Author: johnredwood

It is unlikely this Parliament is about to vote to dissolve itself and hold an election. The massed ranks of the Opposition parties, usually so keen for an election, are shy about meeting electors on the doorstep and giving them the chance of change. The SNP and Lib Dem offer is tactical and linked to trying to stop Brexit. They are busy lobbying the EU to keep us in The EU  for longer as a precondition for any election.

Labour after months of demands for a poll now say they wish to take so called No deal off the agenda first. They now say that could take them to December 2020 to be sure of that. They might as well say they do not want an election before the Thames freezes over. Given their strong belief in Global warming they should feel safe for a few years with that pledge.

Boris Johnson told the rallies and meetings before he became Leader that he did not want an early election. He assumed he could deliver Brexit on 31 October.

Now he is desperate for one, given the impasse in Parliament and the way his majority has disappeared.

A General election could break the logjam in this rotten Parliament if electors are in decisive mood. Were  the vote to splinter too much with four or five parties in contention, we could end up with another hung Parliament which could perpetuate the block over Brexit and the difficulty in forming a government with a majority that can do things..

One of the most common messages I currently receive is Cromwell’s speech when dissolving the Long Parliament. This much purged Parliament wished to perpetuate itself after the death of the King and the advent of the Commonwealth. Presumably my correspondents  think they see similarities to today.

There are however very important differences. Cromwell arrived with 40 soldiers to close the Parliament down, using the force of the New Model Army against Parliament. He did not plan a new Parliament, but planned a personal autocracy as he became Lord Protector.

What we want instead is an election to try to change the personnel of Parliament. The gap between what this Parliament wants about Brexit and want voters want is too great. Worse still, many MPs were elected to see Brexit through only to go back on their word  and do everything in their power to delay or prevent Brexit.

The England rugby team achieved a great victory against the All Blacks. I wish them every success for the final.

My long held view is I want to leave the EU as soon as possible without signing a Withdrawal Treaty. We should offer a free trade agreement to avoid the need for tariffs if the EU would agree to talks after we leave.

Opinion polling shows that just leaving is more popular than accepting Withdrawal Treaty 2. That commands just 19% support. It is more popular than Withdrawal Treaty 1. Withdrawal Treaty 2 is clearly an improvement on 1.  Polls also show a majority of those who want to just leave would rather sign Withdrawal Treaty 2 than remain or delay further if they cannot achieve their first preference thanks to this Remain oriented Parliament.

It is difficult to fathom why so few MPs make the public case for just leaving when it is a more popular option than the policies they advocate and when it is so obviously in the national interest. This dithering and delaying Parliament is creating continuing business uncertainty. It is talking us down. It is making us an international joke. Much of the governing establishment tells us by word or deed they think we should be governed by the EU and cannot manage to govern ourselves.

I thought Ministers, Shadow Ministers and MPs were employed to speak up for the UK, to create a realistic confidence in ourselves and our future. Instead many assist the EU in their negotiations, take their side in disputes when the government does speak up for us, and seem to take pleasure in any bad news as proof the public made the wrong decision.

On Thursday I set out the opportunity we have to set a new fiscal framework or economic policy once we are free of EU Treaty requirements. They have made us run our economy with the twin aims of cutting the government deficit and cutting state debt as a percentage of GDP. Labour, the Coalition and Conservatives in government since 2008 have accepted these imperatives and set the debt and deficit targets as required.

I recommend that the purpose of economic policy is changed to

The promotion of higher living standards through the growth in real incomes for all

The target should be

Government policy should aim to achieve over the next ten years a rise of one fifth in average individual spending power. Average net incomes should rise by one fifth plus the amount of inflation as measured by the CPI(H) index

The government should also continue to be prudent with public finances. It should adopt a Balanced budget rule. This should say

The government will ensure it collects enough revenue to pay for all current spending. It may apply a symmetric cyclical stabiliser, running a surplus during good growth and a deficit during a bad recession.

The government may borrow for public capital expenditure purposes. Each project approved must meet an appropriate test to establish it will make a decent economic return or to establish its importance to the provision of an approved list of public services free at the point of use.

This new fiscal framework would allow us to reduce the tax burden today to boost real incomes and promote more growth as a result

Scottish Power have this week published a partial costing of how much the UK will need to spend in order to achieve the government’s stated target of zero net carbon dioxide from human sources by 2050.

Labour, the Lib Dems and Greens wish to accelerate this timetable. Glasgow plans to reach net zero as soon as 2030, and Liverpool by 2040, so these cities with a few others need to speed up their plans to convert current activities to hit their targets.

Councils and local bus companies can press on with replacing diesel and hybrid buses with electric vehicles. The state owned railway can carry on its expensive electrification schemes to switch more trains to all electric. The government can push the electricity industry harder to switch over to all renewables or carbon free generation. All of these come with a substantial public sector as well as private sector cost.

