Maastricht should no longer rule our economy

Since 2008 the Maastricht EU Treaty rule that state debt should not exceed 60% of GDP has governed our economic policy. It did not do so before Labour’s big build up of debt because we were below the ceiling.

Three Chancellors of very different views and ambitions, Messrs Darling, Osborne and Hammond all accepted Treasury and legal advice that state debt as a percentage of GDP had to drive policy. They battled first to get the annual deficit down to the Treaty ceiling of 3%, and then took it down more to get debt as proportion of GDP down.

Pro EU people often argue the UK did not have to do this because we were not Euro members. This is untrue. It is true we did not face fines for non compliance, but we were bound by Treaty rules and the UK state always accepted the discipline. Every year Parliament held a debate on our compliance. Every Red Book and OBR report included a report on progress with hitting the debt targets as a central part of economic policy.

It was bizarre to hear Opposition MPs condemn the budget stance as austere whilst insisting we stayed in the EU and obeyed its Treaties, as the Maastricht rules were at the centre of the policy.

Now we are out the new PM and Chancellor are right to expunge the state debt rule from our economic policy. Current levels of UK state debt are not too high. The UK can borrow at 0.6% for ten years, showing markets have no worries about debt levels. They supply affordable debt.

The Maastricht rules did not allow us to use the true figures of state indebtedness which should be net of the one quarter of outstanding state debt which the state has bought in and owes to itself. Adjusted for this our debt to GDP ratio is around 67%. This is low by international standards, well below Japan, Italy, Germany, France etc. The Maastricht rules are right to make Euro area states include State debt the ECB has bought in, because of course a Euro state does still owe that debt to an outside party, the ECB. The UK owes money to the Bank of England which it wholly owns.

UK Economic policy should be geared to growth and low inflation, not to state debt levels as the main target.

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  1. Mark B
    Posted February 18, 2020 at 6:03 am | Permalink

    Good morning

    There is nothing wrong with debt, so long as you can meet the payments. What worries me is governments going all Zimbabwe. Borrowing excessive amounts and printing money like there is no tomorrow.

    I make no secret that I am a strong believer of sound money and good finances. I do not mind governments borrowing for important infrastructure that benefits all, such as power stations. But this government will borrow and waste on pointless white elephant projects which will never make a penny profit and only benefit a few. They will also continue to be a drain as they will require subsidy to keep going.

    What checks or balanced do we, the electorate, have to control needless government largess ?

    • Nig l
      Posted February 18, 2020 at 6:47 am | Permalink

      Good common sense stuff but as ever, you are missing the politics.

      • Hope
        Posted February 18, 2020 at 1:30 pm | Permalink

        JR, we are not “out” as you claim, that is meleading at best, most likely untruthful spin. You made it clear in previous blogs, before you capitulated, that Mayhab’s servitude plan would leave the U.K. as a rule taker without a voice etc. i.e. Vassalage.

        At present, as we stand today, there is no agreement under article 50 for our future relationship with the EU. Our time in Vassalage has an extendable clause to it as well! Your govt has utterly failed the public to leave the EU by 29/03/2019- and subsequent dates. We are leaving on the terms set to date to save the Tory party not what is best for the country. Who in their right mind would voluntarily agree vassalage!

        You appear out of touch with other writers, i.e. Con Woman and others questioning what on earth Johnson is thinking by his left wing spending and virtue signaling policies, including his pandering comments about Extinction Rebellion allowed to wanton commit crime.

        • NickC
          Posted February 18, 2020 at 3:27 pm | Permalink

          Hope, Regrettably you are correct. And regrettably JR is upset when the truth is told that we have not had Brexit. The UK is still controlled by the EU. That is Remain.

          I would trust Boris more to actually Brexit by the end of this year, if he did not keep making such lousy calls. From Huawei, to backsliding on immigration, to lack of warships, to the HS2 white elephant, to the truly potty electric cars with no fuel, to the bridge gift to Sinn Fein, his decisions are all of a piece.

        • L Jones
          Posted February 18, 2020 at 9:09 pm | Permalink

          Well said, Hope. We are being bamboozled good and proper.
          How come May’s WA was so bad they voted against it but now it’s so good it has to be signed up to? It’s been generally agreed that BJ’s new/old/new/old WA is still May’s WA in all but a tweak or two. May’s WA ”abandoned” as ”dead” ( I don’t think so.
          We are being cheated. The 31st January was merely a sop. We’re not ”out”. Our opponents in the EU have been give a year to regroup and think up more spiteful punishments in an attempt to keep us ”in”.

        • Otto
          Posted February 19, 2020 at 12:42 pm | Permalink

          JR you wrote – ‘It was bizarre to hear Opposition MPs condemn the budget stance as austere whilst insisting we stayed in the EU and obeyed its Treaties, as the Maastricht rules were at the centre of the policy.’

          This would be the obvious thing to say but I never heard you or anyone else come out with this in the last 3 years. Am I wrong – can you give links showing you did?

          Reply I have raised it before but cannot remember anyone else doing so.Probably on this site if you use Search

    • Dave Andrews
      Posted February 18, 2020 at 7:18 am | Permalink

      There is much wrong with debt, which currently costs the taxpayer half an HS2 each year to service.
      How about the generation that voted in spending governments pay off the National Debt and leave the next generation with a clean slate?
      We take a poor view of other countries where a person’s debt legally passes to their children, but that’s exactly what we do here.

