Author: johnredwood

Yesterday’s figures for the UK’s balance of payments made bad reading by the standards of this worrying series of figures. The deficit reach a new high of 5.2% of national output for last year, and 7% for the last quarter. These are records we do not want to break.

The deficit had three main components. There is first the running deficit on government  account. Overseas aid payments combined with payments to the EU which we do not get back amounted to 1.4% of GDP or one quarter of the total deficit. As government policy is to continue to increase these payments in line with economic growth only Brexit could reverse this trend and cut this part of the deficit.

The second is the gap between money we have to send abroad to foreign owners of property, businesses and shares in the UK and the money UK investors receive as interest and dividends on their overseas investments. The gap is likely to carry on growing. All the time we run such a large payments deficit it means more foreigner buying more UK assets and expecting more interest, rental  and dividend income to be paid to them.

The third is the gap on trade. The UK is still in trade surplus with the rest of the world, but is in massive deficit with the rest of the EU. Common EU policies from fish to steel and from farming to energy are pushing the UK into more and more dependence on imports. We now import electricity which we could produce at home, import steel and steel based products especially from Germany, import more fish as overseas vessels take more of our resource and import food as the vagaries of the Common Agricultural Policy do not always help us.

I would like the UK to adopt a policy of improving our balance of payments deficit. To do so it will be easier once out of the EU. We get the immediate benefit of not having to make contributions. We can then adjust domestic policies to help our industries more than the EU does. I appreciate that the UK has added to some of the difficulties created by the EU common energy policy, but the EU policy constraints are now being used as the main reason we cannot change. It is also the case that the UK feels very circumscribed in responding to the steel crisis by both the state aids rules and the public procurement policy. The problem with interventions in markets like the heavy interventions in energy cause distortions which then lead to the need for other interventions to try to offset them

I want the government to find  a means  for a new owner or owners of our steel industry to keep open our current plants and to maintain a steel capacity in the UK. There are ways government can and should help bring about a new settlement that offers hope of continuing  steel production. Government can and should respond to demands over business rates, energy costs, anti dumping actions and public sector steel purchases.

The Welsh government could give Port Talbot rate relief, as business rates have shot up in recent years. Very high energy costs have been a problem for sometime. The government says it is doing something, but it needs to do more as I have been urging. The EU has taken some action to deal with dumping by Russia and China, but has imposed lower tariffs than some other countries around the world. More allegations of dumping are being investigated. This is entirely an EU competence, so we rely on them for action.

The UK government is working to secure more orders for UK steel works. the large building programmes it has for railways, utilities and property all require substantial quantities of steel. It needs to ensure UK bidders have good access to the possible contracts.

They need to help the management and workforce negotiate with the current owners, Tata, over the terms of transfer of ownership. If no-one emerges for early purchase Tate will face large closure costs, so government can help persuade it to include a dowry with the plants for the new owner which will still leave Tata better off and free of future liabilities.

 

The problems of our steel industry has led to exchanges over Brexit. What is clear is membership of the EU has not protected our industry, and some EU policies have made the problems worse.

To those who think nationalisation offers a simple solution, I suggest they read the sad history of nationalised British Steel from its establishment in 1967. Government had a bold vision of five new large coastal works to produce and sell 35 m tonnes of steel by the end of the 1970s. They embarked on a huge capital investment programme to construct the plant necessary for the task. The private sector industry they took over produced and sold 27 million tonnes in 1965. Output from the nationalised industry slumped from that figure, despite the large investment in new capacity. In 1972-3 British Steel Corporation  produced 25.1 million tonnes, in 1975-6 just 17.2 million tonnes, and in 1978-9 17.3 million tonnes. In the early 1980s a new Chairman concluded he had to plan for just 14.4 million tonnes of output, 59% less than planned output under the investment programme.

Thousands lost their jobs both under the Labour government of 1974-9 and the Conservative government from 1979 onwards. The workforce of 250,000 in the early days of nationalisation became just 50,000 in the early 1990s. Large numbers of redundancies were needed both because capacity had to be reined in so much and because UK steel productivity was well below US and Japanese levels. Bilston, Cleveland, Consett and Corby all had to be closed. There was still far too little work for the five main new coastal facilities which ran up colossal financial losses for taxpayers. The Conservative government  decided to keep Ravenscraig open despite advice from the Corporation that they  had too much capacity and Ravenscraig had the highest cost base.

