John Redwood's Diary
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The Immigration Minister’s Replies to my Written Parliamentary Questions

I find it bizarre that the government does not have an answer to this question which it can share with the rest of us. Given the high numbers of migrants welcomed into our country in recent years, it has taken considerable investment in social housing, primary and secondary schools, new surgeries and other capacity to accommodate them. The EU last decade suggested a figure of around 250,000 Euro for the set up and capital support costs for new arrivals, given the need for homes and good quality public services.

 

The Home Office has provided the following answer to your written parliamentary question (92052):

Question:
To ask the Secretary of State for the Home Department, if she will make an estimate of the average capital cost of providing (a) housing, (b) school places, (c) health services and (d) transport capacity for a new migrant family. (92052)

Tabled on: 21 November 2022

This question was grouped with the following question(s) for answer:

  1. To ask the Secretary of State for the Home Department, if she will make an estimate of the average cost to the public purse of providing (a) housing, (b) benefits and (c) public service capacity for a new migrant who takes a job below the average wage in their first year in the UK. (92051)
    Tabled on: 21 November 2022

Answer:
Robert Jenrick:

The Home Office does not hold this information.

The answer was submitted on 29 Nov 2022 at 15:46.

 

 

 

 

 

The Chief Secretary to the Treasury’s Replies to my Written Parliamentary Questions

I have confirmation that on Treasury/OBR forecasts debt interest will fall substantially by 2024-5 . They confirm the large increase in tax revenues over the forecast period that they expect. They also confirm that were the economy to grow a bit faster the deficit would fall.

All this reflects their strange definitions, including the capital item of index linking with the revenue item of interest paid. It also reflects a model which regularly exaggerates the deficit when there is bit faster growth, and understates the deficit in slowdown or recession.

It reminds us that the budget strategy revolves around increasing tax revenues to pay for rising expenditure.

 

The has provided the following answer to your written parliamentary question (92043):

Question:
To ask the Chancellor of the Exchequer, what recent estimate he has made of the amount by which the total paid in interest on state debt will change between this year and 2024-5. (92043)

Tabled on: 21 November 2022

This question was grouped with the following question(s) for answer:

  1. To ask the Chancellor of the Exchequer, what estimate he has made of the potential increase in tax revenue between the 2022-23 and 2027-28 financial years. (92044)
    Tabled on: 21 November 2022
  2. To ask the Chancellor of the Exchequer, if he will make an estimate of the amount of extra tax revenue that would be received in financial year 2022-23 if the GDP of the UK were to remain at its present level, by comparison with the amount he expects to receive in that year according to present forecasts. (92048)
    Tabled on: 21 November 2022

Answer:
John Glen:

The Office for Budget Responsibility (OBR) is the UK Government’s independent official forecaster. The OBR’s most recent forecast was published alongside the Autumn Statement on 17 November 2022.

The OBR forecast that tax receipts will increase from £1.0 trillion in 2022-23 to £1.2 trillion in 2027-28, an increase of £196 billion. Debt interest spending (net of the Asset Purchase Facility) is expected to reach £120.4bn for the financial year 2022-23 and fall by £37.9bn to £82.4bn in 2024-25.

The OBR does not regularly produce analysis of tax revenue according to varying paths of GDP. Previous OBR analysis from January 2022 suggests that raising real GDP growth to 2-3% a year over three years, from a base growth forecast of 1.6% per year for those three years, could provide a benefit to the public finances of £10-40 billion through a range of effects across tax and spending.

The answer was submitted on 29 Nov 2022 at 12:04.

 

 

 

T

Muddle in the middle

Sir Keir Starmer wants people to think he is standing up to the Corbyn  left and this will make him ready to govern. He tells Mr Sunak he needs to stand up to his right to woo the elusive middle ground voters.

At the same time, revealing his own self serving intents to deceive, Sir Kier woos the very same so called right wing voters by pretending he now cares about excessive migration and accepts Brexit which he spent three years  fighting after the decision.

The advice to Mr Sunak to ignore the views of those who want to see the Brexit wins and want the government to take control of our borders is bad advice. I do not accept there is a simple right/ left split. If there is the  centre ground has been shifted massively to the left with all the Opposition parties in Parliament wanting higher taxes, more subsidies, price controls, more migrants, compliance with EU rules after departure, aggressive unilateral  pursuit of net zero, Wokeish  cultural attitudes and a belief that more public spending solves all ills.

