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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Making and growing things at home

The Guardian decided to complain when I wrote on this website that were the EU to take the surprising course of seeking to damage their own trade with us, we would have plenty of options to make and grow things here for ourselves, or to import from elsewhere in the world with lower or no tariffs.

I was surprised that the Guardian seemed unaware that the Uk does already make 1.7m cars a year in this country. They seemed to muddle up cars made in UK factories with cars made by UK owned car makers. What matters – and what I was clearly talking about – was cars made in UK factories. If the factory is here so are the jobs, the sales, the profits and the investments. The Guardian should not be so dismissive of the great work done by Nissan, Toyota,Vauxhall,  Land Rover and Jaguar, to name but five who make significant numbers of vehicles here in the UK.

Even better news is out of the EU the UK will be free to slash tariffs on agricultural exports from emerging market economies if the EU imposes tariffs on our food imports from them by virtue of charging tariffs on our exports. The UK could remove tariffs on products we do not produce at home, gaining  other trading advantages for us with the emerging countries. We could simply remove the tariffs on food we have to buy abroad because it is not available at home just so we can buy more cheaply. We would obviously wish to help our own farmers to grow as much as possible for ourselves.

I have never understood why the EU wants to impose such high tariffs on foods from developing countries, and then pays them aid money as inadequate compensation. It would be better for them if we imported more of their goods.

Additional UK government borrowing continues to reduce

The latest figures for UK government borrowing show it ended the most recent financial year to March at £52 bn, a little below the March 2016 forecast. It confirms that the UK economy has done well over the last year, bringing in extra tax revenues from growth to pay more of the bills for public services.  Total state debt stood at 86.6% of GDP on the official definition. If we adjust this for the debt the Bank of England has bought up, the figure falls to 65%.

This level of additional borrowing shows the recovery from the extreme levels of additional debt at the end of the last decade has gone reasonably well, though a bit slower than the original plans in 2010. These figures exclude future state pension liabilities, as they also exclude future tax contributions to pay for those pensions on the pay as you go model all governments have operated. The figures do now include the debts of Network Rail, guaranteed by the government, which the Labour government classified as private sector debt.

There is no need to raise taxes from here to reduce the deficit further. A bit more growth will be the best way of cutting borrowing, as more people get jobs reducing their need for benefits, and as more tax revenue comes in from the growing turnover of the economy. Tax revenue is up strongly from companies (plus 21%) as their profits recover, and is up by 4.7% from Income Tax as earnings go up, without any need for higher rates of tax.

The aim of policy should be to boost productivity and output by encouraging entrepreneurship, and ensuring government is run more efficiently to assist in economic improvement.

 

Postings to this site

Some people are sending in far too many posts each day, and some are still sending in very long posts. This is an exceptionally busy time with Parliament trying to complete necessary business and people preparing for the election to come, so my time for moderating is reduced. I will have to delete more.

The French election

We all mourn the death of a policeman in Paris. I send my condolences to his family.

The untimely death shortened the political campaigning, but could not derail the election.

Last  week-end French electors faced plenty of choice. The opinion polls held close to election day correctly predicted  that voting intentions were  very split, and many were still undecided. One of the most fascinating features of the polls was the collapse of support for the socialist party, the Labour party equivalent, and the difficulty for the Republican candidate, the Conservative equivalent, to catch up three others.

Whoever becomes President of France will not belong to either of the two traditional main parties. He or she did  not  gain more than one quarter of the votes on the first ballot. This means that the uncertainties created by such a wide open election will continue after we know who the President is. The Presidential election will  be followed by an election to the Parliament. If the Parliament votes are more strongly for the more traditional parties the new President will have limited powers and have to get on with a Prime Minister who does not agree on some big matters.

Mr Macron is the front runner to win in round two. A former socialist party Minister, he is now a reborn self styled centrist with a movement, not a political party. He might face a Parliament to his right. There could be clashes on economic reform and security. Were Mrs Le Pen to prove the pollsters wrong and emerge as the overall winner, she would probably face a Parliament to her left, with an inbuilt majority to keep France in the Euro and the EU when she wishes to leave.

It is a fascinating commentary on modern France that two of the top four candidates were outsiders, and one was an insider dressed up as an outsider. The only pure political establishment candidate was  damaged by his past use of public money to run his office. It implies that many French voters are unhappy with the terrorist attacks, the high unemployment, the lack of growth in living standards and the lack of control over their borders. Some  voted for a more left wing alternative who wants to take back control and go for more socialism in one country. Some  voted for the National front to leave the Euro and assert national borders. Some  voted for the independent who promises to do politics differently without being too precise how.

