What Gordon should say at the summit

This government’s answer to every problem is to make it dearer and blame someone else. Only the rich can afford to live under Labour.

Today we have the ultimate irony, that they now think the way to deal with food price inflation is to make it dearer, by appealing to the supermarkets to remove the two for three and the one for two offers! You could not write parody better than they write it themselves. It’s the Bogof answer to the struggles of the family budget.

Just look at the list of things that they want to sort out by making them dearer and by interfering with the supermarkets, dedicated to making things cheaper:

1. Some people binge drinking – government answer: cancel cheap drink for everyone at the supermarket, remove promotional offers, and abandon happy hours in the pubs and clubs. Only the rich can then afford lots of drink.
2. Too few roads for too many cars – government answer: congestion charges, so only the rich can drive in central London during the week. This answer will be rolled out elsewhere given half a chance.
3. Too much CO2 from vehicles – government answer: ever higher fuel duties, Vehicle Excise Duty and VAT – so only the rich can drive a car regularly
4. Rising food prices – government answer: get rid of the supermarket cheap offers to reduce consumption! Only the rich can eat well.
5. Too much packaging – government answer: get the supermarkets to charge for bags

Whilst I agree with the general point that governments cannot alone solve all the problems, and what each one of us does is in aggregate important, I do get fed up with a government which never wants to tackle its own contribution to problems, and which sees dearer prices and higher taxes as the way ahead in every case. Part of the reason we are adopting a more inflationary psychology in this country today is because the government is generating so much inflation of its own.

What I would like Gordon Brown to say and do at the Summit goes something like this:

“Today we face the twin problems of energy and food shortage, driving the world prices of both higher. This is damaging the prospects of recovery for the rich western economies trying to overcome the Credit Crunch. It is far worse for the poorer countries, where more will be forced into undernourishment and greater poverty by the surge in prices of these basics. We had planned at this summit to concentrate on the response to global warming and African poverty. We need today to concentrate on African poverty, and to see that any attempt to ease this requires us to grapple more successfully with the world shortages of energy and food than we have managed over the last few years. We cannot solve the African problem unless we can resume faster growth in the West and supply them with better market opportunities for their goods. We cannot resume faster growth in the West unless we can get on top of scarcity and inflation in the prices of the basics. We cannot help Africa by expanding ourselves if we drive the relative prices of the basics so high they cut Africa’s effective income further whilst raising our own overall.

The cases of food and energy are different. The West needs to change its approach to food production and trading dramatically to be fair to the rest of the world. I will be pressing to dismantle the Common Agricultural Policy, which prevents poorer countries selling us as much as they would like at the same time as restricting our domestic output by encouraging set aside and non productive use of land. At current world market prices – and at lower ones than now – we should abandon managed prices and assume world prices within the EU, allow the free movement of overseas produce into our market (subject to health and safety checks) and remove incentives to keep land idle. The USA too needs to tackle its agricultural protection. I will also encourage entrepreneurs and financiers in the UK to look at possible commercial and investment ventures in lower income countries in the agricultural sector.

The West has chosen to levy very high taxes on certain forms of energy, especially penalising its use for road transport whilst favouring it for other kinds of transport and some forms of space heating. When I pressed the Arabs to produce more oil they not unreasonably said I should also look at the UK government’s contribution to high fuel prices. I now do so, and accept that levying more than 60% of the retail price of petrol as tax is too high in current circumstances. I will cut the duty and VAT so I am only collecting this year the budgeted amount. I trust Middle Eastern producers and governments will as a result look favourably on further short term increases in production.

In the medium term many governments of oil producing areas need to encourage more production. I appreciate I have taxed the UK North Sea too highly at the margin, putting off the new exploration and investment we need. I am announcing today cuts in North Sea taxation geared to encourage money into exploration and into increasing production from enhanced recovery in existing fields. I urge governments in other oil provinces from the USA to Russia via the Middle East to do something similar.

Finally, I am conscious that we need to do more to find alternatives to oil based energy for the longer term. I will be going ahead with a much larger programme of permits for renewable and nuclear power in the UK, and will be exploring with industry how we could speed up carbon capture, oil from coal and clean coal technology. The UK has large coal deposits, and we need to find a way of bringing them back into use, meeting modern expectations of cleanliness and working conditions.”

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  1. Letters From A Tory
    Posted July 7, 2008 at 10:52 am | Permalink

    If telling us to eat less is the best Gordon Brown has got, we are in serious trouble. I cannot believe that newspaper editors decided to make his stupid announcement front page news.

  2. Kit
    Posted July 7, 2008 at 10:56 am | Permalink

    I am surprised you did not mention the link between rising food and oil prices – biofuel. Scrap this silly policy and prices will drop.

  3. Neil Craig
    Posted July 7, 2008 at 11:57 am | Permalink

    I have been disappointed by Brown. When he spoke out in favour of Adam Smith I thought he had genuinely accepted the intellectual message but clearly not.

    Most of our problems would be greatly ameliorated or ended if government would just get out of the way & let the invisible hand of the market work.

    We see that 75% of the increase in food prices is because of the bio-fuel scam which. Subsidising this "industry" doesn't actually save oil anyway because growing crops requires fertiliser.

