Author: johnredwood

A great deal has happened politically since the March Budget and during the passage of the Finance Bill. Therefore, on Third Reading, when we are invited to consider the Bill in the round, we should ask ourselves how this set of composite tax measures and forecasts for revenues and budget deficits fits into what the Bank of England thinks is a rather revised picture today, although its gloom is probably exaggerated.

We also had a very significant event from the Government themselves over the summer recess, which has not been reported to this House or debated in this House, but which should not go without comment: the Chancellor of the Exchequer gave his consent for the creation of up to £170 billion of additional money and for the Bank of England to buy large quantities of Government debt and substantial quantities of corporate debt, making available a lot of cheaper money to the banks. As a result of that needless monetary relaxation—there was absolutely no evidence at the time that the economy had suffered an output or retail sales shock in the way that the Bank foolishly thought was happening—we see that interest rates have been driven down. In particular, longer-term interest rates, which are the Government’s price of borrowing, have been driven down, and so we now must imagine that the Budget arithmetic has changed quite a lot in a very favourable direction, as there is now presumably a substantial reduction in the forecast interest rate costs for Her Majesty’s Government over the balance of this year and into the next financial year, assuming that those programmes of aggressive bond buying continue to depress the rates in the way that is clearly planned.

At some point the Government need to explain why they endorsed the Bank of England’s very aberrant view. The Government’s forecasts for the economy, which are the thought behind this perfectly sensible Budget that we are in the process of approving, look forward to the UK economy growing by 2% this year and by 2.2% next year. The Bank of England now says that the British economy will grow by only 0.8% next year. I have no idea why the Bank thinks that, but it would of course change the arithmetic, and instead of us welcoming this Budget with an even smaller deficit, because of yield compression and cheaper borrowing, we should be worrying at this juncture about the shortfall in revenues next year on the back of a much-revised Bank of England forecast. Clearly revenues will be down by quite a lot next year if growth is to be only 0.8% rather than the 2.2% that was the premise of this Budget.

I fully support the Treasury’s March view. It is extremely likely that the British economy will grow by 2.2%. I do not have my own model but I understand how the Treasury model works and I do not think that the underlying assumptions behind the model for the March forecast were unrealistic. I do not think that they have fundamentally changed as a result of the events of the summer, with, perhaps, the one exception that if the Bank perseveres with injecting anything like £170 billion into the economy, growth could be even better than the Government were expecting, because that is a far bigger monetary stimulus than they clearly had in mind when they constructed the March Budget.

The Bank of England needs to be careful. One of the curious things about the timing of its decision was that it made that announcement before we saw the real economy figures for the first eight weeks after the Brexit vote. Those figures turned out to be perfectly reasonable. They were not negative in the way that the Bank had thought. The Bank also made the injection of money just after some very important figures came out, ones that it had obviously read in a different way from me.

If we read the money supply growth figures and credit growth figures for the second quarter of the current calendar year, we will see that they started to accelerate. We had pretty steady 5% growth for quite a long period, which was giving us a combination of low or no inflation and 2% or so growth, but then those figures suddenly accelerated to around 7% or 8%. It is therefore even more bizarre that, on the back of those numbers, the Bank of England should suddenly decide to try to pump so much money into the economy, at a point where it looked as if the commercial banking system was sufficiently strong and confidence had returned sufficiently to mean an even faster rate of money growth than the one that was achieving 2% growth overall.

I am not suggesting that we need to drop this Budget because of that very large monetary stimulus, but the House should be aware that a very large monetary stimulus has been added at exactly a point where we had a perfectly sensible Budget based on perfectly sensible assumptions. The Government also need to be very careful before authorising any further monetary stimulus given what look like perfectly satisfactory numbers.

