I strongly believe democracy is the least bad form of government. I would far rather live in a country where you can express disagreements with government, campaign to change government policies, and vote to change the politicians if all else fails, than live in various types of tyranny or bureaucracy.

Democracy, though, brings tribulations with it. Sometimes the minority is right but unsuccessful in persuading the majority. UK democracy in my lifetime has visited upon us the Exchange Rate Mechanism which did large damage to our economy, with the agreement of all three main parties and most of the UK establishment. Those of us who opposed it were censured and criticised. It brought the big Labour credit bubble, boom and bust. This time various voices including at times the opposition parties highlighted the excessive credit and inflationary dangers, but the majority ignored us at huge cost to the country.

Democracy has also encouraged an activist type of politics, where many politicians think the way to popularity and re election is to spend ever more of their constituents’ money on their behalf.  There is a tendency to overspend inherent in modern democracy, as it produces so many elected officials who think there is a government answer to every problem, and that the answer is usually the spending of more of someone else’s money to fix it.

The same impulse to activism makes of many MPs natural advocates of ever more regulation. Modern democracy is prey to well intentioned lobby groups, who marshall their case using PR and email camapigns. Many MPs think it easier to give in to whatever their demand may be, rather than arguing with them. Rarely do campaign groups campaign for repeal or for less government activity. They usually are completely signed up to the government must do something approach.

As a result pressures to give taxpayers a better deal and to limit the impulse to regulate and control usually comes in the form of an economic and financial crisis. After a period of build up in excess spending and government borrowing, market pressures, the views of the creditors, break through and force the elected government in crisis to take corrective action.  Democracy would work better if the pressures from lobby groups were better balanced between those urging the government to do more, and those urging the government to do less.

 

Macmillan asked me if I would like to review their book by John Shepherd and Keith Laybourn on “Britain’s First Labour Government”. I agreed to as I suspected it would prove very topical, and so it proved.

     For 287 days in 1924 the UK experienced a Labour government for the first time. It was a minority government which relied on Liberal votes to keep it in office. The Conservatives under Baldwin called an early General Election in December 1923, wrongly anticipating a win. The result produced 258 Conservative MPs, 191 Labour and 158 Liberals. Baldwin decided to carry on as  Prime Minister despite his clear defeat. Shortly afterwards he lost a vote of No confidence in the Commons and the King rightly called on Labour to see if it could form an administration. Labour was able to govern for almost a year driving through some reforms they wanted, despite the lack of a majority.

          The authors capture the suspicion of the Establishment over asking Labour to form a government, and over its people and attitudes. They point out that many of the Labour Cabinet members had little formal education, and were not used to being part of the UK governing clique. They were, however, schooled in Labour and Trade Union politics and administration, and supported by defectors from the Liberal party, which was in those days much more used to government  office. Some like John Wheatley rose to the challenge of office as Housing Minister and made a lasting impact on UK society.

          They chronicle the twists and turns of the relationship with the Unions.  Then as now, this was to prove pivotal in Labour politics. Labour MPs owed much to the Unions that had sponsored them or supported their party on its way to office. The leading figures, especially the Prime Minister, felt they had to show independence from the Unions to justify their position in government and to woo people to the idea that Labour might govern in the interest of the many, not just of the Unionised workers. The air was full of accusations of treachery as Labour withstood strikes or tried to bargain with their argumentative sometime  supporters.

            I have some sympathy myself for Ramsay Macdonald, the first Labour Prime Minister. Maybe it was inevitable that he ended up disliked by his own party for the compromises he felt government and power forced upon him later in his career. My own sympathy comes from his brave and widely unpopular decision to oppose the Great War in 1914-18. Whilst I do not share the pacifism of part of the Labour movement that was more common in the early twentieth century, I do think we have fought too many wars.

        Sometimes, as with the Falklands or Kuwait, recourse to arms is necessary to restore international order. It is more difficult to  see why most politicians thought fighting the 1914 war could conceivably be in the UK’s interest. They were led to war by a collective outburst of patriotism without proper thought for what the peace might look like or how many deaths might occur before victory.  The gross tragedy of that war, with slaughter on an industrial scale, was made worse by the knowledge we now have that the subsequent victory and peace with Germany did not settle the German question but led to a even greater but necessary war to deal with Nazism. Churchill himself was impatient with the establishment for risking too many lives in attacks by men running across No man’s land, and not turning more to machines to settle the impasse of the trenches. Men who opposed the war risked accusations of cowardice. It was one of those most bitter conflicts, where the higher the casualties the more the impulse to revenge and the desire for victory.

