Author: johnredwood

COP 29 was all about money. The COP did not chase up improved national plans to get to net zero,though the U.K. did table one. They now say they can get to an 81% reduction by 2035, without telling us what the cost will be or the extent we will have to change our travel, heating , diets and other CO 2 generating activities.

COP 29 opened with a huge gap between the developed countries currently offering $100 bn of payments a year and the emerging world demanding a minimum of $1trillion a year. After much wrangling a late nights they ended up agreeing a trebling to $300 bn a year by 2035 with the emerging countries saying they will be back for more at the next COP. China declined to join the developed countries in the pledge of a big increase.

The US was represented by President Biden’s people. Will President Trump go along with this? All just expect the US to be the largest donor. What is the UK’s share? Presumably it will mean higher taxes to pay for it? How can the main EU countries pledge large rises when they have large state debts and are under pressures to get their deficits down?

This is not a good time to ask developed countries to pay more. Most outside the USA are struggling with low growth and large deficits. US voters have just elected a new President on a pro fossil fuel policy.

Mind the gap. It is difficult to see big rises in payments in the next couple of years. The 2035 target looks hard to hit

It is a useful way for politicians to talk about illegal migration to say they want to stop the small boats or smash the people smuggling gangs. It maximises support as most people dislike those profiting from the unsafe travel trade across the channel. It leaves open opinions of the migrants themselves

If someone from abroad wants to come to the U.K. because they think they have a better chance of a job here or can get a better paid employment here, then they can apply to come by a legal route. If someone wants to seek asylum they should have their passport showing they come from a high risk country along with reasons and preferably some evidence that they were at risk there.

As the French Mayors have pointed out, North France has many migrants camping there waiting to get to the U.K. They do not want to stay in France, a safe country,  because France does not offer them a hotel and easy access to jobs and eventual acceptance of their right to stay. They wish to get to the U.K. because they hear it is easy to stay and once here to get a job.

The Home Secretary says the  right approach is to smash the gangs. The previous government tried that with limited success. She is trying it and so far arrivals have gone up. The last government was trying the Rwanda idea so an illegal migrant could end up in a different country. The idea was this would be a deterrent to coming. Some did start going to Ireland instead because of it. The legal system delayed it and the new government ended it, writing off the costs.

The evidence points to the need for a deterrent to cut demand for illegal crossings as well as measures against the boat organisers. The people paying the boatmen are seeking to break U.K. law and risk their own and their children’s lives. The government should listen more to the Mayors of Northern France.

When will we get the £300 off energy bills promised in the election from backing more renewables?

How many more large rises in managed energy prices will the government put through before they might consider £300 off?

When will the government admit it cannot get to zero carbon electricity by 2030, and trying to will mean ever higher taxes?

Why did the government budget put up inflation and cut growth?

The government inherited the fastest growing G7 for the first half of 2024. Since they took over it is the slowest. When will the economy be the best again?

Small boat migration has gone up. So when will the government stop the people smugglers as promised?

Why did the government offer the Chagos islands to Mauritius and promise to pay to rent them back?

How much will the government spend on net zero policies next year?

Why won’t the government tell the Bank of England to rein in its losses by copying US and Euro area policies to handle their bonds?

How will the government store energy on sunny and windy days so there is power when the wind drops and the sun does not shine?

Imagine the bottles of bubbly being opened by the consultants to Jaguar on their re brand campaign. They will be delighted one ad has become a dominant news story. They will be even more delighted if the new typeface they have designed pays them well, alongside the new JJ insignia to replace the famous Jaguar  head. Consultants  like to get fees for re use or for repeat business to “ maintain and develop” the brand.

The company executives should not join in the celebration. Someone has briefed that the new brand will lose them 85% of their past customers. So they need to start from scratch identifying who it is will like this new brand. They are also making it much more difficult by saying that instead of selling lots of £40,000 to £70,000 cars they now want to sell £100,000 cars. So they need a good pool of new Jaguar buyers who are trendier, younger and richer than the more traditional customers. Good luck with that.Today they cannot even tell those people what they are being offered.

The main reason seems to be their wish or the looming legal imperative that they switch from selling petrol and diesels to battery cars. They have decided on big bang. The trouble is they do not yet have the new range of electric cars to show the public, hence no cars in the ad.

They brief that they are being true to the heritage, because in its glory days Jaguar was prepared to do something bold, different and modern. That is true. The launch of the iconic Jaguar E type for example created a car with wow and new graceful lines that produced love at first sight. It was not an ad or clever PR that sold the car. It was its beauty, pace and realistic price. