Author: johnredwood

The UK General election is both about who should lead our country for the next five years, and what kind of a country we want to create. It is an unusually important election, because the UK has great opportunities now it is leaving the EU. We need to leave in a way which brings more people together in our country. That requires reassurance to all that we are leaving the EU, not Europe. None of us want to damage our economy. We are not out to undermine the many friendly and positive collaborations and friendships UK people and companies share with the continent. We do not wish to turn inward. More than ever the UK needs strong and stable leadership, to negotiate a decent future relationship with other EU member states. I want to see an outward looking, optimistic UK, engaged in the wider world and a pioneer of freer trade on a global basis.

As the official Brexit campaign argued, the UK will not use our departure to undermine the employee protections embedded in EU law. The Conservative leadership has stressed that all existing minimum standards and protections will be transferred into UK law. As governments of all persuasions have in the past, so a future Conservative government wishes to go further than the EU standards. As the Labour party also supports this approach that should be one fear of Brexit removed.

So far there has been no downturn as forecast by some in the Remain campaign who thought the act of voting for Brexit, or the sending of the letter, would bring on an early recession. There is no need for there to be so once we do leave, either. An important task for the new government will be to extend and improve the economic recovery. So far since the banking crash and slump of 2008-9, we have seen good job creation and moderate growth. Setting the right tax rates, allowing sensible levels of public spending to improve the NHS, schools and other crucial services, and creating a climate friendly to investment and enterprise is central to building on what has been achieved since 2010.

There is no such thing as hard or soft Brexit. Remaining a member of the single market is not on offer. Being in the customs Union would prevent us having better arrangements with the rest of the world. It is mightily in the interests of the other member states to have a free trade agreement with the UK, so that may well happen. If it does not in time for our exit, we will be able to trade with them under WTO rules as we do with the rest of the world at the moment.

As we come out we need to legislate for a new UK fishing policy kinder to both our fish and our fishermen. We need to set up a new system of agricultural support, that is sensitive to the UK rural landscape and helps promote more domestic food production. We can get rid of EU taxes we do not like.

I think in a few years time we will have more and better friendly contacts and partnerships with people and companies on the continent. Just as staying out the Euro allowed the City to be Europe’s major fund raising market, so being out of the EU will not impede more trade, investment, academic and cultural exchange. Our future relations will rest of the good will and commonsense of people on both sides of the Channel, not on the sometimes unhelpful words of a few EU officials.

Published and promoted by Fraser Mc Farland on behalf of John Redwood, both at 30 Rose Street Wokingham RG40 1XU

There is a lot of disinformation about rises and falls in the pound. Some would have you believe we had a stable and strong pound prior to the Brexit vote, and then it fell. The truth is somewhat different.

The crucial cross rate is the Euro rate, given the volume of imports we take from the EU. Sterling fell a lot during the banking crash of the last decade. On 3rd January 2009 it fell as low as Euro 1.04. It rallied in the next decade, typically trading around Euro 1.20 in the period 2010-2014. It hit a low of Euro 1.16 in February and August 2013.

By June 14 2016, just before the vote, it was around Euro 1.25, having been higher in previous months. Today it is at Euro 1.18, just 5% down on the June pre vote low. At today’s level, after rallying in recent weeks, it is around its average earlier this decade.

Published and promoted by Fraser Mc Farland on behalf of John Redwood, both at 30 Rose Street Wokingham RG40 1XU

Mr Macron promised to rebuild the Franco-German alliance and to seek to strengthen the role of the EU in his country. To do so he has to fly to Berlin to show Mrs Merkel he agrees with her and will be helpful to her prior to the German election.

He will find in Berlin beneath the public courtesy a very different view of what the problems are, let alone what the future answers should be. There will of course be some goodwill born of relief that Mme Le Pen failed, but the reality of German interests will soon reassert.

The main German preoccupations will be to avoid any new spending commitments by the EU that Germany might have to pay for, and to keep the austerity pressure on the heavily borrowed countries of the Union. France will want to speak for a higher spending and borrowing federal EU government which Germany will dislike. Both countries say they want a political union, but France wants that to include sharing the money whilst Berlin wants it to be governed by teutonic controls on spending, borrowing and printing money.

Mrs Merkel may offer her new suitor warm words, but is unlikely to loosen the German or EU purse strings. Germany will be conscious that her 830 bn Euro deposits in the ECB are already lent on at no interest to countries who will struggle to repay.

Published and promotoed by Fraser Mc Farland on behalf of John Redwood both at 30 Rose Street Wokingham GR40 1XU

The latest report from the MPC of the Bank is as muddled as ever. They record that their February forecast was too optimistic on growth, too pessimistic on unemployment, and got inflation wrong. This time they have boosted their ideas of Uk growth next year and the year after to more realistic levels, but taken 0.1% off this year after big upwards revisions last time.

