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

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Telegraph article on ageing populations

They are at it again. The UK economic establishment drips pessimism on so many fronts as it makes wild and wrong forecasts which deter investors, frighten entrepreneurs and damages confidence needlessly. This time we are told an ageing population means ever rising costs of pensions and healthcare which will require ever rising tax rates. It will, they suggest, eventually prove unaffordable.
¬† ¬† ¬† ¬† As always you should query their understanding of the¬† numbers and doubt their long range predicitons.¬† In a table of 127 countries the UK is well down the list of ageing populations in 43 rd place, close to the USA at 50. The current average age of the UK is 40.6 compared to 48.6 in Japan, 47.8 in Germany and 46 in Hong Kong and Italy. The proportion of the population under 20 is a lowly 15.6% in Hong Kong and 16.1% in Japan compared to 23.2% in the UK. They seem to forget that last year alone the UK invited in 1.2 million new people, many of them young. Quite a lot of more elderly people leave the UK to retire in warmer countries.¬†¬†The UK’s fertility rate, the number of babies per woman, is below replacement, but is considerably higher at 1.63 than Italy at 1.24, Hong Kong at 1.23 and South Korea at 1.11.
        The Uk is better than many advanced countries at raising the retirement age and pension entitlement date as  longevity increases. It is important going forward that we continue to do this so that people pay in for pensions sufficiently to cover the costs of their retirement. The UK public sector has failed to reform its pensions as the private sector did, leaving taxpayers with large bills for index linked pensions that were unfunded or inadequately funded. This should be reformed for new entrants.
         The key to granting realistic  pensions and meeting the bills lies with achieving decent economic growth. With growth tax revenue expends more rapidly than the economy, as every additional  pound of activity is taxed more highly. As individual and company incomes rise so higher rates of income tax are paid and more items attracting VAT are bought. The problem so far this decade is threefold. There has been too little overall growth thanks to high tax rates,  lockdowns and wars. There has been a productivity slump in the public sector with more spending and less output. There has been a big inflation driving up public sector costs and above all the interest burden on the state debt. We cannot go on like this. It is not the fault of any ageing in the population but the result of a public sector whose costs are out of control and whose output has fallen. The UK put u[ corporation tax whilst our neighbour Ireland kept it low. Ireland collects four times as much company tax per head as the UK as a result. What a stupid self inflicted wound.
         Indeed, the elderly are part of the solution, rather than being the main problem. There are many in their 60s and 70s with energy and abilities, and some with savings who can return to the workforce, or set up their own businesses and self employment at times of their choosing, or offer help to their children to free them for more working hours. Many already do this, but there are hundreds of thousands who might like to do more if the tax system was friendlier and the support more easily obtainable. The slump in self employment with a loss of 800,000 self employed since February 2020 includes a lot of older people. If the government changed the IR 35 rules to make it easier to win contracts more might return to do some  jobs for people and for reward. If the VAT threshold for registration was raised more small businesses might expand and offer part time employment to older people. If the rules on childcare and childcare taxation were amended more grandparents might help more to boost the working age workforce.  None of these imply compulsion or conditionality. They offer people better choices and the chance to increase their incomes if they wish.
       The economic establishment has created the problems of high public spending and high borrowings. The Bank forecast inflation of 2%, gave us inflation of 11% and still denies all their money printing had anything to do with it. Now they seem to want a recession as they lurch to too little money and credit. The OBR regularly overstates the deficit by £100 bn or more, usually underestimating tax revenues, yet presumes to tell Chancellors they must raise taxes to tackle the deficit of their imaginings. The very well paid senior management of HS 2  runs with large delays and more than 3 times budget but offer  no explanation of why they were  so wrong and no hope they might be able to put it right. The civil service recruits tens of thousands more staff but cannot explain why its productivity has fallen so far.
       If we run the public sector better, control inflation and use tax cuts to expand work and capacity we can afford decent pensions and heath care. So banish the establishment pessimism, improve its forecasts and  pep up its management.

The Conservative offer

It is good that Conservatives defend people’s right to choose the schools for their children, and support educational charities. It is progress that Conservatives back getting more of our own oil and gas out of the ground instead of importing more. It is welcome that the government will make it more difficult for Councils to pursue their anti driver agendas.

The Prime Minister’s five aims of cutting NHS waiting lists, lowering inflation, getting some growth, bring the deficit down and stopping the small boats are fine.¬† Some of these will need new policies and initiatives to deliver them. What we need this week is more detail on how these important changes will be brought about. If the¬† courts seek to block sensible migration reform then Parliament must be asked to legislate to redirect them.

The government needs to be on the side of the doers, the strivers, the self employed, the small businesses, the savers, the home buyers, the skilled workers as well as helping the drivers. We need to unleash more enterprise to expand our domestic capacity, replace some of those imports, generate more better paid jobs at home and collect more tax revenue from more activity.

