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

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Tax rises and tax cuts

Someone briefed the press that the Chancellor has asked officials to give him options to cut taxes in 2023 and 2024. He wishes to be seen as a tax cutting Finance Minister. Why does he need officials to tell him? Surely an intelligent  Conservative Chancellor should have his own tax cutting priorities?

 

Why plant such a story. He is clearly defined as a tax raising Chancellor on a large scale.. He has broken the Conservative Manifesto pledge not to increase National Insurance by a damaging and needless rise from next April. The  options mentioned in the press do not include getting that back down again.

He has announced substantial hikes in Corporation tax rates which  will probably mean collecting less revenue than keeping rates low. Treasury  models of future CT revenue  have been regularly wrong, underestimating the boost from lower rates. He should set our rate at the  new world minimum rate he wrongly signed us up to.

He has frozen Income tax allowances in order to drag many more people into higher rate tax over the  next couple of years. This penalises people for getting promoted, gaining new qualifications and working hard. It is an anti levelling up policy. This is not a formal break of the Income Tax promise but it is certainly not keeping rates down for people getting a rise at certain income levels.

If the Chancellor really wants to be a low tax Chancellor he needs to reverse the  tax rises he plans before they bite next year. He can use the excuse that in the first half of this year the deficit came in £50 bn below the idiotic OBR forecast, giving him more  scope than he needs for my proposal. He can also argue  that as the economy slows from here he needs to give it a boost to continue a decent recovery. Everything points to the need for him to act as they brief, to become the tax cutting Chancellor.

The U.K. government aims to make us more dependent on imports

Why can’t government Ministers in key departments see that their idea of decarbonisation  will not cut world CO 2 output but will export jobs and business from us to overseas?

This week  was a double win for the import boosting strategy. Shell announced it does not want to go ahead with a major new oil field off Scotland. This will mean importing  more energy, and making fewer things here that need plenty of energy so importing them as well.

The Business Department is the main driver of shutting down our oil, gas and high energy using businesses. Its wish to price fossil fuel energy out of the market means we struggle to keep steel, ceramics, glass, aluminium and other high energy manufacturing.

Over at Agriculture the Minister seems to regard growing food or rearing animals as bad for the environment. He wants to wild farms and grow wild flowers instead. Presumably  the idea is we should import more of our food.

Let’s have more policies to make and grow things at home which could produce more well paid and worthwhile jobs. The energy shortage this autumn should be a warning that you cannot rely on imports. It is a bad idea to import most things that need fossil fuels whilst stopping us making them at home with less fuel used in transport.

In office and in power?

A Minister is appointed to office. He or she has to work out how to exercise the powers available in  that position. Some fail to do so, just signing the documents and attending the meetings their officials place before them. It takes energy, persistence and understanding for a Minister to impose a new agenda, change things or improve the ways government works.

In a democracy Ministers are rightly circumscribed to prevent potential power going to their ahead and to avoid abuses. There are three main controls on Ministerial actions. Firstly, they must not break UK law. Secondly they have to stick by collective responsibility, requiring other Ministers  support within a department or the wider government to pursue the path they wish. Thirdly, everything they do is subject to the court of public opinion. If they and their policies become too unpopular they may be changed.

Ministers  nonetheless can exercise considerable power for the good. They have powers by virtue of collective control of the massive public sector purse, calling up resources and investments nationally. They have stated powers in extensive Statutes requiring or enabling Ministers to do things, regulate things and supervise the public sector. They appoint a large number of people to run vast areas of the public services.

All too often Ministers who lack clarity and understanding about what would be a good direction for the department they are in are buffeted by events and dependent on inconsistent or unreliable civil service advice. From day one the new Minister is held responsible for everything that goes wrong in their department or section of a department, though often the first they knew of the problem was when it was reported to them as a problem. It is often not the result of their actions and may be a case of officials not carrying out the general aim of their stated policy or even worse breaking the clearly stated intention of a Minister. There are also, of course, occasions where Ministers make poor choices or announce things that are  not going to work, where they are rightly held to blame.

This government needs to review where it wishes to exercise powers and where it wants to make a difference. With a majority of 80 it can change the law where it thinks the law impedes progress. It needs to move on from policy dominated by responding to the pandemic, and being about decarbonisation alone. Levelling up, a faster and stronger recovery and making and growing  more of what we need at home should be priorities that  shape public policy in helpful ways.

