Author: johnredwood

The October figures for our balance of payments published last week were disappointing. Once again we ran a large deficit. Such deficits have to paid for by either selling UK assets to foreigners, or by borrowing from abroad. There are limits to how much of this a country can and should do.

I know advocates of staying in the EU want to keep us running a very large balance of payments deficit. They always say we need to run high levels of inward investment = which means we need to keep selling assets to foreigners. They want us to stay in on current terms to keep the trade at current levels, which of course means keeping our imports far higher than our exports to the rest of the EU. When it comes to EU/UK trade the UK is the customer and the rest of the EU is the supplier. That’s why some of us think we can get a better deal, and need a better deal.

Using the 2014 annual figures, if we left the EU we would immediately be £10 billion a year better off. In 2014 our transactions with the EU institutions required by our membership cost us a net £10 billion. That was money we had to send to them. That was money that cost us a loss of £ 10 billion on our balance of payments. All that contribution had to be funded by borrowing from abroad or selling more of our assets.

In 2014 the UK ran a current balance of payments deficit with the rest of the EU at the whopping level of £107 billion. Fortunately our trade with the rest of the world was in surplus, so that cut back the overall deficit a bit. £30 billion of that was our trade deficit in goods with Germany, who sells us twice as many goods by value as we sell her. We also run large goods deficits with Italy, Spain and Belgium amongst others.

I will in future posts look at how an independent UK could narrow its balance of payments deficit. But first we need to get people to understand that far from helping the UK, the EU relationship itself is a major cause of the big balance of payments deficit we run. Coming out would immediately make a very positive contribution to correcting it. We have run a large balance of payments deficit with the rest of the EU for most of the time we have been in it, as the EEC/EU liberalised trade in the things Germany is good at more than the things we are good at.

Phew! What a relief. They have agreed to limit the temperature in 2100 to only 1.5 degrees Celsius higher than the level before industrialisation began. The elite tell us that is great news. We can all sleep easier in our beds. I admire their certainty and the precision of their forecasts.

So now that is sorted, can we get on and tackle the problems of people in 2015? Let’s start with the shortage of affordable energy, and go on to deal with the lack of clean drinking water and piped supplies in many places. Let’s tackle the poverty of the poorest countries of the world with programmes based on trade, investment and free enterprise. Lets tackle low incomes at home with policies to promote better paid jobs, wider ownership, and access to more affordable energy, water, broadband and services.

If we wish to tackle world poverty, as I do, it helps to start with more efforts to end wars and heal civil conflicts. One of the main drivers of poverty in African countries is endemic lawlessness and wanton violence which prevent normal commercial activity and the quiet ways of peace. The efforts 196 countries and the UN put into the climate change agreement needs to be more than matched with political initiatives to teach the arts of peace and orderly government to places that lack them.Where people think they are forced to live together in the wrong country there needs to be referenda and a political process to determine better borders. Where there are corrupt and tyrannical governments that damage freedom and prosperity there needs to be support for a national conversation which can gradually change those societies from within, as the great democracies achieved many years ago through their own internal stirrings and opposition forces.

The wars now raging in parts of the Middle East are visibly destroying buildings and commercial assets, as well as impeding commerce and killing and mutilating local residents. Whilst the deaths are the worst feature of the madness of war, the way it prevents civilian business and advancement can become a self reinforcing mechanism to prosper only the thugs and the military commanders. Where is there hope when so many young men are either out of work or in a violent gang? Where is the better future when a young man thinks his best hope of advancement is to show skill in visiting violence on his neighbours? How does a society survive when warring bands fight to plunder the diminishing assets of the territory fought over?

I am no pacifist. Sometimes violence requires superior force to deal with it so others can live in peace. That is why the victor nations from the last world war set up the UN, to authorise and help guide state force against evil governments and out of control insurgencies. We also need to recognise that after the violence, or to end the violence, there does always need to be a political process. War is a means of shifting the balance of forces to change the politics decisively, and can sometimes do that for the better. It is no permanent substitute for politics or for a peace process. It is in itself always destructive, always imposes a high price in lives and lost economic activity, and always has to be replaced by stable government and economic repair for anyone to claim it has had a worthwhile outcome. Will the UN today show some decisive concern about these weighty current matters now it has fixed the weather in 2100?

