John Redwood's Diary
Incisive and topical campaigns and commentary on today's issues and tomorrow's problems

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My contribution to the Finance (No. 2) Bill debate, 19 April 2021

Of course, I am not going to vote against this Budget and I wish the Government well with it, but I would like them to pause a little, think through where we are and recognise that they may need to revisit some of these decisions in the months ahead.

My worry is that they are being too tough in their tax measures and too tough on people’s incomes at a time when we need to build confidence and recovery, and they are doing so at a time when it is really impossible for their expert advisers and other economic forecasters to give them a clear steer of what the public finances will look like in two years’ time, let alone in three or four years’ time.

The Government seem to think that their experts can define a given amount of money that will be a shortfall in order to hit their longer-term Government targets, and therefore say that we need to make these tax changes for the next few years in order to fill the alleged black hole. It may be that they are trying to fill a hole that does not exist. It may be that we will have a much better recovery than the forecasters are thinking.

It may be that the economy responds much better over the next two or three years or, indeed, over the next two or three months, as the relaxations kick in.

We can see the difficulty that the official forecasters have if we look at the numbers they gave us as recently as November 2020. Then, the OBR, forecasting the budget deficit—the amount of extra borrowing—for the year 2020-21, said that it would be £394 billion, an enormous amount.

Bear in mind that it was having to forecast for only four months, as two thirds of the year had already gone. When we got the 11-month figures, up to February, recently, we discovered that they had come in at just ÂŁ278 billion and so, subject to what happened in March, it may be that the OBR was the best part of ÂŁ100 billion out on the deficit for the year in question when it tried to forecast, already knowing quite a lot of what had happened. It was, of course, massively too pessimistic. It is great news that we will have borrowed so much less than we feared, although clearly we are still borrowing far too much on an unsustainable basis, which is why we need to promote a strong recovery to get the deficit down.

I therefore say to the Government: let us show a little humility. The experts and advisers are not able to give us anything like accurate figures—I can sympathise with them, because extreme things have happened in response to the pandemic—so are we sure that we need to make these moves over the next three or four years?

There is also a case for showing a bit of humility and thinking ahead about whether we might need to show a bit more flexibility because the Government themselves have rightly said, now that we are out of the European Union and the economic world has been stood on its head, that they want to set out a new framework for guiding the economy.

I encourage them to do that, and I hope it is a framework that promotes growth and considers real issues such as the increase in the number of jobs, the rise in real incomes and the productivity growth that can be achieved.

We need to get away from the Maastricht criteria, which have governed our policy for many years and still seem to be behind the architecture of this Bill. We seem to be driven by the need to get state debt falling as a percentage of our national output by the end of the period that we are talking about today for the tax changes. State debt is now a pretty useless figure to try to target in the way that the Maastricht criteria did.

We now live in this age of monetary experimentation, where great banks such as the Bank of England, as well as the European Central Bank, have bought in very large quantities of state debt—indeed, they still are doing so. Surely, where that happens in a single sovereign country with its own central bank, owned on behalf of the taxpayers by the state, we should treat the debt that we have bought back in rather differently from the debt on which we owe money by way of interest to people outside—some our own citizens, some foreigners—who have been financing the Government.

That makes state debt a very difficult number to use to guide the economy. Of course, the future system must have some control over the build-up of actual interest charges that we have to pay to third parties, but it should concentrate much more on promoting growth.

May we therefore have just a few words from the Government, accepting that these numbers are very difficult and that the current forecasts are likely to be very wrong? No one can say exactly how wrong they are going to be, because so many things will happen over the next two or three years and nobody has been through a bounce back of the kind of pace that is possible from such a big hole in our economy, created by necessary health measures to cure the pandemic.

We need a policy that is very supportive of more jobs, of higher incomes and of encouraging investment, enterprise, saving and, above all, self-employment and more small business activity.

My worry is that the Government are being a bit mean with people and with small businesses in the name of controlling state debt at a time when we have no idea what the state debt will be in two or three years’ time, and when the state debt number is now very different because of the purchase of state debt by the state itself.

I would hope that the Government recognise that we may need to revisit all this, and I would want them to be on the side of people keeping more of the money they earn and, above all, of a much better deal for small business and the self-employed, where I think they are too tough.

My Question during the Statement on Covid-19, 19 April 2021

Sir John Redwood (Wokingham) (Con): I congratulate my right hon. Friend on the big reductions, based on the vaccinations, in case and death numbers. Will he briefly update us on better air extraction, cleaning and other measures to control infection in hospitals to reassure the many patients who now need non-covid treatment?

