Author: johnredwood

I am surprised that some newspapers and politicians want to criticise Oxford and Cambridge Universities for having an estimated £21 bn collective endowment, including all the Colleges. They should be celebrating this success in fund raising and investing.

These savings that come  from gifts and from wise investing allow the Universities to do more. Money can be used to employ more and better researchers and tutors, and can be spent on providing help to students from lower income households. It is easier to run an independent global institution if it has its own capital to entrench its self government.

The articles we need are ones discussing  how more of our universities can build substantial endowments. More can emulate Oxbridge success by encouraging gifts and legacies from former alumni. More could build investment portfolios that take a long term view and grow the value of the fund by a decent margin over inflation. University endowments can fund start ups and the growth of spin off businesses from the ideas their faculty members generate. The can build facilities for conference businesses, with most scope for residential conferences in vacations.

Oxbridge is striving to catch the Ivy League US institutions who have been very good at attracting donations and good at investing them. Oxbridge’s endowments should be cause of celebration, not jealousy. All our universities should be pressing for more independent means, not less. Endowment money is not for immediate spending, but a guarantee of independence and solvency for the future. The bigger the endowment the more social good and academic excellence they can achieve.

The recent slow growth of the UK economy still locked into the EU mirrors the slowdown in growth on the continent, with a special UK twist. The higher taxes on property and cars imposed in the 2016 and 2017 budgets have had a further adverse impact, reinforced by the monetary tightening carried out. You expect the economy to slow when special commercial bank facilities are withdrawn and instructions are issued to lend less, as they were.

The good news is that leaving with no deal next March would allow us to speed our growth rate and improve things more rapidly than if we hang around in the EU paying their bills for longer. I have in the last couple of  years been more concerned about the balance of payments deficit than the diminishing government deficit. It is the balance of payments deficit which requires us to sell assets to foreigners or to borrow from abroad. One quarter of that deficit is the UK government payments to the EU and overseas aid.

Stopping all payments to the EU early next year would immediately improve the balance of payments deficit, and give us £12bn a year to spend on domestic priorities. We could implement something like the UK post Brexit budget I have set out  before, with substantial spending rises for  areas like the NHS and social care, and some tax cuts. This would provide a useful 0.6% of GDP stimulus to the economy without any increase in the state deficit. Indeed, the state deficit should fall as more activity will generate more tax revenue and less spending based on need.

I am pleased to see others saying in public that we need to tell the EU we will not  be paying them any more after March 2019 on the kind of deal they are currently proposing. It is most important that becomes the government’s stance. It is the only way to have any chance of getting a good deal, and it reminds us of the obvious advantages of early exit.

The news from Italy takes my breath away. The President has vetoed one of the appointments to Ministerial office because he has expressed some Eurosceptic views, in line with the views of the winning parties in the election. He wishes to impose a government of unelected officials instead, which is unlikely to command the confidence of the Italian Parliament. He is challenging the winning parties to vote his government  down and go for another election, when the results of the last one were clear and produced a potential coalition government with an agreed programme.

As the leader of the Lega has said, this is a direct assault on democracy and threatens a constitutional crisis. I am not an Italian voter and do not agree with some of the things Lega and 5 Star say, but I do see why their coalition programme wishes to cut taxes and boost the incomes of the poorest, and how the voters expect some change of approach. For the last decade the Italian economy has languished with little growth and high unemployment. The Euro scheme offers more of the same.

Their problem is simple. To do what they want they either need substantial reform of the Euro system , or they need to take their country out of the currency. The EU is determined to block either of these courses, and has allies deep within the Italian establishment to prevent change. It was this feeling by electors that the scheme did not work and the traditional parties were not prepare to challenge it that led to the election results. Now the establishment intend to make it worse by seeking to thwart the will of the voters. The Euro scheme needs to have better ways to route money from rich to poor and from surplus to deficit countries. Its refusal to provide the grants and loans on the scale needed is leading to the demolition of traditional parties in the zone, and to a clash between those who want reform and those who defend every detail of the Treaties and Euro architecture.

During the election the Conservatives launched some proposals for paying for social care in the future. These were very unpopular and were rightly withdrawn before people voted. In the correspondence which they generated it was clear some people did not understand the current system, and were surprised to learn that today under a policy approved by all 3 main national parties in office a persons house is sold to pay the bills if they go into a care home unless they are rich enough to pay the bills from other money.