What Mr Sunak needs to do to raise Conservative poll ratings from their recent extreme lows is to show he does mean business when he says he will bring down migration, end small boat crossings, lower taxes , deliver Brexit wins and restore the unity of the UK internal market. Sir Keir may need to reject the left but Mr Sunak needs to embrace millions of Conservative voters who currently think the government is not Conservative enough

 

Implementing the 2019 Conservative Manifesto

My main advice to the Prime Minister  is to revisit the 2019 Manifesto and complete our delivery of it. We all signed up to it and pledged to do what it offered. There are still things to do to keep our word. Actual Manifesto pledges are in bold type.

There are 3 main headings:

  1. Take back control of our borders . Fewer low skilled migrants. Overall numbers will come down. 

The government needs as a matter of urgency to pass legislation preventing long delays and too many appeals against decisions fairly made. It needs to expedite processing of asylum claims. It needs to end the use of hotels and reduce the pull factors encouraging illegal economic migrants.

It needs to have a less generous system of visas for legal migrants, reducing low paid migration. It should intensify improvements to welfare and work policies so many more people currently not working are in jobs and better off as a result.

We will not allow serious criminals into the country. Cut foreign nationals in prison. 

Just get on with that.

2.  Will not raise rates of National Insurance, Income tax, VAT. Raise National Insurance threshold. Lower energy bills.

The Manifesto pointed to great growth and prosperity from lower or restrained taxes. The government needs to re work a growth package, to include lower VAT on fuel and energy, with a better tax regime for the self employed and small business.

3. Get Brexit done. Take back control of our laws, our money, trade policy. Full control of our fishing waters. Take the whole country out as one United Kingdom. Northern Ireland to enjoy the full economic benefits of Brexit.

The government did get Brexit done but there remains issues concerning Northern Ireland and fishing.

The government needs to complete the Northern Ireland legislation to remove ECJ interference from Northern Ireland and to enforce the parts of the Northern Ireland protocol which clearly state NI is part of the UK internal market so should be free of checks on goods moving from GB to NI. There should be no enforced  regulatory alignment for domestic activities in NI/GB.

The government needs to set out expansion plans for our fishing industry along with proper protections against large scale foreign industrial trawlers and undue quota for overseas vessels.

What the Manifesto did not say

It did not promise a full scale reform of social care. It said “We will seek a cross party consensus for social care reform” which still does not exist.

It did promise net zero by 2050 but did not commit to any particular milestones this Parliament.

My Intervention at the Ministerial Statement on Energy Security

Rt Hon Sir John Redwood MP (Wokingham) (Con): Over the last 48 hours, wind has generated as little as 1% of our electricity, and it was at 2% when I checked this morning, while of course most of the homes we represent use gas for heating. Will the Secretary of State confirm that we need to get on with issuing more production licences for domestic oil and gas, which cuts the carbon dioxide involved and will enable us to keep the lights on, which we cannot do when the wind does not blow?

Grant Shapps, Secretary of State for Business, Energy and Industrial Strategy: My right hon. Friend is characteristically correct that we cannot always rely on a single form of electricity generation. As the French have found out, we cannot always rely on nuclear. I think France has 71 nuclear power stations in its fleet, but about half of them are down at the moment, so it cannot rely only on nuclear. I was discussing this very fact with my opposite number yesterday. I know that my right hon. Friend welcomes the £700 million development approval cash that we have put into the first new nuclear since the 1980s, and he is absolutely right that we need a broad spread of different energy forms to ensure that we can provide the cheap power we require at all times.

Being in office does not mean a Minister is in power – My Article for Conservative Home

Being in office does not mean a Minister is in power. The present government has some attractive policies and ambitions, but it is finding it tough to get them adopted and implemented.