How could the Bank be that wrong—it is quite difficult to understand—and why did the Government endorse its strange interpretation? It says two things. It says that a Brexit vote could damage trade. Well, the one thing we seem to know from the very relaxed timetable the Government are proposing for getting us out of the EU is that in all probability we are going to be trading under existing single market arrangements this year and next year. There will not, therefore, be any damage to trade. I do not think there will be any damage to trade when we are out, but we are going to be trading under the current arrangements for the forecast period, so it is very difficult to see why we would knock anything off GDP because of trade. Indeed, we should be adding quite a lot in relation to trade, because clearly exports will rise quite a lot on the back of a much weaker pound.

The other thing it says is that there will be an effect on confidence. We have seen from recent surveys that there was a very short term hit to the confidence of big business executives who did not like the result of the referendum, but there was no hit to the confidence of consumers. They went out and spent more in the shops immediately after the Brexit vote than they were spending before. We saw, in the following month, that many senior company executives regained a lot of their lost confidence because they saw they were wrong and that the customers were returning to, or staying in, the shops. They are buying cars and new houses.

Confidence has not collapsed, something the banks seemed to think would happen.

I urge those on the Treasury Bench to think about these matters extremely carefully. The very long procedure on the Finance Bill means that, in all probability, we are approving a Bill that was constructed in what the Bank of England thinks were very different economic times. I think the economic forecast and the economic times of March are very similar to the ones we should now accept, and I urge the Government to take that view. The House needs to note, if it is the view of the House, that on top of a Budget that has a reasonably relaxed fiscal stance compared with intentions a few years ago—something I am quite happy with—we now have a very large monetary injection. The Government need to be aware of what that might mean.

PS I have since seen the board money numbers for the 3 months to end July (just before the Bank’s stimulus) and they show an annualised rate of growth of a very rapid 15.9%. This makes the case against further monetary easing even stronger.

I had hoped to clear up my point in an earlier intervention on the Minister, but I fear that I was not happy with her answer so I shall try again and extend my case a little on the important matter of VAT on energy-saving materials. That is the principal issue at stake in new clause 15. As I was trying to explain to the Minister, many of us feel that it would be quite wrong to increase VAT on energy-saving materials, given that the House decided to choose the lowest rate that we are allowed to impose under European Union law. A case was then lost in the European Court, and the Government have wisely been undertaking a very long consultation into how they might implement this ill-conceived and unwanted judgement. The longer they consider it, the better, and the sooner we get out of the European Union, the sooner we can bring the whole charade to a happy end.

To many of us, this illustrates exactly what was wrong with our membership of the European Union, and this is something that we can offer to our constituents as we come out. They voted to leave and to take back control of their laws. That includes their laws over taxes. During the campaign, we on the leave side made a great deal of how we wanted to scrap VAT on energy-saving materials. Like many people in this House, we believe that we could do much more to save and conserve energy and to raise fuel efficiency, and if we did not tax those materials, perhaps they would be a bit cheaper for people. That would send a clear message that this was something that we believed in.

I urge the Minister to go as far as she can in saying that this Government have absolutely no wish to put up VAT on energy-saving materials, and that they would not do so if they were completely free to make their own tax decisions. I would love her to go a bit further—this might be asking quite a lot—and say that once we are free of the European Union requirements, we will be scrapping VAT on energy-saving materials altogether. It is not a huge money-spinner for the Government, and its abolition would send a very good message. It would particularly help people struggling in fuel poverty, who find energy-saving materials expensive. The extra VAT on them is far from helpful.

The Minister suggested to me that the Brexit Secretary was dealing with this matter, but I can assure her that he is not. He made a clear statement on these matters in the House yesterday and wisely told us—I repeat this for the benefit of those who did not hear him—that it is his role to advise and work with the Prime Minister to get our powers back. His job is to ensure that this House and all of us can once again settle the United Kingdom’s taxes without having to accept the European Union’s judgements and overrides. However, it will be for Treasury Ministers and the wider Cabinet to recommend how we use those wider and new powers and to bring to the House their proposals once they are free to do so.