    • Peter Wood
      Posted February 18, 2020 at 7:32 am | Permalink

      Tp pick up on your Zimbabwe connection, our host suggests we should ‘net off’ the BoE held government bonds. Lets understand this; the BoE purchased Gilts with ‘created’ money, that the Government spent on .. we don’t know exactly, but day to day expenses and some national assets. so there is more cash in the system, M 0. If the Government and BoE agreed to eliminate those Gilts, then the BoE has, simply, printed money that may or may not have increased the overall assets of the country, with the remaining being distributed over all other assets, along with all other money, thereby causing inflation.
      Zimbabwe here we come….

    • Martin in Cardiff
      Posted February 18, 2020 at 7:36 am | Permalink

      In answer to your last question, only General Elections, but these are won or lost over media-engendered sentiment on divisive and emotive issues, e.g. “national pride”, rather than on good sense on material matters, as we have just seen.

      • NickC
        Posted February 18, 2020 at 3:31 pm | Permalink

        Martin, Why is “national pride” less valid than “material matters”? You don’t get to specify what I am allowed to vote on. Thankfully. Up to present anyway.

      • steve
        Posted February 18, 2020 at 9:01 pm | Permalink


        “national pride”, rather than on good sense on material matters, as we have just seen. ”

        Martin, I find it highly unusual that a self respecting Welshman does not understand such virtue.

        In my experience Welsh people are immensely proud and patriotic, so why you suggest materialism is more important than national pride does seem odd, but probably explains why you voted remain.

        • Martin in Cardiff
          Posted February 19, 2020 at 7:12 am | Permalink

          Then please define it.

          Different people might take pride in quite diverse aspects of their nation.

          For some it would be in its scientists such as Newton, and its contribution to Enlightenment values. For others, it would be in the nation’s history of dominating and of crushing other nationalities, thankfully now at an end.

          These are quite opposing entities, and without more, the term is meaningless.

          • Martin in Cardiff
            Posted February 19, 2020 at 7:13 am | Permalink

            Where did I say that I was Welsh?

            You assume, and assume, and assume – it has not served you well I surmise.

    • BeebTax
      Posted February 18, 2020 at 7:54 am | Permalink

      As to your last para, it seems that we have none at at all. Whenever one group of people is able to freely spend others’ money, “for the greater good”, the result is wastage. It happens from Parish Council level to National government level.

      Bring in referendums allowing taxpayers to delay major infrastructure projects until the next election.

      • Martin in Cardiff
        Posted February 18, 2020 at 12:31 pm | Permalink

        To what authority is your request addressed, and why should they pay any heed to it?

        You seemed quite content to vote for a party with no intention of doing anything remotely like that.

        • NickC
          Posted February 18, 2020 at 3:35 pm | Permalink

          Martin, Afraid of democracy? Too “populist” for you? Or is it that you think other people’s ‘baser instincts’ are not up to your self-importance, hmmm?

          • Martin in Cardiff
            Posted February 19, 2020 at 9:51 am | Permalink

            So you don’t answer my simple question either.

    • Stred
      Posted February 18, 2020 at 8:12 am | Permalink

      At 0.6% it should be possible to finance the building of replacement and new nuclear power stations on existing sites to provide reliable electricity to run the cars and heat the homes that we are being forced to own, but relying on windmills and carbon capture, neither of which are likely to work.
      Meanwhile, the vehicle industry is being trashed by taxes and bans. There should be a good business in reconditioned engines for old bangers in ten years time.

      • Alan Jutson
        Posted February 18, 2020 at 2:16 pm | Permalink


        There may well indeed be good business in reconditioned engines but rest assured that will never happen, as the older vehicle will be driven out of circulation by punitive annual road taxes, which will be bought in for all but so called zero emission vehicles, mark my words.

        Thus the conundrum that many purchasers of new vehicles will find out to their cost within approximately 5 years time, when the second hand value of most vehicles purchased from today onwards will be worth next to Zero.
        Depreciation will be an ever bigger reason not to purchase a brand new vehicle, which does not fit in with the political correctness think at the time.

        • Stred
          Posted February 19, 2020 at 8:12 am | Permalink

          Alan. They are planning for only 15 million cars and those of us with no drive and no money for the batteries will have to take the bus. I’ll be up the chimney by then but the snowflakes will be happy to bike to work in a vegetarian cafe or NGO telling the Chinese how to run their lives.

    • Lifelogic
      Posted February 18, 2020 at 9:52 am | Permalink

      “so long as you can meet the payments” – and are doing something sensible with the money! Usually government are not doing this at all. They do not meet the payments tax payers do.

    • Bob
      Posted February 18, 2020 at 10:04 am | Permalink

      “this government will borrow and waste on pointless white elephant projects which will never make a penny profit and only benefit a few. “

      It’s not just the Tories, Labour are exactly the same.
      HS2 will probably end up being sold off for scrap value to some opportunist. In the meantime a lot of people will have made a tidy sum for themselves out of this taxpayer funded project. They should change the name of it to “The Gravy Train”.

  2. Nig l
    Posted February 18, 2020 at 6:45 am | Permalink

    Good speech by David Frost last night to the EU. Absolutely hit the nail on the head why I.and people I know, voted as we did. Gave me a lot of hope.

    • Andy
      Posted February 18, 2020 at 5:05 pm | Permalink

      It was a confused bunch of twaddle. Most people voted leave because of immigration.

      • Edward2
        Posted February 18, 2020 at 7:05 pm | Permalink

        Not according to investigations by pollsters Andy.
        It was about sovereignty and independence followed by control of our laws money and borders.
        But I realise you have to keep playing the race card every few days.

      • steve
        Posted February 18, 2020 at 8:49 pm | Permalink


        No, most people who voted leave did so because they’ve had enough of the ungrateful EU.