They keep referring to inflation going up thanks to lower sterling, and trying to find a Brexit related explanation to other changes. It’s as if they forget we are in an active global economy with many linkages to the world. They did not ask themselves why UK inflation has gone up about the same as German and a bit less than the US. They forgot that dollar oil price rises underlay much of the US inflation, just as it underlay inflation in other countries that had not had a fall in their domestic currencies. They seemed to fail to make the link between weaker first quarter growth in the Uk and also considerably weaker first quarter growth in the US where the currency has been strong and in most of the Euro area.

Weak first quarters on both sides of the Atlantic owed much to a mild winter hitting energy output and demand. Higher inflation in most places was related to the oil price and general commodities. This quarter oil and commodity prices have fallen, the pound has risen and in the UK the weather has been colder for the time of year. All this points to another change of direction for inflation and output.They asked if weak UK cars sales in April means weak consumer confidence. Surely it is instead the response to large rises in VED in the budget which may reduce sales for more than one month, just as Buy to Let taxes are still hitting the second hand homes market.
It looks as if there will continue to be a synchronised recovery in the main economies. It is difficult to see much sterling effect on prices given the way UK inflation has moved as in other expanding economies with stronger currencies. It is also difficult to see why Brexit should have the impact on the Banks forecasts, as they helpfully assume a smooth Brexit as their base case.

I do agree with their decision to put up their output forecasts for the next two years, and their upward revision to employment.

Published and promoted by Fraser McFarland on behalf of John Redwood, both at 30 Rose Street Wokingham RG 40 1XU

Critics of Brexit on this site have regularly alleged that if we do not get the same access arrangements as today to the EU market after Brexit, the City will lose jobs and business to the continent. I have been accused of complacency for thinking that is untrue.

I have pointed out we were told the UK would lose jobs, influence and business if we refused to join the Euro. We did decline to give up the pound, and our business in Euros grew substantially. Attempts to prevent clearing in London failed, as of course if you run one of the world’s large trading currencies you cannot stop non members of your union trading the currency and securities in it. Business goes to where the talent is and where the capital to execute the transactions resides.

This week there has been a most important statement from the CEO and Chairman of one of our major banks. Barclays has said that they do not see any need to transfer personnel from London to elsewhere on the continent, whatever the outcome of the Brexit talks. They also state that the technical changes they are making to ensure continuity of EU business are less complex than the changes they had to make last year to comply with new business rules in the US, or the large task of ring fencing their commercial bank in the UK to comply. They confirm that complying with any new EU arrangement will be cheaper as well as easier than these changes.

London out of the EU like London inside the EU will face competitive challenges from all round the world. IF you are good at something you need to get better at it to maintain your position. You constantly have to strive to improve and to keep up with or lead change. There is no reason why London should stop doing that once we are out of the EU. In some ways it will be easier, because we will be free to decide on our own arrangements with the rest of the world without having to adopt the EU model for that. The UK will regain its vote and voice in the global talks and formal bodies, where today we often have to be represented by the EU instead.

As Barclays said “We are confident we have multiple choices for how we might continue to serve our customers and clients regardless of the outcome. (Of Brexit)”

Published and promoted by Fraser Mc Farland on behalf of John Redwood, both at 30 Rose Street Wokingham RG40 1XU

There is general agreement in Wokingham and West Berkshire that our local schools need some more money. Just before Parliament was dissolved for the election, the government published proposals for fairer funding. The idea is to narrow the gap between the best financed and the worst financed schools by changing the formula for financing them.

I look forward to the government’s response to the consultation, as there could be improvements to the formula they proposed. I argued the case for more cash in the last Parliament.

It will be important in the new Parliament to find additional money for education in the years ahead to benefit all state schools. We want good provision for teachers and for all the support staff and buildings it takes to provide a good education. This can come from the proceeds of growth, as tax revenues rise with a growing economy. The best tax collector is growth and success. Often the worst tax collector is higher tax rates, which may curb growth and lead to loss of revenue if ill judged.

I will take the argument to Parliament if elected to find more money overall for schools, and to offer a better share to the lowly funded areas like Wokingham and West Berkshire.

Published and Promoted by Fraser McFarland on behalf of John Redwood, both at 30 Rose Street Wokingham RG40 1XU

Several parties are out to show they can deliver more money to public services without hurting most voters. The Lib Dems say they will increase Income Tax by 1p to deliver £6bn more for the NHS and social care. Labour argue for a big hike in the Corporation Tax rate to pay for a wide range of extra public spending and various expensive renationalisations. These views are based on two common fallacies in UK debate.

