The news background for the beleaguered Euro area has remained poor. It has not received so much prominence against the competition of the migration crisis, but it remains serious.
The latest easing from the European Central Bank has not resolved the difficulties of credit creation in a zone with too many weak banks. The Bank of Portugal is now being sued over bond changes applied to Novo Banco in Portugal. The Head of the IMF has been undertaking an acrimonious correspondence with the Greek authorities about the lack of progress in their implementation of austerity policies as a prelude to extending further credit to them. The Italian authorities are said to be looking at ways of getting more capital into their weaker banks and relieving them of some of the problem loans that enfeeble them.

The Euro area economy remains mired in unemployment in much of the zone. The Spanish economy has improved a bit but one in five are still out of work. The Greeks are living with one in four out of work. In Greece one in two young people are out of a job and youth unemployment is still at 45% in Spain. Greece needs to borrow more to keep going. The European authorities and the IMF want Greece to make further cuts to pensions, and to press on with privatisations that many Greeks oppose.

The ECB has now set negative interest rates and is offering more cheap money to the commercial banks. All the time it also needs them to raise more cash and capital, which acts as brake on credit expansion. The Greek banks received extra capital in the last bail out package, but were damaged by the last Greek euro crisis.

The Greek crisis has not gone away. The recent flare up with the IMF is over the need for a longer term solution. The IMF appears to think Greece will need debt restructuring, a polite way of saying some of Greece’s large outstanding state debt has to be written off or put onto easier terms. The IMF also argues that there need to be more cuts all the time Greece is struggling with the present interest burden on her debts. It takes more reductions in public spending, more sales of public assets and more tax revenue, given the magnitude of interest charges and the future debt repayment burden.

We may be about to see a re-run of well rehearsed arguments and tensions. Germany is reluctant to give Greece more money, German electors are not in a giving mood. Any write off of debt burdens means in effect that money advanced to Greece by Germany and others ceases to be a loan and becomes a grant. Meanwhile Greece has a new argument to deploy in opposing austerity. The arrival of large numbers of migrants in Greece coupled with closing of borders to the north leaves Greece with substantial financial obligations to cater for the refugees and migrants. If Greece is to house and feed these people on behalf of the Schengen area and the wider EU, shouldn’t she be allowed some relaxation of the financial constraints?

To many in the rest of the EU the UK referendum is an unwelcome distraction from these big problems that swirl around the single currency. Wouldn’t the UK’s exit help the rest concentrate on the problems their currency scheme has created?

The latest debate about investing and tax has an added salaciousness because some of the investments concerned are abroad or “offshore”. The first thing to grasp is most overseas investments by UK savers are nothing to do with tax planning, but are undertaken to diversify the person’s investments and obtain income and gains from the success of foreign companies and countries.

Again let’s start with the MPs. The MP Pension Plan has substantial investments in foreign assets, like most company and government funded pension plans. These assets are not bought to save tax. The beneficiaries of the MP Pension Plan are enjoying complete tax relief on all the income and gains whilst the money stays in the fund anyway, so it makes no difference where the holdings are invested. For taxpayers saving money and investing abroad, again there is no tax advantage as long as they declare things honestly. If you buy a foreign investment from UK money outside a Pension Plan or ISA you have to pay full income tax and capital gains in the normal way on income and gains made.

Many UK people own unit trusts or Exchange Traded funds that provide them with ready made portfolios of shares. Many of these are based abroad. Under EU UCITs rules providing a legal framework for such funds most are set up in either Ireland or Luxembourg, two of the EU’s “tax havens”. All this is legal under EU and UK rules. UK holders of units or shares in these funds pay full UK tax on income as they earn it and gains when they take them. It is an interesting sidelight on how good the EU single market is for the City that most of these funds are resident outside the UK.

A minority of overseas arrangements are designed to allow rich people or companies to change tax jurisdictions. These could be tax evasion. The people involved need to take good advice and to declare what they are doing to the relevant authorities. The UK now has a requirement for people to register schemes prior to entering them. Any UK citizen and resident who withdraws a load of cash, takes it out of the country, and then invests it elsewehere without declaring the income and gains to the UK authorities is committing an offence and should traced and prosecuted. There are sophisticated electronic versions of the same thing which are also against the law.

Like most people I think rich individuals and companies should obey the tax laws in the places where they earn and spend. They should be pursued and prosecuted where they knowingly falsify their declarations, deliberately conceal income and assets that should be taxed or set up complex arrangements with the express purpose of changing jurisdictions in ways which are unlawful. Tax evasion is against the law and has to be tackled, as governments seek to do. If the Panama papers do reveal tax evasion rather than avoidance their leaking should help speed prosecutions of those concerned.

