Author: johnredwood

There are several ways of looking at the Rachel Reeves likely black hole of £20-40 bn in the next budget, the sum she will be told to raise in extra taxes assuming she is unable to restrain extra spending. Very simply it is the direct result of her overspending since coming to office and deciding on major increases, especially over public sector employee numbers and wage settlements.

More helpful ways of looking at it  include identifying some of the areas of spending over run that would be easiest to rein in without cutting disability or pensioner benefits, which was never a great idea.

According to the March OBR forecast the Treasury will have to give £23.1bn to the Bank of England in 2026-7 to cover its losses, and another £22.3 bn in 2027-8 . I have often commented on how these numbers could be brought down by stopping bond sales and taking other measures to stem the costs.

There is an estimated £40 bn black hole created by loss of productivity in the public sector since 2019. £22bn of this is NHS losses as set out in ONS estimates of lower productivity in this large service. I have provided some commentary on how Ministers could get back some of these losses, and will provide more in future blogs.

There is the good news that the UK now no longer pays in a net £15 bn to the EU since we have at last terminated membership and further contributions under the bad Withdrawal Agreement. Better still, the UK now retains all of the tariff revenue levied on our imports, where 75-80% of that passed to the EU before when we were members. This has given us a boost of £5bn of tax revenue instead of just £1bn before. We also now collect and can spend the £1bn of Plastics tax, where  this all  goes  to the EU from  member states.

If the UK is stupid enough to impose a carbon tax or tariff on imports in line with the EU next year, all this revenue will help reduce the UK deficit whereas it will pass to the EU from member states.  If you take the likely gross contribution of the UK to the EU had we stayed as a member, and add in the lost revenues, we will be around £30bn better off next year out of the Union. Just think how bad our finances would be if still inside, at a time when the EU is increasing its spending, borrowing and tax raising substantially.

When I was 21 I was elected as a County Councillor for the new Oxfordshire  serving the newly enlarged area taking in Oxford City and parts of North Berkshire. I became Chairman (equivalent to today’s Executive member) of the land, buildings, procurement, Architects, Surveyors departments giving me a cross Council remit.

I was keen to get spending under better control and limit increases in local taxes. It was agreed in the majority Group meeting that I could lead a move to cut the large and fast growing bus subsidies.

I was drawing public attention to the  bizarre theory of bus subsidies. This said you offered subsidy to buses tackling social need, defining social need by the size of the loss on the bus route. This idiotically meant that if a bus company ran a bus service no one used that would make the biggest losses and could then claim it therefore had the greatest social need! Instead of incentivising bus companies to maximise fare revenue and passenger numbers this gave a perverse incentive to lose more to get more grant.

I asked the officers and bus companies to draw up a plan for an unsubsidised route network to get a feel for what was possible. They invited me to chair a meeting to present their conclusions. The paper presented very large cuts in services with particularly  large cuts in the town I represented.

I thanked them for their work and told them we would go for the no subsidy option. They remonstrated volubly and asked if I had read the bit about my town, knowing I was always most attentive as a local member.

I said I had of course read  it. I did not believe a word of it. There was no way the bus companies would  destroy their businesses by removing so many services. That would mean unaffordable sackings and mothballing of buses, Their harsh treatment of my area had swayed me, underlining the fact that the whole paper was a silly try on.

They went away and developed a pattern of services  capable of carrying more passengers. Taxpayers were spared large subsidies for bus services people did not want. Councillors have to overrule the defence of bad performance and extra spending.They have to see when the waste and stupidity of the worse parts of the public sector need  to be changed.

Even then some of the environmental/ roads officers were anti car. The annoying ones drove to the central offices to their reserved parking places to design anti car and anti parking schemes for others. I told them we did not want these schemes and if they persisted I would require them first to surrender their special car spaces and come to work by some other means as an example to others. That stopped the anti van and car strand of work.

Reform took control on a platform of eliminating  waste and undesirable spending. With a budget advertised as £2.6 bn a year serving 1.6 million people it is an important responsibility and a good challenge. Reform implied they could avoid the annual maximum permitted Council tax rises which hit householders.

Reform took over near the start of the 2025-6 financial year, inheriting a budget from their predecessors. They also inherited a forward look budget for the following two years and a capital spending budget of £1419 m over ten years.

They chose not to submit a revised 2025-6 budget. They could  have cut spending in year whilst keeping the tax rise, cutting the deficit. For 2026-7 they have put out a Consultation document asking voters for ideas on cuts in spending and on acceptable tax levels without offering a proposal of their own. They are working from their predecessor’s forward look budget. Their draft budget shows a further maximum tax rise and big rise in spending even after the £50 m unspecified cuts they consult on.

