John Redwood's Diary
Incisive and topical campaigns and commentary on today's issues and tomorrow's problems. Promoted by John Redwood 152 Grosvenor Road SW1V 3JL

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The EU doesn’t like democracy

The news from Italy takes my breath away. The President has vetoed one of the appointments to Ministerial office because he has expressed some Eurosceptic views, in line with the views of the winning parties in the election. He wishes to impose a government of unelected officials instead, which is unlikely to command the confidence of the Italian Parliament. He is challenging the winning parties to vote his government  down and go for another election, when the results of the last one were clear and produced a potential coalition government with an agreed programme.

As the leader of the Lega has said, this is a direct assault on democracy and threatens a constitutional crisis. I am not an Italian voter and do not agree with some of the things Lega and 5 Star say, but I do see why their coalition programme wishes to cut taxes and boost the incomes of the poorest, and how the voters expect some change of approach. For the last decade the Italian economy has languished with little growth and high unemployment. The Euro scheme offers more of the same.

Their problem is simple. To do what they want they either need substantial reform of the Euro system , or they need to take their country out of the currency. The EU is determined to block either of these courses, and has allies deep within the Italian establishment to prevent change. It was this feeling by electors that the scheme did not work and the traditional parties were not prepare to challenge it that led to the election results. Now the establishment intend to make it worse by seeking to thwart the will of the voters. The Euro scheme needs to have better ways to route money from rich to poor and from surplus to deficit countries. Its refusal to provide the grants and loans on the scale needed is leading to the demolition of traditional parties in the zone, and to a clash between those who want reform and those who defend every detail of the Treaties and Euro architecture.

Social care and the NHS

During the election the Conservatives launched some proposals for paying for social care in the future. These were very unpopular and were rightly withdrawn before people voted. In the correspondence which they generated it was clear some people did not understand the current system, and were surprised to learn that today under a policy approved by all 3 main national parties in office a persons house is sold to pay the bills if they go into a care home unless they are rich enough to pay the bills from other money.

This applied to my parents who sold their home and I saw nothing wrong with the principle. They did not need their home when they went into  care. I had no right to inherit the value of their previous home.

The crucial distinction in UK policy is between health care, which is free, and living costs which individuals remain responsible for all the time  they have income and or capital to pay the bills. In most cases the  distinction is obvious. The elderly person needs a meal or a roof over their heads . That is a living cost. They need medicine or hospital treatment. That is free on the NHS. The distinction is more difficult with assisted living  or social care.

 

If someone carries on living in their own home they have to pay for various types of social care help, just as the person living in a care home does. They do not, however, have to sell or remortgage their home to do so, nor should they.I am going to be writing more about this topic and welcome thoughts for reform. Good quality social care is crucial to provide support for elderly patients who need help but do not need hospital treatment.

Italy to challenge Euro austerity

The new 5 Star/Lega government agrees about more than its critics thought it would. The two parties both think Italy has faced too much austerity from the EU and needs to spend more and tax less. They both think there are too many migrants entering their country, and want to see tougher controls over migration. They both think the Italian state debt is too high and some of it should be cancelled. Both want to put Italy first. Both challenge the German view of the Euro scheme, which refuses to transfer money from the rich parts of the zone including Germany to the poor parts of the zone. As a result we have had a series of  Euro crises in stressed countries.

 

The worst of these crises so far were in Cyprus and Greece. In each case the commercial banks were unable to honour requests to withdraw Euro deposits, because the Central Bank refused them the cash they needed. In the case of Cyprus the Euro there was slashed in value if you held a deposit over a certain size. The Euro has been more stable and its value stronger more recently thanks to the Target 2 balances. Germany and the other surplus countries now deposit their surpluses at the Central Bank for zero interest with no repayment date. The ECB lends the money on to the stretched banking systems of the deficit countries for zero interest. The ECB also helps countries like Italy by buying up large quantities of their state debts to keep their costs of borrowing down.

 

Italy has now hinted that the ECB should write off the state debt Italy now owes it. The ECB disagrees. Italy thinks there should be some sharing system around the zone, allowing her to spend more and tax less. Germany disagrees.