It wants inflation down as does the public but is caught up with the largely false doctrine that the Bank of England is independent. It appears boxed in by the past large mistakes of the Bank.  This is a body owned by the taxpayer, whose Governor is appointed by the government and who reports to both the Chancellor and the Treasury Committee of Parliament. On its website it tells us that its dominant policy of the last 12 years, printing loads of money and buying bonds was one where it was merely acting as the agent of the Treasury. It is true that successive Chancellors from Alastair Darling to Jeremy Hunt signed off all the bond buying and selling and indemnified the Treasury against the entire predictable huge losses they will now make on these bonds they bought so badly. Unfortunately the Bank’s  independence over interest rates led to them being too low for too long and an inflation five times the level set out in their target and the instructions from Parliament and government to them. . Ministers now need to get a grip on the losses and the policy moves to get inflation back to the 2% where government wanted it. The public will blame Ministers more than the Bank for the inflation and for any recession the Bank now wants to correct its past mistakes.

The government  wants migration down but has just presided over a record number of  new arrivals over the last year. The government looks powerless to stop the flow of illegal travellers across the channel most days. Ministers do want the numbers down. They have made that clear to their officials. They have put legislation through to toughen the rules. They have tipped more money into Home Office budgets. They have gone hoarse asking officials to speed up consideration of asylum claims, and asking legal advisers to ensure people cannot defeat a fair decision they are  not an asylum seeker by frequent appeals and legal stunts. Instead of this working Ministers  get briefed against and complained against for being impatient to demand a policy it appears officials do not like, and clever lawyers run rings round the current law designed to stop them. Some combination of new laws, better administration and fewer enticements to come are needed to bring a success. The PM needs to back his Home Secretary to get it done.

It wants more young people to be able to afford a home. I agree. ¬†Controlling numbers of new people coming to live here is the single most important thing the government could do to help. If every year we need to build the equivalent of a city the size of Portsmouth ‚Äď or last year twice the size, a city like Liverpool ‚Äď to house the new arrivals it is no wonder we are short of homes. Most of the new migrants need the lower priced homes and the social housing which young people also need. The government needs to end the cheap labour model based on granting more permits to migrants to come and take low wage jobs. This is cheap for the employer but dear for the taxpayer, who is left with the bill for top up benefits, social housing, extra public service provision and the rest.

It wants to deliver the Brexit it promised to win a decisive victory in 2019 on the slogan of getting Brexit done. To do so it needs to persevere with the Northern Ireland protocol legislation and understand the EU  has  no intention of reaching a  negotiated settlement that is fair. Their  negotiating mandate never changes and does  not allow flexibility. The Unionists will not re join the Assembly all the time EU law has to apply to Northern Ireland and all the time the ECJ rules over them. We need to restore the UK internal market as the Protocol promised but as the EU prevents.

It wants to deliver the Brexit wins that come from being independent, yet so often Ministers are talked out of them . Where are the VAT cuts? Where the generous Enterprise Zones and Freeports? Where the improved or removed EU regulations to allow business to flourish? Where are the plans and finance to rebuild our fishing industry? Where the grants and encouragement to reclaim lost market share by growing more of our own food again as we did before we joined the Common Agricultural Policy? Why can’t Whitehall and Ministers review all EU law and decide what needs keeping over the next year. Each department knows the law concerned.

It wants to level up the country. The Conservative way is to spread the wealth and income more widely, helping those on lower incomes into better jobs and business opportunities. It is not based on increasing tax rates on  the rich and on companies. It is about growing the pie so each person’s slice can be bigger. Conservatism at its best gets out of the way of the many who can lead their own lives and get on in the world if taxes and regulations allow them, whilst helping those in  need. It means helping people develop their abilities, not concentrating on disabilities and restraints. All so often policies to do this are delayed or overwhelmed by more of the high tax high subsidy public sector led approach which has failed over so many years to make lower income places as successful as we wish.

This government does not have long to motivate the official government and quangoland to achieve the greater freedom and prosperity people voted for in 2019. It must show determination and strong friendly persuasion to get change in Whitehall before Whitehall’s resistance helps engineer a  change of government.

Today I will be urging the government to change its planning policy to allow more local control over new development for housing

I am co signing these amendments to seek a change to the Levelling Up Bill. I want a substantial decline in the numbers of migrants coming to the UK so we can offer those that come decent homes and jobs without causing a crisis in provision. The large numbers coming are the main cause of having to build too many homes in places like Wokingham, when we should be helping people already settled here into the jobs available. Slower growth in population is many people’s preferred environmental policy, cutting pressure on farmland and greenfields, lowering CO 2 output, reducing demand for water and energy¬† and reducing tensions on public services.