Today of course the EU  rules on state aids would not allow any government to pay the huge losses successive governments paid for in the 1970s and early 1980s. They would not allow the £2bn of public dividend capital which turned out to be free money for the business nor the large capital write offs which BSC enjoyed in the 1970s.

1970  21,443 fishermen                    2914  11,845 fishermen

The EU has been most damaging to UK business. The more closely it has been involved, the bigger has been the collapse.

Consider our fishing industry. In 1971 just before entry we produced around 1 million tonnes of fish with a thriving industry in England  as well as in Scotland. There were 21,500 fishermen.

Last year we caught around 600,000 tonnes, with just 11,845 fishermen. The English industry has been very badly damaged, with our fishing now concentrated on Scottish waters. Overfishing and regulation combined have done grave damage to the English fishery in particular, as the EU made our fishing grounds into a common resource with free access for all EU member states with dreadful results.

The UK now imports more fish than it exports, and has witnessed a collapse of the cod,haddock and plaice fishery.

 

Steel Output   1972     25 million tonnes     2013     12 million tonnes

Consider our steel industry. Output has more than halved since we joined the EU, whilst Germany’s at 43 million tonnes has been much more stable and is now 3.6 times the UK’s.

The current state of crisis in the industry has been brought about in part by very dear energy prices from EU energy policies, and from the inability of the UK to buy enough UK steel owing to EU procurement rules. Other states do not seem to enforce them in the same way.  EU state aid rules now also prevent  helping the industry at a time of crisis made worse by cheap Chinese steel.

The UK has become a heavy net importer of steel.

 

Aluminium output

1972  300,000 tonnes   2015  43,000 tonnes

Both the UK’s large smelters at Anglesey and Lynemouth have closed. High energy costs resulting from EU and UK energy policies have been the main reason.

So can we say the EU has been good for business? It has certainly been good for continental businesses, who have come in and taken our fish and sold us many manufactured products. It has promoted imports to the UK, but has helped or caused the collapse of important industries at home. The Fishing decline is wholly attributable to the EU, as throughout the time we have been in the EEC/EU they have controlled it through their common policies and have insisted on others exploiting our natural resource.

 

 

 

 

 

 

I have done many debates and briefings for the business community in recent weeks. They all have some  things in common. There is a strong wish to learn, as many in the business community have  been starved of honest accounts of what powers the EU has and what policies it is following. There is an ignorance of the Leave campaign, as the media crowds out our positive message by endless aggressive interviews asking us to rebut the latest absurdity of project fear, or they seek to turn the whole thing into a Tory split story. The business community and many others are getting fed up with this silly treatment of a big national issue.

 

The first thing few grasp is this is about much more than trade rules and how easy it should be for Germany to sell us her cars. It is about who makes our laws, who levies taxes, who spends our money, who controls our borders. I have to explain just how much power the EU now has over VAT, Corporation Tax, energy policy, business regulation, criminal law and much else.

 

The second thing I notice is even the big  banks and foreign investment houses who say they analyse economics do not understand the need to analyse the favourable economic impacts of saving a £12 bn outflow on balance of payments and a £11bn contribution which is spent on the continent which could be spent at home. When I point out we get a 0.6%boost to GDP from spending our own money no one disagrees but no one  includes this  in their analysis.

 

The third thing I notice is they assume we will follow the Article 50 route out if the EU but do not then realise that means no change for the first two years. They are usually unsighted on the UK Parlianentary route allied to a faster negotiation timetable.

They find it difficult to understand that Article 50  is designed more for the convenience of the Union than of the leaver. That’s why using UK legislation to restore our veto before entering a faster negotiation would give us more leverage.

Many of them  assume we will do a Norway and seem not to have heard the clear  statements of the Leave campaign that we will not pay contributions in or have free movement once we have left.

I have spent all my energies setting out how we will be freer, more democratic and better off out of the EU. I want  a policy of prosperity, not austerity. I want us to take back control of our laws. I want us to spend our money on our priorities.