The world’s governments, large environmental quangos and companies have been locked in talks to save the planet.

Let us make a couple of assumptions that will be unpopular on this site. Let us assume the world is warming. Let us assume that the main driver of this warming is the production of extra carbon dioxide from man made sources. I know that many of you are not persuaded the world is simply warming in a predictable way. Many of you think sunspots and other solar activity, volcanoes, natural carbon dioxide, water vapour and patterns of cloud cover will all have effects on the long run climate. Global warming theorists assure us they have taken this all into account and that these other factors are unimportant compared to man made carbon dioxide.

If we accept the conventional wisdom we can see why there is currently a row between the rich and poor nations, and an argument over whether to spend money on prevention or on adaptation. The poor countries say to the rich, you have created much of the carbon dioxide which causes the problem, so you should pay us to adapt to the results. The rich say it is now the poorer countries which are adding most to the world output of carbon dioxide, so they have to take expensive action to limit their contribution to the problem. The result will be an agreement which entails the rich paying more to help the poor, and results in more emphasis on adaptation. There is much haggling over surprisingly small possible changes in temperature, arguing over 0.5% of a degree, as if the experts can be that accurate.

One of the strange features of the debate is the absence of much talk about population growth. If you believe the world cannot take much more carbon dioxide, surely you want to limit the numbers of people joining the world population. The best strategy for a single country like the UK to cut its carbon dioxide output would be to limit immigration much more successfully, as this would reduce the need for carbon intensive new investments in additional capacity of all kinds to cater for the extra people. China, the world’s most populous country, has had a policy of limiting population growth for many years. It is now changing this as it can have difficult consequences for mothers and babies. The best policy to limit population growth is a policy which promotes higher incomes for all. Family size usually falls through voluntary action as income rises.

The problems with conventional policy responses based on trying to prevent more carbon dioxide include their adverse impact on income levels and therefore on population numbers. The danger of anti global warming policies in a single country like the UK is they may through dear energy simply send our energy intensive businesses to another country, so we lose the jobs but the carbon dioxide is still created elsewhere to meet out demands. Some responses to this problem as defined by the governments will make it worse, not better.

What do Central Banks do when interest rates are around zero or even negative, and Quantitative easing does not seem to be offering much stimulus?

Some say the next thing is helicopter money. By this they mean the Central Bank creates new electronic money in an account (the modern version of printing notes or clipping coins) and gives it to people. The idea is they would then go out and spend. The sages think that if the economy is working below full capacity then the extra money spent will be more demand, and will bring more of the unused raw materials and labour into use. Clearly the conditions would have to be very unusual. Normally if a Central Bank prints more and gives it away or spends the cash it leads to more inflation. Those countries that have tried it to excess end up with hyperinflation, like Germany after the First World War or Zimbabwe more recently.

There are disguised or more elegant variants of helicopter money that are on the agendas of some with power in our modern world. Finland, a poster boy of Euro financial rectitude, is struggling with no growth and lower living standards as a result of the cruel Euro policies being followed. There the government is asking should it move to a system of basic income, where every adult, rich or poor, in work or out of work, is given a tax free basic income by the state. Most other benefits would be removed to partially offset the huge costs, but there would still be a big increase in total public spending from giving money to people not currently on benefits. The idea is work incentives would be bolstered, as there would be no benefit withdrawal as people took on paid employment. If the basic income is enough to get by on, the incentive effects may not be as sharp as some hope. If the basic income is not high enough to live on, then the state will have to carry on with an additional range of means tested benefits for those in poverty.