The Secretary of State for Health and Social Care (Mr Matt Hancock): My right hon. Friend has asked about this many times, and he is quite right to, because it is not just about cleaning.

We have learned a lot during the pandemic about the importance of good ventilation, and that is now embedded in infection prevention and control. As cases in hospitals come down, hospitals across the country are separating, as much as is possible, those who might or do have covid from people who are coming to hospital having been tested and knowing that they do not have covid.

That is incredibly important to reassure people that if they are asked to come to hospital by a clinician, it is the best place for them.

Euro elite entitlement is not a good look for great football clubs

So the football clubs currently in 5th, 6th, 7th and 9th place in the Premier League think they should be in a super Euro league with founders rights to stay there when they cannot currently even get into the slots to qualify for European competition next year. They think they are entitled to compete with other teams that have done well in the past but are similarly gifted a place in the star league. I find it bizarre they should think this a good idea, and even stranger that when their fans and the wider public tells them this is a very bad idea they still do not retreat.

Most people know it is wrong. It is wrong because being an elite team or an elite sporting performer needs a willingness to be regularly tested against the best to prove they are still deserving of the laurels. It is wrong because it demonstrates complacency and arrogance in equal measure. Winning decides who goes to elite tournaments, not buying a permanent place. It is wrong because the many loyal fans of these great clubs are proud of their clubs for what they achieve on tbe pitch and are ashamed by this proposal. It is wrong because it puts money before sporting values and ignores the sense of community which a team and club represent. Some of the best drama in English football comes in the FA cup when outsider teams can take on and sometimes beat the famous. The league itself is a ladder to climb for the energetic and good, and a series of privileged higher divisions which you tumble from if you lose your edge and skill. It would not be so interesting if everyone stayed put each year, the good and ambitious thwarted and the unsuccessful cushioned.

The pursuit of money by exploiting the fan base more may pose questions some owners and well paid footballers might not like asked. If clubs persist in doing things fans dislike, they might not keep all the fans. If clubs pursue too much money and spend much of it on ever higher footballer wages, they may encourage a backlash against the business model that does this. I have no problem with great footballers earning large sums because they entertain and people willingly pay to see them. I do have problems with badly run clubs running up excessive wage bills they cannot afford and pricing lower income fans out of much of the fun. How many fans would be able to afford time and money on Wednesday nights to travel to the continent to see one of these planned superleague matches? And why would they think it important if some of the best and most successful clubs of the day were kept out by the squatters rights applying to most of the clubs in this planned league? There is also the issue of how many games can a club play successfully in a season, and what can it expect of a great player who will also wish to play for his national team? Allowing players time to play for their country is a crucial part of football’s popularity which will be stretched again should this invention go ahead.

The USA and China avoid all specifics on decarbonisation

The world’s two largest producers of CO2 met to discuss what to do about many governments backing net zero. Both governments now believe that man made carbon dioxide is the world’s most pressing problem. Both now commit their countries to reach net zero, the USA by the fashionable 2050 and China by the more laid back 2060. Both commitments mean little and are cheap to promise.

This year the EU, the U.K. and other global hawks on the topic are out to pin countries down to meaningful targets for reducing CO2 by 2025 and or 2030. These are more meaningful as they require immediate actions to wean people and business off petrol and diesel vehicles, get them out of fossil fuel planes, change their coal oil and gas heating and change their diets away from meat and dairy. The USA has promised a credible plan by November for COP 26, the big UN conference for pledges. China is not yet ready to commit, still reserving the right to mine more coal, burn more fossil fuel and expand her industrial reach further for a few more years.

It is most important that the U.K. does not sign up to a one sided deal which leaves countries free to take our business away by continuing with the cheaper fossil fuel option. Take steel for example . How does it help if we close down all our blast furnaces and fossil fuel based capacity, only to import steel from countries that do not do the same?

Upward revision to numbers of migrants

The Migration Observatory reports this week that the official figures for migrants coming to the UK need to be amended, as it seems many more migrants came from the EU over the last decade and fewer from the rest of the world. The suggested changes to the figures show a 76% increase in EU numbers from 2012 to March 2020 and a 31% decrease in rest of the world numbers. Instead of the EU being a minority they accounted for 64%. The overall total also rises. The ONS is having to change its way of estimating the numbers. It has in the past used passenger surveys, but now recognises these were not accurately capturing what was going on. It appears net migration has been running at around one third of a million a year. It is clearly difficult to pin people down about their plans in a system of free movement when interviewing them on arrival.