Today I want to do something the BSE people do all the time. I want to ask a few questions of my opponents in this referendum.

The  BSE campaign should be called the Better Stay in Europe or else campaign. They spend all their time portraying a bleak future for us should we dare to vote for freedom and independence. Their pessimism is usually based on assuming all our partners in Europe will single mindedly seek to do us down in ways which will damage themselves.Why do they want to stay in organisation with people they think are so unpleasant?

Apparently BSE have their doubts and problems.  A series of endorsements by powerful foreigners, large investment banks and multinational companies may be putting more people off than it is winning over. Why should British voters vote for a deal which suits Germany and the USA when it clearly doesn’t meet the Prmine Minister’s aims in his Bloomberg speech, when it does not get us our money back or give us control of our own borders and taxes? Many voters are unhappy about the self serving conduct of some large corporations, so they are not impressed by being told how to vote by them. Lord Rose of BSE let the cat out of the bag when he told us the higher wages he expects when we leave could be bad news!

Given their absence of positive messages it is easy to ridicule their style of bombast. Will EU exit lead to the Black Death being visited upon us? Will France and Germany refuse to ring us up if they hear of a threat to our country?  Will they want to stop selling us their cars and wine, and wrongly impose new trade barriers which are largely  illegal anyway under international law?

What new groups and companies will they get to sign letters of support? What new fears will they dream up? I would welcome your suggestions for more absurd claims than they have already made, though it is difficult to  outdo some of their wild forecasts.

We also need to remind people all the time that institutions like the CBI and some of the investment banks that are so keen on us staying in recommended the European exchange rate mechanism to us which caused a big inflation and a major recession. They then often went on to recommend the Euro, which has done enormous damage to many of the economies outside the German core of the zone. Why should we believe them again when their track record has been so lamentable?

Few of them seem to have read the 5 Presidents Report on future political union and the next treaty and none of them want to talk about it. As we know from the EUs own words they want more central powers, a Euro Treasury and a bigger EU budget, shouldn’t they tell us their view of all this. The EU is on a wild ride to political Union.

John Redwood (Wokingham) (Con): I share the concern of my hon. Friend the Member for Stone (Sir William Cash) about page 19 and that is the main reason I have entered this debate. It is an unfair exposition on the opportunities and risks linked to our membership of the European Union and I do not think it accurately reflects what the OBR has been saying. I am pleased that the OBR has now spoken for itself and put on the record the important point that it does not believe that in the five-year forecast period, were we to leave, there would be a decline in economic output or activity. Like many forecasters, the OBR believes that the net impact would be quite small. Of course, in line with others it has said that there could be volatility in currency and asset price markets. All I would add is that there has been massive volatility in those markets in the years we have been a member of the EU, so it would be somewhat outrageous to claim that that would suddenly stop were we to leave the EU, but I cannot see that it is a particularly damning point.

My hon. Friend has gone on at some profound length about what is wrong with page 19. I hope Ministers will look again and realise that it is not a fair exposition of the OBR’s position. Linking the OBR’s position with Christine Lagarde’s comment, which is obviously a comment made for the “stay inside” campaign trail rather than for normal commentary purposes, gives a misleading impression.

I wish to make some more fundamental points about the figures and the document before us this evening. Let us start with why we are doing this at all. It is a completely pointless exercise, but it is legally required by the treaty and the framework of law under which we live. It is a great pity that in the renegotiation this, along with dozens of other things, was not sorted out because if, as the Minister says, the Government can ignore the advice and the policy laid down by the European Union to control the deficit and get the debt down, what is the point of the Government having to table 300 pages of carefully selected documentation, go through the surveillance procedure, on some occasions receive a report saying that their policy is not good enough or they are not converging in the way that the European Union wishes, and the Government then saying, “Well, fortunately, there is no penalty on us so we will ignore that”?