Some think this is a variant of helicopter money, but under the Euro scheme it is not. Finland cannot print the money to pay for the basic income. Only the ECB can print money, and it shows no signs of wanting to send newly created money to an individual state to pay for more spending, which remains against its rules. So if Finland wished to stick within the tough budget deficit controls of the Euro it would need to raise other taxes to pay the bills. If it was prepared to break the rules on deficits then it would borrow more to pay the bills, making this a normal fiscal stimulus akin to a tax cut.

Another variant is Mr Corbyn’s People’s Quantitative Easing. Under this model the Bank of England would create new money to buy the UK more infrastructure, or it would buy the bonds the state needed to issue to pay for infrastructure in the more normal way. It amounts to the same thing if the state in due course cancels the bonds it has bought up from the market in pursuit of its QE programme. If the extra borrowings have later to be repaid to the private sector, then it is simply a higher borrowing policy of the familiar kind.

I trust the Bank of England will not need to play around with such measures. Nor should the USA need them. Bond and property markets have been pushed quite high enough already by the large Quantitative Easing programmes already undertaken by the four leading monetary authorities of the world. In the Euro area they need to break up the zone so currencies can find their own levels against each other again, and individual Central Banks can follow money policies and set interest rates appropriate for their country. Far from needing more radical and possibly dangerous monetary policies, the Euro needs to go back to more reliable basics. Monetary authorities need to work with sovereign governments who have control over taxing and spending in the area of the monetary union. Together national Central Banks and governments in each country could fix the slow growth and no growth of parts of the current Eurozone. If the Eurozone is going to develop more it needs to get on quickly with its ideas of political union, a Euro Treasury, a common European budget, and much larger transfers from rich to poor. That is what we have in the sterling currency union, and the USA has in its dollar union.

On Tuesday the Commons completed the Referendum Bill by accepting some of the Lords amendments and dismissing their wish to change the franchise from the General election one. I reproduce my speech below (from Hansard) as it may be of wider interest:

John Redwood: I put my name to the amendments tabled by my hon. Friend the Member for Stone (Sir William Cash) because I thought that Lords amendments 5 and 6 were ill considered and unwise, and that we needed to debate them for that reason.

Lords amendment 5 is easy to deal with and I have no particular problem with it, because it states the obvious—namely that, when the negotiations have been completed, the British Government should share their view of the outcome of those negotiations with Parliament and the people. Well, of course they will: it will happen naturally. There will be a statement, and I dare say there will be a written text as well. I therefore think that the amendment is an unnecessary addition to what was a simpler Bill before their lordships got hold of it.

Lords amendment 6 is far more worrying, because it is so sloppily drafted and because it leads to all sorts of arguments that are properly arguments for a referendum campaign rather than for good legislation to set up the referendum. The first part of the amendment says that the Government must publish information about the

“rights, and obligations, that arise under European Union law”

from our current membership. As has already been remarked, if that were done properly it would result in a very long book, given that we are now subject to so many legal restrictions and obligations as a result of an extremely voluminous consolidated treaty and thousands of directives. I think that to fulfil that remit properly, the Government would have to set out all the directives, and explain to the British people why there are now very large areas of law and public practice that we in the House of Commons are not free to determine as we see fit and as the people wish. While that might be a useful thing to do, I fear that the Government might fall short because they might not wish to give a comprehensive list of our obligations, and it is not good law to invite people to do things that they do not really intend to do.

I look forward to hearing the Minister clarify whether he will be publishing a full list of the thousands of legal restraints that now operate on this Parliament in preventing us from carrying out the wish of the British people, and also on the British people, who must obey these laws as they are translated into British law, or else obey the directly acting laws. Of course, all these laws, and our own laws, can be construed by European justice through the European Court of Justice, which, rather than this court of Parliament, is now the true sovereign in our country because we have submitted ourselves to the ultimate judgment of the European Court.

Sir William Cash (Stone) (Con): Does my right hon. Friend attach the importance that I attach—and the Electoral Commission itself has attached—to the fact that the reports proposed by Lords amendments 5 and 6 should be produced on the basis of both impartiality and accuracy? We remember the review of competences: it was a whitewash. If these reports were anything like that, we would be significantly misleading the public, would we not?

