Where are we on the road to Brexit?

It has been a slow process so far, thanks to the delay imposed by the courts over sending the Article 50 letter.

There were always four tasks to complete for exit after the referendum decision. We have now completed the first two.

We have sent a formal notification to leave. This fulfils all the Treaty requirements to leave, and has a date of 29 March 2019 for our departure. It means our departure is valid in international law.

We have now passed legislation to ensure the UK Parliament and courts take back control the day we leave the EU. This also ensures legal continuity, providing that all current EU law remains in force as UK law on exit day, which had to be that same 29 March 2019 date.

We now need to see if there is a deal concerning our future relationship that the government thinks is worthwhile. The EU wishes us to sign a Withdrawal Agreement, but this is not a legal requirement of the Treaty and would presumably only occur if the UK government is satisfied that its terms are reasonable and it is complemented by a good future relationship agreement.

The final act will be Parliament’s decision as to whether we should accept the government’s deal and implement that in UK law, or whether we should leave without a deal.

Some have sought to turn the Parliamentary decision on the final deal into a vote between the deal and not leaving the EU, rather than a vote on whether to leave with or without the deal on offer. This was the underlying agenda to the arguments about a “meaningful vote”. It was finally wisely agreed not to put instructions to Parliament on how we should proceed after the deal has or has not been concluded into law.

It is difficult to understand why some want Parliament to be able to veto Brexit at the end of the process. After all the referendum decision was made by the people, and the Parliament voted overwhelmingly to leave when it voted for the Article 50 letter to be sent. The UK would be in an exceptionally weak or absurd position if Parliament vetoed the deal on offer and vetoed leaving without a deal. Why would the EU want to improve its offer in those circumstances? And how and why would the EU take the UK back into membership on current terms?

The anti Brexit forces claim to be new champions of Parliamentary sovereignty after all those years when they were busy giving it away to Brussels. They have to accept that Parliament has decided to leave and made that clear when it sent the letter. They also need to remember that 3 times now the Commons has voted by large majorities against staying in the single market and customs union. A mature sovereign body has to recognise when it has made a decision.

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The government’s flexible friend

UK PUBLIC FINANCES

 

At the Budget (March 2017) The Treasury forecast £58.3bn of borrowings in 2017-18.

The out-turn was 30% lower, at £40.5bn

At the same Budget the Treasury forecast £40.8bn borrowings in 2018-19. This has since been reduced to a forecast £37.1bn. Early figures suggest the Treasury has again overestimated the borrowing.

The Treasury also say they need to reduce the outstanding debt, which is at £1800 bn. or 85.1% of GDP. They need to remember this is a gross figure. The UK state has bought in £435 bn of debt which it therefore no longer owes. The state net debt is £1365bn or 64.5% of GDP. This is a relatively low figure for advanced nations, and eminently sustainable.

The government did not herald tax rate rises in the Manifesto, and there is no need for them to finance the NHS and other priorities. In some cases lower tax rates could bring in greater revenues, as the cut in top rate Income tax did. What is needed is a policy to promote faster growth from the current slower growth brought on by monetary tightening and tax rises on homes and cars.

The NHS spending can be paid for by a mixture of the proceeds of growth and the savings on EU contributions. In the short term borrowing can be allowed to go up to forecast levels, as it has been running well below official forecasts for some time.

 

Update: Today’s figures for May confirm the trend to undershoot. They have now lowered 2017/18 further to £39.5bn, some £18.8bn below their forecast!  The year to date  2018-19 is 25% down on 2017-18 so far, though that is just two months.  Receipts on income and wealth are up by a large 6%, with spending growing by 2.5% plus a 4.5% increase in benefit costs.

 

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How much money do we save when we leave the EU?

I see some contributors here are out to belittle the amount of money we save when we leave the EU. Let me set out the official figures again:

OBR March 2018  p217 EU financial settlement

 

2019 figures (assuming we still pay full amount that year)

GNI based contribution   17.7bn Euro

VAT payments to EU         3.4bn Euro

Own resources (customs)   3.8bnEuro

TOTAL GROSS CONTRIBUTION   24.9bn Euro

UK rebate      4.7bn Euro

Public sector receipts  (money back)  6.3bn Euro

NET CONTRIBUTION   (Gross payments minus rebate and cash back) 13.9bn E   (£12bn)

We could save all this if we leave with no  deal or an improved deal. If we leave with Withdrawal commitments we will save all this once the transition and leaving payment is over.

