Author: johnredwood

One of the extraordinary things about the main Opposition parties in the Commons and much of the UK establishment is their failure to engage in working out all the good things we will be able to do as soon as we can make our own laws, set our own taxes and spend our own money.

One of the areas I identified and pursued before the referendum was the question of tax cuts that are illegal under EU law. There seemed to be near universal support for the abolition of VAT on sanitary products, so I trust that repeal will go through the Commons easily as soon as we are free. There was no opposition to the idea that we should abolish VAT on green products. Currently we have to charge VAT on controls for boilers and heating systems, on draught excluders, insulators and much else that can cut fuel bills. I hope a Conservative Chancellor will propose an early removal of these charges which impede reducing needless fuel use and keep more people on low incomes struggling to pay the fuel bills. I am disappointed that the Green party does not make a bigger noise against these taxes on fuel saving.

A more expensive item is VAT on domestic heating fuel itself. We are not allowed to remove this all the time we remain in the EU. Given the political sensitivity about fuel bills and the general view in the country that they are too high, removing this tax charge would make a welcome inroad into this difficulty.

Then there is the question of spending levels. Both sides agreed there would be substantial savings of contributions when we left, though there was a long and largely pointless debate over whether you should look mainly at the gross or the net figure. I would like us to leave and cease all payments by the end of March 2019, and would like to see some of the savings announced as extra spending on health and social care in the March 2018 budget ahead of departure.

We can reform our fishing policy to reclaim and improve our fishing grounds. We can design a farming policy that promotes more home grown food. There are so many opportunities. It is high time we had a proper debate about the upside to becoming a self governing country.

One of the first votes I cast was a vote in the EEC referendum in 1975, when we were asked whether the UK should stay in or leave the EEC. My employer asked me to research the consequences of a Yes and a No vote. I constructed an economic forecast based on the two scenarios, read the Treaty of Rome, and started my lifetime study of the EEC/EU and all its doings.

As a result of this research I concluded that the UK should leave the EEC for two main reasons. The first was the content of the Treaty. It made it clear this was no mere common market. It stated the aim was “ever closer union” and sketched an ambitious project which duly unfolded in later years of creating a state called Europe. I realised that the main political parties were all arguing that this was just a free trade relationship, a common market, when it was something very different. They sought to reassure us that no powers of self government were being taken away, when that was the express aim of the wider project.

The second reason I decided against was the economic impact. My forecasts showed that we would run twin large deficits inside the EEC. We would run permanent large trade deficits – as indeed we did. They decided to liberalise the trade in goods where the continent was strong, and to resist proper liberalisation of trade in business and financial services where we were stronger. This asymmetry led to big import penetration of our markets, and loss of Uk industrial capacity. VW and BMW flourished whilst BL floundered. It was also likely to increase our state deficits, as the EEC required substantial and rising financial contributions from us. I did not forecast any introduction of a budget rebate as I did not foresee such a successful negotiation by a later UK government. Even after the Thatcher rebate the large contributions added to our budget deficits.

After the loss of the referendum I accepted the verdict of the people, and spent the next 25 years trying to ensure the EEC/EU was primarily a common market. By the 1990s this was demonstrably impossible, and I turned into an opponent of the centralising Treaties that followed, and started then campaigning for a way out via another referendum. Attending 21 Council of Ministers meetings, mainly as so called Single market Minister, confirmed my view that this was not primarily a common market. I disliked the absence of democratic challenge and accountability to what we were doing, and the use made of the so called common market to further a massive legislative programme that by passed national democracy.

Lending and borrowing have caused all sorts of problems in recent years. The authorities are now proceeding with more caution, after their disastrous experiment with too much credit up to 2007 and too little in 2007-8.
The bulk of lending to individuals in the UK is to let us buy assets we cannot afford to buy outright. Most lending allows people to own a home. Over most time periods since 1945 houses have gone up in value, making the loans safe for the lenders and usually a sensible commitment for the borrowers. The lenders can normally get their money back if an individual can no longer afford the interest charges by agreeing a sale of the property. The older pattern of borrowing on mortgage when comparatively young also increased the security for the lender, as younger people often go on to gain promotion and pay rises making the mortgage more affordable. This would only cease to make sense if the authorities so deflated the system that they brought home prices down a long way.
Lending to let people buy cars also has some features of asset backed lending.If any individual is unable to keep up the payments the lender should be able to sell the car for all or most of the value of the loan. Only if the market overextended car loans greatly and then the authorities created recessionary conditions generally would this become a problem for the lenders who would stand to lose more from falling car prices.
The most difficult area is lending to people who need money to pay day by day bills. Here the lender has to make individual assessments about need and capacity to repay. Until recently Provident Financial has been successful for its shareholders by judging how much it can lend to people without assets and in need of immediate cash. It has chosen usually to lend for short periods of time at high interest rates, making it a profitable business. When this industry was subject to a Competition enquiry it was accepted that the clients on the whole wanted the service offered and were prepared to pay the high rates involved. Some would say they had no choice, as there was no lower priced credit on offer and they needed the money.
This week news has come out that Provident by changing its business approach is now finding it difficult to collect all the money owed on outstanding loans, and is unable to write as much new business as it was accustomed to do. Partly for regulatory reasons and partly for efficiency reasons the company decided to replace its network of Agents going house to house, building relationships with people in need of credit. These agents were rewarded based on their performance at collecting cash from clients. Instead it recruited 2500 Customer Experience Managers and equipped them with modern technology to enable more management information and regulatory control of the relationships. They are remunerated on a different basis. So far they have found it very difficult to collect all the money owing on the loans they have and to write enough new ones to keep it running as before.
What is the right answer to lending to people in need of cash for day to day spending? Could anyone do it for lower rates of interest? How should such a business adjust to new technology and current regulatory requirements? It does not look as if the problems at Provident are signs of some new massive credit crisis. They operate in a part of the market where the main banks do not get much involved.