I hope that we trigger article 50 as soon as possible. This is another reason why we should not rush to impose higher, crippling taxes on energy saving, because it is something we want to encourage. It is another incentive for us to get on with actually leaving the Union. A bigger cash incentive that is relevant to Budget matters in this Finance Bill is that we would soon be able to get back the £10 billion a year. Remember that every month we delay getting out of the European Union we have to raise another £850 million through a Finance Bill such as this to send away and not get back. I urge the Minister to take the matter seriously and to say that this Government have absolutely no intention of increasing VAT on energy-saving materials unless they are legally forced to do so. Will she confirm my view that the sooner we are out, the sooner we can have a rational policy on this most important matter?

I believe in the sovereignty of the UK people. As a democrat I believe that the people exercise their rights and freedoms by choosing representatives for their Parliament, and dismissing them at general elections if they cease to please. Between elections the sovereign people can either let their Parliament get on with the job they were elected to do, or the people can argue, lobby,  press, campaign for their Parliament to vary its plans. The people accept that they, like their elected representatives, must obey all the laws and commands Parliament makes until such time as they are repealed or amended. Parliament has authority and exercises the people’s sovereignty subject to the popular  will.

The present clever lawyer arguments over whether Parliament needs to vote to approve an Article 50 letter or not is based on a number of foolish misunderstandings.  Parliament did have its very decisive  say over whether we remained in the EU or left the EU. After an election and extensive debate and votes, Parliament by an overwhelming majority approved the Referendum Act. When most of us voted for it, the government made clear we were voting to hand the decision over whether to remain in or leave the EU back to the sovereign people. There was no doubt about that. Labour did not object to that from the Opposition benches.

This was reinforced in the Referendum campaign. The government sent a leaflet to all households stating that the people would decide, and then government and Parliament would implement the people’s decision. Both official campaigns were asked if the result was binding, and both confirmed the result would be implement by Parliament. Both campaigns ruled out any need for a subsequent referendum. Parliament made no provision for a second referendum, though we could have done so easily in the Referendum Act if that had been the plan.

There is therefore no obvious need for Parliament to vote to approve an Article 50 letter, as it simply reflects the will of the people. If a sufficient number of MPs wanted a vote on one, there could be a vote. I doubt the official opposition will want to press for one, as it would reveal big disagreements within the Labour party, with many of their MPs accepting they now have to vote for UK exit as that was the national result in a national referendum. Practically all Conservative MPs would respond positively to a three line whip to approve an Article 50 letter.

I see no need for the law courts to get involved with what Parliament debates and votes on. That is no part of our constitution. Law courts are there to enforce the laws Parliament enacts. Sometimes they help make law by handing down judgements that force Parliament into amending or rethinking what it has written in Statute. The courts are not there to thwart a referendum result or to dictate the Parliamentary timetable. Once the powers of the ECJ have been removed Parliament resumes its role as the UK’s highest court, the court that reshape and instruct the others.

Parliament will be fully engaged in the detail of our exit arrangements. Parliament will have to approve legislation to remove the EU powers in the 1972 European Communities Act. Parliament will doubtless question and debate many facets of our new grade based relationship with the EU, and make the case for various new and continuing arrangements for anything from research collaboration to security exchanges.

I was expecting the museums and story lines of the Netherlands to rejoice in  the “golden age” of Dutch economic and trading success and naval power, the seventeenth century. I was not disappointed. Nor did I begrudge them their celebrations of  two great naval triumphs. They did force the surrender of the Prince Royal, The English flagship, in the four days battle in the 1665-7 war, allowing them to destroy it with fire after allowing the sailors off the vessel. Admiral Ruyter later in that war launched an audacious and successful raid against the English fleet at anchor in the Medway, destroying 6 ships and towing away a seventh. It was the English Admiralty’s biggest disaster. The Dutch celebration of it on a beautiful cup presented to the Admiral was entirely justified.  The Dutch navy tended to have fewer large ships, but it offered brave and sometimes successful opposition to English power.

The two museums I visited that told some of this story glossed over the English acquisition  of New Amsterdam,  now New York, in the same war, and some  English victories that also peppered largely inconclusive naval wars on and off between 1652 and 1674. The unpleasant violence of the colonial and trading rivalry between the two countries was brought to a welcome end by the peaceful invasion of Britain by Prince William of Orange, married to Mary Stuart. The British establishment welcomed them and switched allegiance to them so their arrival and assumption of the crown was uncontested. The two countries  moved to naval co-operation.