John Redwood: Indeed. That is why I share my hon. Friend’s concern about Lords amendment 6, and fear that the Government might fall short of the full remit. Will they spell it out to people that we cannot control our own borders, our own welfare system, our own energy system and energy pricing, our own market regulations, our own corporation tax or our own value added tax, because all those matters have been transferred to the superior power of the European Union? That should be the very substance of the referendum debate about whether we wish to restore the full sovereignty of Parliament for the British people, or whether we wish to continue on the wild ride to political union that the EU has in mind, which will mean that even more powers are taken away.

The second part of Lords amendment 6 states that the Government must set out

“examples of countries that do not have membership of the European Union but do have other arrangements with the European Union (describing, in the case of each country given as an example, those arrangements).”

I have not read or heard anything so woolly for a long time. The amendment refers to all the countries that are not in the European Union but have some kind of arrangement with the European Union without even specifying a trade arrangement, although the Opposition seem to think that it relates to trade.

The Opposition try to perpetuate the myth that our businesses and people would be able to trade with the rest of the European Union only if we resubmitted ourselves to some of the powers of that Union through some kind of arrangement like those entered into by Norway and Switzerland. Have they not heard that America is a mighty trading partner of the European Union that does not have one of these special trading arrangements, and certainly does not pay a contribution to the European Union in order to sell goods and services to it—nor does China, nor does India, nor does Canada, and nor does Australia— and have they not heard that some individual countries have free trade agreements with the European Union which are arguably better than the arrangement that we have as members of the EU, because they do not have to pay anything like the very large levies and contributions that we must pay for the privilege of trading from within the internal market?

Mrs Anne Main (St Albans) (Con): My right hon. Friend is making a powerful point. On the basis of what he has said, the debate will be about how “arrangements” will be defined in the report, and, indeed, that could potentially be open to challenge.

John Redwood: That is another reason why I am very worried for the Government. I do not wish them to get into legal trouble over this sloppy drafting.

Those of us who have decided that we wish to leave the European Union have been invited to predict what the Leave campaign will announce when it is finally recognised and officially up and running. I think it would be pretty safe to say that we will not want to recommend either the Norwegian or the Swiss model, because, in our view, the United Kingdom is a far bigger country with a different set of relationships around the world, and one that will have senior membership of the world’s main bodies including the World Trade Organisation. We therefore think that there will be a British solution to our relationship with the European Union, which will not, for example, include paying any contributions to that Union in the way that we currently have to.

Peter Grant (Glenrothes) (SNP): The right hon. Gentleman has given examples of a number of countries that he would not want Britain to be like in the event of an EU exit. Will he give an indication of the countries that he would like us to resemble more? That might help the Government to decide which countries we should be compared to in the information that they publish. It is easy to say who we are not going to be like; will the right hon. Gentleman tell us who he thinks we should be like?

John Redwood: I have already done that. When the hon. Gentleman studies the report of the debate—if he is still interested—he will see that I have dealt with exactly that point with great clarity.

There will be a British answer, but it will be closer to the answer of those countries that trade very successfully with the European Union without accepting the need to pay money into the EU by way of special contribution, and without having to accept great legal impositions. Of course, anyone who trades with the European Union must meet its standards in respect of the goods and services that it wishes to buy, just as when we trade with the United States of America, we must accept its standards for the goods that we wish to sell to it. However, that does not mean having to enter into a common Government arrangement of any kind, and it does not mean having to pay special taxes in order to trade, because most of the world trades perfectly successfully with the European Union countries without having to do any such thing.