Once out of the EU the UK will have more influence worldwide. We will regain our voice and votes on international bodies where the EU currently represents us. We will be able to work more closely with natural allies like Australia and New Zealand, and the wider Commonwealth.

The government has stated its wish to become a pioneer of free trade worldwide, and has found a welcome at the World Trade Organisation now we are converting our membership back to full voting membership. There are ready allies that will see the UK as a good ally giving them more influence on world issues. They will want early Free Trade Agreements with the UK.
The UK as a member of world standards bodies will be able to do more to promote better exchanges of services, which bring with them better understanding between peoples and countries. Collaborating more in the arts of peace and a mutually beneficial commerce could help the world politically as well.

We will remain an important member of NATO, making the largest financial contribution after the USA and supplying essential military capability to the common defence and to the peace keeping and peace making expeditions the Alliance will wish to undertake. The UK will continue to be a leader in global intelligence. working closely with the USA on counter terrorism and related matters.

I would like us to learn from the difficult experiences we have gone through with our Middle Eastern involvements. If the UK wants to have serious influence in the Middle East it needs to spend more time and resource on people with the languages and cultural and political understandings needed. My main take away from Afghanistan, Libya, Iraq and Syria is there needs to be more political work and less military intervention by the west. It is difficult bombing terrorist groups of fanatics into submission given their mobility, the difficulty of identifying them and the impact your actions can have on recruitment.

Thea UK can also do good work in promoting wider global advances. The UK for example can be a leader in promoting animal welfare, in tackling modern slavery and promoting the English language as a medium for cultural as well as commercial exchange.

Trump supporters do not mind if their President breaks the normal conventions of diplomacy or asserts US interests too brashly in his tweets. They might mind a bit more as he backs down from one of the main refrains of his campaign, that he would keep the USA out of many of the military interventions favoured by Mrs Clinton and the Democrat establishment. Mr Trump gave us the impression US troops would be coming home from Afghanistan.

The dismissal of Mr Bannon as Chief Strategist has placed Mr Trump more precariously dependent on the advice of the Generals in the White House who do not share Trump supporters scepticism about US military adventures abroad. Aware of the danger of his foreign policy looking like continuity Obama Mr Trump claimed his policy is new and different. The main differences he tells us are they will not go in for state building, and will win against the terrorists by using greater force.

Ruling out state building arguably makes it more difficult to get a long term success. Only if these troubled countries can establish moderate well supported governments that can turn people to building a more prosperous economy is their hope of stopping recruitment and deployment of more terrorists. If the US now does not wish to help do this, it may make things more troubled.

Saying more force can be used to defeat the terrorists is also not easy. These terrorists belong to a bewildering array of differing and fluctuating groups and cells. There is no single ISIL army to be defeated in the field. They embed in the civilian population, making it inevitable that the more force you use the more civilians you are likely to kill. Given the distrust of Sunni for Shia and vice versa, if the west targets one group of terrorists it can appear to be taking sides in a religious civil war which leads to resentment of the western forces. Some of those the US fights welcome martyrdom which adds to the risks. Years of bombing Middle Eastern targets, several invasions later, there is still a substantial terrorist problem in parts of the Middle East. Why should we believe that more bombs will crack it?

PS I now hear that the US Secretary of State shares these criticisms of his Presidents statement. According to the S of S the US will not have an easy win by using more force and will need to undertake negotiations and diplomacy to resolve the conflict!

The UK borrowing figures are coming out better than the Office of Budget Responsibility and some other forecasters have been suggesting. In July we had the first July surplus since 2002, at £0.2bn. This leaves borrowing at £22.8bn for the year to date. It seems likely the government will borrow less than the OBR forecast of £58.3 bn for the year as a whole.

