Author: johnredwood

This Parliament has argued and voted itself into an impossible position. 82% of the votes were cast in the General election for two main parties promising to deliver Brexit. Now one of those is doing everything to prevent it, and some Conservative MPs have also assisted them or have joined the Lib Dems. The Lib Dems make a mockery of their name  by insisting on not implementing the referendum, saying they want a second vote and finishing off their anti democratic credentials by telling us if that went the wrong way they might  ignore that too.  We have a Leader of the Opposition who has gone on and on about the need for an early election. Now he is faced with the opportunity of one he looks as if he might  instruct his party not to vote for it.

Today the Commons will seek to drive a dangerous Bill through all its stages in one short sitting. Its purpose will be to  deliver the UK into the power and control of the EU. The PM will be required to ask for an extension of our membership, and to accept any terms the EU wishes to dictate. No sensible Remain voter, let alone a Leave voter, can think that a good idea. The Commons procedures have been changed to allow this to happen. An urgent debate which was always on a neutral  motion has been attached to a detailed Timetable motion not of the government’s choosing, binding the Commons and changing Standing Orders. This teems with irony. The MPs who have done this claim to be the true democrats and the defenders of the constitution. Instead they warp the constitution to seek to pass a Bill which would  bind the UK into EU servitude against the express wishes of the electors in  the referendum and in the 2017 General election.

There are usually constraints on MPs other than the government legislating. Only a Minister can move a Money Order, so any new legislation entailing substantial expenditure requires government agreement. This proposed Bill involves spending £1bn or more extra a month for however long we have to stay in the EU. Yet we are told the Speaker is unlikely to agree it needs a Money resolution.  This Bill affects royal prerogative. It therefore should require Queen’s Consent – usually offered by the PM on her behalf- before its third reading. It will be interesting to see if this convention is observed. The government would wish to use Queen’s consent to stop the debate on this Bill to prevent its passage.   In recent times Queen’s Consent has been witheld from Bills the government did not favour. As this is a fundamental constitutional Bill of great significance, it would usually get substantial debating time in both houses, yet yesterday’s timetable motion tramples over this normal protection.

Issues being debated include would an early election help? Should  Conservative MPs  who back this legislation lose the whip? The danger of that is then there are fewer MPs to whom the government can look to get any aspect of its programme through, making it even more difficult to govern.

The media is awash with election speculation. The PM confirmed in his remarks yesterday evening to his MPs that he does not want an early election.

It is by no means clear that the Leader of the Opposition wants one either. His party lags badly in the polls. It cannot say what policy it would offer on Brexit, with some  wanting revocation of our notice to leave, some wanting a second referendum and some wanting some unspecified renegotiation with the EU that the EU might reject anyway. Of course he  has to say he wants one, but he seems happier proposing rebel legislation to delay our exit.

It is quite likely an early election before we had left the EU would be an acrimonious re run of the referendum, with parties wanting to do well having to be clearly leave or remain. There is no guarantee the voters would create a good majority for one single view of Brexit in any new Parliament. Politics is only likely to return to some sense once this so far hopeless Parliament has  fulfilled its main task, to get us out of the EU, as promised by both Labour and Conservatives in the last election.

Our main problem is not too few elections. Our problem is the inability so far of this Parliament to implement the decision of the referendum. Until that is done there will be anger about those MPs who have failed to vote and speak on Brexit as promised in the last election, and an inability to move on to discuss how an independent UK will use its new freedoms. Those MPs have to decide today and tomorrow if they will after all uphold the view of voters in the referendum. If they pass legislation to undermine the government they may just be ensuring the end of their time as MPs as they show disdain for the views of the majority on Brexit.

Sometimes important things are hidden in plain sight. The contentious requirements of getting the Uk budget deficit down below 3%, and getting state debt to fall as a percentage of GDP which have guided policy since the crash under Labour, Coalition and Conservative governments were made in Brussels. I supported the Labour and Coalition governments from 2009 saying annual borrowing was too high and needed curbing to avoid a crisis of confidence in the UK as a borrower, but have not agreed in recent years with the anti growth stance that the Maastricht state debt rules has encouraged in much Establishment thinking. These rules have been the background to low and no growth in several countries on the continent and to mass unemployment in much of the south and west of the Euro area. In the Euro area countries are threatened with fines if they do not comply.