The museums did try to broach the long shadow cast over western European nations by slavery. Where a UK museum would be able to counter point the misery of slavery with the important role played later by leading British figures to secure the end of the slave trade, the Dutch museums just acknowledged the bad life of the slaves and the role of slavery in helping to create the great wealth of the merchant classes in the seventeenth and eighteenth century Netherlands. It was also clear from the Rembrandt displays that arms manufacturers and dealers were some of the richest patrons.

Beneath these dark clouds there are the eternal light drenched canvasses showing the sheer abundance of food and household comforts that Dutch commercial success and wealth brought. Much of the wealth was honestly come by from successful manufacture and trade.  For many Dutch people life was good, especially in the golden age. There was also reasonable social mobility, with people moving through hard work and enterprise from poverty to well heeled lifestyles.

The odd thing about the presentations was the episodic nature of the exhibits and stories, and the large missing gaps. I can appreciate the life and success of the Dutch golden age. I was surprised by the complete absence of material on the evils of the twentieth century occupation in the second world war, and the apparent sidelining of the Great war being waged just a few miles down the road in what was the southern low countries.

It is true that there was one other long shadow hanging heavy over Amsterdam which they do remember. I could not myself face going to Ann Frank’s house. It is such a heart wrenching story. To their credit the Dutch do remember the massacre of the Jews, whilst otherwise  ignoring  several years of being occupied by the Germans. Similarly, there are Napoleon memorabilia of his brother as King and then Napoleon himself as Emperor of an annexed Netherlands, but little about what this meant for those who had to live under the French tyranny.

It was perhaps fitting, however, that by far the largest painting in the Rijksmuseum is a large portrayal of Wellington receiving news at Waterloo of the imminent arrival of the Prussians. Waterloo meant their liberation.

I spent the week-end in the Netherlands. It was a pleasure to visit the EU now we have decided to leave. I no longer went fearing I would need to explain why we are dragging heels on joining the Euro, not accepting Schengen and not joining them in their political union. I would have no more self imposed moral obligation to state if asked why I thought the Euro scheme was a prime  generator of mass unemployment and political tensions. Now we are leaving we are no longer to blame for anything that goes wrong, no longer under some requirement to try and argue for a different route, no longer having to try to stop all sorts of changes we do not want which we judge to be against Europe’s wider interest. As good visitors we should wish them well and regard these things as their matters.

So I was relaxed and able to enjoy the continent more than when we were committed. Even better news was I found my Dutch hosts were great. They treated me as a friend, ally and of course as a valued customer. No-one mentioned Brexit. They were all charming, keen to make my stay comfortable, and willing to share their culture and cuisine with a friendly neighbour. I saw if anything an improved relationship. This was a private visit as a tourist.

I also had some surprises. Throughout my stay I did not see a single twelve stars EU flag. I was ready for it. Once again, now we are leaving, the flag does not worry me. It used to, as it was for me a symbol of our loss  of democratic self government. Now it is the flag of our continental friends. Its absence was curious. There were plenty of flags on display. They mainly proudly flew the Dutch flag from the public buildings, the tourist kiosks and the boats, interspersed with some City flags.

It was also curious in the museums I visited which traced the history of the Netherlands through into the present century I saw no mention of their commitment to the EU or the impact it was having on their lives. I am not drawing any conclusions from any of this.  I am at a loss to know why it is so.

I did find their presentation of their national story fascinating, and will talk more of it tomorrow. The recently refurbished Rijks Museum is beautifully done, and provides a stylish  backdrop to Rembrandt’s fine paintings and many other great works of art. The take away was we should get along fine once we have sorted out our new relationship with the EU.

When I organise car parking for an event, I try to arrange parking spaces at a 45 degree angle to the incoming flows. This seems to allow more vehicles into a given space, and certainly makes it easier for drivers to get in and out.

