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 5 year Coalition plan and the deficit

In 2009-10, Labour’s last year, the state spent £669bn and collected just £479 billion in taxes. The deficit (after allowing for other income) was more than £150 billion. That represents spending of £10,437 for every man, woman and child in the country, average borrowing per person of £2340 in a single year and average tax per person of £7472. These figures are averages including children.

In 2014-15, the Coalition’s last year, total spending reached £737.1bn, total taxes £602.4bn and borrowing was down to £87.3bn. That is £11,497 of spending per person, £9,391 of taxes per person, and £1362 of additional borrowing per person.

How does that compare with plan? The spending is exactly as forecast in 2010. The tax revenue is £54 billion less than forecast, so the borrowing is up on original forecast.

How does 2015 compare with 2010? Spending is up by £68 billion or £1060 per person, tax is up by £122.7bn, or £1914 per person, and the deficit is down by £63 billion or just under £1000 per person.

All who wish to debate the UK economy and austerity should start by examining these figures. The official statistics show us that real public expenditure rose a bit under the Coalition. Over the last five years public spending has made a small positive contribution to economic growth and output. It has not reduced or slowed our economy as some have argued.Welfare spending has risen, despite a fall in unemployment, mainly owing to upratings of benefits.

The main tax rise has come from the increased rate of VAT and from increased transactions in the economy boosting VAT receipts more. Income tax revenue is only slightly up, as natural gains from more output have been reduced by taking 2.5 million people out of tax altogether and by the 50% rate in place for part of the period.Over the five years more than an extra £500 billion or £7800 per person was borrowed. It is difficult to believe the state could have borrowed much more without triggering higher interest rates and a loss of confidence in financial management.

St George’s day

Happy St George’s day. England awakes.
Just the day for a Manifesto for England. Which party or parties do you think will produce one?
The emphasis in this election on the issues of Scotland should make us ask what is on offer for England, on this day of all days.
The media decided to give the SNP star billing in the tv debates. The Scottish voters have decided to propel the SNP to new highs in the polls, making them of more interest to the commentators. The main parties left unfinished business from the last Parliament, to transfer new major powers to the Scottish Parliament from Westminster.
Only the Conservative party saw this also meant we have now to tackle the problem of England. Labour and the Lib Dems have contented themselves with saying they will look into it in the next Parliament. Their lack of enthusiasm for the task comes through in their limp and feeble proposals, and in their belief that somehow a bit more devolution to Councils can answer the problem. It most certainly cannot.
The minimum England needs is the same rights to settle matters for our country that Scotland will achieve through the new devolution Act planned for the first year of the new Parliament. In some cases it will be England, Wales and Northern Ireland deciding things, in other cases just England, depending on the degree of devolution elsewhere.
Today I repeat my campaign for EVEN – English votes for English needs. If Scotland decides her own Income Tax, so must England. If Scotland decides her own local government settlement – within the bloc totals – so must England settle hers. If Scotland can legislate for herself without England, then so should England be able to legislate for herself.
The UK is a country which believes in fairness. Today of all days we should seek fairness for England.

Labour and the Lib Dems want to protect you from Brexit

There is a deafening silence in the Lib Dem and Labour manifestos about the need for a new relationship with the emerging political and monetary union on the continent. It is surpassed by their arrogance in seeking to deny us an In/Out referendum on whether we want to stay in the EU. They apparently know best. They shout at us that we must stay in, without ever examining the options for a new relationship based on trade and co-operation outside the federal treaties. They appear not to understand the dangers of our present course, accepting more and more rules, laws and invoices needed for a political and monetary union to which we do not fully belong.

We need to ask why do these parties and people think they are right this time, when they have been so wrong in the past? Many of them who now just assert we have to stay in come what may, urged us to join the Exchange Rate Mechanism. I remember how they disagreed with me and the few of us who opposed it, how they briefed against us and claimed we did not understand the stability and growth that membership of the ERM would bring. Instead, as we forecast, it brought us boom and bust. First it brought us too much credit and money, then it brought a sterling crisis leading to our forced exit. It gave us a nasty recession based on interest rates which were far too high for UK needs, as the authorities slavishly tried to follow the European model.

Learning nothing from this bitter experience, many of these same people then urged us to enter the Euro. I and others fought a more successful battle to stop that. Had we been in the Euro in 2008 I suspect the banking crash would have forced a UK exit, as I doubt Germany and others would have wanted to stand behind our weakened large banks in the way the Bank of England and UK government did.

Now these same parties assert we have to stay in the EU to be able to trade with them. Why? Doesn’t the rest of the world trade happily with the EU without joining? Hasn’t the German government already said it would need a free trade agreement with the UK if we left, as Germany sells us so much more than we sell to Germany?

It is high time these luminaries of the left who are in love with our current EU membership had to answer some tougher questions. Why do they accept dear energy, a central EU policy? It means less industry and fewer jobs in manufacturing, it means more fuel poverty. Why do they put up with it?