Once a year the UK has a Parliamentary debate around a Treasury Statement on how we have got on in complying with the Masastricht rules. In the last three years the government has been able to report they are below the annual deficit ceiling, but have not until recently started the bigger task of getting state debt down to 60% of GDP. It is this latter rule which encouraged first Mr Osborne then Mr Hammond to resist tax cuts and spending increases that could have boosted the growth rate and improved our investment in transport or improved performance in education and training . Mr Osborne said he wanted to go further and faster than the outgoing Labour government in meeting the Maastricht requirements from 2010 onwards, inheriting big cuts in spending and tax rises from Labour who were also wedded to the policy. In practice he ended up by 2015 in achieving the extent of deficit reduction Labour were planning. He wisely alleviated the extreme cuts on capital spending Labour put into their forward budgets.

As we leave the EU it is time to rethink our economic guidelines. Of course we need to control annual deficits, but we should be less concerned about the debt as percentage of GDP at current levels, and less concerned about borrowing to invest where the public sector has genuinely worthwhile projects that can earn a decent return. As proof that our economic policy has been dominated by Maastricht, I reproduce below a few sentences from the ONS who have set out at length our dependence on the EU rules and our efforts to meet them.

ONS :
“•General government gross debt was £1,821.3 billion at the end of the financial year ending March 2019, equivalent to 85.2% of gross domestic product (GDP) and 25.2 percentage points above the reference value of 60% set out in the Protocol on the Excessive Deficit Procedure.

•General government gross debt first exceeded the 60% Maastricht reference value at the end of the financial year ending March 2010, when it was 69.6% of GDP.

•General government deficit (or net borrowing) was £25.5 billion in the financial year ending March 2019, equivalent to 1.2% of GDP and 1.8 percentage points below the reference value of 3.0% set out in the Protocol on the Excessive Deficit Procedure.

•This is the third consecutive financial year in which general government deficit has been below the 3.0% Maastricht reference value.  

The EU government debt and deficit statistical bulletin is published quarterly in January, April, July and October each year. This is to coincide with when the UK and other EU member states are required to report on their deficit (or net borrowing) and debt to the European Commission.

Article 126 of the Treaty on the Functioning of the EU obliges member states to avoid excessive budgetary deficits. The Protocol on the Excessive Deficit Procedure, annexed to the Maastricht Treaty, defines two criteria and reference values with which member states’ governments should comply. “

We are promised a Statement on Wednesday, and now know some of its contents from pledges made by the Prime Minister and Chancellor. We know that they will ensure every secondary school receives a minimum of £5000 per pupil per year of grant, and every primary school £4000. I have been pressing for this for some time as Wokingham and West Berkshire schools are at the bottom end of the English spending league tables, and need more cash. This was apparent in an unflattering tv account of a Wokingham School this week. The government will increase money for all schools, but see that the lowest funded get a larger increase to take them up to the new higher minimum. This is only fair, as it does not cost less to employ a teacher or buy some books in Wokingham than in a large city.

We know that the government will pay for an extra 20,000 police to be recruited and employed, and will increase money for Further Education Colleges. It has also announced an additional £1.8bn for the NHS, targeted particularly on 20 different hospitals in need of extra investment and revenue.

I assume this will be a prelude to an early budget this autumn which needs also to cut taxes. The UK economy is slowing too much, in line with the slowdowns in the Euro area but more than in the USA. The US economy has enjoyed faster growth thanks to big tax cuts, a spending boost and an easier money policy. The UK needs the same treatment, at a time of Euro slowdown. Most forecasters expect the UK to grow a bit faster than Germany or Italy, but we need to do better than current forecasts and that requires policy stimulus.

Some worry about the present level of state debt, and wish to follow the EU policy of cutting state debt from its current stated gross level of 85% to the 60% Maastricht target. The actual level of UK state debt is currently 65% of GDP, if you eliminate from the calculation the £435bn of gilts owned by the Bank of England who in turn are owned by the taxpayers. The annual deficit is now well under 2%, which in turn is well below the rate of investment by the state sector. These figures allow scope for some fiscal relaxation. A suitable new rule might be that we keep the idea of a ceiling of 3% on the budget deficit from the current rules, and aim to be at zero or below when the economy is growing at more than 2.5% with more risk of inflation. When the growth rate falls below 1% the government should go closer to a 3% deficit ceiling, with the deficit being borrowing to finance capital investment. This would be compatible with a normal current budget surplus, and with no current deficit in low growth periods. We can of course spend more and cut taxes more once we have stopped making large payments to the EU, which I wish to see from November.