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

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The EU is grossly over represented at the G7

If the U.K. thought it should send both the Prime Minister and the Speaker to represent it at the G7 the other states would object that  the U.K. was over represented. If the mighty USA sent both the President and the Majority  leader of the Senate that too would have seemed silly or unfair. Yet if you look  at the photos of the meeting of the G7 you see nine people present. Sure enough the EU had sent not one but two Presidents, the President of the Council and the President of  the Commission.

This absurdity famously spilled over into a row between these same two Presidents in recent negotiations between the EU and Turkey. The President of the Council who I think is technically the senior bagged the one large official chair for the EU rep, only for there to be very public complaints from the President of the Commission. The EU needs to get its act together and decide in each meeting or negotiation which of its 5 Presidents leads the delegation and sits in the one chair they should be awarded like the countries present.

There is at the G7 a more serious and worrying issue. The EU has five of the nine seats, sending three member state Heads and two Presidents. On an issue like vaccines which is a crucial issue at this summit the EU has run the policy for its member states, so on that issue just one EU rep should engage with four independent countries. If these intimate gatherings of a few leaders of powerful countries are to be valuable they should not be slowed down by the EU giving five versions of what they will do on vaccines.

On  issues where member states have some powers but have to work under the legal and policy framework of the EU as in green matters and economic policy it would be helpful if they settled in advance who was in the lead and who could speak for them. There will inevitably be much groupthink and common policy between all 5 so it does not need all 5 present and talking to represent that one viewpoint. Decisions of the  G7are usually by consensus, not vote, but having a majority of the voices could distort the debate and give the EU view an unjustified numerical advantage over the US or U.K. view.

How will governments gain popular buy in for their green revolution?

Yesterday I launched a pamphlet through Politeia on the ever topical green revolution. In it I asked one central question that governments seem reluctant to ask. When will government and the private sector produce the products and services that they regard as green which fly off the shelves and figure on people’s wish lists?

Today practically all of us accept carbon dioxide is a greenhouse gas which will heat the planet if more is produced and  nothing else changes. We also accept that advanced country  governments intend to take people on their railway track to net zero as soon as they can. The track will be signalled and  the trains powered by subsidy, carbon taxes, rules and laws.

Whilst most people tell pollsters they do think the world is warming and something should be done about it, most people do not plan to do anything very much about their own lifestyles anytime soon despite government urging. Most people have no plans to rip out the gas boiler and put in an expensive heat pump. Few want to pay up to get a new electric car, or have done the sums and cannot afford one. Many people still want to fly abroad for a holiday as soon as covid rules allow. Most family diets continue to include dairy  and meat products despite the carbon footprint they create.

Three other panellists had their say. They all spoke only about government policy and large companies. None of them would engage with my simple and crucial question about consumer behaviour. One of them told me the policy answer is a much higher carbon price, presumably to price the lower paid out of  carbon based goods and services. One proposed a big subsidy for electric cars to get more people to buy them. They all seemed to think the prime duty for the revolution rests with governments, and governments just need to keep sharpening the regulatory controls and fiddling with the taxes and subsidies until carbon based activity is taxed out of the system.

They did not wish to pursue the issue of why Germany, a keen green advocate, plans to continue with coal based electricity generation well into the next decade. They did not comment on the way large quoted companies, told to get out of coal, simply sell their coal assets onto someone less exposed to criticism.  They  seemed to think banning all new diesel and petrol cars as early as 2030 would work fine.  So I ask again, where are the iconic must have products of the Green revolution? Where is the  new domestic heating system, the new diet, the new personal transport that has the pulling power of the smartphone, the ipad and the Amazon Prime and Netflix  subscription? For this revolution to take off governments need to engage with the public, not just talk to the elites.

It was not the picture that caused Magdalen College problems

I have no problem with the postgraduate students at Magdalen College Oxford choosing what pictures to place on their wall. Rotating your pictures or finding one you like better is an enjoyable luxury to have.

The problem came with the way the MCR decided to make or allow this to become a political issue and a matter of national debate. Their explanation of why a picture of the Queen was not suitable gained the approval of some and the condemnation of others. A student common room  which needs to allow all its members of whatever view or background to feel valued and respected ended up dividing opinion by being too free with its explanations. Had they said if anyone had bothered to ask they just wanted a change or a different decorative effect there would have been no story. Now monarchists there may feel on edge.