The first fallacy is an extra few billion will make all the difference. The truth is all parties in government do increase the spending on the NHS, social care and other priorities every year, and all wish to see these services properly funded. Since the Conservative led coalition entered government, total public spending has risen by 20% from £669 bn to £802 bn. Health spending has gone up more, by 23%, from £96bn to £117bn. The Conservative government has promised another £8bn to the NHS and £2bn more to social care, and will doubtless review the figures regularly to see if they are enough or need increasing if re elected to government. Just adding £6bn as a one off will not suddenly transform the NHS, I doubt there is a thought through budget of how to spend that money and what improvements it would buy. The extra pound has no magical powers not shared with the pounds already being spent.

The second fallacy is the idea of painless tax rises. 1p on Income tax rates sounds modest. That is a 5% increase in the standard rate, a 2.5% increase in the 40% rate and a 2.2% increase in the 45% rate. It means hundreds of pounds extra for most earners. That is money which families cannot then spend on their priorities.

The proposal for a big rise in Corporation Tax might well backfire. Having a low rate by international standards is one of the ways the UK attracts substantial inward investment, building a strong presence by many dynamic international companies here. Over the period when the reductions in rate have been put in, our revenue from Corporation Tax has gone up. Why wouldn’t we lose some revenue if we push the tax rate up, especially at a time when the USA is planning a major move the other way. I have no wish to be a soft touch for big business, but it does seem we are finding the right levels of Corporation Tax to get them to pay more.

In 2009-10 the Corporation Tax rate was 28% and the tax take was £36bn. £6.4 bn of that came from North Sea oil. This year the rate is 19% and the estimate is for £46bn of tax revenue with no revenue from North Sea oil. The take has gone up in recent years despite a major reduction in North Sea volumes of output. So by cutting the rate from 28% to 19% we have gained 28% more revenue, or an impressive 55% if you adjust for the ending of North Sea taxable output.

Published and promoted by Fraser Mc Farland on behalf of John Redwood, both at 30 Rose Street Wokingham RG40 1XU

It was good to hear Mr Juncker say the EU had made a mistake in briefing in the way they did about the Downing Street dinner. Just as it makes sense for the UK to be friendly and positive in its offer and dealings with the EU as we prepare to leave, so it makes sense for the EU to be the same. We, after all, are an important market for their exports, a valued partner in many collaborations, an important part of their defence and security alliance, and a frequent ally or coalition partner in international matters. We are happy for that to remain true in the future but expect reciprocal good will.

There is a clear need for strong and stable leadership in the UK to represent our interests. The UK needs to explain patiently and firmly that we will be taking back control of our laws, our money and our borders. We also need to make clear that we are making a generous offer of continuity over trade, defence, security and many other joint ventures and common workings across a wide range of areas. There are technical matters to be settled over market access, transport rights, the rights of citizens living in each other’s territories and the rest that need not be difficult to resolve if there is good will on both sides. I see no lack of good will on the UK side. That is why Mr Juncker’s recalibration of the EU response is welcome.

It is never a good idea to try to punish your main customer. I still expect reality and commonsense to break out in due course in the EU over the UK departure, as it has done over the commentary on a dinner.

Meanwhile I see the Evening Standard on line gives prominence to the fear that university research will be damaged by Brexit. Have they not heard Ministers stating clearly talented and well qualified people will be free to come to the UK. This will include faculty members, with an open door for foreign students to undertake courses at our universities.

Promoted by Fraser Mc Farland on behalf of John Redwood, both at 30 Rose Street Wokingham RG40 1XU

The April retail sales figures were good. Total sales were up 6.3%. The delayed Easter reduced the March figures and flattered the April ones as I argued at the time of the March release. We can now see the underlying pattern, which is still one of decent growth. Food has been stronger than non food, with the BRC itself saying that taking the two months of March and April together food sales “were up by around 4% on last year, exceptional growth by all recent standards”. More importantly, there was no overall shop price inflation, giving the lie to those who have argued rising prices will follow from a weaker pound.

Why haven’t prices risen as some said? There is considerable competition in world goods markets. There is even more competition in UK retail. The main store groups have increased their trading areas at the same time as on line retail has provided formidable competition to them. Discount retailers have kept their prices down, whilst use of the web has enabled shoppers to look around for the best deals especially for the larger items. The pound is now strengthening again, some 8% up on its lows. I do not expect that to suddenly cut prices, just as I did not expect a price surge from the previous falls in sterling.

The construction outlook has also brightened. Recent figures imply good growth in house building coming through, and a quickening of the pace in industrial property. New offices are weaker. Overall the PMIs and the recent starts figures point to a growing industry with more investment in buildings.

It is interesting to note that the FTSE 250 Index of smaller companies with more UK business as a proportion is now up by one third since June 27th 2016, whilst the large companies in the FTSE 100 with more exposure to foreign currency earnings are up by 23%.

Published and promoted by Fraser McFarland on behalf of John Redwood, both at 30 Rose Street Wokingham RG40 1XU