My contribution to the Finance (No. 2) Bill debate, 19 April 2021

Of course, I am not going to vote against this Budget and I wish the Government well with it, but I would like them to pause a little, think through where we are and recognise that they may need to revisit some of these decisions in the months ahead.

My worry is that they are being too tough in their tax measures and too tough on people’s incomes at a time when we need to build confidence and recovery, and they are doing so at a time when it is really impossible for their expert advisers and other economic forecasters to give them a clear steer of what the public finances will look like in two years’ time, let alone in three or four years’ time.

The Government seem to think that their experts can define a given amount of money that will be a shortfall in order to hit their longer-term Government targets, and therefore say that we need to make these tax changes for the next few years in order to fill the alleged black hole. It may be that they are trying to fill a hole that does not exist. It may be that we will have a much better recovery than the forecasters are thinking.

It may be that the economy responds much better over the next two or three years or, indeed, over the next two or three months, as the relaxations kick in.

We can see the difficulty that the official forecasters have if we look at the numbers they gave us as recently as November 2020. Then, the OBR, forecasting the budget deficit—the amount of extra borrowing—for the year 2020-21, said that it would be £394 billion, an enormous amount.

Bear in mind that it was having to forecast for only four months, as two thirds of the year had already gone. When we got the 11-month figures, up to February, recently, we discovered that they had come in at just £278 billion and so, subject to what happened in March, it may be that the OBR was the best part of £100 billion out on the deficit for the year in question when it tried to forecast, already knowing quite a lot of what had happened. It was, of course, massively too pessimistic. It is great news that we will have borrowed so much less than we feared, although clearly we are still borrowing far too much on an unsustainable basis, which is why we need to promote a strong recovery to get the deficit down.

I therefore say to the Government: let us show a little humility. The experts and advisers are not able to give us anything like accurate figures—I can sympathise with them, because extreme things have happened in response to the pandemic—so are we sure that we need to make these moves over the next three or four years?

There is also a case for showing a bit of humility and thinking ahead about whether we might need to show a bit more flexibility because the Government themselves have rightly said, now that we are out of the European Union and the economic world has been stood on its head, that they want to set out a new framework for guiding the economy.

I encourage them to do that, and I hope it is a framework that promotes growth and considers real issues such as the increase in the number of jobs, the rise in real incomes and the productivity growth that can be achieved.

We need to get away from the Maastricht criteria, which have governed our policy for many years and still seem to be behind the architecture of this Bill. We seem to be driven by the need to get state debt falling as a percentage of our national output by the end of the period that we are talking about today for the tax changes. State debt is now a pretty useless figure to try to target in the way that the Maastricht criteria did.

We now live in this age of monetary experimentation, where great banks such as the Bank of England, as well as the European Central Bank, have bought in very large quantities of state debt—indeed, they still are doing so. Surely, where that happens in a single sovereign country with its own central bank, owned on behalf of the taxpayers by the state, we should treat the debt that we have bought back in rather differently from the debt on which we owe money by way of interest to people outside—some our own citizens, some foreigners—who have been financing the Government.

That makes state debt a very difficult number to use to guide the economy. Of course, the future system must have some control over the build-up of actual interest charges that we have to pay to third parties, but it should concentrate much more on promoting growth.

May we therefore have just a few words from the Government, accepting that these numbers are very difficult and that the current forecasts are likely to be very wrong? No one can say exactly how wrong they are going to be, because so many things will happen over the next two or three years and nobody has been through a bounce back of the kind of pace that is possible from such a big hole in our economy, created by necessary health measures to cure the pandemic.

We need a policy that is very supportive of more jobs, of higher incomes and of encouraging investment, enterprise, saving and, above all, self-employment and more small business activity.

My worry is that the Government are being a bit mean with people and with small businesses in the name of controlling state debt at a time when we have no idea what the state debt will be in two or three years’ time, and when the state debt number is now very different because of the purchase of state debt by the state itself.

I would hope that the Government recognise that we may need to revisit all this, and I would want them to be on the side of people keeping more of the money they earn and, above all, of a much better deal for small business and the self-employed, where I think they are too tough.


  1. Nigel
    April 20, 2021

    An unusually passionate post from our host today. Government is threatening to act to prevent the proposals, and even the Royal family wading in.
    We have allowed many key innovative businesses, as well as many of our football clubs to be taken over by foreign interests, so why are we surprised when the new owners want to maximise profits on their investments?
    Why have we not seen the outpouring of passion when our key tech companies, for example, are sold off to foreign interests?