The 2025-6 budget they are spending saw  a gross increase of £322 m on the 2024-5 total of £3015m. (11%)The cost net of grants and income was £1531 m, an increase of £102m. (7%).  Net spending growth of £207 m was brought down by offsetting  savings and spending of reserves worth £105 m.

Arguably Councillors should be concerned about the way grants and reserves are spent and how much is spent before just knocking them off the total to fund.They should seek to control gross spend, not  just net. 11% increase was surely too high.

The previous Council claimed large  efficiency savings and said it offered good value for money by Council standards. 48% of the total spend is on adults and children’s social care with rising demand  and rising care costs per person.

I wish all Councils well that are looking for savings, eliminating waste and concentrating resources on essential services. This year saw a maximum permitted  Kent increase in Council Tax and the Social care levy approved by the outgoing Council. This year’s Consultation assumes another maximum tax rise and says they still need to find £50 m of spending cuts to live within budget and available funds. When will we know how they will find the £50 m? Will they find more to avoid another maximum tax rise? Have they given up all idea of how to cut spending or even to control the rise?

When I was a Minister I understood that I had been appointed to office but that did not mean I was as many say “ in power” . The change from being an Executive Chairman of a large quoted industrial company to being a “junior” Minister was an even bigger jolt than I had been expecting.

My world changed from having to be very careful with everything I said because my word was writ in my company, to having to plot and plan every change I wanted to make to get anything I said incorporated as departmental practice and government policy.I had to ensure I had cleared my lines with the Secretary of State, who did trust me to take command of my specified  Ministerial responsibilities. I had to get across to officials  it was vexatious and pointless going behind my back to the  S of S to change or undermine  my decisions.

I had to battle to stop officials trying to  turn departmental decisions into matters of debate with other departments, as a few were up to trying to stop things by an external intervention. I had to follow up everything we had agreed to make sure it happened in a timely way, as delay was always a good means to block a Minister.

In some cases I had to persuade the Permanent Secretary to take action, as much was about the training, motivation and deployment of staff. Councillors have more power over the selection, deployment and remuneration of their officials than Ministers have. Councillors can sack CEOs but effectively Ministers cannot sack Permanent Secretaries without the support of the PM who will usually be advised anyway by the Cabinet Secretary. Truss’s sacking of the Permanent  Secretary to the Treasury was one  of her worst blunders and added to the force of  the establishment push back  to her policy.

I found there were some very good officials. Key to success was getting the Permanent Secretary to allow some  talent to work on your Ministerial priorities. It was crucial to success to know exactly  you wanted to do and to have thought through the detail of how it could  be done. I  always  wrote my own speeches and drafted crucial parts of documents central to a policy I wanted to avoid confusion or dilution.

I found that if you were always polite and thoughtful about your officials you could persuade enough of them that things could  be done better.The civil service does more with much more money  as its mantra. My mantra is faster, better cheaper. You could get a success by showing them how. Most people do prefer being associated with success than with failure, A Minister has to be good enough to cut through a failing culture of poor quality and more money, to deliver some success for the department he is meant  to lead .

When a government is as unpopular as this one, and adrift looking for ways back, good opposition can influence or force changes.

People on this website are ever ready to criticise all political parties  and leaders, and most agree the government is failing. Fewer are willing to get behind constructive opposition and campaign for solutions. You may feel better for letting off steam about most MPs, but they are the ones you helped elect with plenty of choice available. If you dislike all the choices you need to stand yourself or back new people who can transform existing parties or create new ones.If too many do that it gets more difficult to get a government that you like, as it splinters the vote for causes you believe in.

We are closest today to changes in the government approach and policy to three things. They may give ground on extreme net zero policies now the damage they are doing to jobs and big industries is becoming more obvious and now the Unions are opposed to their  approach. There is already talk of relaxing the ban on new oil and gas drilling.

They may need to propose tougher measures to look as if they are getting some control of our borders. The  new Home  Secretary claims to be tougher but so far has not announced the policies to justify the words. Reform will continue to headline the issue. The Conservative have tabled draft legislation and set out an administrative scheme which would control the borders.

They need a new approach to tax and spending. They will find this the most difficult to change as the Labour  party is by instinct a high tax party. Many members and Ministers want to tax the  rich more, with schemes that tax the better off too much. They think making the rich poorer by making them pay more is a good thing in its own right. They like levelling down as well as levelling up.They forget the huge revenue and talent loss experienced by the 1974-9 government when it tried taxing the rich more

We need good campaigns to highlight obvious waste and bad management, from Bank of England losses to HS  2 runaway costs, from a surge of people qualifying for benefits with no need to look for work to the big productivity loss  in public services.