It is strange to belong to a club, accept the rules and then, when we do not like the rules, say, “Of course, we didn’t really want any of that and fortunately we have been opted out of the penalty bit of it.” It is a strange exercise. I suspect that the official machine of the Government, which goes on whoever is in office, is quite guided by all this. There is probably a wish on the part of officials to get the British Government policy and the figures closer to the convergence requirements. It is high time the European Union itself had an honest debate about the most pressing and most difficult target it has set—the target that all member states should keep their stock of debt to 60% of their national income.

Practically every member state is way above that, and some of them violate the target by having more than double the level set down by the European Union. Why does that body think it is sensible to persevere with a target that none of the member states wish to keep and none of them are trying to reach?

George Kerevan (East Lothian) (SNP): May I add that the rule that sets the 60% target also states that member states in breach must have a rectification programme and bring their debt level, whatever it is, down by five percentage points a year, which this Government have significantly failed to do and significantly will fail to do for a long, long time?

John Redwood: All the Governments are failing to do that, and it is even more pressing and difficult for a country such as Greece, where the penalties do apply because it is in the euro scheme. Despite all the best efforts of the European leadership, the European Central Bank and others, and very cruel and difficult expenditure cuts that Members in this House would not have accepted for the United Kingdom, Greece is still miles off getting anywhere near the stock-of-debt target and it has struggled until recently to get down to the deficit target.

We need to ask fundamental questions of our European partners about why we go through this routine and what malign influence it has on some economies and some economic performances around the European Union, which should be a matter of common concern all the time we remain in that body. The Minister says this is not a new exercise and it is not much of a burden on the British state; it is just one of those things, and we send in figures that we produce for other purposes. That is not quite true. The introduction to the document clearly has to be written, the selection has to be made, it is clear throughout the document that it is written for domestic purposes and for the purpose of forwarding it to the European Union, and we try to produce figures that we would not otherwise produce in order to conform with the workings of the European Union.

Next, I would like to highlight the figure for the convergence criteria and the so-called treaty deficit on page 186 of the report. That shows that in 2016-17, if all goes well and these figures work out, for the first time in many years we will get below the 3% target to 2.9%. That makes my point: we would not have to calculate that treaty deficit, think that it was significant or use it as part of the guidance for the British economy if we were not signed up to this surveillance and management system within the European Union. The Minister has to bear it in mind that there is actually some subtle guidance in the European policy. I think that many of my constituents would find it quite surprising that we have to table 300 pages of detailed financial and economic information in order to comply, and that that is then put through a scrutiny and surveillance process.

The next figure that I would like to highlight is on page 156, which shows how much in “expenditure transfers” we have to make to the European Union institutions—in other words, how much money we send that we do not get back. We see that the November forecast for 2016-17 was £10.7 billion, which is a very considerable sum, and that the March forecast, just four months later, has gone up to £11.8 billion. Between the autumn statement and the current Budget there is an increase of £1.1 billion in next year’s expenditure transfers to the EU institutions.

That figure of £1.1 billion is very close to the figure that the Government had pencilled in for disability cuts. I do not know about you, Mr Deputy Speaker, but I would rather not have the disability cuts and not pay £1.1 billion extra to the European Union. Why can we not make those kinds of choices? The reason, of course, is that we are signed up to membership of an organisation that thinks it knows better than we do how to spend our own money. I think that people in the United Kingdom are getting very frustrated at being told that we have to be very careful about our priorities, only to discover, if they get guidance from these complex figures, that the European Union can take £1.1 billion extra off us for next year without a by-your-leave. That leaves us struggling to find that money when we try to make the Budget add up, ending up with options and choices that I am sure Ministers did not really want to make, and which Parliament, in its wisdom, has decided should not be made.

I draw the House’s attention to some very important figures on page 205 that the Government are sending to our European partners and masters about projected net migration into the United Kingdom. I was very happy to campaign with my right hon. and hon. Friends at the previous general election on a sensible and sensitive policy of controlled migration, wishing to get it down to the tens of thousands by the end of the Parliament. It was a very popular policy, because I think that people liked the idea that there would be a fair system offering sensible rules so that people could understand it before deciding whether or not to come to our country. Interestingly, the forecast that we are sending to the European Union shows that the level of migration will stay much higher than the Government’s target—it shows 256,000 in 2016, declining to 185,000 in 2021. There is also a further projection in which net migration stays considerably higher, actually above 250,000 in every year.

