Author: johnredwood

There is a growing mood in favour of cleaner air. There is general agreement that the air in city centres like London needs urgent action to clean it up. In the centres of our Thames Valley towns there is also room for improvement. Some are already blaming the diesel car as the main cause and urging higher taxes or bans on diesel vehicles.  It is a good idea first to examine what we know about the sources and causes of pollution.

The London Assembly researched the sources of Nox in London in 2015. This showed the following sources

Bus, coach and rail public transport    18%

Goods vehicles    17%

Gas heating systems    16%

Non road mobile machinery    14%

Diesel cars    11%

Petrol cars and motorcycles  8%

Aviation    8%

Industry   7%

The TFL study in 2016 showed a similar pattern, with gas heating and industry  as the biggest source, and with  both bus and coach and goods vehicles each a bit bigger than diesel cars.

The new Euro VI standards for engines require both petrol and diesel engines to emit less than 5mg per km of particulates. They allow just 80 mg of Nox for diesels compared to 60 mg for petrol, whilst allowing petrol engines to emit more carbon monoxide than diesels (100mg versus 50mg)

In order to clean up the air, especially removing particulates, requires replacement of a lot of older technology buses, trains, cars, and  gas boilers. This will also allow the introduction of equipment which is more fuel efficient, also helping to drive down emissions and cut running costs.

Instead of working up a new series of penalties for owners of older diesel cars, government should work on a range of incentives to tackle the problem in a broad based way, removing the oldest buses, lorries, cars and boilers which would do the most to improve the position. it could also give a welcome boost to the home industries that produce these items.

We should not ignore the contribution replacing old heating boilers at home and work can have, with the added  bonus of cutting running costs. Lets have better scrappage and financing schemes, so more people can afford to make their contribution to cleaner air, and can at the same time take pride in owning better machines.

 

 

 

Most people’s definition of the rich is someone better off than themselves. The millionaire feels poor in the company of billionaires.

Clearly, someone who has a decent home they own and sufficient invested capital to  be able to pay their bills for the rest of their lives without needing to take a paid job is well off. Many retired people however, are by definition in that category. Many when they retire own their own home and have sufficient accumulated pension to live comfortably without recourse to work. People who achieve that well before retirement age, usually through success in business  but sometimes through inheritance, have financial freedoms the rest of us do not enjoy.

I do not myself wish to punish people who through hard work and energy have bought themselves a decent home and built up financial savings for their later years. Governments of all persuasions used to encourage people to do both these things. There was mortgage interest tax relief to help home buyers, and unlimited tax free savings within a pension fund for the prudent. Recent governments have removed the tax relief on home purchase, and now have retrospectively limited the tax relief allowed to people who have saved and invested well for their old age.

I want to see the tax system allow people to succeed. Business success, when someone builds their own business from nothing, is a fine thing we should wish to encourage. High income and capital gains tax charges put some off building their business, or encourage people to sell out early. Buying and improving your own home is also a good idea. Why then make it more difficult with high Stamp duties?

There is a lot to recommend New Labour’s tax settlement for the better off. They kept the Conservative’s top  rate of Income Tax at a maximum of 40% for most of their time in office. They cut Capital Gains Tax to 18%. These two rates were somewhere near the optimum rates from the point of view of the total amount of revenue collected.  There is plenty of evidence that CGT above 20% raises less, and that Income Tax above 40% loses revenue. People with high incomes and substantial assets are much freer than others to  move their domicile or place of  business. They are also free to do less,  venture less, earn less, if the tax rate goes too high. CGT is very avoidable. Many people refuse to sell shares from their investment portfolios above the tax free allowance. Many people are now sitting on second homes or BTL properties that they do  not wish to sell because they do not want to pay the tax. It is easy to see CGT receipts going up if we went back to Labour’s uniform rate for all assets of 18%.

Stamp Duties are  now at very high levels for the dearer properties.  Once a home goes above £925,000 the marginal Stamp Duty soars to 10%, or 13% for a BTL or second home. Over £1.5m the levels are 12% and 15%. In the Thames Valley I have seen some executive new build  family homes on modest sized plots on the market for around £2.5m. That would mean the family that buys paying £213,750 of Stamp Duty. In Central London in the dearer districts £2.5m would not buy you a house.