It is likely Italy will set a budget which challenges the rules of the zone. The row may then lead on to doubts about the Target 2 system and the sustainability of this borrowing based model. Within the UK currency zone the rich parts send large amounts of money to the poorer parts. They pay more taxes, and the lower income areas get more in  benefits, Council grants and general public spending per head. The Eurozone has no such mechanisms. Italy may be about to wobble the consensus which is based on extend and pretend. The ECB lends on surpluses from rich countries to poor countries, claiming it is temporary and will be repaid. It is best not to probe this too much.

Does the EU favour No Deal?

Reading   the spin coming out of Brussels from the talks, it sounds as if the EU favours No Deal. Their rejection of every helpful and sensible proposal to let them export more easily to the UK is bad enough. When coupled to their demands that we pay them money we do not owe them, obey laws we might want to modify, and avoid trade deals with faster growing countries elsewhere it means No Deal will be better than the Deal on offer.

I regularly stress to government to need to be ready to leave on 29 March 2019 given this background. If that turns out to be the answer we can start spending the £12bn a year saving immediately, we can sign early trade deals with a number of countries that have been keen to get on with it, take back control of our fish and  put in a UK migration policy that works for us. Any Deal has to be better than this. The EU seems to think a Deal has to be a punishment. As an independent country they will not be able to punish us, so the sooner we are out the better.

Green policies and producing food

Defra is keen that our new farming policy should  be ultra green. If that means we value and look after our fields and farmland, and protect our forests and wild areas, I am all in favour. The good news is we can do that at the same time as expanding the food we produce and meeting more of our own food needs.

I trust the Defra Secretary will take on board from his current consultations a strong feeling in the rural community that we need a farming policy that puts food production into a more central role than it achieved during the years of the Common Agricultural Policy. There are good environmental reasons to cut down the food miles, as well as good economic reasons why it would be better to cut the balance of payments deficit.

Over the last winter I was pleased to find I could largely rely on home produce. There were good home grown potatoes, carrots, cauliflowers, leeks and onions available most of the time. For much of the winter there were excellent English coxes and  varieties of pears. More recently I have turned to New Zealand for their fruit when English has not been available.

It was difficult to find oranges from anywhere other than Spain thanks to EU tariffs, though some citrus fruits from Israel, North Africa and South Africa did find their way to UK supermarkets. A new agriculture and tariff policy after we leave could be a big boost for our farms and a bonus for our consumers.

Should we limit everyone’s bread as well as water?

I could scarce believe my ears when I heard there is talk of a limit being placed on  how much water each one of us should be invited to use. Water is the staff of life. It is difficult to predict how much water you need for cleaning or cooking. I thought it was agreed that as water is so fundamental special care is taken to ensure we all have access to a good supply in our homes and places of work.

No-one argues  that with strong growth in our population we could run out of bread in a few years time. They do not  point out that baking more bread and putting in more ovens will entail burning more fuel and creating more emissions. They do not advocate   a bread allowance, to ensure we control the total and at the same time allow fair shares for all.

We do not do so for a very good reason. The market can take care of future demand. There is no need to interrupt individual choice. I do not eat a loaf of bread at the expense of my neighbour. There are enough loaves at affordable prices for both of us. Bread supply expands to fill the shopping baskets available.

The same should be true of water. Water is a resource in massive supply. Much of the surface area of our planet is taken up by huge quantities of water. You do not destroy the water by using it, but return it to the water cycle after use for reuse. It is the ultimate renewable. If we allowed full competition to supply domestic water as we now allow for commercial water, supply would expand to meet the demand. Let’s do just that.

Water is a good growth product. Let’s clean, store and use more of it. If we need an additional reservoir, put it in. If mending leaking pipes is cheaper, do that. There is  no need to ration.

Clean air

I’m all in favour of clean air. The Clean Air Acts which removed the smogs from London and our leading industrial cities were great acts of progress. They did not damage our economy, whilst improving the quality of life and saving our lungs.

Today more can be done. Particulate matter in the air can be unpleasant. It comes from domestic and commercial heating systems, from transport, from power generation and from some industrial processes. Progressively higher standards of pollution control can clean our air more.