The first policy to change is the ban on new oil and gas exploration and development. Importing instead means no well paid ,jobs in the UK. It means large tax revenues on producing fossil fuels goes to the government of the country we buy from, not to the UK Treasury. More CO 2 is generated, especially when importing gas as LNG. That requires large amounts of energy to compress and cool it, keep it cool, transport by diesel ship and then convert it back to gas.

The second is to consult on a way we could reinstate exploration and production onshore. There can be strict rules about drilling well away from homes and towns, about concealing from view the  well head workings as at Wytch Farm in Dorset, and community participation in the revenues for those closest to the development or owning land above the reservoir. No other country leaves such an important resource untapped. We could extract it with less environmental impact than the gas we import imposes on somewhere else.

The third is to remove the ban on producing more diesel and petrol cars in 2030, and to remove the intermediate targets and penalties on companies making too any of them in the run up to 20230. This is massive self harm, undermining our industry and leading to more imports after 2030 as people will still want to buy diesel and petrol cars, and will buy nearly new if they are banned from buying straight off the production line. Overseas companies will have a great market opportunity to send us new cars with whatever the minimum mileage is to qualify as second hand in the UK on the clock. No government can stop us buying  and selling second hand diesel and petrol cars.

The fourth is stop paying guaranteed prices for new wind and solar projects, but to let them bid into the system as other generators do. The government should end renewable subsidies. Adding more heavily subsidised renewables with high guaranteed prices makes electricity dearer, not cheaper. It adds to the need for very expensive expansion of the grid to handle the interruptible power often coming from many miles away from the consumers. We need more reliable gas power stations in the areas where most people live and businesses are located.

The fifth is remove any idea of banning gas boilers and subsidising heat pumps for residential property. Gas boilers usually remain the cheapest solution to install, and we lack the extra electricity to allow major switching to electricity for home heating.

I was pleased to see the Unite Union make the case against the disastrous de industrialisation Mr Miliband’s policies are causing. I welcome Claire Couthino’s return from maternity leave as she takes on the argument that far from UK electricity being too dear because of the gas price, UK electricity is far dearer than gas thanks to extreme renewable policies. The mix of high guaranteed prices and substantial subsidy make new wind power very expensive. She rightly pointed out that recent guaranteed prices for renewable power from new wind farms are several times dearer than for gas generated electricity and for using gas as a primary fuel.

Some here want the main parties to dump the whole idea of climate change, challenging the science. In my two short books on the topic,  “Build back green  The electrifying shock of the green revolution” (2021) and  “The $275 tn Green Revolution   Will consumers buy it” (2024)  I accepted the scientific consensus that CO 2 is a warming gas, and if nothing else changes more man made CO 2  leads to some overall warming.

I raised a number of questions about how the global  temperatures are measured, why there were periods of global warming and cooling before mankind arrived and before the widespread human burning of fossil fuels, how accurate the climate models and forecasts are , whether sun intensity, water vapour presence and other important factors could offset or accelerate the impact of manmade CO 2 and other obvious issues. As many governments and universities continue to spend a lot of money and human resource on climate change studies, clearly they do not think the models are perfect or our knowledge complete. Some of you contribute to the scientific discussion. There is no sign that there is about to be a major change of scientific view held by the leading European and UK governments and the main universities.

I still do not intend to develop the debate about the pace, intensity or reality of global warming. By all means contribute to this debate if you have studied the models and the wider science.  I wish to intensify the debate about UK net zero policies with a view to getting urgent change. To get that change we need the support of the many experts and people in power who do believe global warming is serious and brought on by current manmade CO 2.

One of the strongest reasons for change  all in the debate should agree is the current UK net zero policies are wrong in their own terms. They increase world CO 2 with their manic pursuit of less CO 2 produced here but far more world CO 2 needed to produce all the imports we then need as we close down our own factories and oil fields. Imported LNG means 3 times as much CO 2 per unit burned than UK gas down a pipe from the North Sea.

They are wrong in saying the UK by closing down fossil fuel use more quickly will lead the rest of the world. Instead over the many years we have been leading the world in cutting our own CO 2 emissions manmade world CO 2 has continued to increase. There is no evidence that UK leadership has worked or will work all the time China and Germany wish to make things to sell to us with plenty of coal and gas in their mix of fuels.