      • L Jones
        Posted February 18, 2020 at 9:17 pm | Permalink

        Andy – since you say you didn’t vote ‘leave’ how do you know what others had in mind?
        My choice of ‘leave’ had very little to do with immigration – I come from a mixed race family. We all had very different reasons for voting ‘leave’. You display very little perspicacity, have very limited views – so perhaps you should read something other than Facebook. Clicking ”like” doesn’t make you well-informed.

  3. agricola
    Posted February 18, 2020 at 6:47 am | Permalink

    I do not know what the level of state debt should ideally be or whether it should include money it has borrowed from the BoE/Itself. I do however know that were I to have debt it could not include such devices. Were I to manufacture money it would be deemed to be fraud.

    The essential point to make clear is that we are leaving behind all the treaties of the EU to become a sovereign nation once more. This appears to have been made abundently clear in our opening statement of intent to the EU. Any future trade agreement has to recognise this. If not we walk away. The negotiation should be about trade and trade alone. It is not about whose courts have ultimate jurisdiction or about who can fish in UK waters. The extent and method of EU fishing in UK waters is for the UK alone to decide, and doing it on an annual basis, as do Norway and Iceland seems a sensible way forward.

    From noises emanating from Brussels it would appear that they have not got their heads around UK sovereignty and will need to be reminded from time to time of exactly what it means. They need this lesson in democracy. Holding half the negotiotion in London would seem a good first step.

    • agricola
      Posted February 18, 2020 at 5:19 pm | Permalink

      Posted at 06.47, still awaiting moderation at 17.18. Why?

  4. Ian Wragg
    Posted February 18, 2020 at 6:50 am | Permalink

    Why should the government finance power stations when the profits are sent overseas.
    Foreign government owned companies build them and the taxpayer takes all the risk.

    • Stred
      Posted February 18, 2020 at 1:23 pm | Permalink

      If government borrowed to finance power stations, they would be publicly owned. The contract would be put out to tender on a specification and the controls could be British. Rolls Royce has been used by the Finns when buying Russian reactors. We should study their methods, which are more economical than negotiation with one contractor and ending up with the most expensive deal in the world.

      • Ian Wragg
        Posted February 18, 2020 at 2:14 pm | Permalink

        Under EU rules we would have to open the bidding process to the EU.
        Our civil serpents would no doubt choose an EU company to burnish their pro EU credentials.
        I wholly agree with you that UK companies should build and operate them it could revitalize our steam turbine building industry.

        • Stred
          Posted February 19, 2020 at 8:02 am | Permalink

          We would put the building of the reactors out to tender inviting all foreign builders.This would cut the cost provided that we accepted their safety approval after checking. The EU couldn’t stop us using British controls.

  5. Alan Jutson
    Posted February 18, 2020 at 7:12 am | Permalink

    Increasing borrowing just to pay bills, is very different to capital investment which will provide some sort of a return.

    It seems our Governments (of all colours) over many decades, still believe that all of their spending should be regarded as an investment no matter what it went on !.

    Hence there is the problem.

    • NickC
      Posted February 18, 2020 at 3:40 pm | Permalink

      Alan Jutson, Indeed. And borrowing for capital investment which politicians think will provide a return, but actually won’t, is just as bad as borrowing for current consumption. HS2, take a bow.

  6. Richard1
    Posted February 18, 2020 at 7:19 am | Permalink

    It very odd how few people understand the difference between gross and net debt. Perhaps the reason this is obscured is as you say that for a eurozone country there’s no distinction. It will be worth the Scottish Conservatives pointing out to voters in Scotland the years of radical austerity which will be required for an independent Scotland to comply with these EU rules.

    Meanwhile not much commentary on the bizarre statement by the French foreign minister that the EU and UK will “rip each other apart”. Let us assure our friends and partners that we have no desire to rip them apart, and remind them in a friendly way that they have no power to rip us apart, and that if it seems that is their objective we will say thanks but no thanks, we will go to an Australia type deal with them. Imagine the outrage if eg President Trump had used such language about a friendly allied country! What an utter buffoon.

    • L Jones
      Posted February 18, 2020 at 9:22 pm | Permalink

      ”An Australian type deal”?
      Why not no deal at all – our very own type?

  7. Lifelogic
    Posted February 18, 2020 at 7:30 am | Permalink

    Borrowing to invest wisely in things that produce real and healthy returns that are much best that the interest you have to pay is very sensible.

    What government invariably do is tax borrow and waste, as we see with HS2, the renewables lunacy, electric cars, big bloated government, Hinckley C …. Not only this they then repay the loan with further taxation ) as these “investments” do not fully pay back so taking money of people who would have invested it better anyway on average. Much of this investment not only produces no return it does positive damage.

    It would be good if businesses could borrow almost this cheaply too. But the uncompetitive rip off banks are often in the middle. Sort out some real competition in banking please. 40% and 78% overdraft and well secured business loans at base plus 3%+ min and a large fee are not remotely competitive.

    • Lifelogic
      Posted February 18, 2020 at 9:01 am | Permalink

      much better!

  8. villaking
    Posted February 18, 2020 at 7:31 am | Permalink

    Sir John,
    During the Brexit discussions of recent times you often supported your stance by saying that MPs and parties had manifesto commitments to honour. The manifesto upon which the Conservatives were elected just two months ago made government debt level commitments: public sector net investment would not exceed 3% of GDP for example and there is a commitment that debt will be lower at the end of this parliament than it is now. Do you hold by these manifesto pledges?