Practically all the MPs currently in full cry against tax avoidance, the legal reduction of tax bills whilst declaring your affairs honestly, avoid tax themselves. They are members of the MPs pension plan, a legal scheme to avoid tax and defer tax on a part of their income. The 25 % tax free lump sum they can draw on retirement means complete tax avoidance on those contributions and subsequent gains and income in the fund. The money drawn out as pension may be taxed at a lower rate than the tax relief they got on saving the money in the first place. All income and capital gains on their savings in the fund are accumulated tax free.

I suspect many of those MPs quick to condemn also have savings in an ISA. The sole purpose of an ISA is to avoid tax on interest, dividends and capita gains on your savings. Anyone who holds an Isa is not in a strong position to condemn tax avoidance or tax planning.

Labour and Lib Dem MPs helped set up complex financial and tax regulation in the UK between 1997 and 2015 which included new rules to train and regulate financial advisers. Under their system Financial Advisers are trained to include tax planning as part of good advice. An Ifa who did not tell a saver of the tax advantages of holding savings through an Isa would not be meeting normal professional standards. An IFA should also ask clients about future pension provision and see if they should be using their tax free allowances for pension savings.

Are these critics of tax avoidance now saying all this is wrong? If so do they now support the abolition of these common tax saving schemes? Tomorrow I will look at the vexed issue of overseas investments.

I am tempted to think that whatever the Remain side do now it will help us Leavers. The government “impartial” pamphlet has angered many more people. Most think it quite wrong that taxpayers are being asked to pay for one sided propaganda close to an important ballot. No-one believes a Labour or Conservative government should send out a document written by the civil service recommending general government policy and its benefits ten weeks before a General Election, and no past government has tried to do that. This is similar to such a decision.

It is true that in 1975 the Labour government sent a pamphlet to all households arguing the case to stay in. Subsequent changes to election law have tightened provisions for elections and referendums to ensure greater fairness between the two sides. That can no longer be regarded as acceptable practice.

It is interesting to look back at the lies we were told then by the government. The biggest was our sovereignty was not at risk. They told us that “The Minister representing Britain can veto any proposal for a new law or a new tax if he considers it to be against British interests. … Remember: All the other countries in the market (note not EEC, its true name) enjoy, like us, democratically elected governments answerable to their own Parliaments and their own voters. They do not want to weaken their Parliaments any more than we would”

The pamphlet denied the idea that the Commission has important independent power, and did not mention the binding nature of European court judgements. It was before a directly European Parliament had some say. Ever since we have seen the constant erosion of that veto by Treaty change, and erosion of power away from Ministers to the Commission, Court, European Parliament and other EU institutions.

So why would anyone believe the modern version of this pamphlet? That says “The UK has secured a special status in a reformed EU”. Where are the reforms of the EU? Where are the legal guarantees for the UK and restoration of our rights to make our own laws and levy our own taxes? It says “The UK will not be part of further European political integration” That is clearly wrong. Every new Regulation, Directive and court judgement will drive us into more dependence on the EU and its laws.

It implies we could lose our right to travel and spend money on the continent, which is absurd. It is silent on how we can control numbers of EU migrants properly within the EU, just referring to some changes to benefit rules.

Many will send their pamphlet back to Downing Street, and will want their taxpayers money back from this ill thought through venture. We warned the government not to do this in Parliament before the event, and thought Ministers had assured us it would not happen.

Mr Juncker, the President of the Commission, made clear in an interview just before the Netherlands referendum on the EU/Ukraine Association Agreement that a vote against the EU plan would “open the doors to a continental crisis”. As I presume he is an honest man who knows his EU, I await his measures to deal with this crisis that he has helped create. The results rejected the Agreement roundly, by 64% to 36%.

The vote was called on a petition by Netherlands voters. Though it is advisory, the Netherlands government has rightly said they cannot ignore this strong expression of public opinion. The proposition was rejected despite a vigorous and hard hitting campaign to persuade people to vote for the EU scheme. Voters were told in no uncertain terms that a vote against was a vote for Mr Putin. One poster showed Mr Putin embracing the leading opposition politician in favour of voting down the Agreement.

So why didn’t voters believe the EU and their government? The first thing to realise is the EU/Ukraine Association Agreement is not just about trade, as some sloppy people in the media have claimed. To the government in Kiev the most important parts of its are probably the opening sections about political, foreign policy and defence collaboration. The Agreement sets up “regular meetings both at the level of high officials and of experts of the military institutions of the parties”. It establishes a Political and Security Committee. Article 7 promises to “intensify the dialogue and co-operation and promote gradual convergence in the area of foreign and security policy including the common security and defence policy”. Whilst I have no time for illegal military actions by Russia, I can understand why Russia thought this Agreement provocative. Some Netherlands voters were clearly concerned that the EU is over reaching itself in making financial and military commitments to Ukraine, and saw that this very Agreement is part of the important background to the civil war in Ukraine between pro Russian Ukrainians and pro EU Ukrainians.