It is most important that we have more reliable data. as many policy decisions flow from how many people are coming to stay in our country. We need better figures to work out how much health and education capacity we need, how much more transport capacity, and above all how many additional homes. We want all who are coming to have access to good services and the opportunity to rent or buy a suitable home. Assuming more than 3 million additional people have come over the last decade, as seems likely, that means we needed another 1.25m homes assuming the same average household size of 2.4 people per home as the current population. For some purposes we also need to look at gross migration, as the newcomers may want different housing in different places to those leaving the country. Some leaving the country still keep a residence in the UK and might return years later as their life draws to a close.

An answer to the Green wish to reduce the claim on resources, to cut pollution and reduce the production of CO2 would be to cut the rate of growth of the population. The UK needs to expand its output of CO2, make more claims on minerals and food and take more land for houses because the population has been growing rapidly over the last decade.

I want to live in a free society so I have no wish for government to stop couples having babies as they choose. Nor in a decent society should we say No to asylum seekers seeking a haven from violence and oppression. The UK has gone well beyond these central rights and decencies, welcoming in millions of people to take on low paid jobs. The UK state has also recruited many to come here with great skills and qualifications from lower paid countries. There a is a strong case for a new model. We need to grow more of our own skills base by excellence in education and support for those who will make the commitment to gain the qualifications. Is it really sensible to bid away more great people from a poor country than would come naturally, only to have to do more by way of overseas aid to support that country that is missing some of its natural leaders and qualified people? We also need to move to a higher pay higher productivity model of working. More of the low paid jobs should be backed with better machinery and automation to enrich the job in many ways. We want more interesting and better paid jobs which more automation and digitalisation can generate.

In order to have a good migration policy there needs to be accurate data. In order to plan service and other provision there needs to be good data. No wonder we have seemed short of homes, short of transport capacity, short of NHS capacity, if we have been catering for more people than the official figures say are here. Migration Observatory also thinks there has been a further net increase in EU migrants since the Brexit vote up to March 2020, despite claims that the opposite would happen. They also think that far fewer people left the UK last year than some have suggested despite the collapse in many lower paid jobs owing to the closures of many businesses in response to the pandemic.

These large errors in the official figures had consequences. It meant the government was constantly blamed for failing to control migrant numbers from the rest of the world, when it turns out they had done much more than recognised. It also meant pro EU commentators and politicians could claim EU migration was not large or important , when the numbers were understated by 76%.

The Duke of Edinburgh

Tribute to the Duke of Edinburgh from John Redwood

Many people’s lives were touched by the Duke and the work of the organisations he created and supported. Some enjoyed and benefitted from the Duke of Edinburgh Award scheme. Many met him when he came as a visitor, as he travelled to show interest and curiosity at home and abroad. His energy was spent in many areas from helping young people aspire to better lives, through science and technology to sports and the environment. As a boy I first became conscious of him when he spoke out for better treatment of wildlife. I wanted sufficient wild areas for animals to be able lead their own natural lives free from human interference and was delighted to learn of a powerful force to help bring that about. Later in life I met him in my roles as a constituency M.P. and as a Minister and saw how he supported the Queen and served the nation through charities .

Many have shown their respect for him. We join the Queen in mourning his loss, as she tells us just how important he has been to her own exemplary conduct as monarch.

The cost of wind farms

The Global Warming Foundation put out a piece of work yesterday claiming that 6 offshore wind farms share ÂŁ1.6bn between them in annual subsidies. It went on to argue that the renewables obligation now costs consumers ÂŁ6bn a year and the capacity market ÂŁ1bn a year. They object to income transfers to the wealthy they think own the windfarms from lower income consumers and are worried about grid stabilisation with more intermmittent wind power.

Clearly there is a price for making capacity available whatever the fuel. The costs also depend on which power station and fuel type of allowed to run the most, which affects the unit costs of power delivered. I have not had chance yet to check these figures, but would be interested in reactions to them, as they do show high costs and prices which makes the U.K. less competitive and is hard on family budgets.

Lower rates brings in more revenue

I was pleased to see the Cato Institute yesterday wade into the debate about how to get more tax revenue from business. They have studied the OECD figures for tax raised 1980-2020. These show that in the 1980s the leading 22 countries of the world charged an average Corporation Tax rate of 46.2%, and collected 2.4% of GDP from this. In the last decade they chargeD an average rate of 26.7% which yielded 2.9% of GDP. It’s more evidence of the case I have been making that cutting rates can often produce more revenue. The Treasury accept the principle of the Laffer effect, but think the optimum rate for revenue is far higher than it is in practice.