I raise this to frame a wider debate. It is most important our universities themselves are strictly independent of political opinion or intellectual bias. There should not be a collective student view formed by a majority on the role of the Queen and what she symbolises. There should  be no College or university view of which democratic parties are worthy of support.  There can and should be many different student views of politics, with individuals and issue based societies seeking to make converts and expressing their views as they see fit within the law. The university, the College, or the debating society needs to offer platforms for the main strands of thought and democratic politics so young people can hear for themselves and dispute with believers. The danger is universities become too narrow in a collective view, and no platform people who represent legitimate and often popular positions.

Today there is a feeling amongst populists who favour national democracies and more individual freedoms that universities are hostile to them and unwilling to hear their case. As someone who is not a voter for AFD, Lega, the US¬† Republicans or National Rally, who does not support all their views¬† and who keeps out of expressing individual views on foreign elections, I¬† nonetheless am uneasy if UK universities think representatives of these parties and¬† viewpoints should be excluded from the global debate. A majority of students may well have disliked President Trump and disapproved of some of his views, but they should be willing to hear the case of¬† the supporters of someone who commanded millions of votes in the world’s most powerful democracy. Currently in the EU some anti EU parties are front runners in opinion polls. University people¬† need to understand why and to hear the arguments, even if they do stay resolutely in favour of the EU project.

Democracy thrives on lively exchanges of varied viewpoints and on free votes to determine who has made the most successful popular appeal. In an age of scepticism about a ruling elite of rich business people, powerful officials and a gilded group of establishment politicians Universities need to understand both their aims and why so many people disagree with their consensus.

Recovery is underway

       With Brexit behind us and Covid calmed by a comprehensive vaccination programme  which most people welcomed, the U.K. economy is set to grow quickly from here. The U.K. is forecast by international bodies to grow faster this year than the EU. Sterling has risen against the dollar, the Euro and the yen following our exit from the EU.

        The U.K. authorities have provided a much smaller monetary and fiscal stimulus than the USA relative to the size of the economy. Money growth has been running at half the US level. The Treasury in the U.K. is planning big cuts in the deficit in future years whilst the US President is planning two more $2trillion packages of extra  spending. The Congress may water that down, as some are becoming alarmed by the scale and duration of the planned debt build up and by the inflationary forces unleashed by  the twin stimuli.

In the U.K. the Bank of England needs to avoid premature tightening before recovery is well set. The Treasury needs to speed up ending the special expenditures on companies to cushion the blows of anti pandemic policy, whilst getting us back to work promptly from June 21. Furlough needs to end. Many of the jobs will be there again. Where jobs are lost there will be plenty of new job opportunities as the whole economy opens up and employers seek people to get things done and the orders dispatched.

There are already too many shortages needing more recruitment and more investment. We are short of cement and semiconductors, of HGV drivers and of chefs, of electricity capacity and of home grown fruit and vegetables. I have been asking Ministers to work with business to tackle these shortages urgently, to cut inflationary pressures and create more better paid jobs.

 

There are plenty of opportunities for business creation and expansion as the U.K. embarks on its most rapid and substantial recovery ever recorded. Government needs to make sure the public sector responds by cutting tax rates, granting necessary permissions, negotiating good trade deals and spending its budgets wisely using U.K. suppliers wherever possible.

World taxation Is a bad idea

The G7 Finance Ministers and Central Bankers claimed a breakthrough in moving to a world based system of company taxation. President Biden wanted to set a minimum tax rate of 21% worldwide, and find a way of preventing some global companies booking too much income to low tax countries. He settled for a a 15% proposed minimum rate, and a complex outline over the allocation of profit. The Communique offers “market countries awarded taxing rights on at least 20% of profit exceeding a 10% margin for the largest and most profitable enterprises”.

These so called twin pillars of policy were important to get all the G7 on board. The USA seeks the abolition of the recently imposed digital turnover taxes in the UK, France and elsewhere as a trade off for the promise of some transfer of profit to tax in countries where the digital giants trade substantially. Either way the USA will be one of the major beneficiaries. Many of the large global digital giants are US corporations who have in the past kept substantial business offshore in lower taxed jurisdictions. President Trump offered favourable terms to get some of the cash repatriated. The final agreement was a much watered down version of the original US proposal.

It needed to be watered down as countries understandably value independence in seeking to tax companies. There is no world government with democratic accountability or authority that can set a world tax rate for business and distribute the revenues between countries to a formula. The EU has been trying to get there by small steps, but has found it is much easier to invent a new specialist environmental EU tax that applies to all than to reform a tax like corporation tax so that it becomes a uniform levy. The EU has decided to allow Ireland to be a tax haven with a 12.5% corporation tax rate, even though many EU member states are unhappy about that status.