Government information

If you wish to govern well you need access to good quality information about public services, budgets and outcomes. If you wish to do the job of holding government to account for its actions and inactions you need access to good quality information to come to fair judgements about how well government is performing and what needs improving.

It is currently difficult to get simple factual information from the civil service machine. I and others have not been given good factual answers when we have asked how much extra the NHS will spend, what it will spend it on, what its manpower budget is for the year ahead and how it will bring down the waiting lists. I have also been refused a factual answer to the simple question how many Chief Executives are there in the various structures of NHS England? I have also received no  answer to the question how much the government is  spending  this year on hotel accommodation for illegal migrants pending processing of their cases.

The briefing from NHS England seems to say that in short term the waiting lists will go up as more people engage with the NHS after the intense period of the pandemic and discover they need treatments and procedures. They have declined to tell us how much extra work they can do for the promised extra money, or how much of the one off costs of Covid can now be spared and redirected.

The Treasury as custodian of the budgets should insist on more detailed plans and link these to reporting  outcomes so that taxpayers see they are getting value for the extra cash being committed.

How will the extra cash for the NHS be spent?

The Department of Health and Social Care has provided the following answer to your written parliamentary question (56363):

Question:
To ask the Secretary of State for Health and Social Care, how much and what proportion of the £36 billion announced by the Government to tackle waiting lists as a result of the covid19 outbreak will be spent on the salaries of additional medical staff. (56363)

Tabled on: 15 October 2021

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

  1. To ask the Secretary of State for Health and Social Care, how many additional nurses and doctors he plans to recruit for his Department’s waiting list initiatives. (56708)
    Tabled on: 15 October 2021

Answer:
Edward Argar:

The Department is working closely with NHS England and NHS Improvement to develop a plan for how that funding will be used, including the recruitment and salaries of additional medical staff.

The answer was submitted on 22 Oct 2021 at 10:44.

Fighting the virus

Yesterday the Commons passed the latest pandemic controls, which had been introduced the previous night. As always the Opposition parties all wanted the current controls and recommended more. The Conservative benches were more divided, with a minority questioning the value and wisdom of these further restrictions on our liberties.

We have now seen that a Labour government in Cardiff and an SNP government in Edinburgh have  not been more successful than England at getting case and hospital rates down more and keeping them down by enforcing stricter regulations for longer. The controls are  now going on around the world against air travel from southern Africa where the latest variant was first detected, only to discover that the new mutant has already broken out and is present in countries around the world well beyond southern Africa. Some think this new mutant is likely to spread more rapidly but to be mild. Let us hope it is not a new lethal killer.

I have raised  the issues of whether the NHS has now improved airflows, introduced more UV filters and cut the chances of cross infection. I have also asked about better treatments. During the debate others raised the question of why past forecasts of rising case numbers and deaths have often been inaccurate, how much virus the masks do actually contain and whether these rules will be lifted before Christmas when Parliament is no longer in session.

The NHS senior management needs to make sure the pace and distribution of more vaccinations is fair and achievable and tell us more about treatments and infection control.

What would turn the world green?

An extract from my book on the green revolution:

Governments this century have taken to meet together to discuss how they can close down a large number of carbon based industries in their jurisdiction and how they can write off the asset values of all those deposits of fossil fuels and of all those businesses that process them or rely on them to power their activities. It is true they meet full of hope that the replacements they offer will unleash an offsetting wave of new investment and jobs. The EU itself as one of the leading architects of the green revolution is preparing programmes and subsidy budgets to tackle left behind communities that used to rely on oil wells and coal mines, on petro chemicals and on traditional industries like cement, steel and ceramics with a high use of carbon based energy. The transition will be difficult and painful for some.

As we have seen , the car and food industries are central to the changes. The existing car makers may not succeed in changing over to making enough of the new electric cars and may watch as rivals emerge with the winning products. Agriculture will take time for many farmers to convert from animal husbandry to the new crops and to tree growing. Many jobs and thousands of traditional factories will be lost as investment hurries into the new fields and as the new jobs are created for those willing to train and change.

Governments tell us there is an avalanche of investment money wanting to go into the revolution. Many of the large quoted companies of the oil and gas and other traditional sectors are keen to sell on some of their fossil fuel assets and move into the new green areas, further impelling valuations of the new upwards. This will assist governments in their quest for the new paradigm.