The sad deterioration in the Ukraine and the split of the country with Russia taking Crimea has come about against the backdrop of the EU making overtures to Kiev to strengthen ties between Ukraine and the EU. Maybe voters thought this a bad idea. They also had doubts about regulation of standards in Ukraine in areas like keeping chickens, and worried about any possible future relaxation of border controls between the Ukraine and the EU.

Mr Juncker now needs to tell us how he will handle the “crisis” he forecast. In the meantime apparently the Netherlands government has been asked to suggest a way forward.I would have thought the answer was obvious. The Netherlands cannot have its name on the Agreement. The people have spoken.

On Tuesday night I was asked to speak at a dinner to commemorate the partnership of Ronald Reagan and Margaret Thatcher. I spoke as usual without notes or text, but seek to recreate some of that speech here.

Our two countries are united by our history. Together and sometimes apart, usually in concert but sometimes at odds with each other, our two nations have pursued liberty. First England established rights to a fair trial, equality under the law and habeas corpus through Magna Carta. Next we established Parliamentary control over the Crown through the Restoration settlement and the Bill of Rights. At the end of the eighteenth century America took up the pursuit of liberty, and through her War of Independence produced some of the great literature of freedom and the immortal words of the US Constitution. In tandem in the nineteenth and twentieth centuries both nations pushed on to votes for all adults, a wider range of civil liberties and more general tolerance for how citizens chose to live their lives.

As an Englishman I admire the achievements of the leaders of the US War of Independence as I do of the Parliamentarians in England who over centuries made royal power more accountable. Britain was wrong to treat the American colonists as she did.

Each generation has to fight for freedom, for there are always siren voices wanting government to take back power from people, and there are always enemies of freedom in tyrannies around the world. Ronald Reagan and Margaret Thatcher won the Cold War. Their resolve and Mr Gorbachev’s vision made possible the liberation of Eastern Europe from communism without a shot being fired.

Our generation in the UK has to win back our democratic independence from the EU.

To our guests from America I say try to explain to your President that we are fighting our war of Independence. Fortunately we don’t have to fight our EU war with muskets and cannon . We are fighting it through this referendum and we wish to have our democracy back. Our right of self government has been gravely damaged by our membership in the European Union. Those rights that we thought were inalienable and are part of the pursuit of happiness and the development of freedom have been taken away from us and given to Brussels bureaucrats. As proud inheritors of the English speaking tradition of freedom under the law and accountable government through elected assemblies we now need to resume our rights to govern ourselves in the UK.

We presently have to broker our laws with 27 other countries. We now have to send large sums of money to the European Union we don’t get back which they choose to spend. We run a kind of overseas aid system to rich countries on the continent of Europe. Why are we doing that? We would like to spend that money ourselves on our priorities. We are very conscious our defence alliance needs America and needs NATO and not the European Union which is trying to supplant it is part. It is in danger of creating a wedge between natural allies across the atlantic who have often made common cause.

To Americans who say we should stay in the EU I ask this question. If making laws by agreement with the neighbours is such a good idea, why doesn’t the USA merge with Cuba, Mexico and Canada and show us how it can be done easily and in a democratic manner? If sharing revenues and expenditures with other countries is such a good idea, why doesn’t the USA has a common budget with Cuba and Mexico?

It is time once again to defend our freedoms, restore our rights, and keep in mind that shining light of liberty and the pursuit of happiness.

The biggest success of the advocates of UK membership of the EU has been to perpetuate the myth that we need to be in the single market to trade with the rest of the EU, when the rest of the world trades quite successfully with the EU without being members. If being in the single market were just a case of accepting consensus or majority views on the regulations affecting goods and services then there might be a case for accepting it all. Instead the EU has used the cover of the so called single market to enact a wide range of measures that are now binding on the UK that have nothing to do with trade. The German view is the single currency is an integral part of the single market, and they think the UK is lucky to enjoy what they hope and expect to be a temporary exclusion of the UK from the Euro. The single market already encompasses freedom of movement of people, health and safety, transport and aspects of criminal justice which makes it so much wider in scope than a normal trade agreement.