These rates should  be brought down.

 

 

If we are going to develop a better approach to taxing the better off, we first have to decide who is better off. One of the most difficult issues which tax policy has to face is the relationship between capital assets and income.  How do we feel about people who are asset rich but income poor, or people who are income rich but capital poor?

Let us look at some difficult examples.

Mrs Hardup  is a widow living in a one bedroom flat in what is now Chelsea – it used to  be Fulham. She lives on a state pension, with no savings or private pensions to top up what the state provides. She and her  husband bought the flat in the 1960s when it was much cheaper, and paid off the mortgage. Doing that got in the way of other savings.  The flat  is worth £1.2 million today.

Mrs Lucky lives in a Council bungalow on her state pension, but has recently won £1.2 million on the lottery. She has so far put it into cautious investments. She might live for another 20 years, so she could draw down and spend more than £60,000 a year depending on how well she invests the money. Alternatively she could buy herself a property, remove the rent  bill and pay herself a bit less.

Mrs Hardup decides to sell her Chelsea  flat, move  and  buy a small detached property near her daughter in Bolton for £200,00, leaving her £1 million to invest to provide her with an income well above the national average.

Mr Feckless retires early, sells his £1.5m southern counties executive house, buys a £500,000 smaller property, and spends three years on expensive cruises,  buying luxury cars and other consumption, using up much of his spare £1m.

Mr Prudent retires with a good  pension of £35,000 a year, and continues living in his £1.5m southern executive home. He is surprised by the choices of his former  neighbour, Mr Feckless.

Mr Whirlwind is in the prime of life and earns £150,000 a year. His income has risen quickly recently, and he has been too busy to get round to buying a home of his own. He pays a lot out in rent for the smart new property he has recently taken on, eats out most days and takes expensive holidays. He has few assets.

Do we have views on which of these, if any, is rich? Do people have moral preferences over who should pay more?  Should we tax income more, because it is available to be paid to the government as it comes in? Should we tax assets more, to make people reorganise their assets?

Here’s a surprise. I agree with the three main political parties  in the UK that we have to tax the rich. They are right to say most of the tax has to be paid by those with the higher incomes and with more assets.  All three main parties have been living high on rhetoric about taxing the rich and closing tax loopholes for the last decade, and all three in power have decided to put tax rates up and impose new taxes on the rich. It’s certainly worked. The top 1% of Income taxpayers pay 27.5% of all Income Tax, and the top 25% pay 75% of all Income tax paid.  44% now pay no Income Tax.

Some of this is not  socialism but  commonsense. There’s no point setting out to extract tax revenues from those who have little income and  no assets. Even the steeliest state tax tyrant knows you can’t get money out of those who do not have it in the first place.

The issue between socialism and commonsense is how you tax the rich, and by how much. Socialists want to tax the rich because they do not like them. They do not mind if they tax them beyond the point where they leave the country or to the  point where they are no longer rich enough to pay the extra taxes. Sensible Conservatives want to tax the rich because we want decent public services and understand it is the richer part of the country that has to pay for the bulk of them. We want to tax the rich in ways which will coax the money out of them we need for a decent society, without taxing them so much that they leave, stop investing, decide  not to participate fully in the private sector economy for fear of having to pay more. We believe in the power of aspiration. Many people who start out with no assets and little income aspire to have assets and a decent income. Too much tax can blunt aspiration or thwart ambition.

This poses two questions. What is the right rate for taxing income and consumption of luxuries? Tax at too high a rate and you will collect less revenue and do damage to the productive economy. Tax too high and the marginally ambitious for a better lifestyle will conclude it is too difficult. What is the right balance over taxing things the rich do which are usually thought of as a good if others do it, like buying a home or investing in a pension fund.?