Meanwhile the questions posed about security of supply by events  in September 2021 will need an answer. Governments need to tell us how they will fill the potential energy gap as we transition to a renewable system, and need to come clean on how they will raise taxes as fossil fuels run down and with that lose the heavy tax revenue they carry.

Above all the joint working of governments and companies needs to reveal the range of product and changes to lifestyles that will appeal and be willingly adopted and paid for by the public. Only if a top down revolution fires the popular imagination and becomes a bottom up revolution will the passage to a green future be possible. To succeed green products need to be cheaper and better than the products they wish to displace..

 

I am delighted to say that Build Back Green is now published and available. You can find it at:

 

High tax rates are damaging

I find it curious that the Chancellor tells us he is a lower tax Chancellor when all he seems to do is put the taxes up. I would like to believe him, as he is right in thinking lower tax rates would be good for growth and  the economy. I will give enthusiastic support when he announces the lower taxes.

Unhelpful briefing implies the higher taxes like  National Insurance, Corporation Tax and frozen Income  tax allowances are some  kind of punishment for the PM wishing to increase spending. The polite on the  record  rationale is they need these rises to get the deficit down post the pandemic spending bulge.

None of this makes any sense. The  Treasury has just had to slash its deficit forecast by £50 bn for this year thanks to the surge in growth, with no tax rises yet imposed. The evidence shows if you keep rates down and go for growth the deficit falls. The danger now is the big tax rises will do the  opposite. They will slow growth going into the next financial year as the rates bite, leading to a higher deficit.

I urge the Chancellor to do what he says he believes. set lower tax rates to boost jobs, incomes and investments.There is nothing stopping him getting more spending control into areas like railways and test and trace where there have been large increases.

Will they build back green?

This is an extract from my latest book Build Back Green

We live in revolutionary times. A movement to harness the state to root carbon out of our lives has now entrenched itself in government as the prevailing policy. Joe Biden’s America joins hands with the European Union in declaring war on carbon dioxide. A clever China agrees in principle and corners the market in many green products, whilst still increasing her output of the unpopular gas.

The protagonists strike an optimistic tone. They assure us the revolution will be carried through with a wide range of new green jobs. They hold out the promise of skilled people running windmill and battery factories, joyously powering the revolution of their dreams. They comment little on the other side, as they effectively sign the redundancy notices of all those in the oil and gas business, in drilling technology, in internal combustion engines, conventional ships, planes and vehicles, gas heating and much else. They have in mind a huge transition from the fossil fuel economy to the green electricity economy. They want us all to dump our diesel and petrol cars, replace our gas boilers, change our diet away from meat, give up foreign holidays and take to our bicycles.

 

The conversion to carbon free has not developed the same momentum and pace yet that the petrol and diesel vehicle enjoyed when they were introduced. The problems include a perception that the newer green products are not as good as the fossil fuel products they wish to replace, and a view that the green items remain too expensive. Where the advent of the car, van and bus widened people’s choices and offered longer range journeys to people who otherwise had to walk, the arrival of the electric car or heat pumps does not offer the consumer any new service or capacity they do not already enjoy. The problem with the green revolution is it comes from the top down. Government are the revolutionaries, not the hordes at the gates of power urging change. Government is trying to persuade or make people change their lifestyles without convincing them they will be better off if they do.

It is a paradox that a revolution should come from the very establishment that is threatened by it. Car companies making a good living selling excellent diesel and petrol cars queue up to decry their old products and promise a new range of electric cars as soon as they can get round to making them. Governments that enjoy huge revenues from oil and gas taxes, vehicle excise and fuel taxes sacrifice them with  abandon, pretending that electric cars or electric heating will come tax free in contrast to their predecessors. The elite who have enjoyed dining out on the finest cuts of meat complain about the number of cattle on grassland. The powerful who have lived a charmed life flitting by first class jet to another five star hotel in a remote country warn us off such a lifestyle. The press delights in uncovering hypocrisy, as some of the staunchest advocates of a new austerity or restraint in lifestyle fall foul of their own recommendations to others to cut the carbon miles.

It is time for a proper debate about this ersatz revolution, these grand plans often drawn up by people who think they should have some kind of exemption from the rules they set. So far the green movement has spawned so many long haul flights for delegates to arrive in air conditioned five start hotels to urge the world to stop international flights and much else that many aspire to. It is now at the point where it has to translate aspirations into practical policies, and vague distant targets into shorter terms targets with bite. It will only do so if it unleashes a range of popular products that are affordable and better than the ones they seek to displace.