Why do they put up with the economic policies of the Euro and the wider EU, which generate unacceptably high levels of unemployment in many Euro countries?

Why do they accept the EU policy of controlling government deficits to a maximum of 3% of GDP per annum, when at home they are always urging larger deficits?

Why do they endorse policies which entail massive cuts in public spending in countries like Greece, Portugal and Spain, whilst resisting any cut at home?

We need a new relationship. It needs to be one that gives us more freedom to govern ourselves, and allows the Euro area to complete its union without the UK slowing it down or making it more difficult. If one cannot be negotiated, then the British people need the opportunity to vote out of what we have at the moment, as it is far from ideal. Whatever the negotiation brings, the people should decide. Labour, Liberal Democrats and SNP are united in wanting to deny the British people the choice. If they do not trust the people, why should the people trust them?

Construction, growth and our environment

One of the oddest things about  some Green Party interviewees is their apparent disinterest in the impact of more and more development of homes and commercial space on our environment. They seem unwilling to discuss the issue of growth in population, though growth in population is one of the main drivers of more carbon dioxide output,more use of the planet’s resources, more factory output of kinds they often do  not like.

For an individual country like the UK accepting tough targets for carbon reduction are made much worse if the country is experiencing a strong flow of migrants into it. The international targets are not adjusted to take account of more people. If an individual country wants to hit the targets a tough migration policy would be a good help.

For the many voters who love the English countryside, better control of migration would be very helpful. We do need to build many homes if we continue to invite in so many additional people. Environmentally it makes little sense to build many new homes on greenfields in England in order to leave an equivalent number of homes empty on the continent as people leave their own country and come to live here. It means more natural resources and energy are needed to build the homes here, and adds to the misery in the country losing the people with empty homes disfiguring urban environments and reducing incomes in those communities.

You would have thought true greens would wish to help in the task of creating more jobs and wealth in continental countries, so we have to use fewer greenfields for new building. If only. Part of the left’s problem is they will never criticise the EU/Euromodel, or criticise the dear energy policies which destroy jobs and keep people in fuel poverty. They just want to criticise England and complain that it is all our fault.

EU asylum and the sad deaths at sea

The spate of deaths by drowning this spring has been harrowing. More must be done to prevent the problem arising, and more to rescue those where a disaster does occur . The policing,patrolling and life saving where needed has to be done by those EU countries  and North African countries with ports nearest to the problem, as they have the vessels able to deploy quickly.

The countries and authorities who could do most to stop this problem are the North African states whose ports the ships leave. The ships should be properly checked for seaworthiness and to prevent overloading before departures.

There is a common EU asylum policy. Broadly the policy has to be applied at the first EU country an asylum seeker reaches. They should be permitted entry if they are fleeing persecution and in need of asylum, but not if they are economic migrants. The EU’s borders are as good- or as weak- as the weakest link in them in all the member states. That is one reason why many in the UK would rather have complete national control of our borders, and make our own judgements about asylum without EU law.

The EU itself has been asked to help Italy, currently facing a large part of the present  problem.The Italian authorities, assisted by the EU, need to do more to track down the criminals who take people’s money to risk them in unsafe boats. This vile trade which has led to so many deaths needs a strong police response, and may well need co-operation between EU member states and the countries allowing the people to travel in these dangerous boats. All member states who are part of the common border need to discuss the EU contribution to the policy costs.

The EU needs to stress there is a fair and safer way for people to be assessed for asylum status, than trying to turn up on unsuitable vessels.

More talking, less warring

War breaks out when politics fails. All too often in recent years in the Middle East and on the eastern fringe of the European Union politics has failed, governments have lost authority or have lacked the power to resist powerful enemies. The UK has tried military interventions in the Middle East with our allies, and has wisely avoided military intervention in Eastern Europe. Neither course of action or inaction has brought peace and democracy to those areas. So what in future should we do?

I want the next Parliament to rebuild the UK’s diplomatic strength. The last five years have seen some strengthening of the Foreign office’s capability to understand foreign countries and represent us more widely abroad. By 2010 the FCO lacked the language skills and intelligence staff needed to have a thorough understanding of the Middle East and Russia. Policy analysis and the presentation of our viewpoint was made more difficult by the shortage of skills. The Defence Select Committee has reported on this.

Armed with better information and advice, our diplomats and senior military staff will be in a better position to work with allies and with any democratic governments in the specified areas who are worthy of support. The Middle East needs more talking, and Eastern Europe needs more talking. This is not some vague hope of peace through asking people to be nicer to each other. I am far from naive about the magnitude of the problem faced in these troubled areas. I am also very conscious that we have tried military solutions in the Middle East, and the Ukrainian government is seeking a military solution in its unhappy territory, with no obvious signs that this route creates a stable peace and good democratic practice.

