Author: johnredwood

The government has announced a review of student funding and University fees. They have decided to do this because they are concerned that Universities do not provide competitive and varied course fees to reflect the different costs of provision and the different economic values to the student of differing degrees. They are also concerned about the scale of student debt and the rate of interest charged on it. This was an important talking point in the General Election when some in Labour seemed to say they would cancel all existing student debt, only for Mr Corbyn after the election to make clear this was not an affordable promise.

The government will have to remember that Universities are independent institutions with a substantial revenue from overseas students. It is not surprising that individual Universities have been reluctant to vary their pricing, for fear of being labelled a second or third rate institution if they decided on a price cutting strategy. It is also perhaps understandable that they have decided to price the same for each subject, meaning that high cost subjects like chemistry are cross subsidised by lower cost subjects that do not need expensive laboratories and supplies. Harmony between staff of different faculties and convenience of administration point to common pricing. There has also been a reluctance to vary prices related to demand and market value, though a law qualification or a finance qualification from a top university probably bestows more economic value on the holder than some other courses from less well regarded institutions.The government may well encounter resistance to the idea of segregated pricing, and may not wish to take pro competition action against the universities.

The present loan system allows for the possibility that some degrees do not enable the student to enter relatively high earning jobs, by allowing write off of student debt if the person stays in low paid employment. It also has the weakness that a high flier who can attract a well paid job may decide to leave the country and walk away from the debt. The high rate of interest acts as a kind of graduate tax on all those who do settle into employment above the income threshold.

There are three main ways that the system could be altered. The government could put more money in to subsidise expensive and worthwhile courses, or to subsidise good UK students. The Universities could be made to compete, with requirements for differential pricing based on costs, supply and demand. The government could continue with a loan based scheme with reform of the interest rate and tweaks to the requirements to repay and to the enforcement of repayment by those who are successful. The scheme can be made to be more like a graduate tax.

I am not myself recommending any reform. I will be interested in your thoughts. The loan scheme which Conservatives originally opposed, fearing it would lead to fewer people attending university and fewer people from poorer backgrounds thinking they could go, has had neither of those consequences. For that and other reasons the Conservative party altered its stance and came to accept and extend the loan scheme Labour introduced. I do favour more increases in scholarship funds so good students can be grant financed. Many universities now are raising these access funds from ex alumni and other wellwishers.

I saw in the press the case made for private sector run roads. The IEA pointed to the shortage of capacity of the current road system, the high pay backs that new road investment would achieve compared to new railway lines, and urged a more radical approach.  The present government has ruled this out, and is only considering road user charging for lorries, not for private cars. Without a system of comprehensive user charging private run roads with private new investment are impossible. This article is not an attempt to re open this issue, which the government regards as settled.

In the run up to the 2010 election the Conservative party looked at a scheme to repay debt from franchise fees for roads whilst abolishing  Vehicle Excise Duty, but decided against it. The Conservatives were keen to find ways of cutting state debt. I am not recommending this scheme now, and the numbers no longer work with lower interest rates on government borrowing. I thought it might be of interest to see what has been explored and rejected in the past in the light of some people’s wish to re open road pricing as an issue.

The aims set were

1 Abolition of Vehicle Excise Duty, introduction of road charges. Road users overall to pay no more in tax and no less as a result of the change

2. Tax road use rather than vehicle ownership

3 Raise a large sum of money from the private sector  to pay off some national debt.

4. Government to retain the  freehold of the road network so we were not selling long term national assets

5 Motorists to display and register their insurance so there remained accessible records of vehicles in use

6 Private managers of the highways network incentivised to increase capacity,safety and availability of road space

7 Price controls to stop monopoly exploitation of popular roads at popular times of day.

8. Winners from the scheme to be people on lower incomes, low mileage drivers  and users of roads at off peak periods

The scheme entailed introducing road charges to replace the lost VED revenue. The government was to offer franchises to the private sector yo manage and improve the main roads and to collect the charges to pay for the maintenance, management and franchise premium paid to the state.  The franchises were to be auctioned for a specified price, with bidders bidding for length of contract. There would be absolute price controls to stop monopoly exploitation, allowing franchise holders to charge less off peak as they saw fit. The numbers worked to deliver £ 100 bn of capital to the government to repay debt, with later reversion of the franchises to do it again.