It is clearly right that we will only have a successful economy if the rich share their surplus somehow with those on lower incomes. We rely on the rich to invest in businesses that will employ others, to buy luxury items and services which others supply, to redevelop our cities and build new buildings. If they do not spend and invest enough willingly, the UK economy may be impaired. Germany’s refusal to share her massive surplus with her partners in the Euro shows what misery large scale underspending and underinvestment can create if the rich surplus holder is too cautious.

Taking some of the money off the rich in taxes does ensure more of it is spent, as much of this money is given to people on lower incomes as benefits or in the form of public services free at the point of use. Take too much and you may get the opposite effect, as the rich go elsewhere or adapt their behaviour to an even more cautious private sector pattern. If a relatively well off person feels their tax rate is too high, they may well spend less to conserve what money remains.

In subsequent posts  I will look at what this means for the detail of tax policy on income and assets.

Some of you want to talk about Syria and want to know why I have not written about it. The main purpose of this website is to raise issues I am pursuing for constituents and for the wider nation. The aim is not to mirror the concerns of the media all the time, or to try to repeat what they do. Nor am I going to post items which assert that the main news media have got this story of the missile attack factually wrong.

I aim to present news, not recyle olds in the way so many media journalists do. That is why I have wanted in the last few days to highlight Network Rail’s losses on derivatives and foreign currency borrowing, because you cannot see or read that elsewhere . That is why I have sought to provide background and new analysis to the policy work and exchanges underway over Gibraltar, Brexit and Scotland.

I have not so far sought to intervene in the recent debate about Syria. This is mainly a matter for the USA, the country that decided to take limited military action against the Assad regime. It does not look as if Mr Trump wants to get involved in a major way in the Syrian civil war, which is probably wise.

As I have pointed out before I do  not back either  Sunni or  Shia. I have no view on who could best govern Syrian and reunite it around a peaceful governing policy that can  bring  people together. I have no love of the barabric attacks on his own people by Assad, but nor do I have any time for one of his main opponents, the terrorist movement ISIL. I am also aware that there are other unpleasant murderous groups at large who also do not deserve our support.  I have heard previous UK ministers in the  Coalition argue we need to help so called moderate  rebels.  So far there is no evidence of a powerful enough group who could both defeat ISIL and Assad simultaneously and then rule a peace loving country thereafter. One of the reasons the West’s interventions have been sporadic and so far unsuccessful is trying to find a side we want to win the war.

Mr Obama threatened Assad  if he used chemical weapons but  failed to enforce his threat. Mr Obama allowed Russia to take a much more prominent role in suppport of Assad, making it  more dangerous and difficult for the west to intervene militarily.

I suspect Mr Trump will not wish to extend his  military involvement, and will hope Assad will now desist from using chemical ordnance. Presumably were Assad to use chemical weapons again there would  be further US attacks.  The aim seems to be to try to get more of the protagonists  into talks. Recent events will clearly disturb efforts for there to be more collaboration between Russia and the USA to fix world problems. Mr Trump hopes that Russia will  now exercise more discipline over Assad, and will see the need to seek a peaceful political solution to Syria’s riven factions in conjunction with others around the negotiating table. Let’s hope that works out.

 

 

Before the EU referendum the Scottish economy was growing far more slowly than the UK as a whole. From the 2008 crash to 2015 the Scottish economy only advanced by 4% in cash terms, compared to 23% for the UK. Since the referendum the Scottish economy has continued to underperform. On the latest figures the UK is growing around 1.2% real more per annum than Scotland, with the Scottish economy in danger of stalling.

It clearly isn’t the EU referendum doing that as a few would suggest. It is a longer term Scottish  trend. Part of the reason is the decline in oil output. The North Sea fields are in decline. As oil volumes and revenues tail off, so that has knock on effects to the supply industries and the service sector that has lived off the oil industry where it is strong.

Recent figures show disappointing results for manufacturing as a whole, and a weak balance of payments. Scotland spends more per head in the public sector than England. Scotland borrows more as a percentage of GDP to support public spending than the UK as a whole. If larger deficits and higher public spending made for more growth , Scotland would have a more successful economy than England. It does not seem to.