 

NC21:

 

“Prohibition of mandatory targets and abolition of five-year land supply rule

 

(1) Any housebuilding target for local planning authorities in‚ÄĒ

(a) the National Planning Policy Framework (NPPF),

(b) regulations made under any enactment, or

(c) any planning policy document may only be advisory and not mandatory.

 

(2) Accordingly, such targets should not be taken into account in determining planning applications.

 

(3) The NPPF must not impose an obligation on local planning authorities to ensure that sufficient housing development sites are available over five years or any other given period.‚ÄĚ

 

NC24

 

“Requirements of the National Planning Policy Framework

 

  1. The Secretary of State must ensure that the National Planning Policy Framework (NPPF) is in accordance with subsections (2) to (6).

 

(2) The NPPF must not contain a presumption in favour of sustainable development including where there are no relevant development plan policies, or such policies are out-of-date.

 

  1. The NPPF must provide for the right for persons to object to individual planning applications.

 

(4) The NPPF must provide that the Planning Inspectorate may only recommend that local plans not be adopted if‚ÄĒ

(a) the consequences of that local plan would be detrimental to the objectives of such plans, and

(b) that local plan is markedly and verifiably atypical in comparison to other such plans.

 

(5) The NPPF must permit local planning authorities to impose bans on greenfield development in their areas, other than in exceptional circumstances, where‚ÄĒ

(a) greenfield areas make a marked contribution to the local economy through leisure or tourism, and

(b) where sufficient brownfield land is likely to be available to meet housing needs identified in neighbourhood and local plans.

 

(6) The NPPF must include specific measures designed to support the creation of additional retirement homes, sheltered accommodation for the elderly and facilities for care homes.

(7) This section comes into force at the end of the period of six months beginning on the day on which this Act is passed.‚ÄĚ

 

NC6

 

Clause 83, page 91, line 30, leave out ‚Äúnational development management policy‚ÄĚ and insert ‚Äúdevelopment plan‚ÄĚ

 

 

 

A guide to the way the Bank controls the bond market and interest rates

I have often been asked recently to explain how bonds work and why the market fell this autumn.

The government needs to borrow money for spending in excess of tax revenues. The Treasury (Debt Management Office) issues bonds or gilts.  It borrows money from investors, offering them interest and a repayment date for the loan. People and investment funds buy the amount of these big issues they want. The normal bond called a gilt offers a fixed rate of interest with regular cash payments of interest to the holders. The bond has a repayment date so you can choose to invest for a shorter time period or for many years.

If you change your mind and want to get your money back before the bond repays you can sell it to someone else in the market. If interest rates are unchanged since you bought it you can sell it for what you paid for it. If interest rates have gone up you will sell it at a loss. If you bought a 1% 1 year  bond for £100 when 1 year interest rates were 1% you would sell it for £99 if rates went to 2% immediately. The buyer would want the £1 capital gain on repayment of the £100 as well as the £1 of interest he would receive by buying it at £99. If you had bought a bond that repays in 50 years time or longer you would experience a much bigger loss as the buyer would need a large capital gain to offset 50 years of too little interest. Roughly you would lose half your investment.

The Bank of England exerts huge control over this market. The Bank owns around one third of all the bonds government has issued following its huge bond buying programmes. It fixes the interest rate for short term borrowing and  strongly influences interest rates for longer term borrowing. All the time from March 2020 to end 2021 that it was a big buyer of bonds it drove prices of short and long bonds up. This meant ever lower interest rates available to any investor wanting to buy a bond. Many sold out to the Bank seeing the prices were crazily too high.

In the run up to the Truss growth package both the US Fed and the Bank of England were talking their bond markets down. Both wanted interest rates higher and were threatening further large rises in the rates they set. They got the markets falling. The ten year UK bond rate started to rise from offering an income of 3.1% on September 19th following the Fed.  The Bank of England the day before the Growth Statement on 22 September went further and announced it planned to get rid of £80 bn of bonds over the next year, which was bound to drive prices down further. This created turbulence which forced some pension funds to have to  sell bonds in a hurry to find the cash to cover their losses on so called LDI funds. These funds own more bonds than they can afford to pay for by using  futures. Fast falls in price require them to make payments to cover losses.