They are even wrong over their proposed remedies for too much CO 2. Buying a new battery car may mean more world CO 2 not less when you take into account all the extra CO 2 produced by the mining for rare minerals, the manufacture of the batteries and the likely use pattern of the vehicle. Worse still much of the time in the UK when you come to charge the battery car there is no spare renewable electricity available so they need to burn more gas in a gas powered generator. The same can be true of a heat pump. On a very cold windless day in winter your heat pump will need more gas fired electricity to keep it running.

I will look in a later blog at the changes we urgently need in policy.

The arrival of drones over various EU countries should act as a further spur to the UK to make the improvement of  surveillance and interception systems its greatest defence priority. The UK has early warning of foreign fighters, bombers and missiles coming in. We now need an upgrade to give us the best systems, capable of detecting the smaller unmanned drones and sending up counter measures.

As no country or interest claims responsibility for the unannounced drones there can be no objection to destroying them where and when it is safe to do so. The UK cannot get into a situation where unwanted drones can turn up without permission and occupy airspace we need for peaceful civilian purposes. Clearly hostile incoming vehicles and missiles are best destroyed before they cross the coast. Nor can we allow any chance of an attack from hostile sources getting through our defences if a terrorist group or a hostile state that does not play by the rules decided on an attack.

The UK as a good member of NATO will spend above the minimum and needs to make faster progress to matching the more exacting aspirations set out by the US and NATO recently. The UK should also remember the importance in the NATO founding Treaty that each member state should see to its own self defence. The support of other members is important, but that is  not any state’s first line of defence. Other states expect a state under attack to have prepared and to lead the fighting.

In a world where non state actors can get access to dangerous and sophisticated weapons, and where drones can be made for modest sums and launched in great numbers, the UK needs to look to its aerial defences. The government has said it will accelerate the development of Uk drone technology and increase the UK’s ability to make them at home. This too is an urgent priority. The war in Ukraine has shown us the importance of the drone and the vulnerability of conventional weapons like tanks and ships to drones and missiles.Finding an effective response to massed drone attacks is not proving easy.

The Telegraph published an article of mine on line yesterday explaining why the trade figures disprove the Remain forecast of economic damage from trade friction. This is the trade story of the last ten years.

In 2016, the year of the vote, the UK exported £542Bn and imported  £581 bn, a deficit of £ 39 bn. Last year the UK exported £894bn, an increase of 64%, and imported £937bn, an increase of 61%. The deficit was £43 bn. These were good increases, and were led by large increases in our exports of services to non EU countries. So  much for all the predictions that our trade would be badly hit by Brexit. Our exports particularly of services have taken off in recent years.

Last year the EU counted for just 41% of our exports, with the rest of the world at 59% and increasing. Services also accounted for 59% of our trade and is rising.  Our trade in goods with the EU is experiencing declines in our exports of some key items, not thanks to Brexit but thanks to the net zero policies. Our largest exports to the EU have included oil, gas, and refined oil products, but the UK is set on closing down its oil and gasfields and has just shut two large refineries owing to dear energy and net zero bans. Export of diesel and petrol cars has also been an important contributor and that trade will stop by 2030 as all those new  cars are being banned in the UK. We should expect our export of goods to the EU to fall as a result. Meanwhile we should expect our imports from the EU to rise as we come become ever more dependent on them for our electricity and our food, whilst we will also import more vehicles from the EU and China who will fight for market share. The EU last year already accounted for 49% of our imports compared to 41% of our exports.

In 2024 our trade with the EU showed a major deficit of £97 bn whilst our trade with the rest of the world produced a healthy surplus of £53 bn. This shows the UK is not uncompetitive worldwide, but does have an unfair trade issue with the EU. They are reluctant to buy our services in the same quantities as elsewhere with language, legal and  protectionist barriers against us. They use their rules and continuing influence on us through the Northern Ireland Protocol, Windsor Framework and our reliance still on inherited EU law to allow them unfair advantage in food and farm products, to allow them a disproportionate share of our fish, and to give them a big advantage in exporting electricity to us.

So after Brexit our exports to non EU flourished, our imports from EU continued to expand and our overall trade rose substantially, contrary to all the forecasts from Remain. The tragedy is some of our exports to the EU are being hit and will be hit more by the government’s passion to throttle back the energy, oil products, and petrol and diesel cars that used to be important lines  for us to sell to the EU. It almost looks as if UK policy is designed to cut our exports to the EU to be able to claim Brexit did not work. Given the way government is deindustrialising us and making us a big energy importer, it is great news our liberated trade in services is now advancing rapidly and is providing most of the cash for us to be able to be import dependent on an unfriendly EU for much of our food and energy. We could change the damaging policies that bring that about, but lack the will or the ability to do so.