  9. formula57
    Posted February 18, 2020 at 8:01 am | Permalink

    Maastricht should never have ruled our economy: the U.K. should just have given itself the same exemption as France does for itself persistently.

    Given what we can now discern about the global recession prospects, the people’s Blue Boris should certainly plan on spending like a Corbynista.

  10. Will Jones
    Posted February 18, 2020 at 8:03 am | Permalink

    If we borrow when times are good and debt is cheap, and we borrow in hard times to tide us over, when exactly do we pay it all off? Servicing all this debt costs us a fortune.

  11. John S
    Posted February 18, 2020 at 8:12 am | Permalink

    It is fine for a business to borrow money if its returns (profits) exceed the interest it is paying. Governments do not make profits and debt is increasing. I believed it approximately doubled under Osborne. I agree with you on most things but not this.

    • Lifelogic
      Posted February 18, 2020 at 1:14 pm | Permalink

      Indeed project like HS2 and the renewable subsidies, almost certainly, do far more harm in disruption than good. Over £150 billion wasted just on these! Probably a net negative return in fact, plus the £150 billion wasted too.

    • Narrow Shoulders
      Posted February 18, 2020 at 3:23 pm | Permalink


      Without debt interest to service we could raise the tax free threshold to £20K.

      • Narrow Shoulders
        Posted February 18, 2020 at 3:24 pm | Permalink

        Incidentally I posted the above in an NHS hospital and their WiFi blocked your site as inappropriate.

  12. Kevin
    Posted February 18, 2020 at 8:12 am | Permalink

    “showing markets have no worries about debt levels. They supply affordable debt.”

    What of the argument that the 2008 financial crisis originated in the packaging of subprime mortgages into securities that were rated independently of the mortgagors’ ability to repay their debt?

  13. Ian Kaye
    Posted February 18, 2020 at 8:36 am | Permalink

    It would be more sensible to pay attention to the interest bill on the National Debt,currently about 50 billion pounds.Of course this could be slashed if there were several Debt Conversions.

  14. George Brooks
    Posted February 18, 2020 at 8:43 am | Permalink

    For over 40 years the EU has been trying and in many cases succeeded in dumbing down our economy which has favoured Germany, France and other EU member states.

    The whole point of Brexit is that this will not continue and we will decide our financial policy. Labour always make a mess of it and the Conservatives get us back on track, which they have done again. Now we have a fabulous opportunity to branch out world wide and really strengthen our economy.

    David Frost was absolutely right to set out our platform last night that we will set our own rules totally free of the ECJ and any disputes will be resolved by World Trade rules and NOT the EU. Their threat of tariffs is no more than blackmail and they will come off second best if they try it. Germany will go into recession (which it is close to doing anyway) and French and Spanish farmers and wine growers will bring their countries to a standstill. Chile would love us to put a tariff on French wine.

    The EU will wise up fairly shortly providing they are not supported by the BBC and other media giving ardent remainers space and airtime. We are OUT and will be clear by December 31 and any extension has been ruled out in the WA. So I hope we are spared the nausea of another pathetic run of Project Fear and can look forward to a very bright future as we regain or rightful place much higher up in the world ranking.

    • Otto
      Posted February 19, 2020 at 4:07 pm | Permalink

      ‘… any extension has been ruled out in the WA’

      What about that clause in the WA that could extend the extension till 20XX?

      Can you discount it? Please explain.

      • Otto
        Posted February 19, 2020 at 4:30 pm | Permalink

        I meant transition period if that is different but I now see that 20XX is now missing in the new agreement apparently.

  15. Dave
    Posted February 18, 2020 at 9:14 am | Permalink

    Here’s a revolutionary thought. Live within your means and don’t run up debt for future generations to have to pay off. Governments are the most incompetent managers of anything on the planet and should not borrow money for vanity projects or to fund their extravagent promises of free stuff. Small government is always better and by small I mean almost non existent.

    • Everhopeful
      Posted February 18, 2020 at 12:37 pm | Permalink

      Not much chance of that sensible idea being adopted.
      Apparently they have been doing it since William 111’s time!

    • glen cullen
      Posted February 18, 2020 at 2:05 pm | Permalink

      Wise words indeed….its how the majority of households live

  16. William Long
    Posted February 18, 2020 at 9:17 am | Permalink

    After the wish to be once again a sovereign nation, this was my major reason for wanting to leave the EU. Doing so without freeing ourselves from the Maastricht constraints would be largely pointless and I can only hope that the new Chancellor really intends to do so; only seeing will be believing, though.
    Osborne’s downfall was that he was so wedded to Maastricht that he tried to claim its imposed constrictions as being virtuously put in place by himself.

    • margaret howard
      Posted February 18, 2020 at 1:46 pm | Permalink


      I keep asking people like you: “When did we lose our sovereignty?”

      I voted in the 1975 referendum and all I have experienced is the enormous change that EU membership has brought us. I can’t remember anyone in the intervening years talking about loss of sovereignty until we had the last referendum.

      What exactly was it we were supposed to have lost? Can you tell me?

      • glen cullen
        Posted February 18, 2020 at 2:07 pm | Permalink

        The sovereign ability to set our taxation policy and international trade deals etc

      • SM
        Posted February 18, 2020 at 2:15 pm | Permalink

        Margaret, if you cannot remember anyone talking about loss of sovereignty, you’ve obviously been keeping your hands over your ears for at least the last 30 years.

        I appreciate that you are a True Believer in the concept of a European Union that is a universal panacea, which is of course your absolute right. However, many of us are heretics, which is our right too!