Private management of the highways was likely to result in improvements to flows and use, with less time  with intrusive roadworks and closures. Franchise holders could add to the network, with incentives to spend capital on road improvement and protection for sunk capital if they lost the public sector road  franchise.

The leadership considered it carefully but rejected it because it had a big political drawback . The public were so distrustful of government that they did not believe any government would honour the promise not to charge more.  The scheme did of course offer  a useful tax cut to those using the main roads less than the average. It was particularly helpful to low income and elderly households who drive fewer miles. The user charges only applied to the national trunk and motorway network.

Today interest rates are lower so the public finances would lose out from the loss of state revenue, so it is a non runner. The scheme worked financially only because the state saved in interest  costs from debt repayment what it had lost in VED revenue forgone. Today some people are proposing a switch from VED to road charges but all collected by the state. This cuts out revenue loss but fails to deliver service improvements in highway provision. With user charges the motorist would likely get even more critical of the poor service and availability of roadspace in the UK with a public monopoly.

I find it strange that three Heads of Security Agencies had to speak out for fear that Brexit would damage exchanges of information between France, Germany and the UK after Brexit. Why should it? They would have to want to change their current procedures, or their governments would have to stop instructing them to make sensible exchange.

It is already the case that if the UK gets intelligence about a threat to lives in France it will tell the French authorities and vice versa. There are data sharing agreements, based on what we can usually share with due consideration of how each Intelligence service protects its own sources. The UK belongs to the Five Eyes grouping of the USA, UK, Australia, New Zealand and Canada where trust is even stronger and the sharing has gone further, and that will clearly continue after Brexit.

This seems to me to be another non problem, unless the EU side wants to make it a problem. As we have high quality and extensive intelligence it is unlikely they will want to reduce the flow of information, so they can just agree to carry on. The information share is usually bilateral anyway. Issues in the UK should be adjudicated by our court, and issues on the continent by their court.

An Extradition Agreement might be a better route for bringing suspects to trial in another country rather than trying to continue with the Arrest Warrant, where ECJ jurisdiction would be a problem.

Last week I was asked some questions at a meeting based on wildly inaccurate information about myself and my views. I was told the basis for the questions came from Wikipedia so I looked up my entry.

I understand it is not the done thing to correct your own entry, so instead for greater accuracy I will record here where the entry is factually inaccurate, and also where it is particularly misleading.

Factual errors

I am not currently the co chairman of the Conservative Party Policy Review on Competitiveness. That job ended in 2010.
I do not act as the Leave means Leave pressure group spokesman
I am not Corporate Affairs Adviser at Concentric PLC
I have not been non executive chairman of Mabey Securities this decade
I completed and received a D Phil – not a PHD – at All Souls College, Oxford, not at St Anthony’s
I was elected to a fellowship by examination at All Souls in 1972 which led on later to a Distinguished fellowship.
I did not write an investment column “recommending investors pull their money out of the UK”

Misleading impressions

I have never spoken or written against civil partnerships and gay marriage and am not proposing any change to current laws. I regard the debate about capital punishment as being over and do not support its reintroduction. I never spoke or wrote in its favour.

Next Tuesday I have been invited to give a lecture in the Speaker’s House at Westminster on the opportunities Brexit affords the UK. I have plenty of ideas of what can be better, and believe the UK can both be freer and more prosperous once we are out of the EU. That was why I campaigned and voted for just such an outcome. I will share more of the details with you on this site next week.

My vision will include discussing how to spend all the money we save from our contributions, which will boost both our growth rate and our balance of payments. It will look at opportunities to remove taxes we do not agree with but have to impose as part of our membership. It will examine the scope for a fishing and farming policy which is better for our farmers and fishermen, and will cut our dependence on imports. It will consider what a new migration and borders policy ought to look like, and set out how we can pursue a free trade agenda that will be good for jobs in the UK. There is a longer list than this, but these are some of the highlights.

I would be interested to hear from readers what they think we can do after Brexit that will improve our lives and government, given the freedoms we will gain to vary our laws and spend our own money. We have had months and months of being told by a small group of contributors here – and another small group of contributors to the national media – what they think the downsides will be. Most of these will prove as incorrect as the forecast of a recession immediately after the referendum vote.