There has been a tendency in the UK debate to concentrate on the impact of the car and lorry, and to minimise or ignore the role of other sources. It is true there has been quite strenuous efforts to clean the output from  factory chimneys. There has been a strong move away from open fires and coal and coke burning boilers. Their replacement with oil or gas systems has lowered the output of hazardous waste. There has been less concentration on the particulates coming from diesel buses and trains.

The government will be long on words and targets, but more  careful on proposing changes to the way individuals live. You cannot suddenly demand that everyone replaces their domestic boiler or scraps their coal or wood burning devices. Effecting change in the hearths and boiler cupboards of the nation’s homes requires patient progress and incentives to encourage voluntary change. Requiring people to burn less harmful  fuel in solid fuel devices would be possible. Banning bonfires is part of modern life.

The state should look to its own. There are still cities where bus fumes and particulate matter from the exhaust are an important part of the problem on the streets, especially near bus stops . There are stations where waiting trains keep their diesel engines running, with smoke and particulates circulating in high concentrations by the platforms. There are many public buildings with inefficient and dirty heating systems. Improvement and change in these areas would be the most positive way the government could lead this change.

UK Net debt down by £18.5bn

The ONS had to admit today that it had overstated Public Sector Net Debt excluding  banks by £18.5bn in past figures. £11bn of this was an error, and £7.5bn comes from updated figures. It is all part of a pattern of too much official gloom about our economic and financial position.

Last year to end March 2018 total additional state borrowing came in at £40.5bn, compared to the March budget forecast in 2017 of £58.3 bn. So that  forecast was overstated by almost £18 bn.

Given these much better figures the Treasury needs to ask itself some  questions about its spending and taxing policies, and ask why the official forecasts and figures find it so difficult to track what is going on.

Data Protection and constituents queries

I have asked my office to be fully compliant with the General Data Protection Regulation.

We will pass information on to public bodies or other counterparties involved in a complaint or query when a constituent writes in. We will regard the submission of the complaint or query as consent to this.  We will keep a record of that query and response usually  for the life of the Parliament in case of follow up issues, and will update constituents as appropriate on that topic.

Where the data sent is particularly sensitive, as with details on medical conditions and treatment, we will usually request express permission to share this with the other  bodies involved.

We have always sought to handle people’s data well and to respect confidentiality. We have to trust government, local government and their  Agencies to do the same when we pass on information to seek to resolve an issue.

We have also often have to point out that I cannot act on a case affecting someone’s adult relative without the express permission of the person affected. I understand why people often want to intervene for their adult children or for their parents, but unless they have power of attorney I do need to ask for consent from the person at the centre of the complaint or query. If a power of attorney is involved then my office need to see the written record of it. Where the relative is living in another constituency it will usually be necessary to refer them to the MP for that constituency, whilst I am happy to take up all such issues affecting people living in my constituency, even if they have been initiated by a relative living elsewhere. I will always need the consent of my constituent.

Trade wars

The USA has temporarily suspended the tariffs it threatened to deploy against China. Apparently the trade talks are making progress. China accepts that the balance of payments surplus it enjoys with the USA is excessive, and wishes to help the USA find more ways to sell to China. Some of this requires market opening by China of a general kind, and some requires more successful US exporting relative to say Germany of products China already imports.

China is a heavy importer of transport goods, engineered products and technology. The USA is wishing to be more cautious about how much technology she sells, given worries about the way China has handled Intellectual Property in the past.  Boeing will be hoping a new trade deal strengthens their hand against Airbus, and the US car makers will  be wishing to do better against Mercedes and BMW.

The UK should win from some of the changes envisaged. China accepts she needs to liberalise her banking and financial services markets more, which could assist the UK as well as the US. We too have a substantial trade deficit with China.

I assume Mr Trump would prefer to find some common ground and show he has a “win”. So far China seems to understand and accept this, and is busy trying to find ways in which the US can do a  bit better. China can argue that her policy is to liberalise progressively anyway, as she has been doing at a slow pace since joining the WTO.  Accepting the idea that the trade gap must narrow a lot is one thing, but bringing about the day to day reality of more US exports or fewer US imports is still going to take time and will be difficult to deliver.