      • a-tracy
        Posted February 18, 2020 at 3:07 pm | Permalink

        we lost our sovereignty (the authority of a state to govern itself) when it came to who was eligible to British benefits, even extending to EU children who weren’t living in Britain.
        When we were fined a guessed amount of tax for not collecting sovereign taxes on prostitution and drugs. When we discovered we were paying across 80% of taxes collected on rest of the world imports and sending it to the EU.
        When we were told we had to provide housing benefits to newcomers made homeless if they lost their work, tv programs regularly reminded people of this i.e. Benefits Britain, Can’t Pay We’ll Take It Away etc.

      • Edward2
        Posted February 18, 2020 at 3:13 pm | Permalink

        I think you must have forgotten decades of political arguments about sovereignty and debate over the growing powers of the EU over the UK.
        Have you forgotten huge rows over us signing up to Maastricht Lisbon and other treaties?

        From a Common Market of six similar nations to the United States of Europe in a few decades.
        Courts Presidents Anthems Flags Embassies, a entral bank and it’s own currency and soon an empire of 30 members.

      • Andy
        Posted February 18, 2020 at 3:28 pm | Permalink

        It’s all about foreigners. When they talk about wanting their country back we know precisely what they mean. But they are, rightly, too ashamed to actually spell out the details.

        • Edward2
          Posted February 18, 2020 at 7:02 pm | Permalink

          Playing the race card is always a demonstraion of the paucity of your argument.
          It was simply a desire to be an independent nation once again.
          I’m sure you think it is OK for previous Commonwealth nations to seek independence and you probably support independence for Scotland but illogically not for us.

        • steve
          Posted February 18, 2020 at 8:46 pm | Permalink


          Then perhaps YOU could enlighten us as to these mysterious details instead of being ashamed ?

          Lead by example.

      • Narrow Shoulders
        Posted February 18, 2020 at 3:32 pm | Permalink

        @margaret many times since Maastricht (and probably before) I have heard government say it can not act on a suggested initiative due to EU rules.

        The most prominent of these was during the first leadership debate where David Cameron posited a limit on immigration in the tens of thousands and was told by both Gordon Brown and Nick Clegg that it was not possible while we were a member of the EU.

        A candidate for Prime Minister being unable to propose policy during a General Election campaign due to EU rules would indicate at least some sovereignty has been ceded.

        If you don’t want to talk about immigration VAT is another example as are the Maastricht rules mentioned in today’s blog.

      • NickC
        Posted February 18, 2020 at 3:48 pm | Permalink

        Margaret H, Yes, I can tell you. In fact I have frequently told you. The loss of our our sovereignty is confirmed by Declaration 17 which states that EU laws have primacy over our own. But you don’t listen.

      • John Hatfield
        Posted February 18, 2020 at 4:06 pm | Permalink

        In 7 February 1992 the EU took over the governance of the United Kingdom. We lost our sovereignty.

      • William Long
        Posted February 19, 2020 at 10:04 am | Permalink

        I must thank all those who have answered this question for me!
        We did of course have a vital bit of sovereignty restored in 2016 by Article 50 of the Lisbon Treaty which set out a procedure for member states to leave the EU, and we have now taken advantage of this.

  17. Pat
    Posted February 18, 2020 at 9:23 am | Permalink

    On the other hand it’s a lot easier to pay down debt when interest rates, and hence payments, are low. It looks highly unlikely that interest rates are going to fall and a racing certainty that long term they will rise.
    I guess it depends whether the projects funded by borrowing actually have a rate of return above the rate of interest on the loan. I have limited faith in the ability of civil servants and politicians to judge this impartially,since they have no skin in the game.

  18. Bob Dixon
    Posted February 18, 2020 at 9:24 am | Permalink

    Lets hope our policy going forward is as you have explained.

    Remoaners,The Media and all of the opposition parties tell us it is Government Cuts.

  19. Everhopeful
    Posted February 18, 2020 at 9:39 am | Permalink

    Nothing to do with the EU should still rule us! But I dare say it will.
    The “Three Pillars” ( certainly not “ of wisdom”). GOOD GRIEF who sat and confected all that when they should have been at home sorting out their own affairs?
    Obviously pre Brexit one had heard of “ Hollowing out of Westminster” but fancy submitting one’s budget to a foreign power…voluntarily! Especially with the memory of the IMF “cap in hand” business. Maastricht rebels tried to fight it ….but to no avail!
    Doesn’t govt only borrow from BoE though ( except for IMF/Callaghan) so nobody’s business but our own?

  20. Lifelogic
    Posted February 18, 2020 at 9:50 am | Permalink

    Doing some rough numbers on electric cars it is hard to accept that they save any CO2 output at all. If a typical electric car does say 50,000 miles over their useful life (they tend to be low milage smaller cars and the batteries do not last very long) then the value of the electricity needed to do this mileage is only about £1,000. How much energy goes into making this £30,000 car and mining the materials for the battery etc. It must surely far exceed this £1,000 and doubtless this is almost entirely from fossil fuels.

    Plus you still have to generate this energy and transmit it to charge the battery with losses on route. Even if generated by wind turbine the manufacture of these wind farms and grid infrastructure produces a very great deal of CO2.

    So why exactly are the government pushing for them and using tax payers money to bribe buyers? Even if you accept the CO2 devil gas religion it make no sense.

    Yes we want clean air in cities but plugin hybrids (or other technology) that can do the city miles on battery (or very cleanly) make far more sense for most situations and most customers.

    Can we get some sensible engineers and physicists into this decision making process please. Thanks goodness we are rid of Claire Perry/O’Neill.

