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I have pointed out before that the UK uses a different statistical presentation of public sector health and education to comparable countries. The UK attempts to proxy output of these services, rather than just including their costs. This led to a faster decline in UK GDP when the lockdowns occurred, as both services cut back on the measured outputs which included numbers of pupils attending schools and numbers of doctors consultations. This same scoring system is now losing us GDP because these core services have not got back up to pre covid levels of output despite big increases in spending. Indeed, the latest poor figure for GDP with a 0.5% fall in the last month had as it largest negative a further decline in health output thanks to strikes in the NHS.
The quirky presentation is telling us something real and of importance. It would not be right to bump up our output figures for all that extra public spending when it is not delivering gains in output. There has been a large decline in public sector productivity in the last three years which has coincided and maybe resulted from the excessive increases in spending committed to the services. This productivity problem now lies behind some of the big political rows going on, though there is still a reluctance by the opposition parties to discuss what you should do about the way putting more money in does not necessarily result in more service coming out.
The one row where productivity has been openly discussed is over the backlog of illegal migration cases. The Opposition accepts there was a bad decline in the number of cases dealt with by each employee in the service. Their answer to the problem is to recommend more staff , and to propose better paid and more senior staff. Ministers have committed more money to the budget and have recruited more people to try to shift the backlogs and report that more cases are now being decided per employee after a period of very low output.
We live in a world where Ministers are responsible for the productivity but rarely have the powers to directly hire, fire, and manage the staff. The case seems to raise the issue should Ministers have removed senior managers when output fell off? Should they take more powers to reward, offer incentives and become more involved in recruitment? Why did productivity fall off so far? Why didn’t senior managers in the department take action to tackle it, or alert Ministers and ask for assistance and resource to do so? I cannot believe any recent Minister wanted there to be a collapse in productivity or who would have blocked moves to tackle it if it had been accurately reported early enough. Ministers were setting targets to get more done and had as a policy reducing the backlog.
The bigger one that is similar is the target to get NHS waiting lists down. The Ministerial wish to cut these has been clear throughout. Ministers have provided large general increases in money to the NHS, and have offered additional specific sums to get waiting lists down. Why hasn’t that worked? I will develop these issues in future blogs.
Some of you would like to discuss the war in Ukraine. You ask my view.
I hate to see senseless slaughter and destruction of property.The loss of life and injury to Ukrainians is dreadful. I would like to see a ceasefire and negotiated settlement, but this can only happen when Russia and Ukraine both wish to proceed in that way. I do not want to see other forces and nations intervene to try to impose a settlement on them. That would doubtless mean even more deaths and unhappiness.
I do not agree with the few who take the Russian side and say Russia is close to victory. All the evidence available from this far away points to a fairly static war now, with both sides well dug in. Both can damage the other but cannot win quickly or easily. I condemn Russia’s violent seizure of Ukraine territory.
The issue of how much support the UK and allies should offer Ukraine is difficult. There is general agreement that no NATO, therefore no UK, forces should enter Ukraine and fight on their side. There is agreement no NATO supplied weapons should be used by Ukraine for an attack on Russian territory , but they can be used within Ukraine against Russian occupied areas. There has been a reluctance to supply fast jets, but some tanks and more sophisticated drones and smart weapons have been supplied.
Clearly the volume and power of western weapons supplied will have an impact on the result, just as weapon supplies and economic support to Russia by her allies helps Russia. I wrote before this latest conflict about the circumstances that led to a change of government in Ukraine in 2014 and the background to the Russian seizure of Crimea. I would be interested in your thoughts on how NATO should proceed. I have not been seeking to influence or change this policy.
There are big issues arising from the prolonged war concerning the displacement of people, the costs of rebuilding and the future financing of Ukraine.
The path to net zero threatens many traditional industries that rely on fossil fuels for their manufacture and for their products. The car industry is being asked to close all its petrol and diesel car factories, writing off large amounts of sunk capital in machinery and research and development. The steel industry is being asked to switch from making steel from ore smelted in a blast furnace, to melting old metal in an electric arc furnace. Oil, and gas companies will be asked to stop extracting more fuel from their wells as the electric revolution proceeds, leading Green campaigners to talk of stranded assets. If the UK does this too soon we will end up importing fossil fuel heavy products instead and world CO 2 will go up, not down.
Western governments want to force the pace of these changes, going faster than consumer preferences and normal market forces will deliver. As a result business is demanding large subsidies to set up the new activities, bans and controls on the old activities to prevent people still wanting these products, and even favours the use of taxation to tilt the markets in the direction of net zero products.
Biden’s America has decided to increase spending and borrowing substantially to be able to pay large subsidies to divert green investments to the USA from other places that might have attracted them. The EU with a smaller budget is also planning on spending and borrowing more at EU level to do the same. So far EU strategy has been good for electric vehicle and battery manufacture in Hungary and Poland. This poses a serious issue for the UK. How do we best compete?
Out of the EU gives us a great advantage as we can target our own policies to benefit the UK rather than going along with EU policies which are likely to help other countries in the Union more, as has so far been the case. It seems to me we could best add to the attractions of the UK by strengthening our offer on skilled people, lower business taxes and informed government purchasing. Bidding up the subsidy cost of getting an investment is not a good idea, and may help to undermine the future profitability of these new businesses by concentrating attention on subsidy farming rather than on what the consumer wants to buy. In the end the only guarantee of a strong business and of the tax revenue that can bring is for the business to make things people want to buy at an affordable price. Too many business bought with large subsidies flounder when the subsidy ends.
