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

Anyone submitting a comment to this site is giving their permission for it to be published here along with the name and identifiers they have submitted.

The moderator reserves the sole right to decide whether to publish or not.

The European Court of Human Rights and small boats

There is speculation that some members of the Cabinet are wanting to put repeal of our  membership of the European Human Rights Treaty into the Manifesto if there are further legal reversals to the policy of transferring illegal migrants elsewhere.

That would mean accepting legal defeat for more than a year and then needing an election win and a new Parliament to resolve the small boats impasse. That seems like a bad idea.

The Prime Minister has been categoric and consistent that he will stop the small boats. It is one of five key pledges. It is therefore imperative  to resolve any legal obstacles to his chosen anti illegal migration policy now, not at  some distant future time.

I and others have proposed a simple one clause Bill or amendment to an existing Bill which would confirm current government policy on illegals and say in terms that this applied notwithstanding any other legal arguments or ECHR judgements. Parliament is sovereign and on this should assert its sovereignty.

The Uk was previously told to grant votes to prisoners by the ECHR. Parliament said No to that. We stayed  with the Treaty but disapplied that judgement democratically. We can do so again. Get on with it to stop so many  boats coming thus summer.

Inflation and growth

I was talking to government advisers yesterday about how to deliver both falling inflation and better growth.

I pointed out that the Bank with its wrong forecasts of inflation and the OBR with its wrong forecasts of the debt and deficit are conspiring to create a recession through excessive monetary tightening and austerity. They now want  to kill the inflation their excessive money creation, spending and borrowing over and post pandemic has generated. They want to put us through another officially inspired boom bust cycle.

I recommended a different approach.Ministers  should require the Bank and OBR to urgently revise their models and back test the new ones to show they can now get closer to predicting what has happened using actual back data. They should assist the government in producing a supply side growth package of targeted tax cuts balanced by spending control, import substitution and abandonment of unhelpful regulations like the ban on new petrol and diesel cars from 2030  and the extra tax on sales petrol and diesels from next year if EVs are not 22% of the manufacturers total sales.

The Bank should stop sales of bonds at big losses all the time it does not have a reliable forecasting model. The Bank’s  Chief Economist acknowledges the Bank could be overdoing the tightening but without better forecasts cannot tell. A Bank which says its best forecast of unemployment is it might halve or double over the next three years needs to speed its work on forecasting before blundering into more policy changes.

You cannot have capitalism without capital.

History and geography teaches us that societies that  back free enterprise, freedom and private property more deliver higher living standards. Societies where government regulates, taxes and nationalises on a grand scale deliver lower incomes and less freedom.

The great east-west communism against more free enterprise systems in post war Europe delivered much higher living standards to the west of the Iron curtain. In today’s world the most socialist or communist states like North  Korea, Venezuela and Cuba have much lower living standards than western countries. China is still a long way behind the USA in GDP per head.

Socialists argue  against more free enterprise, claiming it creates unacceptable inequalities. In communist societies the luxuries of the elite who govern are often extreme compared to the average worker.

Essential to a more free enterprise democratic system is equality of opportunity. To work well these societies need to offer a number of routes to prosperity for the many, and need to be generous to those who cannot walk those routes.

The government needs to revisit pathways to home ownership, to self employment, to personalised pensions saving, to building small businesses , developing co ops and partnerships, and gaining shares in a company you work for. I will be looking at all of these in the days ahead. Wider ownership is important campaign. Everyone an owner is the way to embed free enterprise and higher living standards and greater freedoms.

Imports galore

The combination of belonging to the EU until 2020 and adopting strange accounting practises for attributing carbon has left us in permanent balance of trade deficit in goods with the EU. Taking responsibility for CO 2 generated here by producing fossil fuels or industrial products from fossil fuels,  but accepting no responsibility for CO 2 on energy and industrial production for our imports has reinforced the impact of EU rules and tariffs to make us a heavy importer of  European goods.

It is alarming to see in recent low electricity using days we have at times been importing  more than one fifth of our electricity.I have been warning about this for some  years, and have been very critical of  energy policies that keep putting in extra inter-connectors to allow us to import more instead of more domestic generating capacity.  New CCGT, wave  and water power, new oil and gas reserves  and nuclear have been blocked or delayed whilst cables have been built and imports encouraged. We have made ourselves more dependent on an energy short continent.

The government now says it wants to get more oil and gas out. So where are the production licences? Why is there still a windfall tax on home production when the windfall has subsided? Why is the UK still using a carbon accounting system that encourages imports whilst boosting world CO 2?

 

 

Which technologies could replace our fossil fuel driven economy?

With most people relying on fossil fuel for vans and cars, deliveries, holiday travel and heating and with most industry using gas coal and oil for its factories and processes, shifting from fossil fuels requires an enormous investment and change.

Net zero enthusiasts regularly tell us a huge increase in wind farms, onshore and offshore, would enable a faster UK transition. Yesterday I asked them to guide us on how quickly the grid and street cable systems can be greatly expanded and how this will be paid for. We await cogent answers. Without more grid and cable the wind farms cannot send their power to customers.