It is true the absence of reduced spending plans and of borrowing figures in the Growth Plan led to a further decline in prices after the announcement on 23 rd, but this followed a week of falls in response to the Bank wanting bonds down.More falls followed mainly owing to the LDI panic. The ten year interest rate hit 4.5%.  The Bank showed it controlled the market by sharply reversing the falls with an intervention on 28 th announcing suspension of bond sales. The ten year rate is now where it was on September 19 th before the Bank said wanted rates higher, back at 3.1%.

The two biggest influences causing the falls in bonds up to 28th September were the Bank of England deliberately driving the price of bonds down to raise interest rates, and the LDI/pension funds having to sell bonds as they scrambled to deal with their overcommitted positions. The markets rallied only when the Bank said it wanted rates lower and bond prices up proving its power.

Moderating

When I am busier than usual I will just delete posts with long paras of densely written material and or with links I do not recognise. I do not have time to word count or count multiple postings. It is quicker just to approve them if I can see immediately they do not make potentially false allegations about named people or institutions. I do not censor views from other political perspectives and allow plenty of criticisms of government. I do give myself the same protection as anyone else from personal abuse and the worst false allegations.

Why is the Bank of England so far out of line on bond losses?

Four of the big five Central Banks have undertaken money creation and bond buying ‚Äď the¬† US Fed, the¬† European Central Bank,¬† the Bank of Japan and¬† the Bank of England. The Peoples Bank of China thought it a bad idea. Three of them are sitting on huge losses on the value of their bond portfolios – US, ECB, UK. The same three are also ¬†losing money daily on the gap between the income the bonds earn and the cost of commercial bank reserves placed with them now they have raised interest rates. The capital losses on the bonds are much bigger than the running losses on the interest charges.

           There is no need to accelerate and worsen the large losses by taking them early through market sales of the bonds.   The Bank of Japan with the largest bond portfolio relative to the size of the economy has kept rates at zero so does not have the same problems. It intends to keep rates at zero to avoid these issues. It can still afford to do so as it did not balloon the money supply in the way the other three did causing excessive inflation, though Japanese inflation has reached an unusually high but probably temporary level of 3.7% recently. China has inflation at 2.1% showing that a large energy importer did not need to have inflation , because they had a money target for their Bank and kept it under good control.

 

¬†¬†¬†¬†¬†¬†¬†¬†¬†¬†¬† All three¬† Central banks with losses are sitting on negative capital were they to take the losses. This has led to a divergence in approach. The US Fed has ploughed on with aggressive rate rises and with sales of the bonds into a falling market, taking large loses as a result. The US Treasury refuses to reimburse the Fed for the losses and says it does not matter if the realised bond losses exceed the capital of the Bank, as they will quite soon. They rightly argue a central Bank cannot go bust, as it can always create money to pay its bills. The US Fed will account for the losses in a special way to allow the Central Bank to carry on as if nothing has happened. In contrast the ECB , alarmed by potential losses and the adverse impact of selling bonds into a falling market refuses to sell bonds at a loss. Meanwhile the ECB itself is telling the member states Central Banks that “own‚ÄĚ the ECB they will be responsible for 80% of ¬†the losses made on repayment of bonds by governments as they fall due. The member states central banks will come to their own view of whether to ask for capital¬† grants from their governments or whether to adopt the US approach of just leaving the losses within the accounts of the Central Bank.

 

¬†¬†¬†¬†¬†¬†¬†¬†¬†¬† Only the UK is burdening the Treasury and taxpayers with totally unacceptable losses for no good reason. Money policy does not need sales of bonds. They will run off at a slower pace and with lower overall losses if just held to repayment. There is no need to recapitalise the Bank from tax revenues as this happens. You can follow the Fed. This has always been a policy controlled by the Treasury, with the Bank stating clearly on its website that it carries out the bond buying ‚Äď and therefore selling ‚Äď for the Treasury as agent. It has always needed Chancellor sign off.