         The main achievement of the Labour government was to establish the idea of Council housing as another means to try to complete the popular promise of homes fit for heroes. Whether you agree with Council housing or not, it was an idea that became an important part of twentieth century UK reality. Less progress was made with pr0moting female equality and with the need for more and better education. That was to come later, and not just from Labour.

          The General election that followed Labour’s period in government was overwhelmed by the Zinoviev Red letter implying Labour’s links with communist Russia made it an unreliable party for government. It fed a prejudice of the day that was not accurate, and left Labour in opposition with more time to try to reconcile the continuing central struggle – how much power over policy should the Unions expect in return for all the support they gave the party?  This timely work reminds us of other periods when no party had a majority, and how they handled that situation in a lively Commons. It is a good read for those who wish to understand more of Labour’s origins and of the role of the Commons when no party is in charge.

 

 

 

On Monday I sent the following letter to the longer serving members of Network Rail, who are meant to be the taxpayers’ representatives holding the management to account:

I am writing to you to ask what actions you, in your role as a Public Member of Network Rail, have taken in recent years to protect the interests of taxpayers in the way Network Rail spends money and adds to its borrowings.

I would be grateful for a brief guide to the main issues you have raised and where you have tried to secure improvements to the value for money and financial security of taxpayers’ investment. I am not looking for an executive Network Rail reply to my queries, but to your Member response.

In particular I would like to know:

1. Why you have backed borrowing in foreign currencies for a business whose revenues and grants are all in sterling, exposing it to currency risk?

2. What is your appraisal of the use of derivatives by Network Rail? What is your forecast of the likely gains and losses from the derivative strategies being used?

3. How long will it take to achieve the efficiency improvements identified by the external review of Network Rail?

4. Have you examined the issues arising from the development and use of railway land, and the issues arising when other developers and land owners wish to gain access to their land across the railway?

Yours sincerely

The Rt Hon John Redwood MP
Member of Parliament for Wokingham

I have made the constitutional case before for a renegotiation of our relationship.. If you wish to live in a vibrant UK democracy the main decisions have to be taken by the UK Parliament. Then the electors can influence them, or throw out the MPs who give them the wrong policies and laws. They can persuade the Parliament to their view, or change the Parliament to change the policies. If too much is decided at the EU level you lose your democracy, as voters can no longer throw out the lawmakers and require a change of approach.

Today I wish to look at a few of the examples of policies enforced by the EU that the UK would like to change if we were in charge.

Many of us want cheaper energy. We would like to relieve the pressure of high and rising energy bills on family budgets. Fuel poverty gets worse each time the energy price goes up in real terms. We want to back Mr Osborne’s vision of the “march of ther makers”, an industrial revival. To do so we need to offer competitive energy, energy for business priced at US levels, not at EU levels.

EU policies require a high proportion of our energy to be generated from renewables. EU policy also imposes a carbon tax on European activity. EU energy policy forces us to have dearer energy than our US or Asian competitors.

Many UK voters want controlled immigration. The EU common borders policy does not allow the UK to impose controls on migrants coming from another EU country, making it very difficult for any UK government to deliver what many voters want.

Many UK voters want wasteful or less desirable public spending to be reduced, so taxes and borrowings by the state are lower. Some of the worst examples of wasteful spending occur at EU level, where UK voters and politicians have no control and little influence.

Many UK voters want UK fishing grounds to be sensibly regulated in the UK interest. They feel that the Common Fishing Policy has conspired to damage our fishing grounds and at the same time not protect our fishermen.

There are many other examples, which you can help supply. In a UK democracy these matters could be changed for the better. In the EU reform and change is usually impossible.

The pro European Union minority are always telling us how much business likes the EU, and how it is a superior arrangement to our other trade, business and investment agreements with the rest of the world. Yet when it comes to where business puts its money, they shy away from the EU.

The figures for UK investment abroad by UK companies show that they have invested just £20bn in Germany over the years, only a shade more than in non EU Switzerland, a far smaller country. Meanwhile corporate UK has invested a mighty £210bn in the USA and £40 bn in Hong Kong and China. £36bn in Australia and £27bn in Canada compares to a total investment in Italy with a much larger population of just £11bn.