    Once again we get total inaction from the police over the digging up of Trinity College Laws by deluded, criminal dopes. Etc ed

    • Lifelogic
      Posted February 18, 2020 at 1:20 pm | Permalink

      Will the BBC take action against the BBC employees who publicly support this idiotic criminal action? Or have they been given permission or the nod by the BBC chiefs and the BBC’s alarmists?

  21. glen cullen
    Posted February 18, 2020 at 10:14 am | Permalink

    Sir John, while I agree with your sentiment and understand I constraints of Maastricht I feel that the approach to debt and borrowing from all governments is flawed. Its to easy for governments to spend tax-payers money, you might think you’re a business but you’re not. Only spend what you get in. Of all the countries that sailed though the 2008 financial crash without difficulty all had one thing in common….low or zero debt.

    Also please don’t fall into the trap (5th para) writing that ‘now we are out’ of the EU, we aren’t out till Dec 2020 (poss 2025) we’re in a transition period. I see this again and again on other social media sites.

  22. Draggi
    Posted February 18, 2020 at 10:30 am | Permalink

    Yeah- i think your’re in a dark place right now as far as negotiations go. You want to diverge away but how far you diverge will govern the trade access you’ll eventually have. ‘Have cake and eat it’ negotiation tactic is not going to work either- as you’re Mr Frost will shortly find out- but you can rest easy about Maastricht I don’t think it will be much of a consideration in all of this- and despite what some EU types have hyped about up the warm feelings between UK and EU- there’s too much bad blood now. It’s going to be an interesting year with Fisheries Vs Financials in round one.

    • rose
      Posted February 18, 2020 at 3:41 pm | Permalink

      No need for fish versus finance. Finance can look after itself and the fish are coming back home again after having been shamefully bartered away without anyone knowing.

    • NickC
      Posted February 18, 2020 at 3:59 pm | Permalink

      Draggi, What is this “‘Have cake and eat it’ negotiation tactic” you’re talking about? Can you tell us what you mean? We cannot get less than WTO access to the EU market (well, until the EU leaves the WTO, of course). That’s not a “tactic”, it’s a fact.

      And there’s no “Fisheries Vs Financials” either. That’s an EU invention. Fisheries are a resource governed by UNCLoS whereas financial sales are a service traded under the WTO. If the EU empire wants to sell us their goods and services, then they must allow the UK sell our goods and services – that’s what a WTO compliant trade negotiation is.

  23. kees
    Posted February 18, 2020 at 11:43 am | Permalink

    It’s unlikely you’re going to get a Canada EU style deal because there is a big difference- Canada is four thousand miles away and does not pose any serious threat to the Bloc by way of unfair competition while on the other hand UK is slap bang up against Europe and the EU fears UK will take unfair advantage so we can see the EU is not going to go along with any of this Boris stuff you want to trade under, so then there has got to be rules, FTA rules or WTO rules? I cannot see it any other way.

    • a-tracy
      Posted February 18, 2020 at 2:54 pm | Permalink

      “the EU fears UK will take unfair advantage” – yet it does not make all members have the same minimum wage, the same taxation (see Ireland), the same road tolling, and it is content to allow an unfair advantage to other Countries whose debt and deficit targets it ignored.

      All the EU has to say is that anything sold into the EU has to meet their trade conditions otherwise, we can supply the rest of the World and the Rest of the UK on whatever terms and trading conditions we negotiate for ourselves.

    • Narrow Shoulders
      Posted February 18, 2020 at 3:35 pm | Permalink

      Ah, the new issue that has been made up.

      There is a large moat between Europe and us on each side.

    • rose
      Posted February 18, 2020 at 3:37 pm | Permalink

      Unfair competition? Our standards are higher than theirs. You have fallen for the protection racket’s propaganda. They just want to keep us under their control. That is not independence, but they are bound to try it on after what they were up against during the last three and half years.

    • NickC
      Posted February 18, 2020 at 4:08 pm | Permalink

      Kees, What has distance got to do with “unfair” competition? The WTO ensures that competition is fair, whatever the distance. I think you’re just making excuses for the belligerence of the EU. In fact the EU just hates the idea of the UK being successful outside the EU. That’s the real truth, isn’t it?

    • Lifelogic
      Posted February 18, 2020 at 6:16 pm | Permalink

      “The EU fears UK will take unfair advantage” – in other words try to be competitive rather than another EU economic basket case!

      • steve
        Posted February 18, 2020 at 8:27 pm | Permalink


        Yes that’s about right.

        You wouldn’t have thought we sacrificed so much for that ungrateful shower.

        Still, we shall have to see what Boris is made of, or at least in fairness give him the chance to stand up to these ungrateful sods.

        Chief of the ungrateful ones, Barnier, is now saying we cannot have a Canada style deal and is also insisting on EU (french) access to our sovereign waters otherwise we don’t get access to EU markets.

        Undeniably it’s the usual french style of blackmail and threats, so perhaps we should just walk away without ‘deal’ now.

        • graham1946
          Posted February 19, 2020 at 10:46 am | Permalink

          David Frost told the EU what the UK is all about in Brussels so they should have no doubt now as to why we are different from them. They have mostly felt the iron fist of totalitarianism within the last 100 years and more naturally want to cling together to avoid a repeat, than we, who have not. Lets hope Boris does not do a Mrs May and undermine him in the negotiations. He has one chance to get this right.