The other day I heard an interesting item on radio from a mathematician. He had worked on optimising the use of car park space, and had concluded that you can fit in 23% more cars in a typical surface car park if you organise one way flow into and out of the park, and use Angled spaces. It reduces the amount of spare space you need to allow cars to turn into spaces, and improve the flow of vehicles in and out. If you add more exits than entrances it reduces delays from traffic even more.

We are short of car parking in many places in the UK. Getting cars off the highway and into parks is good for cutting congestion, good for reducing emissions, and good for drivers trying to get to work, the shops, schools or wherever they need to go. I think Councils should look at this suggestion and see if they can improve the flows in their parks and raise capacity. The only cost is a bit of new line painting in most cases. It should raise them more revenue as more cars get to use the parks, and more are enticed in away from more contentious parking on the highway. Indeed, expanding car park places could be allied to some reduction in on highway parking where that causes obstacles and delays.

I have suggested to my local Council that they take a look at this.

Why do those keenest on the EU think the other members are so nasty and will want to damage us as they inflict self harm?

And why do they think all the laws of the Treaty we are renouncing legally still apply to us, yet the rules do not apply to those staying  in.

The other member states are bound by Article 8 of Lisbon requiring them to have good relations with us. They are bound by WTO rules against many tariffs and barriers. They will find it very difficult to agree a damage package, as many of them do not want to do that or fear retaliation.

I am much more positive about our former EU partners than the pro EU lobby. I have talked to various senior business and government people on the continent before and after the vote and found them keen to build, not undermine our trade.

ACTION PLAN FOR BREXIT

1. Send Article 50 letter explaining we are leaving using our own constitutional arrangements as per previous Article, which will be an Act of Parliament.

2. Offer talks on trade and tariffs if they wish to change anything, saying we are happy to offer them no change to current arrangements. In other words we stay in the Single Market as now, without the freedom of movement and the contributions. The advantage we have is when it comes to trading we are happy with the status quo, so they are the ones with a problem if they wish to change it.  This reverses the presumption of many commentators that the UK needs to negotiate with the rest of the EU, and is the supplicant. By definition we cannot negotiate with them over taking back control. You are not taking back control of your laws, money and borders if you need to negotiate this with other EU countries. By offering to keep all rules, laws and trade arrangements relevant to trade and investment we have no need to negotiate, unless they wish to impose new barriers on us. So we make them the generous offer of no change so they can continue to sell us so much more than we sell them, and see if they can reach agreement on barriers amongst themselves which we would then need to talk to them about. Were they to be able to agree tariffs or other barriers they need to  be WTO compliant, and it would allow us to impose tariffs on things like food and cars where they sell more to us. They are very keen to avoid tariffs.

3. Cancel EU contributions and incorporate the money in UK budgets, providing 0.6% GDP boost through the extra spending and tax cuts amounting to the £10bn net a year we currently send to the EU and do not get back.

4. Announce that as from the specified date any EU citizen coming to the UK to work is welcome to do so until we have left the EU, but will  need to apply for a work permit on our departure under the rules then applying worldwide on a non-discriminatory basis.

5. Develop and take work permit system for EU migrants to Parliament for approval.  The scheme would be based on allowing high level migration (qualifications and or pay rates) but controlling worldwide numbers of lower paid employees. It would allow for seasonal labour and labour where there was a shortage or skills gap the UK could not easily plug in the short term.  The Irish border would operate as today, but any continental EU migrant using that border would need a work permit to get a job.

6. Work out new fishing arrangements and discuss with other North Sea  neighbours both within and outside the EU

7. Launch Repeal Bill for 1972 Act with confirmation of EU laws as UK laws into Parliament.  The aim should be a short and straightforward Bill that takes back control of our laws in the first clause, and guarantees all current EU law in the second clause as good UK law, pending any subsequent decisions to repeal or amend items not required to meet our trade obligations with the rest of the EU. This would include early passage of new migration controls, and the cancellation of EU contributions.