The worst the proponents of continued UK membership can do is to take individual features of the single market that they like and ask us how we could possibly manage without them. This way of arguing ignores all the extra costs and baggage that the EU’s wide definition of single market leaves us with. It also ignores the fact that many of the trade features of our EU membership will continue because they are in the mutual interest of both parties. Many are guaranteed by our membership of the World Trade Organisation.

I spent part of Monday afternoon being interviewed by the BBC for a programme they are making on sovereignty. Much of the extended interview – not all to be broadcast I assume – was designed to try to get me to say that for example the EU anti state aid rule was a good one and we should be prepared to sacrifice the right to make some of our own decisions in order to get a common approach to state aids amongst the EU members.

Two things struck me forcefully about this line of questioning. The first was the Remain side have managed to persuade the BBC and others that EU membership is just about the narrow definition of the single market. As far as I am concerned the EU referendum is about getting our £10bn a year net contribution back to end austerity and spend the money at home. It is about making our own laws across the board instead of having to broker deals with 27 other states to make or amend a law. It is about controlling our own borders and granting our own citizenship under rules we approve. The Referendum debate should be more about the big issues than the minutiae of trade rules.

The second thing that impressed me was the idea that having some influence over the conduct of 27 other European countries mattered more than influencing the 160 plus countries that are not in the EU, including the three largest markets of the world, the USA, China and Japan.

The third thing was the misunderstanding about how best to negotiate. If we leave the EU we will get our veto back over all matters governing our relationship with the EU.That gives us more influence. Today we can often be outvoted so we lack influence on many crucial matters.

As always it was important to explain again the confusion some want to create between power and sovereignty. A country is sovereign when its people and Parliament can take any decision they wish without a foreign court and other institutions limiting their rights and choices. It does not make any country, not even the USA, all powerful. Each country has to live within the checks and balance of international politics and finance. I dispute that we are more powerful by being in the EU given our lack of influence over important issues.Of course large countries with more wealth, income and weapons are more powerful than smaller countries, but that does not mean small countries are wrong to wish to be independent. The UK is far from being a small country.

It was good news to read over the week-end that the UK government has not given up on the UK steel industry. The industry and others including me have long been explaining that very high energy costs and business rates are big handicaps to the UK industry. It has also been well known that there is massive overcapacity worldwide, led by the large investments in steel in China, which has slashed prices for the product. If the UK persists with much dearer energy than leading competitors it will be our industry which closes, whilst the CO2 will be produced elsewhere with the jobs and the profits.

The Chinese currently account for around one half of world steel output. They have announced plans to cut up to 150 million tonnes of annual capacity, almost as much as the entire EU industry makes each year. Such reductions will make a big difference to future prices as they are implemented. It could mean that the current low level of steel prices will be temporary, with prices rising again as capacity is reduced. World demand for steel is likely to rise from here as advanced economies gradually recover from the slump of 2008 and as more emerging economies raise living standards. As they do so more people want and can afford cars, domestic appliances and other products with a steel content.

The issue is how will the UK manage to get its energy costs down to assist the industry? Can it do so enough to make a material difference? The government is talking of subsidising the energy costs more, as it has started to do. It’s not an ideal solution, but given the large interventions made in our energy markets to push prices up it may be the only short term fix. The government will of course need clearance from the EU to do so.

Government is in a stronger position when it comes to business rates and other domestic impositions. There it could take some action to allow the industry to keep more of its revenues.

The government has pledged to buy more UK steel as part of UK public sector contracts. Several of the large infrastructure and equipment programmes have a substantial steel content.

It may also be necessary to help create cheaper energy on a longer term basis if the work to save steel is to endure. I have often written on how this could be done, after two decades of expensive interventions the other way. The sooner we do this the better. It is our only hope of keeping and expending our industry.

Germany’s large trade surplus with much of the rest of the EU is doing much harm.

Countries in the Euro in deficit have to borrow from Germany. As countries borrow more from Germany so they become more dependent on the German view. Germany says that she will only lend to other countries in the Euro in return for their acceptance of EU/German discipline over budget deficits, public spending and general economic policy. Germany sees her loans as a way of extending control over the policies of the countries that are borrowing. It results in an EU view of benefits, pensions, general public spending, taxation and deficits becoming official policy in the debtor nations.

In the case of Greece the borrowings have become so big that the country has reneged on its private sector debts and is looking at ways of cutting the amount of interest it has to pay on its borrowing from other EU states and hoping for debt extension or retirement. The Euro area is learning the hard way that if a debtor gets too heavily into debt the creditor may have to forgive some in order to get a bit more of their money back. Bankrupting the debtor nation may not be a good idea for the creditor, and it is certainly bad news in the short term for the debtor. In Cyprus bank depositors had to take a hit when the system was overborrowed.