If the French people fail to give a decisive mandate to a new President, and then fail to give their President a decent level of support in Parliament, the anger and anguish will continue.

 

 

US tax cuts – saving Speaker Ryan

I had the pleasure of hearing Speaker Ryan of the US House of Representatives when he was in London last week talking about the new Administration’s strategy.

He came across as able, engaging, well informed and keen to get on with the job. He wore power well, and handled deftly the questions of those in the media and think tank world who wished to trip him up or drive wedges between the House and the President.

There was surprisingly little reporting of his remarks on the media. He was warm and positive about the US/UK relationship. He constantly stressed its special nature and its long history, joked about the time the UK  burned the White House and made a clear offer of early progress on a US/UK trade deal just as soon as the UK was in a position to do so.  Given all the comments we hear reported on possible complexities in confirming our current free trade arrangements with the EU in a new format, it was odd we did not hear a lot more about a likely free trade deal with our single largest overseas country market.

He explained in a response to my question that both House Republicans and the President are keen on tax reform and reduction. Both agree on the shape of the simplification and reduction of personal income taxes. The differences over reform and reduction of corporate income taxes he thought to be easy to overcome, as both want the same direction of travel. Healthcare reform has been given priority because the spending reductions it produces are helpful in working out the  budget impact of the tax changes. However, if they cannot secure an early healthcare reform the tax reform can still proceed.

He repeated that Republicans understand the current mood of scepticism about political establishments. They understand they need to deliver on both healthcare reform and tax reductions to keep their promises and to speed the US recovery. Getting things through the Congress even when a party has a majority in both as the Republicans do is never easy. Speaker Ryan seems determined to achieve something before the year is out.

 

Happy St George’s day

Today we celebrate England’s day.

We remember our greatest  dramatist and poet, William Shakespeare, who was  born and died  on or about this day.

I wish you all  a happy April 23rd.

Deficit reduction and EU rules

In a recent debate in the Commons the UK government presented its report to the EU over the UK’s progress in meeting the debt and deficit rules of the EU Treaties.

Every year the Uk has to report to Brussels on how far it has got with getting its running budget deficit down below 3%, and its stock of national debt down to below 60% of GDP. These rigid requirements have been an integral part of EU policy ever since the ratification of the Maastricht Treaty. Most EU states have conformed with the budget deficit rules, but few have got anywhere near reaching the stock of debt requirements.

Euro area members are subject to possible financial penalties for failing to comply. The EU authorities seem to take a much stricter approach to supervising the annual budget deficit rule than the stock of debt rule. They seem to recognise that making states repay large quantities of debt would  be very deflationary, whereas curbing annual deficits they judge to be less so. The EU does not have the same power to fine non Euro members, but it still makes the UK go through the business of submitting its plan for deficit reduction, and can respond with a statement  on whether it approves or disapproves of the approach being taken.

The issue arises as to how much impact this requirement had on the previous Labour and Coalition governments? They said they took the exercise seriously, and they have always faithfully reported their position against the Maastricht obligations. The Coalition  always pursued a policy of trying to get the annual deficit down, as did Labour after the crash,  and have always looked forward to a time when they will also be reducing the stock of debt as a proportion of GDP.

During the debate I found it fascinating that the SNP and Labour, parties who dislike deficit reduction and the spending cuts that often accompany it, could not  bring themselves to condemn the Maastricht requirements and the policies they have clearly led to on the continent. Apparently plans to cut the growth in spending or to raise taxes on anyone other than the rich are not desirable if home grown, but are just fine if in pursuit of compliance with the Maastricht Treaty, You would have thought parties of the left especially would welcome freedom from these debt and deficit controls when we leave the EU.

Free of them I do not suggest we let rip with larger deficits and faster  build up of debt. I just want us to make rational decisions of how much to borrow and for what purpose, given the state of the economy and the ability to invest sensibly. It does not seem likely that most EU countries will get to below 60% any time soon, yet the requirement still sits there unamended.

School money and class sizes

All UK parties have been keen to get class sizes down in state schools. Yesterday Labour decided to make an issue of this, forgetting that class sizes have risen quite a lot in Wales where they are in government. I was interested to hear one of their spokesmen defend this by pointing out satisfaction with schools in Wales had gone up at the same time as class sizes. He was then at a loss to answer the obvious sequel – if parents and pupils think things are getting better, why did class size worry him?