 

 

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The Bank succeeds in slowing money and credit – nothing to do with Brexit

The Bank of England has taken a lot of action to tighten money and credit since early last year. As this gets little attention I thought it might be helpful to remind people what it has done:

 

  1. Increased rates from 0.25% to 0.5%
  2. Cancelled the Term Funding Scheme which allowed banks to borrow at low rates to lend on to the UK economy  (£127bn used by end of scheme in April 2018)
  3. Increased Counter Cyclical Capital Buffer banks have to hold to 1% from November 2018 to reduce bank lending for any given amount of bank capital
  4. Toughened “prudent affordability limits” on home loans
  5. Imposed new tight limits of mortgages above 4.5 times income
  6. Warned against credit card zero interest rate promotions
  7. Required tougher standards for car loans related to future value of vehicle
  8. Warned that Central London office properties were expensive
  9. Set out to “tighten consumer credit conditions”

Given this, as predicted here, it is not surprising the UK economy has slowed. Similar action is not being taken in the USA or the Eurozone. The Eurozone continues with zero interest rates and still more Quantitative easing. The USA is deregulating banks to allow more credit, and undertaking a major fiscal stimulus  though it is raising rates.

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Health spending, tax and that Brexit dividend

There has been a long running argument within government over health spending and how to pay for future increases. That is why I wrote about efficiency and quality last week, and set out the case against a hypothecated health tax sometime ago on this site.

I am pleased to report that the idea for a hypothecated new Health Tax seems to have been dropped. I explained how such a tax  would not  be enough on its own, how there would still be plenty of arguments about how much extra money the NHS needed as well as the hypothecated tax, and how you cannot throttle back health care simply because one particular tax has fallen short.

I am also pleased to report that those of us who argued a substantial part of the Brexit dividend should be used to meet increased future health costs have also been  persuasive. There will be an extra £12bn a year available for spending and tax cuts once we have terminated our payments., I am in favour of doing this immediately  after March 29 next year, unless the EU suddenly comes up with a good deal which is worth letting them have a bit more of our money after we have left.

There is still work to  be done on whether there is any need for extra borrowing. That will depend on how fast the economy grows and how quickly the revenue increases. Lowering tax rates would help raise more revenue in several cases, which would be a welcome boost to the economy with beneficial consequences for future spending. When the US is going for a top Income Tax rate of 37% and  Italy for a top rate of 20% the UK needs to stay competitive to ensure enough well paid and successful business people stay here and pay their taxes here to help our public services. The UK economy needs a fiscal boost to offset the monetary tightening administered by the authorities since March 2017.

It is also important to grant increased spending for the NHS on the basis of something for something for something. Just granting a blanket increase could result in wasteful spending, as we saw in the big increases in the middle Labour years before they had to slash public spending generally after the crash.

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The nature of this site

Sone of you have written in suggesting I post less on this site in order to have more time to moderate. Some of you have written in with your own views on what this site is or should be . Maybe it would help you if I told you what I think this site is.

This site is not a conventional MP website. Such sites are paid for by the taxpayer and present the MPs work in a favourable light. They are not allowed to be party political. This site is paid for by me and ranges beyond my work as an MP, though it does cover the ways I am seeking to influence the national debate in the interests of my constituents, and has local pages for constituents.

This site is not a Conservative party site. It does not reproduce the party line as this is readily available on official party sites. If I disagree with the party line or am trying to amend it  I will say so here. The pieces are  often about things where there is no party lines, or are about controversies raging prior to the formation of a party or government line. It is of course a site written by someone who does support the Conservative party and takes the whip.

This is not a Brexit website, though all the time press and Parliament are preoccupied by the Brexit process this site will provide commentary on that.

This is not a business website. It refuses adverts or sponsorship and does not promote any individual company interest.

The idea of the site is to provide insight, commentary and a contribution to the national debate, laced with pieces about topics I am interested in that may be of interest to others. I have, for example, run pieces about historical events and anniversaries,about cultural events,  pieces about continental politics , and insights into the global economy.

I am still happy to post the views of others who want to extend the debate or add their own facts and perceptions. I will, however, simply delete pieces which may offend others, are potentially libellous or repetitiously unpleasant. Two people who try to contribute have all their pieces binned as their descriptors could give offence.  I am going to bin more submissions from the one or two who disagree with anything I write and seek to undermine any positive idea or action. I also do sometimes bin long and potentially worthwhile submissions  if they come from someone who has already published more than I have written that day on my site and has laced the comment with references that need checking.If the workload gets too high on busy days I will post fewer incoming messages but will not stop my own postings as I need to keep people informed.

I do not knowingly post false allegations about anyone, including about myself.  Those who have tried to post false allegations about me will be able to find the true position in what I have written here.

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The EU needs a new migration policy

The recent refusal of the new Italian government to accept a boat carrying many migrants has thrown into sharp contrast varying attitudes on the continent to this vexed issue. Mrs Merkel who used to speak for Germany and the EU still thinks the EU should welcome in all who want to come. The newly constrained Mrs Merkel trying to keep together a coalition of opposites on this as so much else after her bad defeat in the election is having to compromise and toughen her position. Her one time allies, the CSU, are in open disagreement from inside government.

