John Redwood (Wokingham) (Con):

Many people share the Government’s ambition to stop the boats. Would these Lords amendments not muddle the legislation in a way that, once again, would leave us open to an unnecessary court challenge? Can he reassure us that, unamended, the Bill will do the job?

Michael Tomlinson:
I know my right hon. Friend has taken a close interest in the Bill since the outset, and he is right. The amendments fall into two categories: those that are simply unnecessary and those that are worse than unnecessary. The second group are wrecking amendments deliberately designed to prevent the very things that the Bill was designed to do—namely, stopping the boats and getting the planes off the ground.

My hon. Friend the Member for Stone (Sir William Cash) has previously accused me of repeating myself from time to time—heaven forfend—but he is right, because our approach is justified as a matter of parliamentary sovereignty and constitutional propriety. Indeed, my right hon. and learned Friend the Member for South Swindon (Sir Robert Buckland) has even said that it is not unprecedented, and he is right. It also meets our international obligations.

I am trying to get more  to put this case to the Treasury and Bank to stop the outrageous losses. Please use this text.

The Bank of England has received £49.4 bn in payments from taxpayers and the Treasury so far to cover its losses on holding and selling bonds.. OBR forecasts point to further substantial losses to come. They estimated these at £179 bn in the March budget papers. This year could see the need to pay the Bank of England a further large sum.

       These payments increase the public sector deficit excluding the Bank of England, which is the figure used to assess how much headroom the government has to increase public spending and or reduce taxes. It is in everyone’s interest to minimise these losses and to protect the taxpayer from the possible outcome forecast  by the OBR.

        There are three main sources of loss. Some of the  bonds were bought at prices above the repayment value of the bond. These losses are unavoidable if the bonds are held to repayment. It is true  if at  some future date interest rates had tumbled and the price of the bonds have again risen above the repayment value you could then sell at a profit. We cannot assume that is going to happen anytime soon. Meanwhile there will be some losses as bonds mature.

         The Bank is actively selling £100bn of bonds a  year into the market, taking larger losses than if they held them to maturity, and taking the losses sooner than they need to. The Bank could stop selling these bonds, allowing them to be repaid in due course on maturity. Some mature quite soon, Others are long dated and can stay on the balance sheet. Stopping selling the bonds would stop a large amount of the total  losses.

         The European Central Bank and the Federal reserve Board also bought lots of bonds at high prices and have considered what to do with them. The ECB has decided not to sell any prematurely into markets that are now so much lower than when they bought the bonds. They will allow them all to run off as they mature with lower losses. The Fed has been selling some Treasury  bonds but has recently stated it plans to halve the rate of sale, and to place more emphasis on selling shorter dated  bonds where the losses are considerably lower than the losses on long dated. When interest rates are pushed up as they have been losses on longer dated bonds are much larger than on short dated, because you have to wait so much longer to get your money back.

        The third source of loss is the Bank receives a lower rate of interest on the bonds it has bought than the rate of interest it pays the commercial banks for the money they deposit with it. All the time the Bank keeps the base rate as high as today there will be losses on simply holding the bonds. The ECB has decided it will no longer pay interest on minimum reserves commercial banks have to hold with the Central Bank to cut these losses. The Bank of England and the Fed did not pay interest on reserves prior to 2006. The Bank of England could align its policy with the ECB.

        These actions would lead to a substantial improvement in the UK public sector finances excluding the Bank of England. The Bank would not suffer as a result, as it admits these sales are not crucial to its monetary policy. These proposals do not interfere with Bank of England independence. The Banks independence is over settling the Base rate and assessing inflation , which this does not change. The Bank says it acts as an agent for the Treasury over  bonds. It needed the approval of successive Chancellors for  all the purchases, and insisted on a Treasury guarantee against loss. As the Treasury is the guarantor it can also influence when these bonds are sold.

The IMF like the left wing parties says there must be no unfunded tax cuts. Like them it does not complain about unaffordable wasteful  spending. Indeed it argues spending needs to go up. Why?

There is so much to be done by getting  a proper grip on spending. There is no need to let the Bank of England lose another £40 bn this week on top of the £49 bn they have already billed taxpayers. It is a needless disgrace.

There is the identified £20 bn of lost public sector productivity the Treasury put in their last plans. Why is it taking so long to get it back? Why do they need to spend to save when the task is to get back to 2019 efficiency levels?

There is the announced sale of Nat West. Why are we waiting? Why are the proceeds spread over three years in the forecasts? That’s another £8 bn. The OBR puts £3.2 bn of the proceeds into 2025-26

The large losses and cash absorption by the railways needs controlling better, with a proper plan to increase fare revenues.£33 bn of subsidy and investment spending is too high.

Introducing a ban on external recruitment to the civil service and public sector admin would help. Getting rid of bad quangos like UK Government Investments and selling off the British Investment Bank would be a good idea. Making a big reduction in legal migration would cut demand for more social housing and public service capacity .

It is fashionable amongst the political parties and some football fans to demand a Statutory “independent” football regulator. Some fans support such a change as they are critical of some club owners or managements   and think a Regulator  might be able to sort things out for them .