I am all in favour of decent funding for schools, and have been asking for more money for Wokingham and West Berkshire schools where  budgets are tight. I have been asking b0th for more in total to schools, and more as a proportion of the budget to areas like Wokingham that have traditionally been given much less than the best funded. I would, however, be interested in your thoughts on class size.

It seems to me there are obvious occasions when individual pupils need individual help. That requires a good staffing ratio., There are also occasions when a good teacher or outside speaker or lecturer has something interesting and important to say when you can open the lesson or lecture up to many more pupils, as many more can benefit from it. Class size is an average figure which can conceal as well as reveal. Some star teachers and star lessons are so good that they are recorded and used in a wide range of ways by many students. On line learning is both one to one and one to many.

The  best judge of how many teachers a school needs should be the School Bo0ard and management team led by the Head. There need to be sufficient teachers for those things that need teaching in small groups or require individual attention. There can also be other times of day and topics that can be covered in larger groups. In practice schools experiment with smaller and larger groups depending on subject and age range of pupils, and often have more than one adult in the classroom so individual pupils can have individual attention as well as more general group or whole class work proceeding. The number of teachers in a secondary school is also affected by how many subject options the school  wishes to offer. The number of subjects varies considerably between schools.

 

 

Buying things from the EU

We are still waiting to learn if the rest of the EU wants to impose tariffs on all their many agricultural exports to us, and on the  cars they send us. Most of the things we export to them are tariff free under WTO rules or would be subject to very low tariffs. All services are tariff free, the things like aerospace parts and planes are tariff free.  The EU  sell us so much more of the limited number of items that do attract serious tariffs under WTO schedules.

I would like to reassure people who are worried about this. If by any chance the rest of the EU does turn down our offer of tariff free trade in an unlikely fit of self harm, we can find plenty of cheaper and better substitutes.

You do not have to buy German or French cars.   There is now a good choice of models, prices and specifications available from a range of UK car factories. If the EU wants tariffs on cars I would recommend the factory owners increase their UK capacity, as we will be wanting more home produced vehicles.

A visit to one of England’s vineyards  taught me that England makes some good white wines.  There are plenty of good  Australian and Californian reds as well as English.

There are many great English cheese, so you don’t need to buy French. There is such an abundance of choice.  Our dairy industry was held back and made smaller by EU policy, with a long period of restrictive quotas. It needs more domestic demand for higher value added products.

Our supermarkets do rely on a lot of continental fresh produce, but there are other possible sources at home and abroad outside the EU which would be more attractive if they go for the EU tariff option. The UK could remove tariffs on rest of the world food where they produce things we cannot produce here which would  bring those prices down.

In a world of oversupply, with low rates of world inflation, being the customer has its advantages. All the time we remain in the EU we have to impose high tariff barriers on food from the rest of the world. Out of the EU we can cut or remove tariffs, and can bargain for a better deal for our exporters at the same time. The EU would be silly to make it dearer and more difficult for us to buy their products, when there is plenty of choice elsewhere.

 

 

The BBC wants to change the news, not report it

Yesterday I was phoned to be asked onto the BBC Radio 4 Today programme this morning. They said they wanted me to answer questions about how the election would change the UK’s ability to negotiate a good new relationship with the EU. I was happy to do so, and said I could make any time at their studio. It seemed like a good topic, and central to what the PM said about her reason for calling the election.

They then proceeded to ask me a series of questions all designed to get me to disagree with the UK negotiating position and Prime Minister. I explained that I supported the PM, agreed with her Brexit White Paper and stated aims, and suggested if all they wanted to do was to criticise her they should approach the Opposition parties. They continued to try to get me to disagree. They did not seem to have read the White Paper or the PM’s speech on the topic, so I had to tell them what was in them and why I agreed with them.

I explained again that their thesis that the Leave supporting MPs were in disagreement with the PM and were “rebels” was simply untrue. We are not in disagreement with the PM and we have been strongly supporting the government’s statements and legislation on Brexit. She said she would get back to me about the invitation to go on, with the details.

She did not of course bother to, as it was clear I was unwilling to feed their view of what the news should be.

I then found another Leave supporting Conservative MP had been given the same treatment, and he too had thought the BBC were trying to change the  news rather than reporting the position. When I came to do a live interview on some other BBC programme I was faced with the same stupid thesis and had to explain on air how wrong their idea  was.

I do not know who is feeding the BBC this nonsense, but it is frustrating that they do not accept the truth from those whose views they claim to be reporting, and do not bother to get back and openly say they do not want you on because you won’t say what they want you to say.