    1. MiC
      April 20, 2021

      Yes, I empathise with the emotion of John’s contribution, but let’s remember this – higher incomes arise from higher value work, and in turn, in today’s knowledge-based economy, that stems from a better educated workforce.

      However, we have a party of government which depends on widespread ignorance in order to get elected.

      There is a glaring conflict of objectives there.

      1. jon livesey
        April 21, 2021

        And yet very much the same population with very much the same level of education gets you every electoral outcome from Blair’s landslide, through hung Parliaments, to Boris’ eighty majority. I am a big fan of evidence, but not of evidence that explains outcomes and also their opposites.

        1. MiC
          April 21, 2021

          It’s not about all of the people.

          It is about which, exactly, amongst them can be easily enough inflamed or otherwise to vote Tory mistakenly.

          It only needs 43% of the vote to get an 80 seat majority.

      2. Peter2
        April 21, 2021

        Keep insulting the voters MiC, it will ensure the current opposition remain as the opposition for many years.

        1. MiC
          April 21, 2021

          It’s a proven fact.

          The likelihood of voting Leave was inversely proportional to educational achievement, when all else was the same.

          And you say that people voted Tory to “get brexit done”.

          You can’t have it all ways.

  2. Lifelogic
    April 20, 2021

    Exactly right many businesses will struggle to pay back PAYE and VAT arrears and their Covid loans let alone all these large and misguided tax increases. Plus we have more and more red tape. Pointless Electric certificates for landlords and VAT no longer being able to be done manually or on a spreadsheet and all the other idiotic and expensive attacks on the productive and self-employed that have recently come in.

    1. Lifelogic
      April 20, 2021

      The government are a vast, parasitic job creation scheme rendering the UK less or even totally uncompetitive and exporting real jobs and industries. Their expensive, intermittent energy agenda will do the same in spades. Then we have absurd and increasing tax complexity on top of all these taxes. These a further tax in itself, on top of these large tax increases.

    2. a-tracy
      April 20, 2021

      Lifelogic, it makes me wonder how landlords are getting away without doing these electrical checks that good landlords like yourself do, personally, I think electrical checks especially on homes over ten years old aren’t a bad idea, you’d want to know there was a potential deadly problem before someone got hurt and sued you surely. I read yesterday that the National Housing Federation say 8m people in England live in unsuitable, unaffordable and unsafe homes. It makes me wonder how they know this, what is the NHF purpose if they don’t inspect those rentals they accuse of this? Perhaps you private landlords that are doing things right need to form a group and insist they are inspected and held to the standards.

  3. Ian Wragg
    April 20, 2021

    The latest wheeze is Boris declaring that we are going to reduce carbon emissions by 80%.
    Apparently we are all going to be vegans and freeze to death with inefficient heat pumps, a bit like windmills, not effective when you need the ie. during cold weather.
    Industry will be compelled to reduce emissions by decamping overseas.
    Meanwhile in the real world Germany opens 23 lignite fired power stations, China, India and rest of the world split their sides laughing.

    1. Everhopeful
      April 20, 2021

      Hear, hear!

    2. No Longer Anonymous
      April 20, 2021


      Green targets brought forward to 2035. Who voted for this ?

      We did vote for the clamp down on immigration that we’re not getting – even with an 80 seat Tory majority and the Covid pandemic.

      Boris only gets tough on white, law abiding people.


      Today the BBC announced on the radio this morning during my drive to work that I was more likely to be killed driving to work than by CV-19 as the people killed on the UK’s roads outnumbered those dying of CV-19 yesterday.

      So why am I not banned from driving ?

      Why do I have to watch my local pubs go bust trying to operate under impossible restrictions ?

    3. Fedupsoutherner
      April 20, 2021

      Thanks for bringing this up Ian. Yes, and bringing everything forward to 2030!!!!! We will all be in poverty just trying to heat our homes let alone wondering if we will be able to afford to drive anymore. Well, that’s my mind made up. No more voting Conservative. I will be spoiling my ballot paper in the local elections as I cannot bring myself to vote in the crap choice I have. I despair at where this country is going – or not going.

      1. Fedupsoutherner
        April 20, 2021

        Sorry my husband told me he heard the year was 2030 but it looks like it’s 2035. Still a lunatic decision.