The IMF was one of several international bodies and opinion formers who wanted the UK to stay in the EU. They misjudged that call, misunderstanding UK voters. Now they have issued an update report telling us that we have to take strong policy action to succeed. Their remedy is to abolish the regular increases in the state retirement pension which they think is too generous, and to put through a series of tax increases. They want to hike VAT on heating fuel from 5% to 20%, and to put up taxes on the self employed.

What a bizarre and negative mix. Why do they recommend this? Because they say our state debt to GDP is too high, yet it is very similar to the USA and below the levels in Japan, France, Austria, Italy and some other advanced countries. They fail to recognise that the state has bought in a substantial part of the debt they claim to be worried about.

It is difficult to see how taxing the self employed more would help innovation and economic flexibility. It would hit one of the flourishing areas of UK growth. Nor is it easy to see why pushing more people on low incomes into fuel poverty through a massive tax hike on domestic fuel would be a good idea. Nor does removing spending power from pensioners help promote a faster growing economy. This ticket would never win a UK election, and proves again UK voters are more sensible than the IMF.

The IMF does not even seem to be good at forecasting the UK economy. They were too gloomy about the likely short term impact of the vote. They now make much of the slightly slower rate of growth in 2017 compared to 2016, and blame Brexit. If they analysed the figures better they would see growth speeded up a bit after the Brexit vote, and started to slow in 2017 thanks to action to slow the economy taken by their friends at the Bank of England! The Bank has put up rates, sought to tighten car loans and consumer credit, stopped QE and is now withdrawing special lines of credit to the commercial banks. At the same time the European Central Bank has kept interest rates at zero, has printed a lot more money and has not restrained bank credit.

So could we have a bit more analysis and a bit less policy prescription? Oh, and they do condemn UK educational standards at the same time. No mention of the world class universities in the global top ten.

We know that the Foreign Secretary’s speech today was checked and approved by 10 Downing Street, and is a statement of government policy.

It is clear from the text that it remains government policy that we will leave the EU, the Customs Union and the single market in accordance with the Article 50 letter and Act, and the EU Withdrawal Bill.
It is also clear from the text that the UK will regain control of its laws and regulations, and will take the powers necessary to amend and improve the law codes once out as we see fit.

This should come as no surprise to all those who have followed the votes in the Commons on the Bill or who have read the PM’s two speeches on this topic. It will nonetheless come as a surprise to those who have been writing that the government is about to reinvent the or a customs union, forego an independent trade policy, and accept the need to follow all new EU laws.

The speech does not offer us any guidance on whether we need and will accept a so called Transition period, or on whether we will agree to a substantial payment to the EU on departure. I assume the speech is silent on these matters because nothing is agreed until everything is agreed, and much has not even been discussed so far. I still see no need for a transition or for payments all the time nothing good is offered that we will transit to.

It is misleading to say we can nationalise the railways and this will solve all their problems. The bulk of the assets are already nationalised through Network Rail. The state owns all the tracks, signals, most of the stations, trackside assets and the land the railway uses. The main reason for the high cost of rail fares and the high taxpayer subsidy is the high cost of providing the large infrastructure the railway requires, and maintaining and improving it.

Quite often the reasons for failures of service rest with the performance of Network Rail. The wrong kind of snow or leaves on the track, signal failure, bent rails, failure of station equipment are regular reasons why trains are late or cancelled.

The private sector part of the railway on most lines is the provision and operation of trains that use the railway. These too can lead to delays and cancellations. If you hear staff are on strike, or a train driver has failed to turn up, or the engine breaks down, that is the private sector part letting you down.

The private sector is very circumscribed now in what it can and cannot change on the railway. It has to run a timetable laid down by government. It is often unable to get train slots on the tracks to expand or vary its service. Many fares are controlled. It can change the catering and on board train offer, but does not control the arrangements for ticketing, waiting on stations and the general service provided for passengers when not on board.

Some parts of the private sector have failed to reach good agreements with their staff to ensure smooth running of the trains. Is there any reason to suppose if the workforce was nationalised it would be any easier to reach an agreement to use the Guards for customer support? Nationalised industries had poor records when it came to employee relations. Labour’s In place of strife approach when in government failed, and Labour lost in 1979 following bruising public sector strikes.

There is plenty of scope to apply new technology to the railways to improve service and raise productivity. As there is also plenty of scope to grow usage of the trains, there is no need for redundancies. The present mixed model is struggling to bring about the changes that are needed. A fully nationalised model, on the evidence of past experience, would fare even worse.