The Italian government and the German AFD Opposition, along with the CSU, challenge the idea behind the EU humanitarian policy of picking up anyone from the Med who is seeking to come to the EU and delivering them safely to Italy or Greece. Doesnt this, they ask, just encourage more nasty get rich quick people smugglers to take their money and embark migrants on unsafe boats in the knowledge they will soon be picked up by EU naval vessels? Why are economic migrants brought to the EU if they do not have permits rather than be returned to the last safe country they left? On the other side Mrs Merkel points out that the EU is a group of decent nations who come to the humanitarian aid of those in peril on the sea, however this has come about. Indeed at the peak of the recent migration Mrs Merkel went further and saw the migrants as a plus for a strong German economy in need of extra labour.

The large number of migrants places demands on housing, infrastructure and public services. Electors in Eastern Europe, Germany, Italy and elsewhere are voting in larger numbers for restrictions on migrant numbers. The EU has allowed countries to build big walls and border fences to arrest the flows, and has helped finance a very long Turkish border defence now there is free movement between Turkey and the EU. Mr Salvini in Italy and the CSU in Germany are now in a position to demand change. Meanwhile the UK can get on with designing a new border system which is generous to asylum seekers, helpful to business needing skilled people, but capable of delivering the controlled migration Mrs May has always promised us.

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Quality and efficiency are allies, not enemies

There is still plenty of work to do to raise efficiency and quality in various public services. Some in the public sector seem to think efficiency means cuts, and cuts means lower quality. That is not the way to do it. Doing things efficiently should mean doing them better.

If you get something right first time you avoid the costs of changing and remedying, or the even bigger costs of having to apologise and compensate if the good or service has gone out in bad shape. If you harness more machine and computing power to a good programme design you can improve accuracy and quality whilst speeding up the process and cutting its cost. Modern digital technology offers huge scope to both raise quality and cut costs if done well. It also offers new ways to mess things up and to make life more difficult for the consumer.

Let’s take the case of NHS supplies. A good system would cut down stockholding of drugs and specialised food products in the system, reducing waste from poor holding and handling, and from items going out of date. More just in time deliveries to hospitals, surgeries and users would reduce the amount of medicine or specialist food that is tipped away as unwanted when a patient recovers. Some hospitals still do not have computer controlled drug dispensing, with suitable controls over what is administered, when and in what quantities. Doing it through a drugs trolley with staff members reading the notes and then finding the medicine leaves more scope for error than a system based on a patients computer record and computerised handling of the required drugs. I have talked before about the return and reuse of hardware like wheelchairs, crutches and other aids.

There is the direction and use of manpower. Public service personnel are crucial to successful public services. Their dedication and professional skill are the essence of much of it. Not only do they need proper computer and machine back up to do their jobs, but they also need intelligent direction of effort by management who see where they are needed and can make their best input. Some managers do this well, but there needs to be a constant effort to ensure personnel are well deployed. I have seen cases where two health visitors have turned up to an elderly person facing a problem, only to discover neither of them could resolve the query. Home visits are important but are expensive, so it is crucial the preparation for them directs the right manpower to the right home to sort the issue.

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The benefits of Brexit

The Prime Minister tells us the government is committed to Brexit and wishes to deliver the benefits it can bring. That is good news.

I look forward to early news from the government on the following.

First, I want to know how all the money saved is going to be spent, and a sense of urgency in getting us out of financial commitments as soon as possible. I have set out my own suggestions for increased spending on health, social care and other priorities. Spending that money at home gives a 0.6% GDP boost and saves us a lot of money on our balance of payments deficit.

Second, I want to see our new fishing policy as we become an independent coastal state. We need a policy that is kinder to our fish and our fishermen, and which lands more the fish caught in the UK for UK consumption.

Third, I want to see a new migration and borders policy which is fair between EU and non EU migrants, and assists the government in hitting its targets for levels of migration.

Fourth, I want to see the Trade Department roll over the current EU trade agreements with other countries into UK agreements and make good progress on negotiating good agreements with more of the 90% of the non EU world that does not have a trade agreement with the EU. I want the UK to offer reduced tariffs and barriers to developing countries in return for more market access for ourselves.

Fifth I want to see tax cuts in areas where we cannot cut taxes at the moment, including the abolition of VAT on green products and domestic fuel.

Sixth I want to hear what our global agenda will be as we regain our vote and voice on a number of important international bodies.

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Postings to this site

I have been extremely busy for the last two days with a lot of activity in the Commons and many votes to attend to.

I am currently unable to handle the volume of postings from some people, and the length of many postings. Where people have posted many and long postings I am deleting some to reduce the backlog. Some people do get away with a lot of short postings, because I moderate the short ones first. I do not delete based on whether they are pro or anti. I do delete posts that make unfair or unproven allegations against anyone, whatever their politics.

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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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