All this goes to show that the selective pro EU voices of UK business do not tell us the truth about the relationships. After more than 40 years in the EU we still have a much much larger business commitment to the Commonwealth and the USA than to the main EU countries. It is true the figures show large investments by the UK in Luxembourg and the Netherlands, but that is not a set of underlying investments in these countries. It represents a tax efficient means of investing elsewhere, usually outside the EU. The large £40bn invested in our own non EU offshore islands (Isle of Man and Channel islands) also reminds us of the power of lower taxes to attract business money.

Pro EU people always talk about trade in physical goods. They do not talk much about trade in services, where we do far more business outside the EU than in the EU, and always ignore the figures for overseas investment by UK companies.

Investing in a foreign country is a far greater commitment and far deeper and longer term relationship than buying manufactures from abroad. Judged by that standard, UK business thinks the US is the most important place by far to do business, followed by a range of Commonwealth countries. Tax rates, levels of regulation and the cost of government are amongst the features that put UK business off investing in the rest of the EU.

The lack of such investment flows should worry EU enthusiasts. It should lead the Brussels government to ask why is such long term commitment so unpopular? They could start by looking at the whole range of policies they pursue that are not business friendly.

 One of the worst examples of large scale spending of questionable effiicacy is the big UK railway budget.

I am going to take up again the whole issue of the unaccountability of Network Rail. An independent review has found that it could be much more efficiently run, with large cash savings. Its strange structure designed by the last government tries to hide the fact that it is in effect a nationalised monopoly.

Ministers need to examine how and why members of the company are appointed and reappointed or dropped. They need to find out whether these members – who are meant to work on the taxpayers behalf – ask the right questions and create the right atmosphere to encourage more efficient operation at Network Rail.

The members should ask why Network Rail has a reputation for holding up development projects adjacent to the railway, and why they often demand ransom payments for anyone wishing to bridge the railway or develop adjacent to it.

They should ask why Network Rail has taken on foreign currency and index linked debts, and how it plans to repay the massive £30bn debt built up so far.

The argument about what kind of a relationship the UK wants and needs with the emerging centralised Eurozone should not be monopolised by arguments over our trade.

Those who say we need to stay in on current terms, or stay in on similar terms often tell us we need to do so to protect our trade. This is not true. Many countries trade successfully with the rest of the EU without being members. The rest of the EU would be as keen as the UK to ensure continuity in trade when the UK renegotiates its relationship.

Those who wrongly see the EU as just a trade and business club we need to belong to should understand that the EU is not a free trade area. They often imply it is and say that is what we want. Belonging to a free trade area with the rest of the EU would be a welcome improvement on what we have now, removing remaining tariff and subsidy barriers, expecially in areas where the EU has restrictive policies.

There are customs areas, free trade areas, and common government areas. The EU is both a customs union and a common government area. The danger of the latter is it entails the erection of substantial barriers and costs to doing business through a large legislative and regulatory programme. Worse still, all these extra costs are imposed on UK exporters to non EU destinations as well as to EU ones.

The UK could have full access to the single market on current terms, it could just belong to the customs union, or it could negotiate a free trade area with the EU. To those who think the current single market is better than relying on the international trade framework, it should be possible for the UK to belong to the single market from outside the federalist Treaties. Better still would be a new arrangement which leaves both the UK and the continental trading partners free to do as we wish, whilst preserving the trade which is in our mutual interest.

The motor industry is rightly against facing a higher tariff wall from outside the single market than they face from inside. The German industry, I am sure, will want access to the UK market on at least as good terms as it enjoys today, so there should be no great worry about this issue. There needs to be more debate explaining the crucial differences between free trade areas, customs unions and the single market. You do not need hundreds of common laws in order to trade with each other.

The Foreign Office was keen to get the views of a range of states and people likely to praise the current state of the UK’s relationship with the EU. In doing so they seem to have overlooked the views some of us were putting to them regularly in the Commons and elsewhere explaining why the current relationship is unacceptable to most UK voters and is not in the UK’s national interest. The Foreign Office also seem to have ignored the Prime Minister’s own Bloomberg speech, which made clear it is now government policy to negotiate a new relationship with the rest of the EU. Surely one would only do that if you had already agreed that the current relationship is not working.

I wish to explore how this new relationship can be defined and brought about. Let me begin today by reminding the Foreign Office what they should have picked up from the debates in Parliament in recent years.