The main reason given for a better performance was the increase in self assessment income tax receipts. Total revenues were up 3.4% whilst spending was up by 1.6%. The total stock of official debt stays at £1758 bn or 87.5% of GDP. The effective stock of debt is £1323 bn or 65.8% of GDP, as the state has bought in £435bn of the debt and now owes itself this money.

There is still more commentary and idle speculation about Brexit than I would like, whilst what we need is to pin down the EU on whether they want a deal or not. The more the opposition, business and some in the media argue on about what the UK position should be, the more likely it is the EU will delay and avoid engagement in the hope that the UK will give more ground.

This is, however, a very dangerous strategy for the EU. The more they reject sensible approaches by the UK, the more UK opinion will harden against them and in favour of simply leaving. If the EU delays talks about trade for too long, they reach the point of no return where they will run out of time to prevent the imposition of tariff and other barriers on Danish bacon, French dairy products, Dutch vegetables and Irish beef. At some point they will need to respond positively to the UK offers on trade if they wish to retain full tariff free access to the UK market.

The EU has some strange negotiating aims, and one understandable one. They seem to think the European Court of Justice should still decide cases affecting the UK. They have missed the point that when we become an independent country again the UK Supreme Court is the ultimate appeal court for UK based matters, just as the ECJ will remain as the ultimate appeal court for EU based issues. So an EU citizen legally settled in the UK will come under our jurisdiction for their rights in the UK, just as surely as a UK citizen living on the continent will continue to fall under ECJ jurisdiction on matters surrounding their rights. Trade disputes will be resolved by the usual international methods, as they are today between the EU and Australia or the USA. This does not entail Australia accepting ultimate ECJ authority. There are WTO procedures for adjudications of trade disputes.

They seek to think the UK should stay wedded to EU laws as they evolve. Again this is not something other countries have to do just to stay trading with the EU. Of course if the EU wishes to impose requirements on products and services they are importing they may do so, as long as these are the same conditions for the whole world, and are not a restraint on trade as defined by the WTO. It will be a matter of future negotiation and UK choice how far we go in matching or adopting standards and rules the EU imposes for the rest of our trade. The UK will regain its voice and vote on a number of global standards bodies where we may be able to help create global standards that are good and drive more trade.

They seem to think the legal settlement of someone in the UK under current rules should allow them to pre-empt any future UK migration policy. Most of us want there to be a fair policy after exit that offers the same rights to EU and non EU arrivals.

The issue I understand but reject is their belief that we should go on paying after we have left. This would clearly be helpful from their point of view. There is no legal basis whatsoever for any such payments. The UK did not receive a bonus or downpayment when we joined the EU to reflect liabilities they had all built up before our joining, so why should we pay them for future liabilities. Once we have left we get no benefit of the spending so we should not be contributing to the spending.

As we leave the EU the UK will be free to design a new foreign policy. Whilst it is true that the present Treaties allow an EU country to express a different view about a third country from the common EU line, it is becoming increasingly centralised with more resources being put into the EU diplomatic service and more loyalty expected to the EU High Representative’s view. In many areas, ranging from trade to climate change the UK and other member states have to accept the common line and allow the EU to lead. The UK is bound in to a trade policy by Treaty, and has to watch as the EU represents us at the WTO even though we have to pay a membership subscription to the WTO. There are many other bodies making standards and regulating business worldwide where the EU has taken over form the UK. When it comes to military intervention the UK and the others still have the power to decide for themselves whether to commit to common action or not.

The UK needs a new foreign policy not just to incorporate the areas the EU currently does for us, and the new freedoms we will have to shape a policy in our own national interest. We also need it to reflect on the problems caused by coalition and NATO actions in the Middle East and elsewhere in recent years. Many UK voters are critical of the UK’s policies this century, disliking the military interventions in Iraq, Afghanistan. Libya and Syria, and disliking the inability of the UK to argue its own case in matters like trade and energy to look after its own economic interests. Take back control was mainly articulated about migration, taxes and domestic laws, but it was also relevant to the conduct of foreign policy.

I wish to explore how we should use our new freedoms, and what we should learn from the military interventions of recent years, in a series of blog posts over the weeks ahead. Today I wish to start with the issue of what should be the main purpose of UK foreign and defence policy? I would propose that the main aims are

1. Creating friendly and positive relationships with our neighbours and partners, including promoting more free trade, more exchanges of ideas, investments, intelligence, cultural activities and the rest.
2. Having sufficient power to defend and protect the UK islands and our dependent territories, and sending clear messages of our resolve to protect ourselves should need arise.
3. Working with allies and partners to promote peace and prosperity worldwide, seeking conflict resolution and better economic development in troubled developing countries. Acting where we can make a difference for the better.
4. Recognising the limits to our abilities to reform or amend governments and their policies far from home. We are not to blame for all the ills of the world and cannot solve all the worlds problems.
5. Seeking mutual understanding with the major powers of the world, whilst being able in conjunction with our NATO allies to protect ourselves if diplomacy fails.