This conflict between the German view of the need for discipline and the view of many in the debtor countries that they need a different economic approach to lift people out of unemployment and poverty has spawned new parties and political movements to try to shift the German position. So far challenger parties have been able to do well and even take government in Greece, but they have been quite unable to alter EU policy which remains under the strong influence of the German state as bank manager.

Some senior Germans think the UK should join the Euro if we stay in the EU. They see allowing the value of the pound to change as a way of escaping the disciplines of EU/German economic policy which they regret. In the meantime the large UK deficit on balance of payments means that German investors can buy into UK private sector assets and companies, and start to exercise more control over our economy through private sector ownership.

I fully understand the German view that they work hard and manage well to produce a surplus, and they expect others to do likewise. There is nothing wrong with a modest surplus. The problem is when a country runs a persistent and high surplus it means others are running a persistent and high deficit. This can become unsustainable, and is ultimately damaging to the surplus country as well. The first round bad effects are recession or no growth in the customer economies, leading to less business for the main exporter. Second round effects can be reneging on debt, as we have seen with Greece, or nationalising assets acquired as sometimes happens in emerging economies without such a strong rule of property law.

I have always thought the UK’s balance of payments deficit is a bigger problem than the state deficit, though the two are in part related. I have spoken about it often here and in Parliament. The reason is the longer we run a large balance of payments deficit the more money we will owe to foreigners, and the more of our industry and property will be brought up by overseas investors. Progressively a country loses economic control as it sells many of its assets and mortgages the rest.

A larger state deficit can in some circumstances be financed at home by lending to ourselves. We do not necessarily lose overall control of our destiny, but switch money and assets around amongst ourselves. The state can always repay the debt, though if it overdoes the borrowing it will end up repaying in devalued pounds, partially reneging on the debts through inflation. The state will pay for itself at the expense of domestic savers or by taxing productive people more to repay the debts. Done to excess it makes us poorer. A large state deficit may also mean having to accept loans from abroad. These are more difficult. These usually require repayment in someone else’s currency , so we do not have the power to simply print that. If we borrow in foreign currencies the debts may get bigger and more onerous to repay if and when our currency falls in value.

The EU model put out by the Remain campaign is a model for economic dependence. Taken to extremes it leads to bankruptcy as we have seen in Greece and Cyprus. They say they want to attract more overseas investment. They welcome more purchase of UK companies and assets by French nationalised industries or by German shareholders. That means running a bigger balance of payments deficit and placing ourselves more and more in hock to overseas investors. They do not come here out of charity or kindness. They come to earn a return, to make a profit and to take money out of our country from their activities. One of the main reasons our balance of payments has been deteriorating so quickly is foreign investors are now taking much more out in terms of profits, dividends and interest charges.

The Remain model welcomes German investors taking majority voting control of our Stock market, and accepts we will import German steel rather than make our own. They welcome large imports of German cars and French food products. They do not tell us the truth, that the UK has to compete to maintain and improve our living standards. We cannot afford to allow too many industries and services go uncontested. There are limits to how many activities we can give up doing altogether or can sell to overseas buyers.It is interesting that Tata wants to exit all steel making in the UK and also wants to invest in German steel making. By doing so it accepts the EU logic that Germany should as the creditor nation keep on strengthening its industrial base to export to the other states. They in turn become more dependent economically on Germany. We see the dangers of going too far down that road when you see what happen to an economy like Greece which is now very dependent on the goodwill of Northern European creditors led by the German state. The creditors forced a 25% cut in Greek incomes as they tried to rebalance their books.

Let us draw an analogy with an individual household. It is true that you can boost your spending power above your income for a bit by borrowing more to buy new things . You can also boost it by taking out a loan on your home or selling some of your furniture and other assets. Done in moderation you can buy assets on borrowings which go up in value and make you better off. Done to excess you can end in grave financial difficulty. You find out that you then have to work harder and earn more just to pay the interest on the extra debts. If you are not careful you will reach the position where the interest charges take up too big a percentage of your income and your living standards fall as a result. You eventually reach the end of your ability to borrow more. You also run out of assets to sell. You can only sell your house once to spend the proceeds.

I want the government to curb the national deficits. I want us to generate our own power, make our own steel,produce more of our own cars. I believe we can do this. It requires taking back control from the EU, cutting energy levies and prices, and redoubling efforts to create good conditions at home to produce and sell our goods and services. Leaving the EU will immediately improve our balance of payments deficit and give us back more of our own money to spend on our priorities as I have pointed out from my analysis of the balance of payments deficit. At the moment we are being made to borrow to send money to rich continental countries to spend on what they want.