It takes many years or decades even for a country to establish democratic practices that are reasonable. It takes even longer for democracy to become a reflex reaction, to be part of the social and political fabric. It is only when people assume governments can be dismissed by voters, recognise that minorities have rights and protections, understand the power of the state cannot be used for party political purposes, and realise everyone is beneath the same law administered by independent judges,do you have the makings of a democratic state. The UK’s unique contribution in future could be to do more to build confidence in democracy,to explain to more people how democracy works, and above all to show it is an attitude of mind and an approach that has to be shared by government and opposition alike.

 

Lots of jobs

 

The employment figures have been goods news for many months. Yesterday’s figures mean that 2million new jobs have now been added since 2010. The UK economy is in marked contrast to southern and western Euroland, where high unemployment remains entrenched and where there are precious few new jobs being created.

Yesterday also saw praise for the UK from the IMF boss. The IMF themselves are not immune to making poor forecasts or for giving bad advice on what to do next . This time they gave a sensible comment on what has happened. They noted that the UK has been much more successful at achieving growth than the rest of Europe, and agreed that the UK had made some good calls on the pace of deficit reduction and how to reduce it.

The task ahead is to generate still more jobs. It is to generate better paid jobs. It is to raise the skill level, and to resume productivity growth. It is to create a climate for more industrial growth as well as service sector growth

The singe most important change to speed that process has to be a major change to our energy policy. The UK needs to distance itself from the job destroying dear energy policies of the EU, and have a UK policy based on the pursuit of greater self sufficiency in energy provision.

The position in the Euro area is weaker in many ways. Their overdependence on wind energy will become a particular problem, burdening them with much dearer energy than their leading competitors. Japan and China are putting in large quantities of coal based  electricity production, which is presently much cheaper. As if the disaster of the Euro was not enough, the EU has hit upon another way of destroying jobs and giving the advantage to the competitors.

Last night’s debate

 

Last night was a wake up call to the reality. On current polls the SNP will be clearly the third largest party in the next House of Commons. They will make all sorts of demands on England designed to undermine the Union.

Labour has no answer to this problem. We clearly need justice for England, which only the Conservatives are willing to talk about and address. Labour and the Lib Dems remain silent on how England’s Income Tax should be settled once Scotland decides her own. The winner last night was the Conservative party.

China’s strategy

Whilst people in the UK are preoccupied by our election debates, the IMF and World Bank meeting with Finance Ministers  is happening  in momentous times.

The most significant thing that is happening is the rise of China. China has a plan. They are in transition from relying on exports and investment to grow quickly, to depend more on consumer spending at home. After years of making good value goods to sell to foreigners, to build up a large reserve of foreign exchange, China is now making more to sell to her own citizens. Her  economy is also in transition to higher tech and to delivering more service output.

China is liberalising its financial system. It now has more two way investment into and out of mainland China to Hong Kong. It is putting its currency, the renminbi, forward as one of the world’s great trading currencies. It is seeking the entry of the renminbi into the Special Drawing Right basket of the IMF alongside the dollar, yen, sterling and the Euro. It has set up the Asian Investment Bank to extend credit across Asia and the Middle East.

The most dramatic plan is China’s proposal of a new Silk Road and silk maritime road. The idea is new and improved sea and land transport links from China through Central Asia to Russia and Europe. China has in mind a new large economic zone with joint investment projects in transport, communications and  energy, with more common trading and co-ordination of economic and development policies.

China is working with the City of London, recognising UK excellence in finance and valuing London’s ability to make markets in the renminbi. We need to make the right diplomatic response to China’s developing wish to play a bigger role in the world, and to use some of her great industrial and financial muscle to extend her influence. The UK government was right to back China’s Investment Bank initiative.

You don’t rule well by trying to divide a society

There’s a lot of class war rhetoric around in this election. There are some who seem to think you can make the poor rich by making the rich poor. There are certainly many who speak divisively about society, seeking to set poor against the better off, as if their interests were incompatible.

I have spoken and written before against austerity. I want greater prosperity for all. I want tax cuts for all to help bring it about. I want people at all income levels to keep more of the money they earn, and to pay more tax when they earn more money. Cutting tax rates, and lifting some people out of income tax and some capital taxes altogether is one of the best ways of stimulating more enterprise, more activity and more prosperity.

The Conservatives are not the party of the rich as endlessly stated in Labour and Lib Dem caricatures. We want the rich to pay more tax, and think the best way to bring that about is to set rates that mean they will stay and pay, and rates which encourage them to venture more with their money, employ more people, contribute more to our economy. We want everyone who can work to have the chance of a job. We want everyone in a job to have opportunity for promotion, training, higher pay.

You do not rule well by seeking to divide society, and by thinking that differences of income are of all consuming importance. You rule well by enforcing a fair law equally on everyone. You rule well by ensuring the many can aspire to better jobs, higher incomes, better homes, and by looking after those who cannot manage.

The danger is we spend too much time arguing how to divide the cake up, and far too little time and effort thinking how to bake a larger cake. Some want to break the country up, setting rich parts against less well off parts. Some want people to depend more on the public sector. I want to see policies which promote better training and education, more people setting up their own business and working for themselves, more small businesses expanding, more people owning property and other assets.