Author: johnredwood

Last night I was privileged to give the inaugural annual Trustees lecture at the London Institute of Banking and Finance.

I used it to examine why we had large recessions in 1974-6, 1990-3 and 2007-10. In the UK we lost 4% of our output and income in 1974-6 (Labour), 1.1% in 1991-2 (Conservative) and 4.5% 2008-9 (Labour). In each case we lurched from rapid credit and money growth to a dramatic tightening of credit and money in an effort to curb past excesses. In each case two errors were made – the initial excessive credit build up, and the decision to stop it by rapid tightening.

In the 1974-6 period there was lethal inflation which reached 27%. Lots of jobs were lost but unemployment peaked at 5.5%. In 1990-2 inflation hit 10.9% but unemployment rose to a worrying 10.8%. In 2007-10 unemployment hit an unacceptable 8.1% whilst prices started to fall as the crisis intensified, such was the extent of the monetary tightening.

The 1990s crisis was entirely the result of the European Exchange Rate Mechanism. As I had written before we adopted it as policy, it was a destabilising system. We started with the markets trying to force sterling up, which meant printing lots of money and keeping rates low to stop them. This resulted in a surge of credit. Then the pound wanted to go down, so the reverse took place with a major tightening of money and credit leading to recession.

The 1970s and 2000s crises were the result of mistaken views of the Central Bank and commercial bankers that they could take more risk and lend more money without adverse consequences. This was followed by too rapid a change of tack. Today we do not yet face a similar policy induced recession, but we need to be aware that the Bank of England is tightening too much which is visibly slowing the economy. Money growth is also being slowed a bit in the USA and China.

I have heard all too many interviews by a few senior business people and their lobby group representatives telling us leaving without a deal will be “disastrous, catastrophic, falling off a cliff”. They should know better. If they wish to be credible witnesses they should cast aside wild and emotional language, and spell out exactly what they fear will happen that they think will be damaging. All too few interviewers challenge them to be precise.

I have tried to see why they hold their general view. They nearly always say the same things, that leaving without a deal will get in the way of their complex supply chains, making it more difficult to import their components. I find this difficult to believe.

They nearly all confess that their current supply chains include a minority of components that come from outside the EU. If being outside the single market and customs union so disrupted trade with the rest of the world they would not have part of their just in time dependent on non EU supplies. If they can manage 10 components from outside the EU today they could manage 100 from outside the EU tomorrow. The WTO has worked hard on facilitation of trade to remove non tariff barriers.

The EU does impose some tariffs on some components that come in from outside the EU. The UK could offer tariff free components of all kinds once we have left and we can set our own tariff schedule. I suggest big manufacturers join me in pressing for this.

They suggest that there will be delays at the ports, especially at Dover- Calais, and these will disrupt Just In Time systems. I do not accept there need be additional delays, but if there was a regular increased time to transit the ports, you would just ask your supplier to allow for the longer journey time so the supplies still reached you when you wanted them. As they fit in Chinese supplies maybe taking 40 days to arrive by sea into current complex supply chains it shows that longer journey times are not deal breakers.

The main reason I do not expect new delays on imports is that the crucial importing port will be under UK control. There is no need for us to impose new processes and delays at the ports. We can adapt or continue the current system of checks away from the ports for any purposes we need. On the Dover-Calais route if more spot checks are needed on trucks then do them on the ferry or on the nearby train carrying the load through the Tunnel. There is plenty of competition to Dover-Calais Ro-Ro from containers, so in the unlikely event of difficulties at Calais there would other choices.

They sometimes say they will need more complete complex customs paperwork. This they say is an added cost, but not of course a delay as it is done usually before the lorry departs from the exporting factory. There will be little if any additional electronic paperwork in practise. All EU trade requires them to fill in a long and complex Intrastat declaration which overlaps with customs information. Most industrial and retail purchasers these days require extensive product information, with specification, cost, test results etc. A computer programme can send the bits of this the authorities need at the UK/EU electronic borders.

I suggest to the media they will be more convincing if they stick to the facts. What exactly are they worried about, and why don’t we just fix it in the four months that remains before we leave.

.

Im very busy and finding there are too many postings from the same individual, and too many long postings in general. I have started deleting some just for length or long third or fourth posts that day. Please try and sum up what you say in shorter format if you want to be posted promptly otherwise I will go over to more deletions.

So five Cabinet Ministers who voted for Brexit are staying in the government. They tell us they do not like the draft Withdrawal Agreement, and will try to get the PM to seek amendments to it.