I would be interested in views on why Scotland has been lagging, and what the Scottish government can and should do about it. The SNP live on the fact that the Scottish average GDP per head is  not too bad compared to the UK and European averages, but this relies on the residual advantages of a declining North Sea oil sector and past achievements from pre the 2008 crash. They need to answer more of the questions about the disappointing performance over the last decade when they have been in office, and to explain why so far their approach has not even succeeded in getting Scotland back to the average growth rate for the UK as a whole. The crash of course hit the high value added financial sector whose Investment Bank activities were concentrated in London, but this has  not had the same impact on the London economy as the oil decline on the Scottish one.

The modern railway is based on a cruel paradox. Some of its routes into the main cities are too popular at peak times, with overcrowding.  The commuters are made to pay premium prices for what can be an inferior service. Many other routes have too few passengers, and those who do travel often benefit from heavily discounted or off peak prices well below the costs of running those trains.

We need to solve the problem of too little capacity for some, and too much capacity and too little revenue from others. What should  be done? Commuters naturally think it unfair that they have to provide a disproportionate part of the fare revenue in what remains overall a heavily loss making or subsidised business. Other travellers often do  not appreciate just how large a gap there is between what they pay to travel and the costs of providing the train they use.

The problem of capacity may be easier to solve than many think. According to the railway management they can typically only run 20 mainline trains an hour on any given line. At peaks there are still large gaps between trains on uni direction track. Poor signals, poor brakes and heavy trains mean the safety margin required to stop a train in time leaves much of the track empty. Modern digital signalling could alter that. If a train is equipped with on board signals and sensors, and automatic braking where needed, it is possible according to railway experts to run 30 trains a hour safely. That is a massive increase of 50% in capacity. It also means a service which at best is one train every three minutes becomes one train every two minutes, more like the tube. If new trains are built out of lighter though strong materials, and equipped with better brakes, there could be further improvements.

I have been urging the government and railway to get on with digital signal investment. They have now established a larger fund to tackle the five most overcrowded routes into London. I am asking them to do more, as so many commuter routes into major cities are afflicted.

Getting more people to use the trains off peak and on longer routes does not have such an easy fix. There needs to be more analysis of why people travel and what they want to get out of it. We need timetables that offer good services more geared to the pattern of passenger needs, and sensible pricing which offers a discount for off peak but does not simply dump seats at prices well below marginal costs.

 

 

 

The Supreme Court upheld the law which states parents must send their children to school during term time unless they are ill or are being home educated to an agreed standard and programme.

Some think this is an unreasonable interference with parents who may have other ways to bring up their children. They believe children can learn outside school as well as in, and think that sometimes a child could benefit from travel during term time.

Others, including the Supreme Court, think children are best advised to follow the full courses offered by their schools. Missing a week or two in a busy term would mean the child has to catch up somehow on the lessons and exercises missed. Teachers do not welcome having to make special provision  for children who missed the first explanation and the work on the new topics introduced when they were away. Of course they need to help children who have been off sick for a time period to catch up, but they usually do not want to increase the numbers and incidence of this remedial task. They point out that schools offer quite long holidays allowing families time off with their children.

The father who brought the case now says he has the money to send his child to a fee paying school, where he thinks he could get a better agreement with the Head teacher. He says he is bringing the case for all those who cannot afford this option. It is true that limiting families to travel in school holidays allows travel companies to charge more for these peak periods. In the  case of the summer holiday in the UK the school time off also coincides with the  better weather which would attract premium prices anyway.

Parliament intended the law to require parents to send their children to school in term time. The Court has upheld the will of Parliament.  Do any of you think that wrong?

Some are writing in stating that Mrs May is making concessions before the formal talks begin and complaining about this.

The Prime Minister’s approach is to make major statements of her position in the form of speeches or press conferences and statements to the Commons. Her position on EU matters is as defined  by the Lancaster House Speech and the latest Statement and White Paper at the time of sending the Article 50 letter.  The PM does  not usually brief the media or press to provide a running commentary on the prospective talks. There will be plenty of wrong stories put round by Remain supporting people and institutions, and much  speculation based on conversations with senior officials or Ministers not in the loop, which cannot  be relied on.