The contest for influence between the EU and the Eurasian Economic area

The EU and Russia are engaged in a contest to attract the countries clustered on the eastern margins of the European continent into their respective spheres of influence and control. They use some similar techniques to attract countries, though the West would argue that Russia also uses force in some cases and localised areas. They offer a customs union, some discounted or favourable access to things countries need, possible membership of an associated defence grouping, and some mutual support. The west offers EU membership of a customs union and trading system through an Association Agreement, which binds a country into a considerable volume of EU law. Russia offers membership of the Eurasian Economic Union for trade and economic collaboration. For defence the West offers to some membership of NATO, whilst Russia proposes her own Collective Security Organisation.

These competing offers or pressures can prove difficult for the buffer states caught between them. They did so in Ukraine. In 2014 protesters took to the streets in pro Western West Ukraine to topple the elected President who was trying to keep Ukraine neutral between the EU and Russia. The pro EU forces thought him too sympathetic to Russia and disliked his refusal to sign an Association Agreement with the EU. He had also been trying to ensure Russian continued use of warm water ports in Crimea which the Russian navy needs especially in winter. The decision of Ukraine to change Presidents and draw closer to the EU was seen as a reversal by Russia and led to their annexation of Crimea, claimed as part of Russia with a population said to be strongly in favour of joining Russia. Russia assumed and resented EU involvement on the side of the opposition forces to the outgoing President. Russia also then released a transcript of a claimed conversation by Victoria Nuland, the US Assistant secretary of State, to show the USA was also involved in seeking a new anti Russian government in Kiev. The USA never confirmed the tape was accurate but they did not rebut it either. It mentioned Vice President Biden as offering support for the actions, without mentioning President Obama. Clearly the Russians harbour a grudge against Biden and Nuland over Ukraine, and want to give them a tough time by providing a show of strength on the Ukrainian eastern border. Nuland is currently nominated to a very senior role in the State department.

There are similar issues of influence and loyalties in Moldova, Armenia, Kazakhstan and Georgia. President Biden and his EU allies have to work out how to avoid further attempted annexations of territory and how far they can go in allowing or containing the spread of Russian influence by other means. President Trump did let Russia gain influence in Syria as he sought to avoid war in that troubled part of the world.

The UK’s internal market and the Northern Ireland Protocol.

The NI Protocol includes clear statements to protect the integrity of the UK internal market, including the principle of the “importance of maintaining the integral place of NI in the UK’s internal market” and “both use best endeavours to facilitate trade between NI and other parts of the UK”. No sensible person can interpret this to mean other clauses can be used to stifle GB/NI trade and place it all under EU rules interpreted with a damaging construction . Nonetheless the EU wishes to enforce clauses relating to the importance of its single market in ways which violate these important safeguards and are against the spirit of the Agreement. The extra powers of the EU over GB/NI trade in the Agreement relate only to goods at risk of moving on to the Republic. These are a small minority of the traded goods, and can be identified and policed by the UK.

The EU may try wrongly to refer any attempt by the UK to control its own internal market between NI and GB to the Joint Committee or the ECJ. The UK asserted its sovereignty by leaving the EU and the EU agreed that our sovereignty would be restored. If they will not agree sensible and proportionate arrangements applying EU rules to just those items which are sent to NI from GB in order to go into the Republic – or over goods sent by NI to the UK for onward despatch to the EU – they are in breach. In that case the UK should assert that we will implement the Agreement by controlling all goods movements that are our internal market items in our way as before, and will do a good job identifying onbound products for the EU where of course we will apply their rules and procedures.

It is completely unacceptable that the EU thinks it can control all trade within a significant portion of the UK, and revert any disagreements with us to its own court for adjudication. That expressly overturns the restoration of sovereignty which both sides saw was the point of Brexit. Some actions of the EU damage legitimate UK internal market trade into Northern Ireland, possibly in the hope that they can substitute EU exports to NI via the land frontier.

The UK should also make clear that there is no such thing as a sea border. The barrier or border they wish to create is on land at Northern Ireland ports and airports so it is a border on the island of Ireland. The UK does not need new physical barriers at the land frontier between the Republic and NI. It has long been a complex border with electronic arrangements to handle excise, VAT and currency differences between the two jurisdictions prior to Brexit. Any post Brexit additional requirements can be handled in a similar way. The UK will of course implement the controls on trade destined for the EU in good faith.