I think tax competition has a lot to recommend it so there is some countervailing force to the remorseless pressure to tax more based on the theory that higher rates produces more revenue. In the case of business taxes a lower rate often raises the amount of money collected, acting as an incentive to invest, raising the prospective returns and leaving more cash in the business to pay for it. Lower rates can produce more income for shareholders and governments.

This proposal looks difficult to enforce. The 15% minimum is not too damaging, and is still below the UK rate so it does not currently constrain us. There will need to be some good drafting to decide how turnover and profit allocation will work within a multinational profitable company. So far the general language allows various interpretations.

Assuming the G7 leaders endorse this recommendation, it then needs to be worked up further and sold to the G20. China and Russia may have other ideas. If they can be accommodated then it needs the support of the whole OECD. The proposal is vulnerable to some countries seeing an opportunity to set a low corporation tax rate or to accept the minimum rate but offer lots of offsets and concessions to try to remain or gain status as a good tax location for substantial booking of business.

Helping migrants in the UK is a form of overseas aid

The UK has welcomed a large number of migrants in recent years. When considering our overseas aid budget, people should also put into the balance the large numbers of people from dangerous and low income countries we help by supporting them on arrival and then granting them rights to stay and to work. I have always thought the costs of housing and setting up the facilities for migrants should be properly attributed to the overseas aid budget. The international definition of official development assistance allows a country to include some money spent in the donor country helping people from a recipient country.
The EU once estimated that a migrant into the EU received the equivalent of 250,000 Euros in capital as they received a home, access to health care, education, transport and all the other public services provided free at the point of use for them or subsidised. There is no reason to suppose the UK current offer is below this indicative figure. Many migrants are housed in London and other locations where housing is dear. Whilst establishing their right to remain and to work the migrant receives board as well as lodging from the state. Once in work they receive top up benefits if their employment is at least in the first instance lower paid.
Given the number of people coming to the UK as refugees or migrants to live and work, there is a direct cash cost on the state to provide many more social homes, and additional school places and healthcare capacity.

Overseas Aid

I am glad the UK spends money on ships and equipment that go to assist countries facing flood and tempest. I am in admiration of our medics and armed forces when they sometimes go to help treat and contain dangerous infectious diseases abroad. I am pleased the UK as one of the leading and richest countries of the world helps alleviate and tackle poverty in the developing nations.

The UK should set out what it can do and what it is good at, and should be generous where need arises and where we have the means to help. I want to see reform of our budgets and our activities in these areas so we achieve more with better value for taxpayers.

I went along with the Conservative leaderships’ support for hitting the 0.7% target of GDP, though I have misgivings about such targets. I do not think we should commit to spend a certain proportion of a fluctuating and usually growing number. We should decide on spending on a case by case basis and against our general budget background. We do not pledge to spend a fixed proportion of GDP on health or education or policing, but look at those budgets in the light of needs and costs.

Labour will doubtless oppose such a change. They averaged under 0.4% of GDP on overseas aid in their period in government 1997-2010, despite pretending to support the international commitment to spend around twice as much as they usually managed. Others will join them in opposition. I would suggest it would be best to lobby the EU and its members, who consistently spend well below our spend levels and well below the international target, and will still do so next year. What matters more to me is what each country achieves and how ready it is to go the help of those in immediate need, where the UK rightly excels.

Last year the UK again spent 0.7% or £15bn on overseas aid. £10bn of this was spent on projects and activities we chose along with the recipient country in so called bilateral aid. The balance of £5bn was spent by our giving the money to the EU and other multinational bodies to spend as they saw fit in so called multilateral aid. As we leave the EU it is a good time to bring our overseas aid spending back in house and decide on how we can best help those in need. We should also look at the full support we give, which goes wider than the items allowed under international conventions to be called Overseas Aid. Some of our Defence expenditure is aid, being used to help bring peace to strife torn countries and providing assets to tackle disasters.

I want us to identify the areas where we have most expertise and can do most to help. Maybe the UK should specialise in a few large areas like the provision of clean water to each home, the provision of primary education to all girls as well as boys in poor countries and the roll out of programmes to tackle infectious diseases.

We should follow certain guidelines. The money should for preference be spent in the country we are trying to help, using as much local labour and skills as possible. Where we need advanced country inputs these should usually come from people and companies based in the UK. We should work on the principle that it is better to teach a hungry person to fish and farm for themselves rather than sending them food parcels. The aim is to get countries out of poverty, not into dependence. More trade is often of more help than more aid.

It will be great to see us achieve more by concentrating our efforts in areas where we have most to offer, harnessing public and private sectors together, and taking control with more programmes we run for the benefit of the poorer countries.