    • villaking
      Posted February 18, 2020 at 8:57 pm | Permalink

      Kees: no, it’s going to be the easiest trade deal in human history. That’s what we were assured. Any contrary view is project fear. Not long now until Leave is proved right

      • NickC
        Posted February 19, 2020 at 8:12 am | Permalink

        Villaking, I have always said that a comprehensive trade deal with the EU will be so hard that we should just walk away – not even using Art50. Very few Leaves thought that the trade deal would be the easiest in history. It could have been – but most of us know the EU is too nasty, corrupt, and intransigent to be rational.

    • L Jones
      Posted February 18, 2020 at 10:01 pm | Permalink

      ”… four thousand miles…” or ”..slap bang up against..” doesn’t really count any more in these digital days. Or hasn’t that fact occurred to you?

    • Stred
      Posted February 19, 2020 at 7:50 am | Permalink

      Keeys. WTO is fine. Are you the Keeys who ran Rotterdam port. If so, congratulations on your preparations.

  24. acorn
    Posted February 18, 2020 at 12:41 pm | Permalink

    The process of the BoE swapping Treasury Gilts back into Treasury “reserves” does not change the net fiscal assets in the economy, the “units of account” in total remain the same less the interest payments. The BoE just shifts the value of the Gilt from the Treasury securities account to the Treasury “reserves” account.

    At that point it is just a giant time stretched “repo”; injecting liquidity that is intended to find a better yielding savings vehicle. The BoE could do a “reverse repo” and suck back in the liquidity. Or, leave the reserves / cash in the private sector and delete the Gilt serial number from the Treasury securities spreadsheet.

    The BoE is the least capitalised bank we have at circa £3.5 billion, it can’t afford to BUY IN £435 billion of Treasury Gilts; but, it can lend like any other bank, which it did to the APF so the APF could appear to be doing the QE swaps.

    Alas, being owned by a sovereign currency issuing Treasury, that hasn’t borrowed from anybody; and, never has to pay anybody back; it really doesn’t need its own funds. It really is one huge smoke and mirrors game.

    • Mitchel
      Posted February 18, 2020 at 4:39 pm | Permalink

      I don’t know if the position remains the same as when Peter Hitchens wrote about it in relation to the 100 year anniversary of the start of WWI in August 2014 but the $4.4bn (£866m at 1934 exchange rates) war debt to the USA that we defaulted on in 1934 (worth £40bn adjusted for RPI,or £225 bn adjusted to GDP at the time of that article) had the following status:

      “The UK government’s position is this :”Neither the debt owed to the USA by the UK nor the larger debts owed by other countries to the UK have been serviced since 1934,nor have they been written off.”

      Any other gems like that hidden amidst the smoke and mirrors?

      • acorn
        Posted February 19, 2020 at 7:23 am | Permalink

        Throughout both wars the global central banking system carried on as normal. It didn’t care who’s side you were on, payments still cleared.

        Countries that issue their own fiat currency as their unit of account never “borrow” it and never pay it back. It is a unit of measure like metres or kilogrammes which they can not run out of. They make their unit of account valuable by imposing taxation payable only in their currency units.

        Some countries get conned into borrowing in some other countries currency and end up defaulting when they can’t get enough of a foreign currency to pay it back.

        Alas, the Euro system manages to do all of the above totally and completely arse backwards. The EU should get rid of it.

  25. Everhopeful
    Posted February 18, 2020 at 1:18 pm | Permalink

    Can it be true that an extended version of the EAW is being presented as a bill in the Lords??
    Hope not!

    • glen cullen
      Posted February 18, 2020 at 2:19 pm | Permalink

      Surely not, the European Arrest Warrant is overseen by the ECJ….any involvement must therefore mean that once again the ECJ will have continued jurisdiction

  26. percy openshaw
    Posted February 18, 2020 at 1:36 pm | Permalink

    Sir John, like many of your correspondents on this thread, I am seriously worried by recent developments in government policy. The risk of alienating America, its current president, the five eyes and other allies thanks to allowing Huawei to set up part of our 5G networks should surely mean that the plan is scrapped. Likewise, the prohibitive costs and uncertain benefit – if any at all – of HS2 should consign it to the archives. As for mooted mansion taxes and current kite flying over pension tax increases, words fail me. And now we learn that the PM is wobbling over the question of the license fee. I have to say, in language as moderate as possible, that I am deeply disappointed and alarmed by the government’s state intentions. You and likeminded colleagues have gathered together before in the name of Conservative principle. Could you not do so again?

    • Lifelogic
      Posted February 18, 2020 at 3:26 pm | Permalink

      Exactly but the Conservatives have been tax borrow and waste socialists all my life from the dire Ted Heath, Major, Cameron and the appalling Theresa May. Mrs Thatcher and was more sound. But even she fail to cut the state down to size, killed many excellent grammar schools, embedded the country further into the EU, retained the inept free at the point of delay and rationing NHS.

      • Lifelogic
        Posted February 18, 2020 at 3:38 pm | Permalink

        Better than Corbyn/SNP though, thank goodness the voters rejected that horrendous prospect.

        Average weekly wage up to £474 it seems finally beating the £473 of 2008 by £1. But not quite as good as the Lords where the daily allowance is set to rise to £323 tax free and nearly all of them remainers, climate alarmists and essentially big government Libdems or Socialists.

    • Martin in Cardiff
      Posted February 18, 2020 at 5:10 pm | Permalink

      So the effect of leaving the European Union means a complete loss of freedom to do a single blind thing that one Donald Trump might not like.

      In what way is that in the least “taking back control”?

      You seem to be quaking in your boots.

      • Edward2
        Posted February 18, 2020 at 6:59 pm | Permalink

        Can you give some examples of your bold claim that not being in the EU will result in “a complete loss of the freedom ……etc.
        Interested to read your list.