To do this we need an early budget. Tax rules and rates that are driving people out of self employment need to be reversed. The VAT threshold that stops many a small business expanding for fear of the heavy compliance costs of VAT and the 20% extra imposition  it entails should be raised. Energy is far too dear and is just getting dearer as OPEC stifles oil output and drives up the prices again. The taxes on it should be brought down as the oil price rises.

The government should lead an ownership revolution, making it easier and more worthwhile for people to venture their savings, to set up and grow businesses, to work for themselves, to buy their own home  and to invest in their local community.

It should promote more domestic supply, to give us more choice, better  value and to cut down on all that CO 2 long distance transport by ship and lorry imposes to bring in so many imports. Why not spend our agricultural grant money on promoting more food growing to cut the food miles, instead of using it to wild what were good farm fields? Why  not  bring down energy taxes so  more energy using industries can stay here and  grow here?

Conservatives need to be the low tax party, the enterprise party, the back Britain party.

The Prime Minister’s speech to conference

The P{rime Minister this week has a great opportunity and a great platform to set out his vision of the future and tell us how Conservatives can make things better and help people improve their lives.

Today I ask what should Rishi Sunak tell the nation this week, from such a good platform?

After 5 years of a Coalition government and 8 years of a Conservative one he must  not trash the past and can  be proud of some achievements. The transformation of school standards, the freedom from the large EU budget contributions and escaping from the running up of big new EU debts, the global reach of an independent UK   strengthening our ties with Australia, New Zealand and the Trans Pacific Partnership are all to be welcomed. Nor must he spend much time on the past, but show he as a new Prime  Minister is looking forward to the huge opportunities ahead for the UK now Brexit and the covid lockdowns are behind us.

He needs to reassure us that the high levels of taxation are temporary, brought on by covid and the Ukraine war. He should point the way to a slimmer, fitter and better public sector after several years of poor productivity and service interruptions from lockdowns and strikes. We need empowered users of public services, and well rewarded public servants with the machine power and data to be more productive. People want  access to doctors and hospital appointments to be easier and quicker, for their children to  have a choice of good schools, for our public transport to be on time and affordable and for our roads to have fewer potholes.

He began the fight back over the last two weeks. Government should not be telling us which  cars and heating systems to buy and then stopping us buying ones they do  not like. It should not be keeping our oil and gas in the ground and importing it from abroad. They should not be raising taxes on strivers, savers and small businesses.

Tomorrow  will offer some ideas on what he can now deliver.

 

Public spending up by £350 bn this year on 2019

The combination of inflation, a productivity collapse and higher interest rates means public spending is up by £350 bn this year compared to 2019.

No wonder taxes are so high. If the public services got their productivity back up to 2019 levels they would cost £30 bn less. Productivity was down 15.2% in 2020, up 7.3% in 2021 and up 1.7% last year.Overall public sector productivity 2019 to end 2022 is down 7.5%.

The BBC fails to represent a wide range of political views and news.

It took my breath away to hear BBC Radio 4 attacking GB News because they do not observe the BBC‚Äôs view of ‚Äú neutrality‚ÄĚ.

Why do the BBC think they reflect the range of ¬†political views in the UK? How can they not see themselves as they are, a voice for the public sector establishment. They seem to be ¬†pro Biden and anti Republican, pro Social and Liberal Democrat groupings and anti ‚Äúpopulist‚ÄĚ parties that sometimes win elections. You see that in their choice of stories, choice of ‚Äú experts‚ÄĚ and line of questions. They are anti Brexit going on and on about trade with the EU as if that was the main point of it, anti lower taxes and a smaller state. Their chosen experts in economics slavishly follow the failed forecasts and models of the OBR and Bank. They find comfort in continuously getting it wrong together.

They seem to believe that every problem can be solved by government action, usually requiring more spending and higher taxes. Yesterday their US political correspondent had to tell us some are raising age issues about  Mr Biden, yet he told us as a fact that Biden is only two and half years older than Trump. He  is 3 years seven months older than Trump. Why not tell the truth and let us decide if either or both are too old to undertake another 4 years in the top job?

They refuse to interview the Bank of England to hold  them accountable for inflation and the collapse of the bond market. They  tell us the Bank is independent and responsible for inflation so  why no tough interviews? They made a huge fuss about bond yields rising under Truss, but far less fuss now they have risen higher. They fail to interview the management and advisers to HS 2 to find out why it is so massively over budget and out of timetable. They do not cross examine top management of the NHS about the poor employee relations and productivity issues. They do not interview  the OBR to explain their hopeless record on forecasting the deficit.

They are the main cheerleaders for an extreme version of progress to net zero for the UK, so we have to rely on imports from countries still burning coal. They decline to examine the problems with carbon accounting or the way in which some of the net zero “solutions” actually increase world CO 2.