Today I want to ask what do we do on days and at times  when the wind does not blow or blows too much? There are various technical answers being explored. There could be more large battery farms, where the batteries are charged on good wind days and discharged to the grid on low wind days. There is considerable power loss on charging and discharging, and issues over effective battery lives.

There is the possibility of using surplus wind power on good wind days to make green hydrogen.  Direct drive hydrogen engines are arguably more effective for heavy plant, trucks and buses, than trying to make powerful enough  batteries. Hydrogen home heating may prove warmer and better than heat pumps. A hydrogen system would require large plants to make and store commercial quantities of the gas and a distribution system for it.

There is the possibility that new synthetic or plant based fuels might emerge which are thought to lower CO 2 output and could be used in a variety of transport, industrial and heating uses.

The problem of intermittency could be abated by one or more of these answers. It would still be difficult to have enough battery or stored hydrogen capacity should a long cold windless period emerge in winter. Each of these answers requires further work on best methods for achieving them and on how  they would be rolled out quickly and paid for on a large scale. Going over to hydrogen or to electricity for the many things that currently run on fossil fuels  requires large investment in new grids, cable systems, and hydrogen pipes,stores and deliveries . The  same applies to other new fuels.

When might we get greater clarity on the preferred technologies, the timetables and costs?

Expanding the grid

To get to net zero the Uk would have to shift most people away from petrol and diesel and aviation spirit  to electric transport , shift most away from fossil fuel to electric heating ,and  eliminate most fossil fuel use by business. This would require quadrupling the grid capacity and greatly increasing capacity of the cable system to every home and factory.

It will also be essential to end the output of the coal and gas power stations and find a way of storing and time shifting the output of wind turbines and solar panels.

How realistic is this on the time scales the government wishes? How is this done so there is enough renewable power in time for the new EVs and heat pumps? It’s pointless to put in wind farms if there is no grid to carry the power and self defeating to spend on EVs and heat pumps if the power is generated from gas.

So far there is no plan I can read for a massive expansion of the grid and cable systems let alone large sums of committed capital to build out the necessary facilities. There are planning rows over the modest additions to the grid being discussed. There is little thought about digging up the streets to provide more power to each home, nor positive thoughts about trying to bury the cables somewhere other than under the middle of the main roads.

Who will pay for all this? Presumably it will fall to electricity consumers as ways are found to add all this to bills. It would be good to know how much of an increase this might entail.

My Interview with Talk TV about the Bank and inflation

I gave an interview yesterday  to Talk tv about Bank of England monetary policy.

I called for an urgent review of their economic model and forecasts. The Bank has admitted its forecasts have been wrong on inflation  for sometime but have announced a long winded review of what to do about it. If they cannot forecast inflation well it is difficult to understand how they can carry on setting rates to adjust inflation.

Their justification of a fourteenth rate hike this week was they needed to depress demand more to cut inflation further. They wish to do this by hitting the spending power of those with mortgages. It does not seem to have occurred to them that raising rates increases the spending power  of those with savings. Their current policy is creating a manufacturing and housing recession.

I called for an end to selling bonds at huge losses. They pass the bill to the Treasury and are now lurching from creating too much money to destroying too much. Letting their balance  sheet contract as the bonds repay is sufficient a squeeze.

Why does the Bank lurch from inflation to recession inducing policy yet again?

find my interview with Talk TV’s Mike Graham on You tube where we discussed the Bank of England’s forecasts and monetary policy.

You can find it between: 33:4344:23.

 

Competition is good for many public services

We have discussed the  strange agreement in much public debate that there are a defined  number of public services which need to be in public ownership or control owing to their importance to our lives.  These include the obvious ones of health and education, where it is a generally agreed fundamental that the state should pay for the care and education. There is no need for the same state involvement in water, rail travel, and electricity  where customers pay. The danger is they want monopolies in the utilities, when customer choice is crucial to higher standards, more innovation and lower prices.

Health and education are special cases. All main parties agree healthcare and schooling should be available free to anyone who needs them, so all agree the state has a big role. There remains choice and competition for those with good incomes, with some people opting to send their children to fee paying schools or to buy private healthcare despite their eligibility for the free public service.  The state allows a smaller private sector to compete whilst charging patients and pupils. The state also harnesses substantial private sector involvement in these services. Both main parties have accepted all drugs are supplied to the NHS by competing companies, many for profit. Both have accepted substantial private provision of meals, cleaning and other essential services within health and education. The NHS continues with many GPs as private contractors. The large pharmacy based sector provides  healthcare for profit for more minor aliments.Labour introduced the idea of the NHS buying in medical capacity from private hospitals and clinics.