This applied to my parents who sold their home and I saw nothing wrong with the principle. They did not need their home when they went into  care. I had no right to inherit the value of their previous home.

The crucial distinction in UK policy is between health care, which is free, and living costs which individuals remain responsible for all the time  they have income and or capital to pay the bills. In most cases the  distinction is obvious. The elderly person needs a meal or a roof over their heads . That is a living cost. They need medicine or hospital treatment. That is free on the NHS. The distinction is more difficult with assisted living  or social care.

If someone carries on living in their own home they have to pay for various types of social care help, just as the person living in a care home does. They do not, however, have to sell or remortgage their home to do so, nor should they.I am going to be writing more about this topic and welcome thoughts for reform. Good quality social care is crucial to provide support for elderly patients who need help but do not need hospital treatment.

The new 5 Star/Lega government agrees about more than its critics thought it would. The two parties both think Italy has faced too much austerity from the EU and needs to spend more and tax less. They both think there are too many migrants entering their country, and want to see tougher controls over migration. They both think the Italian state debt is too high and some of it should be cancelled. Both want to put Italy first. Both challenge the German view of the Euro scheme, which refuses to transfer money from the rich parts of the zone including Germany to the poor parts of the zone. As a result we have had a series of  Euro crises in stressed countries.

The worst of these crises so far were in Cyprus and Greece. In each case the commercial banks were unable to honour requests to withdraw Euro deposits, because the Central Bank refused them the cash they needed. In the case of Cyprus the Euro there was slashed in value if you held a deposit over a certain size. The Euro has been more stable and its value stronger more recently thanks to the Target 2 balances. Germany and the other surplus countries now deposit their surpluses at the Central Bank for zero interest with no repayment date. The ECB lends the money on to the stretched banking systems of the deficit countries for zero interest. The ECB also helps countries like Italy by buying up large quantities of their state debts to keep their costs of borrowing down.

Italy has now hinted that the ECB should write off the state debt Italy now owes it. The ECB disagrees. Italy thinks there should be some sharing system around the zone, allowing her to spend more and tax less. Germany disagrees.

It is likely Italy will set a budget which challenges the rules of the zone. The row may then lead on to doubts about the Target 2 system and the sustainability of this borrowing based model. Within the UK currency zone the rich parts send large amounts of money to the poorer parts. They pay more taxes, and the lower income areas get more in  benefits, Council grants and general public spending per head. The Eurozone has no such mechanisms. Italy may be about to wobble the consensus which is based on extend and pretend. The ECB lends on surpluses from rich countries to poor countries, claiming it is temporary and will be repaid. It is best not to probe this too much.

Reading   the spin coming out of Brussels from the talks, it sounds as if the EU favours No Deal. Their rejection of every helpful and sensible proposal to let them export more easily to the UK is bad enough. When coupled to their demands that we pay them money we do not owe them, obey laws we might want to modify, and avoid trade deals with faster growing countries elsewhere it means No Deal will be better than the Deal on offer.

I regularly stress to government to need to be ready to leave on 29 March 2019 given this background. If that turns out to be the answer we can start spending the £12bn a year saving immediately, we can sign early trade deals with a number of countries that have been keen to get on with it, take back control of our fish and  put in a UK migration policy that works for us. Any Deal has to be better than this. The EU seems to think a Deal has to be a punishment. As an independent country they will not be able to punish us, so the sooner we are out the better.

Defra is keen that our new farming policy should  be ultra green. If that means we value and look after our fields and farmland, and protect our forests and wild areas, I am all in favour. The good news is we can do that at the same time as expanding the food we produce and meeting more of our own food needs.

I trust the Defra Secretary will take on board from his current consultations a strong feeling in the rural community that we need a farming policy that puts food production into a more central role than it achieved during the years of the Common Agricultural Policy. There are good environmental reasons to cut down the food miles, as well as good economic reasons why it would be better to cut the balance of payments deficit.

Over the last winter I was pleased to find I could largely rely on home produce. There were good home grown potatoes, carrots, cauliflowers, leeks and onions available most of the time. For much of the winter there were excellent English coxes and  varieties of pears. More recently I have turned to New Zealand for their fruit when English has not been available.

It was difficult to find oranges from anywhere other than Spain thanks to EU tariffs, though some citrus fruits from Israel, North Africa and South Africa did find their way to UK supermarkets. A new agriculture and tariff policy after we leave could be a big boost for our farms and a bonus for our consumers.