In two of the largest areas, cars and homes, individuals and families will need to meet most of the cost. The Scottish Power report tells us they think we will need 25 million electric charging points for electric cars to complete the transition. The Scottish government plans to phase out all diesel and petrol cars by 2032, with the UK government doing the same by 2040 where there is no quicker devolved government timetable. Their estimate of charger costs is £45bn, with additional costs to expand electricity output to meet the much enhanced demand. Individuals will have the investment costs of the vehicles to contend with.

The charger points will be partly financed by the private sector. I assume individuals will be responsible for the costs of chargers at home. Energy companies may put charger points into present filling stations or other suitable properties. Supermarkets and other companies and institutions may make public provision. Doubtless there will also be a taxpayer expense for various public sector charging points.

The Report says that 22 million homes will need to switch their current heating systems largely based on gas to electric powered heat pumps. This could cost £192 billion. Much of this cost will presumably fall on the consumer. I trust there would be financial help for those on low incomes as new boiler and heating systems with heat pumps are very expensive items if and when this becomes compulsory.

The UK has announced there will be no new gas boiler heating systems installed after 2025. There will be a substantial cost early in the next decade to retrain many heating engineers into the new technology.

I would be interested to hear your thoughts on all this, and in particular to know who wishes to be an early adopter of the new domestic heating systems recommended.

It’s time to hear from the government a new economic policy. As we leave the EU we should abandon an economic policy based on the twin requirements of EU policy, the reduction of the running deficit of government and the reduction of state debt as percentage of GDP.

I know when I have mentioned in the past the importance of the Maastricht debt and deficit controls to UK policy some have written in to deny this. Let me remind you of the extent of the EU requirements on the UK since 2008.

The UK was under EU budget control from 2008 when Decision 2008/713 stated the UK was running an excessive deficit and had to take action to reduce it. The deficit worsened thanks to the great recession, so they reinforced the requirement. They required us to make spending cuts and tax rises worth 1.75% of GDP a year  (£38.5bn a year at current values) from 2010/11 to 2014/15. In 2015 they reviewed the position and renewed the requirement to cut spending or raise taxes as they remained concerned about the level of state debt to GDP. They set specific reducing deficit targets of 4.1% of GDP for 2015-165 and 2.7% of GDP for 2016/17. The UK government always filed the relevant figures and submitted to the discipline imposed, as it is required to do by Treaty .

In 2017 they decided the UK had complied and lifted the excessive deficit plan after a nine year programme of cuts. They however said “As from 2017-18 the UK is subject to the preventive arm of the Stability and Growth Pact and should progress towards the minimum medium term objective at an appropriate pace…and comply with the debt criteria in accordance with Article 2(1a) of Regulation EC No 1467/97.” (i.e. the aim of economic policy had to be to get state borrowing down to 60% of GDP from around 87% over the medium term).

As we come out of the EU this ceases to apply. The UK needs a new fiscal framework which helps us promote growth, jobs and higher real incomes. We need a purpose and guides to economic policy based on these good outcomes for people, not a policy based on getting state debt down as a percentage of GDP.

Of course there needs to be a prudent control on extra debt incurred. There is nothing unstable or unaffordable about current levels of state debt, especially taking in to account around one quarter of the state debt is owned by the Bank of England which in turn is owned by the state!

A sensible rule could be that additional  state borrowing should not exceed the levels of public sector investment. The government will ensure the current account of the government is in surplus or balance. On 2020-21 figures from the last Red Book this gives the state the opportunity to borrow 3% of GDP, the forecast level of investment, which would allow a sensible fiscal expansion. Tax cuts of around £10bn on top of the spending increases announced should  be possible. There could be a recession override allowing fiscal stabilisers i.e. a bigger deficit  to apply were there to be a nasty downturn at some time in the future. I am not currently forecasting a Uk recession

references

European Council Decision 2008/713/EC

2009/409/EC Council decision

2015/1098 Council decision

14852/17 Council decision

As I expected yesterday the Commons voted for the Withdrawal Treaty Bill to have a second reading, then voted down the Timetable motion needed to allow further progress on the Bill.

Some MPs voted for the Bill, then switched and voted against its early proceeding. They did so knowing the PM has promised we leave, with or without a deal, on October 31.

In order to leave with this unhappy “deal” the Commons needed to pass all stages by Thursday so the Lords could do the same, to complete the Bill by end October, just 8 days away.

The only way forward from here that might deliver a good Brexit on time is to leave on 31 October without signing a Treaty, offering a free trade deal as we leave. I have been trying to get the government to do this for sometime. Maybe more will now see trying to compromise with a Remain Parliament by offering a watered down Brexit does not work.