Time for Defra to use our freedoms from the EU

The Defra website is more of a history lesson than a celebration of new opportunities and freedoms for farmers. Instead of brimming over with the changes they want to make to our fishing and farming policies now we can control them, it faithfully records the EU laws, rules and old schemes that dominated us for so long. It tells us there is a Countryside Productivity scheme offering only small grants funded by the EU, but goes on to say it is closed. It tells us there were forestry,Water, waste and food productivity schemes but these are also all closed.
It is true it does also now set out more recent U.K. schemes of support but most of these are for environmental improvements. Some of its latest initiatives in wilding and nature look like UK versions of work being done in the EU. Some are worthwhile but the overall impression given is the Department wants less land available for food production and has not yet got round to offering positive support for better farming to boost our output.

You could of course say why not leave it all to the market? There are two reasons. The first is other countries do not , so the UK has to compete under the EU free trade arrangements with farms on the continent that do get subsidies and other support. The second is if the Department itself is offering cash incentives not to farm on potential farmland it may need to level the playing field by offering suitable help for good farming on that land. It is all very well to say wilding cuts the carbon output on the land wilded, but if we then have to transport food into the UK from hundreds or even thousands of miles away, grown and produced in carbon generating ways, we have done nothing to save the planet and much to damage the UK economy.

The government has promised new schemes to stimulate innovation, investment and promotion of more U.K. food. I wish it would get on with them. We need to promote our farms and food now. There is no good reason for delay.

Helping the jobs market

A BBC journalist remarked on how a pro Brexit entrepreneur is now lobbying for more work permits for people from the EU as if this is some contradiction or denial of Brexit. They still do not get it. Brexit was about taking back control. We voted for Brexit so a wide range of decisions including the decision of who we invited to work here is taken in future in the U.K. by Ministers and MPs who can be thrown out at the next election if they get things wrong. We did not vote to ban all economic migrants to the U.K., though many did vote to reduce the large flows we were experiencing under freedom of movement.It was the EU’s demand that all arriving EU citizens had access to benefits on arrival that David Cameron tried to change and failed, illustrating how little influence we had on EU policy.

The way the U.K. came to depend on hundreds of thousands of low paid workers from the EU in a number of sectors was not a good model for them or us. We need going forward to do more to raise productivity by investing in people and in machine and computer support to raise wages and reduce our need for cheap unskilled Labour. The so called cheap labour imposed strains on housing, welfare and public service budgets whilst not guaranteeing a good lifestyle to the migrants. We can do better by welcoming fewer economic migrants, attracting a higher proportion with skills, and doing more to promote higher productivity and wages.

There is also a regularly repeated need to have more control over illegal economic migrants. The government has promised new legislation to allow it to take tougher action against the scandal of people trafficking and the dangerous boat services across the Channel. I do not doubt the Home Secretary’s wish to end this Nasty trade. Given the decisions in the courts it will take a change of law to bring this under some control.

I respond to the Farming Today challenge

On Tuesday Morning BBC’s Farming Today asked listeners to send in ideas for future programmes. They certainly need some to vary their diet of stories on climate change, the dangers of free trade and the need to wild the countryside. We have had five years of anti Brexit and climate change dominance.

So here’s some of the missing stories and viewpoints they can catch up on

1 The dangers of free trade with the EU to our farms. Why did we lose so much market share to the EU as members of the single market and how can we correct now?
2. The way we can raise animal welfare standards now out of the EU, and how we can enforce higher standards on EU imports
3. The scope for a much bigger timber industry in the U.K. as the plans for planting so many more trees are rolled out
4. Why DEFRA has still not set out its subsidy and support packages for more food growing and farm productivity improvements.How can we expand our food production?
5.When will the U.K. ban the large industrial foreign supertrawlers overfishing our waters and damaging the marine environment?
6. Will the U.K. regulators and water industry put in more reservoir capacity so farms in future will have access to irrigation water in dry spells?
7.As there is growing demand for U.K. fruit and veg What more needs to be done to expand the U.K. industry. Can we reverse the damage done by past EU grants to grub up U.K. orchards.
8. An evaluation of training, wages and career prospects in farming to nurture more home talent and increase the number of better paid jobs.
9. An assessment of damage to dairy in the U.K. from keeping U.K. short of milk quota for many years.
10. Opportunities to reclaim land for agricultural use through better drainage, water management, and sea defences.

Yesterday I was relieved to learn from this programme’s expert witness on landslips in the Brecon Beacons indicating climate change that landslips are the “canary in the mine” and the canary is “singing loudly” at the moment. That is a relief, so no undue landslips then. The canary in the mine did not sing but passed out if dangerous carbon monoxide gas was present. How do the BBC find such well informed experts?