Author: johnredwood

Parliament needs to work sensibly to implement the wishes of the UK electorate. We cannot put everything on hold until Mr Cameron has gone and his replacement is in post.

Remain voters are understandably apprehensive and wish to see everything done to minimise disruption and to reassure markets, companies and investors. So do I wish to see that.

The main items which Leave voters wanted can be summarised as

1. UK control over new law making and over our courts
2. Cancellation of our EU contributions, with more spending on the NHS and repeal of VAT on fuel out of the cancelled contributions we do not get back
3. A new fair system of immigration control, delivering lower overall numbers
4. Replacement of lost EU spending by UK spending paid for out of saved contributions we do get back
5. Maintenance of trade, tourism and other regular contacts through negotiation of the best deal for future relations

 

Next week Parliament will need to push the government to provide more information upon how these objectives can be secured. Many are within UK power regardless of the  views of our partners. It is a UK government matter to prepare legislation to repeal VAT and to  change the migration system. It is within the power of the Treasury to spend more on UK priorities and on replacing lost EU grants.

There are issues over future trade and investment arrangements which require  both sides to agree any changes. The UK has no proposals for changes to current trade and business arrangements. We need to discuss with the others what if any they would like us to accept.  Starting these talks does not require a new PM, merely a committed negotiating team which the current PM could appoint.

There is a legal issue over our right to break EU law on VAT and stopping contributions. Some say we can only do that if we submit to the process of the Treaties under Article 50. Others say we can do that by amending the 1972 European Communities Act ourselves. After all the UK voters voted to reject the Treaties and to re establish UK control. That is the debate we need to have at an early opportunity in parliament. Draft legislation is already prepared to take back control, but it will need government support to carry. The legislation includes transferring into UK law all current EU laws. the UK  should not seek to  vary trade and business laws and arrangements without agreement and should uphold them until both sides agree any changes. This will also reassure those who want the full range of EU employment rights to remain as good UK law.

All post vote attention has been focused on the fall in the pound against the dollar rather than the surge in UK government bond prices or the good performance of the FTSE 100 since February. It is true that the pound hit a  ten year low against the dollar of $1.36 on Friday, compared to $1.38 in January 2009 (when we were firmly in the EU). Over the years we have been in the EU the pound has been up and down against the dollar in a very wide range of $1 to $2.  Much of the recent slide of the pound against the dollar has been part of a general strengthening of the dollar and a weakening of the Euro, yen and pound as well. The more immediate moves can be put down to market responses to the vote.

The pound against the Euro gives us a different picture, and arguably a more relevant one on Brexit. The big plunge in the pound occurred during the banking crash. The pound fell from a high of Euro 1.51 in January 2007, to just Euro 1.03 in December 2008, a fall of one third. From Euro 1.14 in July 2013 the pound rose to Euro 1.43 in July 2015, before gently declining as the Euro started to strengthen more broadly. On 23 June before the referendum result the pound stood at Euro 1.31. Yesterday it closed at Euro 1.23, still almost 20% above its previous low.

A modestly lower pound will be welcomed by many exporters. I will keep people posted next week to see how it settles down.

Some in the media have led people to believe there was a collapse of the Stock market on news of Brexit. It is true dealers greatly widened prices for a bit before things settled down, with some silly low prices at the opening.

So what has in fact happened,  now there has been a trading day to digest the news?

The FTSE 100 index hit a low of 5909 in September of last year, rallied, and hit another low of 5536 in February. This was all before the intense Brexit campaign and news coverage of Brexit. These movements were also in line with other major world markets, that also sank in the first weeks of 2016.

This week, the week of most intense news and market focus on Brexit, the market ran upwards, reaching 6138 on Wednesday. It closed at exactly the same level, 6138 on Friday. It is true that on Thursday it spiked upwards to 6334 when markets expected a Remain win, and fell back to the Wednesday level on Friday when Leave won.

The surprising things about the FTSE given the alleged mood are that 1. It has risen a lot over the referendum period  2. Its correction on Friday was modest.

Yesterday in the markets UK government prices surged, with an overall rise of nearly 5%. This was despite the fact that they had already risen considerably this year ahead of the Brexit vote.

The UK government can now borrow at just 1.08% for ten years, and for under 2% for 30 years, the lowest rates in living memory.

A rating Agency has meanwhile put our debt on watch for a possible downgrade, despite this strong wish all year by the markets to value our debt more highly.

Far from the UK facing a crisis in borrowing for state purposes, or having to pay higher rates as some feared, the rates have tumbled further. As a sovereign country the UK state has full powers to raise tax and to create money to honour all debts.