The Conservative party in opposition opposed the Nice, Amsterdam and Lisbon Treaties. We did so willingly, as a united Parliamentary force. We did so because we thought these Treaties transferred far too much power from UK democracy to EU decision taking. We did not accept the loss of 68 vetoes over important policy areas at Lisbon, the loss of 46 vetoes at Nice and the loss of 24 vetoes over key areas at Amsterdam.

The arrival of Conservative Ministers in office has not changed the Conservative party’s view on the unacceptability of these Treaties. The need for Conservative Ministers to reach an accommodation with Lib Dem enthusiasts for the EU does not mean the Conservative party has now given up its principled and fundamental opposition to the mass transfer of power recorded under the previous government in these three large Treaties.

There is also a strong feeling amongst many Conservatives that vetoes sacrificed on a lesser scale under previous Treaties in the name of promoting freer trade have not lived up to billing or should no longer go unchallenged. Far from fostering more trade, these qualified majority votes are all too often used to impose more regulation, backdoor taxation and charges on business activity. There has been a continuous erosion of our right to settle decisions democratically at home, and put the results to the British people in elections.

Conservatives are not looking for some minor adjustment of powers, or the amendment of a few directives to settle a new relationship. Just as the name implies, most of us want a very different relationship to the present one. We want to preserve and foster trade with the continent, which is as much in their interest as well as ours. We did not wish to be locked into collective decision taking across most of the range of government activities before the Euro started to place greater pressures and tensions on the EU. Now the Euro members are seeking even more intense unification, seeking political as well as monetary and economic union, it should be obvious to all that the UK, a non Euro member, must have a new relationship with what emerges.

 

             The last couple of decades have been written off as lost decades for Japan. GDP has only risen by around 1% a year, and in several years has struggled to grow at all. Meanwhile, until 2008, the western advanced countries grew at more than 2% a year. Both Japan and the west grew in part as a result of a big build up of debt.

             The big difference between Japan on the one hand, and the US and the UK on the other was population change. The US and the UK were expanding their populations by inward migration and higher birth rates. Japan’s population was shrinking, with very little inward migration. The southern European countries are adding to their Euro anguish by also experiencing population decline.In the UK at the peak of Labour’s rapid migration you had to take 0.4% off the growth rate or up to one fifth of the growth, to get to the growth per head. Now migration is lower and so the adjustment is smaller.

           Recent UK figures have posed a couple of puzzles to economists. The first is the productivity puzzle which we have talked about before. It is not much of a puzzle. The numbers in jobs have been rising and productivity has been falling, because the two most productive sectors, finance and oil and gas have been contracting.

          The second is the retail puzzle. Retail sales over the last year have risen despite the obvious squeeze on average real incomes. This can be explained in part  by people saving less. We also need to recognise that continuing levels of inward migration, even allowing for the one third reduction achieved by this government so far, will serve to boost retail spending. There are also a large number of temporary visitors who indulge in retail therapy when here. Just visit Bicester Village or central London and see the large number of expensive purchases made by overseas visitors.

           We need to keep in mind when reading different country figures the population background. You would expect the US and UK to grow faster than Japan or Germany, because of the rising populations. Adjusted for population the Japanese performance is not very different from the west.

I look forward to the day when I can buy a car which allows me to programme my destination and let the car drive me there.

The big travel difference between the rich and the rest of us is the rich can afford chauffeurs to drive their cars where and when they wish, freeing them to work, talk or picnic as they travel around from appointment to appointment. If they want to have wine with a meal or beer in the pub, they can do so and be driven home safely. If  they want to crowd another appointment into the day, they can do so and take a  nap in the back of the car on the way. They have greater freedom from their extra cash.

We are close to the point where technology can create automatic chauffeurs for the many. If you go from the Business car park at Terminal 5 to the airport, you go in your own automatically controlled pod vehicle. That requires tracks. Soon the technology with sat navs and satellite controls will allow similar treatment for a vehicle using the normal highway.

It is difficult to see how last century train technology can compete with this likely development. The controlled vehicle can go door to door at times convenient to the user. Satellite technology can also find the least congested route, and keep the vehicle away from traffic hotspots. We could get better use out of our roads, as the vehicle could advise on likely times for the journey to minimise travel time.

Bring it on. This would be the kind of development the UK could back and get up and running first, just as we pioneered the railways, the jet engine and the hovercraft.