They do not regard £24 bn of losses year to date by the Bank of England as news. They fail to report and discuss the government studies showing a collapse of public sector productivity this decade. They do not mention the loss of 800,000 self employed since February 2020. They fail to offer regular critical analyses of policy and politics in France or Germany, seeing the EU as a repository of international values they clearly like.

They rarely interview Conservative thinkers or explore popular Conservative ideas. They prefer to find caricature slots for them or to highlight it when someone makes a mistake in what they say.They read little and  talk to few sources outside a circle of similar thinking establishment figures. They promote every  kind of diversity save diversity of thought.

Ways to cut the UK’s CO 2 output

I have been critical of various government policies that have been done in the name of net zero yet on analysis may well increase the output of world CO 2. I have been generally critical of policies designed to shut down carbon intensive activities in the UK, only to import from abroad.

Knowing how keen the Opposition parties and government are on cutting our CO 2, I thought today I would set out some obvious ways of doing this that the government should consider. In many cases they would also cut public spending and generate more tax revenue, helping tackle  excessive debts and deficits as well.

  1. Reduce the numbers of legal migrants to the UK. One of the biggest causes of extra CO 2 is the need to build homes, surgeries, schools, other public facilities and utility provision for an extra 600,000 people a year on last year’s figures. Once the construction is done then they all turn on their gas central heating and get in their petrol cars. That is a big rise in CO 2.
  2. Extract more gas and oil from the North Sea, recording a substantial CO 2 saving on imports.
  3. Remove the Old Oak Common to Euston leg of HS 2, saving a large amount of CO 2 intensive concrete, steel and construction activity.
  4. Install better insulation and solar roof panels in a wide range of public sector buildings to cut energy use and cost.
  5. Cut back heavily on government trips abroad in person using jet travel, by using on line conference calls  much more. Encourage the COP meetings to be on line as it looks so bad to see so much jet travel and air conditioned hotel use for an anti CO 2 conference.
  6. Encourage the development of synthetic fuels so we can continue to use existing vehicle/plane/plant engines for longer. This will save all the CO 2 involved in scrapping existing  technology and making all new electric versions. Extending useful lives and recycling is crucial to cutting CO 2. Synthetic  fuels can be introduced as soon as they are available by increasing the proportions put into the current fossil fuels.  (E 10 petrol. sustainable aviation fuel)
  7. Do not subsidise more electric cars, heating systems and the rest until a) all our electrical power is low or no  carbon and b) there is enough grid and  cable capacity to do this
  8.  Please get better at carbon accounting

The UK balance of trade

I have worried more about the UK’s continuing balance of trade deficit than its persistent government deficit though both pose problems. Our trade deficit became entrenched during our time in the EU and revolved around a heavy deficit with EU in goods. Now we have left more could be done to replace imports from the EU. Our  trade with the rest of the world has been much better balanced despite big deficits with China and Norway. We are in deficit with far too many EU countries.

In 2022 our deficit in goods was £231 bn. The three largest sources were Germany, Norway and China, accounting for around £40 bn each or a total of £120 bn. We have come far too dependent on importing  energy  from Norway. We import many vehicles, chemicals and machinery from Germany and many goods including our turbines, solar panels and batteries from China.

Getting out more of our own oil and gas is important to cut this deficit. Rosebank yesterday was a good start. Bring on the others I have written and spoken about.

 

What should we teach six formers?

The world of digital data and Artificial Intelligence poses interesting  questions about what young people need to learn and how much they should be able to rely on their personal computers and phones.

Clearly everyone needs to be given a basic training in how computers work and how they are programmed, as so much of modern life requires use of these items. Using AI in teaching and preparing answers is going to happen, so pupils need to be trained to check sources, question what the AI answer says, and to develop an understanding independent of the computer. There will need to be more reliance on exams  rather than coursework to check what young people know for themselves when the computer is turned off.

As an employer I have come to value enthusiasm for the job in hand, an interest in the issues and subject matter of the job, a sensibly critical approach to data and analysis and above all honesty about what the person is doing. A lack of knowledge or training can be remedied, but a lack of interest cannot. Ideally you find someone who has immersed themselves in what you are doing because it is their hobby as well as their future job. People who are really good at things do a lot of them. The more I practice the luckier I get.

Six formers do need to hone their language skills to communicate and to analyse problems . They need maths and statistics to handle data and resolve problems. Above that they can get started on more advanced study for whatever they wish to do as a degree or technical  qualification.

I would not wish to stop young people studying a few subjects in greater depth as preparation for university, or specialising in technical qualifications to set them up for a good job at 18. The A and T levels have a role going forward. Equipping all better in maths and English can be achieved by doing more before 16 and changing the maths and English options for GCSE.