvement of public services and the pursuit of a more prosperous and decent society. The UK is a serious democratic country. Occasional referenda on big issues are part of that. Constant repeats of referenda would turn us into a debating society with government constantly diverted from the day job of governing well.

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The Netherlands government picks a diplomatic fight with Turkey

It looks as if the strong polling of Mr Wilders and the PVV in the Netherlands has worried the government led by the VVD. They have recently denied access for Turkish Ministers to their country on the grounds that their visits would be inflammatory.  The Foreign Minister was stopped from coming and the Family Minister was ushered out of the country. Turkey is of course a NATO ally and has recently agreed a comprehensive and close Association Agreement with the EU. This Agreement includes the free movement of people from Turkey to EU Schengen countries which include the Netherlands.

It will be interesting to see tomorrow if the idea of acting in this manner serves to reassure those otherwise thinking of voting for Mr Wilders and the PVV, or whether it simply highlights Mr Wilders agenda in a way which helps him. Turkey is angry about the actions of Mr Rutte and his VVD party, and have asked the Netherlands Ambassador to remain out of Turkey. Meanwhile protests about this in the Netherlands have led to the use of water cannon and ugly street scenes.

None of this is good news for the EU/Turkey relationship, and brings the whole issue of the EU/Turkey Association Agreement back into contention. Many voters in the Netherlands have been worried about these Association Agreements, but so far the Dutch government of Mr Rutte has gone along with them at EU level, so they do apply to whole EU Schengen area including the Netherlands. This row may serve to remind unhappy voters about these developments.

It does not look as if Mr Wilders can win enough seats to be part of a future Dutch government, but if he wins more seats than any other party it will add to the stresses and strains on the ruling coalition which emerges from the election.

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Voting for the Brexit Bill

Today I will be voting to ensure the Brexit Bill at last passes the Commons again unamended , so the government can send the Article 50 letter. I do so because I campaigned to give UK voters a referendum, and made clear before and during the referendum campaign that the people’s decision would be implemented by the government.

I am pleased the Bill has passed with a large majority in the Commons, and trust the two Lords amendments will be removed by the Commons who rejected these views before.

As I stressed in my speech on the Bill, the letter itself marks the end of the UK’s membership. The one thing I agree with Lord Pannick about, the lawyer who led the Gina Miller case in the Supreme Court, is that the notification of leaving is irreversible. Under the Treaty you can only leave legally by notification. Once you have notified you have up to two years remaining in the EU to seek an agreement about the future relationship, but are out  without such an agreement at the two year stage, or sooner with an agreement. That provision was put into Article 50 deliberately to ensure the EU cannot delay unduly the exit of a country in order to get more money out of them in the form of their regular contributions as members. The rest of the EU should not be able to delay exit unduly when a country has decided it wants to leave. The EU, after all, is meant to be an association of democratic freedom loving states, so their freedom must include the freedom to cease to belong.

I  am surprised to see the rest of the EU is still using the misleading analogy that this is a divorce. It is not. It is a country leaving an international treaty arrangement which no longer suits it, because that Treaty based organisation has changed so markedly compared to one the UK agreed to join in 1972.  There are no provisions in the Treaty to make additional payments to leave or to carry on making payments after leaving.

The main question to be settled about our future relationship is whether we trade under WTO Most favoured nation status in future with the EU as we do successfully at the moment with the rest of the world, or whether we carry on tariff free. The UK would be happy to carry on tariff free despite being in large deficit on this basis, so it is a simple choice for the rest of the EU. It is high time UK media started putting this basic question to the other member states and Commission, instead of trying to find holes in the UK stance.

At the same time they could ask the rest of the EU why they have not yet reassured all UK citizens living on the continent they can continue to do so after Brexit, as we wish to do for all  continental EU citizens currently settled in the UK. The UK government is not a threat to either tariff free trade or civilised treatment of EU citizens living in a different country to their home one. I find it odd that the EU might be a threat to these straightforward common decencies. Why is the people who most like the EU that have a such a low opinion of its likely conduct?

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The Foreign Affairs Committee gets it wrong – Parliament should just enable the letter to be sent

Parliament will have every opportunity to debate the progress of the Brexit negotiations over our future relationship with the EU. Right now Parliament needs to show resolve to get on and send the letter under Article 50. It is annoying many on the continent that the UK has delayed this process.  The government is right to want a simple unamended Act of Parliament to allow the letter to go, to show that Parliament is united behind the democratic wishes of the public as expressed in the referendum. That is the way to increase the chances of a better deal for our future relationship. If Parliament seeks to bind the government it will be seen as a weakness by the rest of the EU  in the talks that follow.