    The high price of electricity & rapidly approaching shortages are because we haven't built nuclear which is half the price of conventional power & 1/4 of windmills. A free market allowed to do so would go nuclear.

    The housing shortage is caused by government not allowing them to be built. Here I must admit Brown still at least sounds more free marketish than the Tories.

    The economy has been buoyed up by a series of bubbles. Economic growth depends on low business taxes (when Brown came in our corporation tax was lower than the EU average now it is higher because the average has dropped), less regulation (we have more) & cheap & plentiful energy (see above).

    I'm not sure about the Rock but either government could have arranged a quick sale, as happened in the US, or I suspect if put into administration the administrators would have done an even quicker one.

    Most of these (food prices, housing, regulation, energy shortage) can be laid squarely at the door of pandering (by all parties) to the Luddites of the "environmentalist" movement who aren't really environmentalist anyway. If you take the above away almost all our economic problems are solved & all of them can be removed not by government doing anything useful but merely by ceasing to do harm.

  4. Acorn
    Posted July 7, 2008 at 2:14 pm | Permalink

    A fine speech John, but a little timid me thinks. You could throw in a couple of quotes from Dr Bill White's swan-song – the departing chief economist at the BIS; in his 78th Annual Report.

    Particularly, chapter VIII of the overview.

    Please can you tell us if there are any signs of the government cutting back on its spending, pending a reduction of its income as the economy slows? Or, should we taxpayers expect to pick up the bill for further government borrowing after the next election?

    BTW. Make sure you have someone in your party working on a new employment law. Check-out what sort of cases are going to Tribunals, that is, which legislation is being abused by trade unions to further their left wing agenda. The public sector is rife with Disability Act claims and Human Rights / Discrimination claims. These are becoming easy pickings for trade unions.

  5. John
    Posted July 7, 2008 at 3:30 pm | Permalink

    Can I add another Government "answer" to a growing problem(or as I call them:nuts to crack a sledgehammer) Childhood obesity: Kevin Brennan's solution is to lock all pupils in at school lunchtimes to stop them going out and buying junk food (this will be happening at my daughter's school from September onwards). Brilliant problem solved, I think not. The children will simply buy junk before and after school.
    Unless more effort is made to educate and promote heathier eating the obesity problem will increase further. You cannot solve these problems by simply locking children up.

  6. mikestallard
    Posted July 7, 2008 at 8:58 pm | Permalink

    I feel, myself, from reading and looking on the TV and also from the record of his behaviour that Mr Brown is a man who is desperately shy. That is why he surrounds himself with much younger people (and many women who obviously adore him).
    I think he is terrified of being disliked and shoved out of the crowd.
    That is why your excellent words will not be heeded, I am afraid. The Europeans who are closest to him have their own ideas and he, if he is to be one of the gang, will have to go along with them.
    The biofuels and climate change will not be discussed at all because they never were discussed at all. That is not how the EU operates. Climate Change is, to them, a fact. Biofuels and renewables are just commonsense. they have a White paper on this, so they know.
    The French are not going to back down over their precious CAP. that's just dreaming.
    He cannot reduce tax either because of the huge debt – well over a £ trillion (3% of GDP) as even the EU admits.
    The only area in which he can make a change is nuclear energy.

  7. Derek
    Posted July 8, 2008 at 12:21 am | Permalink

    I agree with all your points. Two for three and one for two offers sound lucrative also.

  8. William B.
    Posted July 8, 2008 at 4:24 am | Permalink

    With any luck the likely further deterioration in government finances over the next two years will cause the Conservatives to stand back and think again about their current obsession with all things "green".

    Even if one accepts the manmade global warming theory the predicted cost of amelioration is simply breathtaking, and the deeper the government puts the country in debt the more difficult it will be to justify the additional expenditure.

    New research and analysis seems to undermine the theory on a weekly basis and by 2010 one can foresee that the "settled science" will, very publicly, be anything but settled.

    One can but hope that this piece of (as I perceive it) lunacy will be put on the back burner.

  9. simon k
    Posted July 8, 2008 at 6:44 pm | Permalink

    Gordon Brown should say: "I announce my retirement (words left out) where i shall spend my time profitably writing the 'Big Bumper Book of Political Anecdotes'. Surely you must have noticed how I liberally sprinkle political bon mots to such effect in my speeches … as JFK said to Nye Bevin… O Nurse … nurse … i feel one of my turns coming on… As Disraeli said to Palmerstone …"

  10. Puncheon
    Posted July 8, 2008 at 9:05 pm | Permalink

    Great speech, but as long as we are in the EU it will get nowhere. The French and Germans will never, ever let go of the CAP. The biofuels directive was introduced under the Spanish Presidency for two reasons: they wanted a new lucrative crop for their large, but inefficient farming sector, and the Commission wanted a lucrative crop for the even larger and even more inefficient farming sector in Poland, ie Euro-Stalinism. The EU Commission is infested with marxists and mad greens – I recall one crazy Dane who had been fired by his own (at that time Green) Government for being too extreme, and who now holds a senior position in the Energy Directorate of the Commission.

    John – Can you tell me why the UK political class are so obsessed with being in the EU, and whether the scales ever fall from their eyes?

  • About John Redwood

    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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