    4. Lifelogic
      April 20, 2021

      Insanity from Boris & just repeated by him again at his doom and gloom (we expect a 3rd wave) press conference. Do the government not have any honest scientists to advise them. Put Matt Ridley and Peter Lilley in charge of finding some.

  4. Fred.H
    April 20, 2021

    Sir john you should have said: ‘Of course, I am not going to vote against this Budget – but I strongly hope I will not live to regret that undertaking ‘

  5. Everhopeful
    April 20, 2021

    They did not need to do what they did.
    Every penny they are planning on wasting should come from their own pockets.
    I have no doubt that if this scenario were reality the government would never have DREAMED of bloody well imprisoning us!

    After all …ALL taxation is theft.
    But theft is not the worst crime. Is it?

  6. Everhopeful
    April 20, 2021

    Sorry. Sorry.
    But isn’t all that rather over optimistic?
    Wishful thinking?
    The govt. is out to screw us over.
    Sell us out for a packet of beans.
    And may they scramble up the beanstalk looking for gold and fall off the top!!

  7. Newmania
    April 20, 2021

    Interesting to see John Redwood now a fully converted modern monetary theorist, or at least cavorting in its gaudy clothes.
    My problem with the idea that the only limit on borrowing is inflation ( in effect) is that cause and effect can be so far apart. Even in Venezuela which printing funny money a took several years to turn into wheelbarrow currency , the Uk battled inflation in theb1970s caused by policies and decisions made from 1945 onwards.
    My problem with pretending State debt is irrelevant is that what may be sustainable at one time is not in another Tony Blair Greece and Venezuela are some of the people who have learnt this lesson .
    My problem with the idea that anyone who can print money cannot run out of it is …well every poor country in the world.
    My problem with politicians arguing for more debt now by any means is that they are spending our future on their current interests and cannot be trusted.
    Brexit boosters are extreme Nationalists and this type of populism has a long history of big hats ,medals mirror shades silly uniforms decaying prestige state projects hyper inflation and disaster .

    and I could go on

    1. Narrow Shoulders
      April 20, 2021

      So is your problem that the spending is to support the economy (post leaving the EU and mid-Covid as that is where we are) and not paying for more free school meals and extra benefits for the poor and state “infrastructure”

      Or that the printing is happening whatever the circumstances?

    2. David Brown
      April 20, 2021

      Very interesting comments, as an individual I never ever believe in saving money. The days of granny and grandad having savings in a bank are long gone.
      I recognise governments must watch what they spend, but individuals should live for today and spend all that comes in. Even more so since Covid.

      1. Peter2
        April 21, 2021

        You are in a minority and wrong about granny and grandad.
        UK household savings ratio went from 5% in Jan 2018 to 15% in Jan 2021
        The average person in the UK has over £6500 saved.

  8. Hugh Clark
    April 20, 2021

    Football clubs, not!
    Football companies rather.

  9. turboterrier
    April 20, 2021

    Well Sir John in the words of the immortal song:

    In more ways than one. With the announcement regarding new targets regarding CO2 emmissions being passed into law, we have now have without doubt arrived at this country’s history that ” the lunatics have well and truly taken over the asylum ”
    I do not think I will be alone with my complete withdrawal of my vote and support of the party.
    This is going to decimate the poorest in society, no mention of the costs for such a venture. Politicians generally have completely capitulated to the supposed green threat with not one iota regarding infrastructure and roll out.
    Parties in a brewery comes to mind.
    The rest of the world must be laughing their heads off, we will become totally reliant on them for everything. For god and the sake of this once proud nation get rid of these idiots.

    1. turboterrier
      April 20, 2021

      Just to confirm Sir John a copy of my previous has been sent to my Tory MP but I know that it will not make one iota of difference. What is the headline report on the 6 pm news on BBC?
      Football Super league. You cannot make it up. Just about sums up the state of our country.

  10. No Longer Anonymous
    April 20, 2021

    So Boris tells us that we have to eat less meat. Is that just working class people ? How do we do this ? Ration it ? Make it unaffordable ?

    We voted to keep Corbyn out and ended up with the most socialist government in our history instead.

    1. Fedupsoutherner
      April 20, 2021

      Well I can’t vote for it anymore.

  11. a-tracy
    April 20, 2021

    “We need a policy that is very supportive of more jobs, of higher incomes and of encouraging investment, enterprise, saving and, above all, self-employment and more small business activity.”

    What would that policy look like?