The other ones on the list of those who think the state should own or run them are all privatised utilities where customers have always paid all or  most of the bills for what they use. Instead of offering everyone free or subsidised water or electricity, money is given to those on lower incomes to help them afford these bills for essential needs.  There are competitors to many of these offerings. Rail travel faces formidable competition from road and air travel with much larger private involvement. Competition was deliberately built into the privatised models for telecoms and energy, to provide more forces for innovation and better prices. Water was not given so much competitive challenge which has lessened the favourable impact of privatistion. Some say these are natural monopolies.

 

The truth is there is no natural monopoly. It is easy to have competing producers of electricity. You can run competing trains on different lines – west coast and east coast  to Scotland for example – and you can use a regulator to ensure train pathway allocations over fixed track for competing services in many places. You can let competing water companies gain access to common pipes, as oil and gas suppliers share pipes for some of  their deliveries.

Competition puts the customer in charge.  It drives innovation and productivity improvements and forces companies to deliver high quality services. Monopoly does not create the same benign pressures and leads to everyone blaming the government that owns them for poor performance and poor quality.Instead of calling for further nationalisation of water or rail those who want better service and more provision should  call for more competition.

Why legislating in the EU was a bad idea

I was used to an open democratic process when helping make laws in the UK. A Green paper setting out the problem and legislative options invited those with  views to suggest improvements or alternatives. A White Paper setting out a detailed government proposal invited forensic criticism. Three readings in each of the Commons and Lords, with a detailed scrutiny of the draft line by line on Committee ensured plenty of opportunity for MPs, peers and outside interests to defend or attack the idea of the bill and to work to improve its details. At every stage the public could be involved. Every stage was undertaken in public.

The EU system as so different, restricting public discussion and scrutiny. The main debates over the draft laws took place in secret. The Commission drafted the law. Ministers from member states were not meant to draft laws or even to table amendments. It is true that over the years the European Parliament did develop more open procedures to consider draft laws, but only based on  laws the Commission had written and the Council meeting in private had approved.

As a legislating Minister I wanted to open it up for wider public scrutiny. I did what I could by showing drafts to the UK parliament and encouraging debate there before I went to Brussels to negotiate. I kept in my mind what each country had said about the draft when the Council came to debate it and sought to share this with the press. The press were not interested. They explained to me that they needed stories on all the days I was not in Brussels, and the Commission took a dim view of anyone saying what had happened in the Council. Of course many Ministers did tell their national press what they wanted them to know about their own role, without having to worry about anyone having a different recollection of what they said and did.

In practice most Ministers went along with the Commission that they needed to reach an agreement, however needless or undesirable yet more laws might prove. I objected to the way there was no official opposition saying either we did not need that law, or telling the Commission how it  needed a major rewrite. At every stage in the UK Parliament the opposition is there to challenge the need for a law, the principles behind the law, and the detail of the draft.

No wonder we ended up with so much law that proved to be anti innovation, complex, bureaucratic and costly. It is a major brake on the progress of the European economy.

 

Why I am happier now we have left the EU

The worst job I was given in government was the UK’s single market Minister. I held it at the time of maximum activity, with the EU claiming it needed to hurry through a substantial number of new laws to complete the so called single market programme for 1992. They wished to regulate so many different sectors and activities in the name of freer trade. I found myself in disagreement with the underlying theory. You do not need to standardise everything to have a successful market. You do not need to lay down required methods or standards for every good and service to be offered for sale. It seemed as if the single market was being used as an excuse for a large expansion of EU power.

The EU believed in the doctrine of the occupied field. Starting from a position where member states made their own laws and enforced their own justice, the EU wished to get to the point where the EU made most of the laws and had superior powers to national legislatures to impose and enforce their preferred ways of doing things. If the EU could get any directive or regulation agreed for a new sector or area, however weak or general, it could then go on to more detailed legislation on the grounds that it had already established its competence in the chosen area.

The EU also practised code based law where they wished to set out in detail what you could do rather than the common law approach where you could do as you wish subject to specific bans or general duties to act safely, responsibly etc. To me a single market just required the enforcement of a rule their court had already established in the cassis de Dijon case. If a product was offered for sale and was of merchandisable quality in one country in the EEC then it could be offered for sale in another without further regulation or checking. Labelling would tell customers sufficient so they could make their own decisions about whether they wanted to buy a product from another country.

I found the EU was hectoring and bullying if you objected to their legislative proposals. Meetings were always being pressured to pass more laws, whether the laws made sense or were good or not. I had to spend a lot of time trying to build blocking groups of countries against draft laws which I thought particularly damaging or needless.  It was never ending work as the Commission and rotating Presidencies were merciless in wanting to get laws through in bulk.When I protested that people would not want an extra law on a topic the reply usually disparaged the people, as they did not approach lawmaking in a democratic way.

Now we are out we can refine our common law system which is more useful to the rest of the world than the EU code system. It is very disappointing that so many people in the UK governing establishment are unable or unwilling to grasp and use our new freedoms, but great to know we can if we wish. The EU still wants to treat us as a naughty member who needs to obey their rules.The UK  government needs to move on from the misery of compliance rows over their spiders web of controls. Time to use and enjoy our freedoms.