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A budget for Brexit

The Chancellor intends to move to one budget a year. He also made clear that budget will be each Autumn. The budget we have just witnessed was designed to change little, and to launch various consultations ahead of the main event. It is therefore a little unfair of some to complain that the March budget did not set out what he intends to do post Brexit, nor did it herald and develop the economic opportunities Brexit presents. Let’s hope that comes in the autumn.

Over the next few weeks I will include some articles on this site looking at the opportunities in various departments and sectors. The first general point to make in today’s opening article is that post Brexit the government will have more money  at its disposal to cut taxes, increase spending or reduce the running deficit, thanks to the cancellation of our substantial net contributions. The balance of payments will get an immediate and substantial continuing boost once we cease making those payments abroad for our financial contributions. As the balance of payments deficit has been all too large during our years in the EU and especially in recent years, this will  be a welcome improvement.

The Leave campaign by way of illustration of the advantages of cancelling the payments said it could be spent on the NHS. They always made clear it would in practice be up to the government of the day to decide  what to do about the saved money. As part of the Vote Leave campaign I set out a detailed possible post Brexit budget, which combined increased NHS spending with more money for social care and a series of tax cuts taking VAT off tampons, green products and domestic fuel. These proposals made it to the Today programme and the Telegraph amongst others.  That illustrative budget had some worthwhile ideas in it. Indeed, the extra money for social care has just appeared in the latest budget and is welcome.

One of the big advantages of Brexit will be the restoration of our own control over taxes. The VAT cuts I suggested should be popular across the political spectrum, tackling excessive energy bills which fall hardest on people on low incomes, and encouraging more energy saving which makes sense. I would also like to see in the Autumn budget measures to cut tax rates where the rates are currently too high to maximise the revenues. It seems clear, for example,  that the last Chancellor’s penal Stamp Duty rates have cut  property transactions markedly, to the detriment of total revenues and getting in the way of people improving their property and tailoring their home to their latest family and income circumstances.

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The European Parliament

The European Parliament reminds us they can veto or approve any EU/UK deal on the future relationship.Some of them also say they want to offer EU citizen rights to individual UK citizens who want it. This appears to be a generous offer, as of course the UK will  no longer be paying in or accepting the judgements of the Parliament, Council and Court.

It is difficult to reconcile this with their wish as well to ensure insofar as they can influence it that we will not be better off out. Fortunately whether we are better off or not will be mainly up to us, based on the approach we follow when we are free to make our own decisions.

I trust the European army will not be making conscripts of European citizens.

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Self employed status

I am glad the PM has agreed to delay NI proposals and has confirmed that the Chancellor will listen to concerns. They will receive a report on the wider issue of self employed status and will also consider the differences in benefits between the self employed and other employees.

I am still consulting my constituents on the issue and will welcome their views on these wider issues as well as on Mr Hammond’s tax increase proposal.I will then put suggestions to the Chancellor.

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Fairer funding for schools

I along with MPs with similarly placed constituencies urged the Coalition government to narrow the large gap between the money going to schools in some parts of the country and the much smaller sums going to schools in places like West Berkshire and Wokingham. Conservatives were not able to get agreement in coalition, but did put a commitment to fairer funding in the Conservative 2015 Manifesto.

Ministers have since been working on a scheme. This is currently out to consultation. The request for people to write in on the “National Funding Formula” was first issued on 14 December. The closing date is 22 March. I am writing to remind those interested as they might like to send in their thoughts.

I have put the case to Ministers along with other MPs on several occasions. I will be having another meeting with the Secretary of State shortly about it again. The case is very simple. The main cost of education for each pupil is similar around the country, as it is based on teacher pay and other staff wages paid at  national rates. Of course there should  be extra money for pupils that require more support, and to recognise problems in deprived areas. There also needs to be some recognition of higher property and support costs in expensive parts of the country. The current gap between the highest and lowest funding, at more than 100% of the lowest level,  is too great.

I have asked for the  introduction of a new system as soon as possible, and for further transitional increases in money whilst we are awaiting a fair funding answer. The total support per pupil needs to be sufficient for decent provision. Individual schools may have other budget problems. If a school is unable to recruit sufficient pupils then its total funding will drop, and that may force it to reduce the number of subject options as it adjusts its teaching numbers to the lesser number of pupils.

In 2014-15 the per pupil funding of English schools ranged from £8595 per head in the City of London to just £3950 in the lowest funded authority. The average was  £4550. Wokingham received £4125 and West Berkshire £4367.

 

The contact is SchoolsNationalFundingFormula.CONSULTATION@education.gov.uk

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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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