I think that matters, because the Government’s intentions are very clear: they would like to get net migration well below these forecast figures. Why, then, is the forecast so high? I think that it is very simple: the forecast is that high because the European continental economies, particularly in the south of our continent, are performing very badly and have created mass unemployment on an extremely worrying scale, so the UK, which has a more successful economic policy that is generating a lot of jobs, is acting as a magnet for people who are otherwise without hope of employment.

That policy is making it very difficult for the United Kingdom Government to hit their very popular target on migration. I hope that when this document is submitted Ministers will follow it up by pointing that out to the European Union and saying that they have a solemn promise to keep to the United Kingdom electors, who helped elect them to government, and that this set of EU policies, creating joblessness and therefore triggering a lot of foot-loose migration around the European Union, is making it very difficult to honour that promise.

It also leads us to worry about the quality of some of these forecasts, because I am sure that the Government wish to get the level down, but there is a great danger that the variant of a much higher level has been put in, because actually that is what they are afraid will happen. I hope the Minister will consider that when he replies and that if we are going to go through the process of submitting our homework on economic matters to the European Union to be marked—by sending it 300 pages of figures—we will also say to it, “You are making it impossible for us to meet our legitimate wish to create more jobs to mop up unemployment in our country and to get wages up, as we would like to, because your failing economic policies in many parts of the euro area are bringing a number of migrants into our country that makes it impossible for us to meet our targets.”

Those are just a few brief comments on an extremely complex set of documents and numbers, which show that, while we stay in this body, we need to engage much more and to get some change so that there is honesty in the targeting and an understanding of the damage that some of the targets and policies are creating. However, it will not be a surprise to hon. Members to learn that I think that the simplest thing would be for us to leave the European Union so that this is the last one of these documents we ever have to produce. We can then take control of our own money, banish austerity, spend the £10 billion on things that we want and leave the European Union free to get on with its political union, which is clearly what it will need to do to try to deal with the mass unemployment, the lack of cash transfers and the inadequacy of its regional policies.

I hope tonight’s debate will be of use to the general public and that they will understand that we can take back control, spend our own money, and have prosperity, not austerity. That is what we will get if we leave the European Union.

Yesterday there was a debate on the UK’s report of its public finances to the EU. Under the EU Treaties the UK has to submit its budgets to the EU, and they examine and comment on our economic management. Under the Treaty the UK is meant to keep its deficit to less than 3% of GDP. The figures sent in this year show the UK hitting that target for the first time since the crisis in 2008-9

Being out of the Euro the EU cannot fine the UK for failing to comply, but the EU does apply moral pressure and will comment on the UK’s financial situation if it wishes. As the government has been seeking to reduce the deficit anyway there has not been tension, but if a government had been elected that wanted to keep the deficit well above Treaty levels there could have been more public tensions.

The UK government felt it had to send a 300 page document to the EU to meet the requirements of the Treaty. This takes the form of sending the relevant parts of the Budget reports, along with a special preface to the figures. The document reproduces some of the interesting materials of the UK publication, including the latest OBR forecasts of population change. Their central forecast assumes net migration of 329,000 in 2025 and 256,000 in 2016, declining to 185,000 in 2021. This is well above the government’s own target for reduced numbers, and of course is based on the assumption of continuing EU membership. They also run a higher migration forecast where it stays above 250,000 for the next five years.

I raised with the Minister several issues. First, I asked why the UK has to go through this process. As the UK has failed to hit the deficit target for an extended period of years, wouldn’t it be better to exempt the UK from this whole process? Clearly our controlling our deficit is not important to the others in the way it is crucial if you belong to the same currency as the neighbours. Shouldn’t the UK’s so called “special status” recognise this?

Second, I raised the issue of population forecasts. What action is the government taking to prove these forecasts wrong, given the stated policy objective to get net migration down to the tens of thousands.

Third, I asked about the increase in expenditure transfers to the EU institutions, where the forecast for 2016-17 has been increased from £10.7bn in November to £11.8bn this March. This increase of £1.1bn is unhelpful, and just happens to be similar to the amount of the annual savings being sought in disability payments in the original budget.