    Higher incomes – What would this look like, what NLW would you prefer John? Would it be the same in every region? at the moment over 23’s for a full time 37.5 hour week can’t earn less than £17,374.24 and if they do the average hours of 40 it is £18,532.80 what do you think it should be?

    A paye worker and their employer contributes 25.7% national insurance into the government coffers, a self-employed worker (not with IR35) 9% over £9569 pa class 4. How do you square that circle? So that people who hire their workers rather than keep them self-employed aren’t punished.

  12. Beenthere
    April 20, 2021

    By looking at comments I can see the blog us winding down – nearly time to head for the hills?

  13. acorn
    April 20, 2021

    The government has what it calls a “full funding rule” started in 1995. It says the government will issue debt instruments to match its spending. There is no operational requirement for debt instruments in a fiat currency economy. Debt instruments do not fund government spending and in no way restrict government creating and spending its own fiat money. But, it does make it look to the Muppets, like the government has to borrow its own monopoly money before it has any of its own monopoly money to spend. The Debt Management Office is charged with carrying out this government “nobble lie” process.

    Hence, the DMO had a gross financing requirement (GFR) of £485 billion for 2020/21 fiscal year. £369 billion to cover the government’s spending (Central Government Net Cash Requirement) and £116 billion redeeming old Gilts etc. The current fiscal year 2021/22 has a revised up GFR of only £303 billion. Have a read of

  14. agricola
    April 20, 2021

    A bit too much, lets not frighten the horses. Not enough promotion of radical tax reductions and the total re-writing of the tax book with the intent of making us Singapore offshore of Europe. We could enjoy ths tax benefit of the large multinationals dkmiciled in Lichtenstein were we more seductive taxwise. Too much steady as she goes, not sufficient drive. We are in danger of losing the benefit of Brexit and the early exit from Covid in a frenzy of inertia.

  15. jon livesey
    April 20, 2021

    Low taxes make a good rallying cry, but all that’s really happening here is that during the worst of the pandemic the Government was lending money to us all via stimulus payments, and now it is taking that money back.

    Sure, the Government could leave that new money in the economy, but if it did it would eventually see inflationary pressure as more money chased an unchanged amount of goods, and although some inflation isn’t the end of the World, it’s pretty pointless when you can head it off with some modest increases in taxation.

    And please remember the classic “boom and bust” behaviour of the British consumer. If the consumer has money to spend, they will spend it and more, and much of what they buy will be imports. I think today’s Conservatives just don’t want to repeat the familiar pattern of prosperity followed by trade crisis.

    1. dixie
      April 21, 2021

      “the Government was lending money to us all via stimulus payments” – No, we didn’t “all” get stimulus payments.

      But the public sector certainly kept itself in clover while decreasing services even more.
      Now, those of us who didn’t get incoming while being forced to subsidise those not providing services are being squeezed further by having to pay more tax to cover the bailouts for those that did.

      I would be surprised if a strong message were not sent at the elections in May… and beyond

  16. XY
    April 20, 2021

    All true and correct. Lower rates can lead to higher receipts, as can be seen knows all too well by looking at Ireland.

    I know many people who are self-employed and have been utterly disincentivised by Conservative government measures over many years. Don’t exepct them to keep voting Concservative much longer – Project Fear (of solialist/rejoiners) will only work for so long. Reform UK is a very attractive prospect for many.

  17. Lindsay McDougall
    April 21, 2021

    What cannot be denied is that the Government is spending way too much (and not just related to COVID-19) and, if it wants to avoid tax rises, must spend less. I find the argument that State Debt owed to the Bank of England is not really there wholly unconvincing. If that were the case the BoE could cancel the debt – but it doesn’t and can’t.
    i suggest that anyone who wants to know how disastrous USA and UK monetary has been – leading to a massive increase in asset prices (which facilitate a transfer of wealth from the middle classes to the rich) – should tune in to Max Keiser on RT’s Keiser Report.

  18. jon livesey
    April 21, 2021

    I read somewhere the other day that Oxford says it can have a new vaccine for Covid variants by the end of the year. Looking at the current numbers, I think we are going to need it.

    In the West, at least, it looks like the US and UK are going to be the main primary biotech resources for a long time,. I hope we have a lot of finish and fill lined up in other countries.

  19. George Brooks.
    April 21, 2021

    All those involved in forecasting and analysing the figures were brought up on strict diet of Maastricht and it is going to take quite a long time for them to retire out of the way and allow us to be creative and think as a truly independent sovereign state.