When Moodys downgraded UK state debt from AAA to AA1 in 2013, the last actual downgrade, they said

“The UK’s creditworthiness remains extremely high because of the country’s significant credit strengths.” They then drew attention to European risks, highlighting “the considerable risk exposure through trade and financial linkages to a potential escalation in the Euro area sovereign debt crisis”.

 

Yesterday Moodys rightly stated that out of the EU the UK needs to “largely replicate” its current access to the single market. That is exactly the aim of UK policy, with many on the continent also wanting largely the same access to the UK market after exit.

I was pleased to see that President Obama does wish to have a strong relationship between the USA and an independent Britain. I was not surprised to read that Mrs Merkel wants to protect the trade and friendship between Germany and The UK. Nor did it come as a shock to hear from various big businesses that they can manage the change of Brexit and see opportunities in the new landscape.

Brexit supporters need to be magnanimous in victory. We should welcome the overtures of overseas countries and companies. I always thought the world’s fifth largest economy and member of the Security Council would still be worth a visit and be part of the normal diplomatic exchanges amongst the leaders of the world. We need to make early moves to regain our seats, votes and voices on major international bodies, which will mean more countries wanting to discuss matters with us, more ambassadors seeking UK support for their causes in world bodies.

The financial markets are still behaving in a strange way. The early mark downs on the first day after the vote were often extreme, with little evidence of much volume taking place at some of the sillier prices. Investors need to think through what if anything so far has changed in the UK economic outlook? The main overseas investors are committed to their current factories and commercial premises, like their work forces and want easy local access to our market. None of this alters thanks to Brexit.

There are always some companies that think they have found a better place to go for their next investment. In the EU a number have been bid or tempted away. There will also be others that now think about coming here, given the recent downwards movement in the value of the pound making us more competitive.

Those who wanted us to stay can be reminded that we are leaving the EU, not leaving Europe. There will still be plenty of student exchanges, cultural events, sporting contests, trade, investment and research collaboration. It will also be easier to be friends with our neighbours if we are not under constant pressure to  agree our laws and taxes with 27 other countries.

 

The Government needs to move on from Project fear to reassure and help bind the  country back together. There are believers in the EU project who are very unhappy tonight.  There are market speculators and market makers who are fanning the idea that there will be abnormal price movements as a result of this momentous  decision.

The Bank of England has made liquidity available. Bond interest rates are low and down. There is no Brexit related cause of major downward revision of earnings or output from companies, as nothing has yet changed economically. As the government pointed out today trade continues today as yesteday.

After a great democratic decision we can all help our society by respecting each other’s views, and ensuring legitimate worries are dealt with. It is also important to avoid exaggeration or talking ourselves into problems which do not exist otherwise.

Well done all of you who helped bring about this great victory for democracy.

Now Parliament and government has to turn to the task of reassuring people and markets. I will write this afternoon about what needs to be done to implement the promises made by the Vote Leave campaign and to smooth the transition for businesses and  investors.

I do not make public forecasts of results in elections where I am a candidate or in votes where I am closely involved on one side. If you forecast your own success it can look arrogant or complacent, and you need to keep working to persuade as many people as possible of your good intentions and just cause. Nor can you ever be sure you will win until you see the ballot boxes opened and the votes counted.  If you were silly enough to predict your own defeat your opponents would not let you forget it. I always think it odd broadcasters keep on asking participants if they are going to win or not, when I want to hear from them why I should vote for them and not waste time on punditry from the biased.

Now the polls have closed I will express a view of this referendum. I have always found it strange  that the polls have generally been so close, and that most of the pollsters and pundits have united to tell us it is so close they cannot predict the outcome. 50/50 should be  an unlikely outcome, not the  norm or mean.  From what I have seen and heard I am anticipating a win for Leave.

Judging by the arguments and attitudes set out by the two campaigns, it seemed to me people began to disbelieve the greater fears about Brexit expressed by  the Remain side quite early on. They also began to take more note of just how restrictive and unhelpful the EU can be, and saw the dangers of staying in a body with very different aims  from the trade and friendship limited policies  shared by most UK voters.

Tomorrow we can restore our democracy.

A free people can make their own laws, impose their own taxes, decide on their own spending together.

A free people can elect their representatives, lobby them to carry out their wishes, and dismiss them if they fail to heed the popular will.

A free people are all under the same law, adjudicated in their own courts, and impartially administered by people accountable to their Parliament.

 

Inside the EU much damage has been done to these essential freedoms which we should hold dear.

We live in a  nightmare world of 5 Presidents, an unelected Supreme Court, a Commission which does  not bend to our will.

We elect  none of these people and cannot get rid of them when they let us down.

We have a puppet Parliament at Westminster, that has to bow to EU law and European Court instructions.

 

UK awake!

Let every man and woman do  our democratic duty.

Let us grasp the opportunity of this vote.

Let us once again be a free and sovereign people.