I fear the prospect of an all wise Regulator who would just happen to bring about change in each club that fans would like  is a good dream, but difficult for any appointed Regulator to achieve.A Regulator faces very difficult pressures when Team A claims rival Team B has broken rules and then Team B responds with a counter claim. The more rules there are, the more disputes. Where two or more teams are in dispute any verdict will upset a lot of fans.

Football is a popular sport. It is entertainment. It attracts a large number of rich individuals and some companies that like the game and want to spend their money on trying to build a winning team. Some do make more money out of it by succeeding in getting their team promoted and so generating more revenues. Some make money out of associated property development and retail opportunities using the club assets and brand. Many just spend their money on the costly hunt to transfer talent and then pay mega salaries to retain good people which can  end in financial losses.

The FA is the regulator. They believe there needs to be rules over how much money a club can spend and borrow and rules over how clubs attract and retain talent. There obviously have to be game rules all accept, and rules over how you win or lose in league and cup competitions. It is difficult to see how an independent regulator could usefully change FA rules over most of these matters. The FA itself is discovering that its efforts to regulate club finances using penalties that include reducing a teams points in the league can upset fans and make rivalries more bitter. What is best settled on the pitch ends up being settled by lawyers.

If we do set up an independent Regulator under Statute law there will then be a wish to drag Ministers into decisions. When too many fans become critical of the Regulator the cry will go up for Ministerial interference or for some change of the law.

There is a good case for an element of fan ownership or for clubs  to be established as trusts owned by fans. This would need to be arrived at with agreement or from buy out of the existing owners.  All the time the football model is based on bidding ever higher sums for a small pool of well known players and managers clubs will turn instead to billionaires to help fund their expensive habits.Fans will not have sufficient collective money to pay the sky high prices of the famous.  They then have to live with  that relationship.The   rich shareholder  is well advised to keep on the right side of the fans. The fans offer the team support, pay  high prices for tickets and buy the merchandise.   I do not think politicians should tell football clubs and the FA how to finance themselves. There must be no question of taxpayers bailing out clubs.

Please find below my interview with GB News on the Bank of England’s losses:

Yesterday I criticised 3 big boom/ bust cycles that came from Bank action and establishment thinking. In each case they ignored money and credit.

The 1975 inflation high peak followed a doubling of broad money 1970-4 as a result of a badly supervised switch to competition and credit control policy by the Bank.

The 1992 inflation followed a 36% surge in broad  money 1989-92, brought on by the dangerous  European Exchange rate mechanism. IMF figures clocked broad money growth peaking  at 86% when the Bank and Treasury were creating billions of pounds  to try to keep the value  of the pound down to the permitted target. They then saw it plunge to a low of minus 28% when the Bank was busily buying in pounds trying to get the value back up to the target after the inflation sank the currency.

The 2008-9 banking boom followed and created a 66% surge in broad money Q1 2009 compared to Q 12005. Over the Labour years 1997 to 2010 money growth trebled.

The more recent inflation followed 30% money growth 2020 to 2023.

I set out the case against the European Exchange Rate Mechanism before we entered. I urged the government to turn down the Bank and Treasury advice. I explained it could lead  to  excessive money or too little. It led to both. I took the quoted company I led  out of the CBI because the CBI refused to accept ERM membership would be damaging.

In the run up to the crash of 2009 I supported the Opposition in Parliament who regularly  warned of excessive credit expansion and government overborrowing.

This time round I warned against the continuation of QE during 2021-2 as inflationary. More recently I switched to warning against excessive bond sales as recessionary.

Why do the Bank and Treasury persist with boom/ bust policies?

President Biden changed US policy towards the Middle East in 2020. He pulled out of Afghanistan too suddenly, losing a crucial air base and undermining  his allies. It led directly  to the Taliban taking the country over, after 20 years of the west losing lives and spending huge sums to stop them. He then tried to get a negotiated settlement with Iran. President Trump had negotiated successfully with the Gulf states to achieve their peace with Israel and to try to do the same with Saudi. All agreed Iran was a threat.

President Biden has ended up with worse relations with Saudi and the Gulf states, with OPEC pushing up oil prices by witholding production and now with US forces shooting down Iranian drones and missiles. Iran was always constructing a ring of hostile forces to the west with the Houttis in Yemen now firing on civilian cargo ships, with Hezbollah in Lebanon , Iraq and Syria and Hamas in Gaza.

The UK needs to be super vigilant to stop terrorists gaining access, to continue to work closely with allies to ensure good intelligence

The political classes seem incapable of understanding why we have so many boom bust inflationary cycles. I want more MPs to be demanding a change of policy by the Bank so we can have a growth policy with lower tax rates and better funded core public services.

It is no accident or external force which gave us an inflation in 1975. It was the  Bank conducting a policy called competition and credit control badly leading to fast money growth and a secondary banking crisis. In 1977 it was an overspending over borrowing Labour government which ended with a humiliating trip to the IMF to bail us out.

In 1990-92 it was Bank and Treasury policy to put us into the European Exchange rate mechanism which ballooned the money supply backed by PM Major and gave us more inflation.

In 2007-9 it was Bank and Labour government policy to allow commercial banks to lend much more which led to inflation, egged on by high public spending and borrowing.

In 2023-4 the inflation came from Bank Quantitative easing and a big boost to the money supply.

In each case the Bank over corrected  for its errors pushing us into recession.

Why doesn’t the Bank learn from  this string of errors and give better advice?