        • bill brown
          Posted February 20, 2020 at 3:42 am | Permalink

          Edward 2

          Arrogance and no facts

          • Edward2
            Posted February 20, 2020 at 9:27 am | Permalink

            Bit harsh on Martin bill.
            Aren’t you two supposed to be on the same pro EU side?

            Still waiting for any examples of Martin’s bold claim either from him or you.

      • steve
        Posted February 18, 2020 at 8:36 pm | Permalink


        “You seem to be quaking in your boots.”

        No, that’ll be the work shy, the snowflakes, and the lefty lib remoaners, cacking it at the thought of not getting free rides in life at our expense because the EU says we have to give them preferential treatment.

        Times WILL get tougher Martin, despite what even some brexiteers will tell you. As a nation we are going to have to rise to the challenge and graft our way into a better future. Most of us are up for it, we’ve been here before.

        • L Jones
          Posted February 18, 2020 at 10:04 pm | Permalink

          Well said, Steve. I doubt, from what we’ve read in his posts, that MiC will be ‘up for it’. Lack of moral fibre or just a lack of belief in our great country?

          • Martin in Cardiff
            Posted February 19, 2020 at 8:27 pm | Permalink

            I’d like to know what use the largely elderly, retired Leave vote will be in that country which you describe.

            Nor the cash-in-hand tax-dodging tradesmen.

            The country cannot thrive on tarmaccing driveways alone.

  27. bill brown
    Posted February 18, 2020 at 2:29 pm | Permalink

    Sir JR,

    We have had this debate before and the debt bought by the BoE has implications on the future value of the Pound , no matter how much you try to explain that this is debt owed to ourselves.

    • Edward2
      Posted February 18, 2020 at 10:23 pm | Permalink

      Yet the Pound is doing well against the Euro since we left the EU.

      • bill brown
        Posted February 19, 2020 at 9:43 am | Permalink

        Edward 2

        Stick to the facts as they are outlined and leave the propaganda at home.
        The argument on the QE is exactly the same you used on the EURO debt so stick to line

        thank you

        • Edward2
          Posted February 19, 2020 at 3:06 pm | Permalink

          Complete economic twaddle bill.

          • bill brown
            Posted February 20, 2020 at 3:39 am | Permalink

            you really do not have any idea about the difference between the two options. I must admit I thought your economics knowledge was a bit higher as both are QE

          • Edward2
            Posted February 20, 2020 at 9:25 am | Permalink

            You are trying hard bill but still failing.
            My statement that the pound is doing well against the Euro since we left the EU is correct.
            You pro EU fans told us it would crash in your failed Project Fear predictions.
            Your QE point is a red herring.

      • bill brown
        Posted February 19, 2020 at 1:31 pm | Permalink

        Edward 2

        and it has also weakened against the dollar SFR and yen, so what can you deduce from that about the Pound?

        • Edward2
          Posted February 19, 2020 at 3:08 pm | Permalink

          That the pound operates in a world currency market where factors beyond our control affect its value against other nation’s currencies.

          Project Fear predicted the pound would crash against the Euro
          It hasn’t happened.

          • bill brown
            Posted February 20, 2020 at 3:36 am | Permalink

            Edward 2

            Another answer without facts and figures

          • Edward2
            Posted February 20, 2020 at 9:22 am | Permalink

            You asked a question without facts and figures sonI gave you my quick reply.
            I made two correct statements in rebuttal of your post.

  28. Mike Wilson
    Posted February 18, 2020 at 11:32 pm | Permalink

    State debt is not too high eh!

    Difficult to know whether to laugh or cry.

    2.3 trillion and an extra 5000 a second. But it’s not enough!

  29. Tomaž Slivnik
    Posted February 23, 2020 at 4:40 pm | Permalink

    I am surprised to see myself not in agreement with you, because to-date, I don’t think I’ve ever read anything on your blog I disagreed with.

    Is it really the markets lending money to the government at 0.6% p.a. for 10 years?

    Would you lend money to the UK government at 0.6% p.a. for 10 years?

    The only one lending to the government are the commercial banks, which in essence act merely as an intermediary for the government and the central bank, allowing the government to print money and lend it to itself at an absurdly low and manipulated interest rate (nothing to do with any free market) which is way below the rate of inflation (hence allowing itself to write off a big chunk of the debt in the long run by inflating it away).

    The banks play along because they are allowed privileged access to free money (i.e. at well below market rates) from the central bank, but they are still allowed to lend it out to individuals and businesses (but not the government and other cronies) at much higher rates of interest, making a huge margin – free money – at virtually no risk.

    It is the government and the banks engaging in mutual backscratching and enriching themselves at the expense of the public – those of us who, unlike the banks and the government, don’t have privileged access to central bank’s artificially cheap money, and may even have savings earning interest at way below the rate of inflation.

    The banks today are not private free market participants, but, looking at it one way, are nationalized industries in a semi socialist economy, or, looking at it another, they are the corporate spouse in Mussolini’s infamous unholy marriage of the government and the corporate.

    So no, in my opinion, “the market” is not lending money to the UK government at 0.6% p.a. for 10 years, nor would it, if there was a free market in interest rates allowed to operate at all.

    Before the current Alice in Wonderland financial world (say before 2007, although sanity has been gone from the world’s monetary system since at least 1971 if not earlier), 67% debt to GDP ratio was considered huge. In reality, it still is. It needs to be reduced.

    Reply Pension funds and insurance funds willingly lend to the government at these very low rates. They buy lots of bonds. If you have some managed investment or pension you doubtless are lending to the government.

  • 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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