I hope that the Minister will appreciate that those of us who are on the Leave side have read the words that the Lords have actually written, rather than the words that the Opposition wish the Lords had written, and have noted their vagueness. It would, I think, be extremely foolish to specify the Norwegian example—which is not an example that anyone I know wishes to copy— rather than considering some of the larger countries, Commonwealth countries and others that have perfectly good trading arrangements. It would also be wrong of the Government, in answering this exam question, to confine themselves to the issue of trade, given that trade is mentioned nowhere in the draft law that is before us. We do need to consider the political arrangements that we have with EU countries, through NATO and so forth; we need to consider such matters as pipeline agreements, aviation agreements, and all those other arrangements that are clearly covered by this sloppily drafted piece of law.

My final worry with this clause is its asymmetry. The Opposition have shown us how they wish it to be asymmetric. They wish the leave side in the referendum to hypothesise about what our relationship with the EU will look like in two or three years’ time, whereas they do not seem to think it is incumbent upon the “stay in” side to similarly hypothesise. I would not mind betting that there will be even more change if we stay in, because if we vote to stay in, the rest of the EU will take that as an excuse to demand that the UK conform to many more parts of the Union than we are currently prepared to.

We know from the Five Presidents’ Report of the EU published this summer that as soon as our referendum is out of the way by 2017, they wish to press on with their move to capital markets union, full banking union and, above all, political union. We on the Leave side will be asking those who want to stay in to describe to us how Britain would relate to the political union and the very much stronger union generally which the euro members envisage. We should be in no doubt that the euro members wish to use the institutions of the EU as a whole for their own purposes, and it would be very difficult for Britain to be alongside but only half in—in the EU but not in the euro.

I would therefore like to see a symmetrical request. It is important to spell out what staying in looks like, as I believe that staying in is a wild ride to political union. That may not be possible or to the Minister’s liking when dealing with this clause and whether we leave it as it is, but I can assure him that it will be a very important part of the referendum campaign from the leave side.

The legal base for the UK’s military engagement in Syria is founded according to the written briefing I received last week on the Iraqi right to self defence against ISIS.

The UK government is always stressing that when it comes to attacking ISIS the Iraqi/Syrian frontier is of no relevance, because ISIS do not recognise it and operate from both sides of that frontier. In other ways, of course, the border is important. It does represent the line that segregates those who live under the government of Iraq from those who live under the chaos of Syria.

The UK government has been invited in by the government of Iraq to help it destroy the ISIS insurgency in that country. Iraq has a right to use lethal force in self defence against the ISIS insurgency. The fact that ISIS moves across into Syria and can finance and support its Iraqi operations from Syria extends the UK’ s right to assist Iraq in its plea of self defence by taking action in Syria as well. Will the same extend us into Libya where ISIS are also active? The Uk government also argues with its US and French allies that its position in attacking ISIS has been confirmed by the general words of the UN resolution asking member states to use all means against ISIS, though they did not base their legal case on this. The Russians, allies of Assad in Syria, confirm or accept the rights of the Coalition forces to attack ISIS in Syria. Russia presumably bases its intervention on Syria’s right to self defence against ISIS, as they co-operate with the Syrian regime. Assad, leading the official government of Syria, does not accept the legality of the Coalition action. He sees it as a violation of Syrian sovereign territory, but is himself visibly unable to police or control large parts of the country.

The issue of what is a just war is sometimes easy, sometimes complex. Two recent UK wars that I wholeheartedly supported were the war to liberate the Falklands Islands from illegal invasion and occupation by the Argentinians, and the UK’s participation in the coalition force to liberate Kuwait. In both cases sovereign territory had been invaded by a hostile outsider. In both cases the settled population in the violated state wanted to be liberated. The moral and legal cases were overwhelmingly clear for our military action.

Our other interventions in the Middle East have been more complex. They have sought to prevent mass slaughter by local tyrants, to prevent extremist insurgencies taking over large areas of distressed states, and to support forces within those states that seek more moderate and democratic government. The West’s governments claim that all have been well intentioned. In each situation a legal basis for military action was part of the argument for intervention. None have been to gain territory for the West, all have been to influence the personnel and style of government in Middle Eastern countries and territories. Others claim that these interventions have been unhelpful. Critics of the West have sometimes argued they have been illegal.