I have been drawing attention for sometime to the loss of 700,000 self employed since the lockdowns. The latest figures show that the loss has now risen to 790,000. Some of this was the direct result of the lockdowns themselves. Unable to earn a living owing to bans on activity, some decided to end their self employment and retire, or look for jobs when the lockdowns ended. Some of it is the result of the toughened tax regime which makes it difficult for self employed people to gain contracts from companies worried about tax status questions. Clearly the more recent falls are not the result of the lockdowns but of something else.
Self employment offers flexibility, more capacity and competitive pressures that help the customers. It can also be a good way of life for people who can earn directly form their own efforts and increase their earnings from doing more and offering great customer services. I am renewing my proposal to the government that they should change the tax rules for the self employed to encourage more to take it up, to the benefit of the economy.
John Redwood (Wokingham) (Con):
Did the Chinese representatives give any indication of when they might stop their big increases in carbon dioxide and start to reduce them? Does the Prime Minister agree with me that it makes no sense for the UK to rely on Chinese imports of electric vehicles, solar panels and other green products when they are so CO2-intensive in their production, and deny us the jobs and added value?
The Prime Minister, Rishi Sunak:
My right hon. Friend makes a good point. He will see in the G20 declaration a commitment by all members recognising the need to peak emissions in the next couple of years. To his broader point, that is why the Government have consulted on measures to address carbon leakage. It is absolutely right that there is a level playing field, and that if we take action here it should not come at the cost of British workers if it ultimately makes no difference to global emissions. That is why we have consulted on proposals on carbon leakage, and I very much welcome his thoughts on that.
The licence fee has had its day. The government should decriminalise it, leaving it as a bill like any other. More people are going to give up the tv set and live programmes.
The government should give every licence fee payer a share in the BBC on a stated date. Then the share holder licence payers can decide who should run their People’s BBC and what its strategy should b e. The government could negotiate a contract for the BBC to provide whatever public service broadcasting it thought it needed, which would include the World Service, and pay for this from general taxes. It could alternatively put out to tender the public service work allowing others to bid. We need to see exactly what they think public service broadcasting is and what it costs.
Freed of the licence fee entrapment the BBC would be free to raise new share capital, to take out longer term borrowings, and to exploit its excellent back book of material more effectively. It should aim to become a major world media corporation capable of taking on the mega stars of the current US dominated media world.
So that it remained British the shares could contain a restriction on sales, only allowing sale to other UK citizens.
I see discussion from Treasury sources of a Spring budget with tax cuts, based on updating benefit payments by a smaller amount than the current system would provide next April. This is a bad idea.
It is a bad idea because we need the tax cuts now, not delayed to next Spring. The economy is slowing badly thanks to clumsy Bank of England actions driving rates so high and selling bonds at low prices. We need tax cuts now to stop a drift into recession and provide the growth the Prime Minister has promised.
It is a bad idea because there are many easier and more sensible ways of cutting public spending. Why doesn’t the Treasury tell the Bank to stop selling bonds at big losses – £24 bn so far this financial year – all losses which the Treasury and taxpayer has to pay for? Why doesn’t the Chief Secretary complete his review of public sector productivity which has nosedived in the last three years and put in measures to boost it? Why doesn’t the government impose a ban on all new external recruitment into the public services save for trained medics, teachers and uniformed personnel?
The government needs to review the huge costs of the net zero programme, stated to be a total public and private £1.3 tn up to 2050 by the Climate change Committee. It needs to be brought down for the government by re phasing and by relying more on private sector investment and technical advances and less on government subsidy.
The tax cuts we need include ending the IR 35 changes to the self employed, increasing the VAT threshold for small businesses to £250,000, reducing taxes on energy to get inflation down quicker, cutting corporation tax and reducing the carbon taxes which are pricing the UK out of industrial activity. Getting on with producing gas and oil from fields already discovered in the North Sea would help the balance of payments and boost tax revenues.
The way to tackle the welfare bills is to speed up the programmes the government is designing to help more UK people into work. We could then also issue fewer work permits to migrants, cutting the costs of housing and other facilities for low paid new arrivals.
Please find below the link to an interview that I took part in discussing the final years of John Major’s Government
You can find it here on BBC Sounds:
I was argued against the UK joining the Exchange rate Mechanism, predicting the troubles it could cause our economy. I took up the battle against the loss of the pound following the Maastricht Treaty discussions. I resigned from the government to get policy change, especially wanting a guarantee that a Conservative government would use the UK’s opt out from joining the Euro.I helped secure the promise of a referendum before destroying the pound from both main parties. I knew the British people would never vote to surrender their currency.
John Redwood (Wokingham) (Con):
I strongly support the initiative to help more people who are long-term sick and disabled into work where they wish to do that. My query is: why on earth is it going to take so long? We need to be doing this now, to ease our workplace shortages and to give those people earlier support and hope. Will my right hon. Friend please work with his officials to speed it all up?
Mel Stride, Secretary of State for Work and Pensions:
I share my right hon. Friend’s keenness to see these proposals—whatever may or may not emerge—come forward as soon as possible. They will require a lot of work on IT systems and changes to systems. The providers will have to incorporate the changes that may or not come forward as a result of this consultation. Let me reassure him that, given the benefits there will be to many people who will otherwise not benefit from work, I am as anxious as he is to make sure that we move forward at speed.