There are three problems with this approach. The first is there is no sign the PM wants to renegotiate. Secondly, based on the PM’s determination to advance this draft, the EU has made clear it doesn’t want to renegotiate. The third is the Agreement is so bad just changing some words on the Irish backstop does not fix it. The document is seriously rigged against us and has to be scrapped. It leaves us powerless in many ways. Far from leaving the EU it keeps us chained to their rules, payments and Customs Union, with no unilateral way out. The only way the EU would be persuaded to renegotiate is if the UK government said we were leaving without signing the Withdrawal Agreement.

Ministers have to support this unacceptable Agreement all the time they stay in. They will be watched particularly closely by the media and the PM now we know they are trying to alter the policy. They would be better off resigning together. Then we would see the simple truth. You cannot want to leave the EU on 29 March 2019 and join or stay in this government. No Leave voter could possibly accept this deal as giving us what we voted for. It appears a lot of Remain voters also think it is a bad deal.

There is considerable misunderstanding in the media about the ERG. The ERG is the European Research Group. There are paying MP members who contribute jointly to research staff to help them. Non paying members like myself contribute our own research and also attend some of its meetings. As the name implies all the research is geared to understanding the impact of the EU on public policy and in the last two years to detailed consideration of leaving the EU and establishing a new relationship. Those who subscribe are running a research group that is not party political. A wider group of MPs including myself have meetings with the MPs that run the research club to discuss EU issues.

There are many MP members of this wider group. We all agree that the draft Withdrawal Agreement is unacceptable and as far as I know all will vote against it if it reaches the Commons as draft legislation. The ERG as a Group does not have a view on the future of the PM. Jacob Rees-Mogg (Chairman) has announced in public that he has submitted a letter, and Steve Baker is very active in promoting a vote. There are some other ERG members who have stated they have sent letters. There are some members who have sent letters but do not wish to make a public statement. There are members consulting their Constituency Associations about it. There are some members who do not wish to send letters for a variety of reasons.

The MP Group has only had one formal discussion of this matter when Jacob advised us of his intentions, because the future of Mrs May is not within the normal remit. Our aim as an MP Group is to concentrate on the issues around withdrawal and to set out a clear path on the ones where the Group has something important to say, as on the Irish backstop. Members of the ERG MP Group have over the last two and a half years set out a comprehensive approach to Brexit and urged the government to take it up. We have written and spoken as individuals or with other organisations on the legislation needed, on the legal and constitutional issues, on food and fishing, borders and immigration, trade and tariffs, the economy and taxation, transport security.

The campaign to have a confidence vote is now effectively led by Jacob Rees Mogg and Steve Baker. As Steve has stated on tv he thinks 48 letters should now have gone in. Clearly more letters have gone in than the number of public declarations. I do not believe Sir Graham Brady will fail in his duty. When he has received and opened 48 such letters he has to tell the PM immediately, and organise a vote promptly.

Last night I was asked on Any Questions why I supported Brexit which the young questioner thought would have an adverse effect on her generation in particular. Here is a longer version of my answer.

Dear fellow voter,

I support Brexit above all for the younger generation, because it will give to you something I was denied. It will give you the most precious political inheritance of all. It will give you a powerful UK democracy where the British people can make their own choices. Our Parliament will be able to do whatever the people wish, whatever we choose in the ballot box.

The freer the country the more prosperous it usually is. The USA is a mighty economy based on the architecture of freedom, and on the great principles of its Constitution. Switzerland is richer than EU countries, with a fine tradition of Parliament and referenda. Norway’s democracy has been preserved by staying outside the EU, and she too is a very rich country.

It is because I have confidence in the generations to come that I want to pass to them a democracy that works, where they will be in charge as they reach the age of holding powerful jobs. It is the EU’s austerity policies and thought throttling centralisation that has spawned such high youth unemployment in many EU countries. I do not want you to have to battle to restore our democratic freedoms, and to resist their further erosion to the EU, as I have had to do.

Yours sincerely

John Redwood

I was surprised as many as 23% of Conservative members support the draft Withdrawal Agreement. Maybe they heard the Prime Minister say on tv that we are taking back control of our laws, our money and our borders and ending freedom of movement. We all agree with that. That is exactly what the EU Withdrawal Act achieves. Unfortunately it is not what this Agreement says.
The PM must understand that the draft Withdrawal Agreement does the opposite. It means we pay the EU a fortune, stay in everything for at least 21 months and will have to stay in the Customs Union thereafter unless the EU is suddenly very nice to us. As more members read the document or read about it and understand it is not Brexit, I suspect they too will be disappointed.

(Conservative Home survey)