    We have only escaped from the clutches of the EU a few months ago but our reaction to this football farce indicates that we are beginning to think and act along the right lines.

  20. Bryan Harris
    April 21, 2021

    Well said

  21. acorn
    April 21, 2021

    “Mosler describes [in 2014] how Italy (or any of the 17 EU countries that use the Euro) can leave the European Union safely if the EU persists, as it insists on doing, in impoverishing their country and citizens.” Newmania should particularly read “SO WHAT ABOUT INFLATION? Google “Warren Mosler’s talk in Chianciano, Italy, January 11, 2014”.

  22. Ian Pennell
    April 21, 2021

    Dear Sir John Redwood

    I agree that we need to support the British Economy going forwards and that the Corporation Tax rises planned for 2023 should be avoided. The Government also needs to invest massively in roads, railways and the regeneration of towns and cities in the North, Midlands and South Wales if “Levelling up” is to mean anything to voters. There must be more spent on front-line Defence, the NHS and the Police- so that these Public Services are top quality. The question is, how to pay for it all without resorting to economically-harmful Tax rises on the one hand or spooking Bond and Currency Markets on the other. If any taxes must be raised, then taxes on static wealth do less economic harm than taxing Income and hard work (i.e. Corporation Tax and Income Tax).

    As a Public figure with a good grasp of Economics I am quite surprised that you have not seen the answer staring you in the face: Borrowing more will lead to higher borrowing costs, especially with a National Debt at 100% of GDP- and no, just because the Bank of England has issued half of it does not mean it matters less (as you, Sir assert)- there are Interest refinancing costs on Bank of England-purchased Government Bonds which are determined by current Interest rates- and these could have to rise to curtail Inflation!

    Talking of inflation, a surge in Demand as the Economy opens up could lead to higher Inflation, particularly if the productive capacity of the Economy is still weak (one reason not to support Corporation Tax rises). However, there is a way to forestall Inflation in the face of rising demand- by strengthening Sterling: The Bank of England should slowly sell it’s stock of Government bonds- so that they are all sold over the next five years- but use the proceeds to buy up Gold and Platinum securities from the UK . The Bank of England should also tie Sterling to Gold using the still £200 billion worth of it in the Bank of England.

    However, so that the Government’s borrowing costs dont rise as the Bank of England sells it’s Government bonds, the Bank of England should also print £100 billion of new money annually, using £90 billion to buy Gold and Platinum securities and £10 billion to be given direct to the Government each year. This will not lead to serious Inflation with Sterling backed up but the extra £100 billion in the economy each year (some of which will leak abroad via imports) will increase economic growth- and increase Government revenues at a rate of £30 billion a year- enabling all the above to be paid for without extra borrowing over the next few years.

    These policies will not upset either the Bond or Currency Markets, the National Debt will fall as a percentage of GDP (leading to lower Debt Interest costs). If the Economy starts growing faster the money- printing can be stopped but the Bank of England can continue selling its stock of bonds, using the proceeds to buy Gold and Platinum. If the Bank of England buys Gold/ Platinum to back up Sterling, the UK can withstand faster Economic growth without causing Inflation: Moreover- with more Gold/ Platinum backing up Sterling you would need growth and some money-printing to stop Deflation: That’s a “nice” problem to have as the solutions to Deflation involves policies that please the electorate!

    And, if you wish the Conservative Party to remain in power and keep out the pro-EU Left you need to be able to please the Voters!

    Ian Pennell

  23. X-Tory
    April 22, 2021

    Your refusal to vote against the government on important legislation is the reason they feel safe in ignoring your complaints on things like NI, fishing, taxation, etc.

    Boris Johnson has no loyalty and no respect for traditional Conservative values or policies. He doesn’t care what his backbenchers think and, like Napoleon did with his troops, treats them as cannon fodder. Either rebel or be walked all over!

    Reply I did vote against lockdown. If there is a chance of defeating a bad proposal I will definitely vote against.

    1. X-Tory
      April 22, 2021

      Yes Sir John, I know that you have the right policies and that you have the courage and integrity to vote according to your conscience. If I lived in your constituency I would vote for you. My comment about you not rebelling was a direct response to your statement in the Commons which began by stating clearly you would support the Finance Bill. I was suggesting that in order to make the govrnment listen to your concerns on other issues you should rebel on important legislation (such as the Finance Bill) to make them fear your anger. A figurative shot across their bows.

      Reply I would have been on my own opposing the tax rises. you need 2 to even Have a chance of a vote.

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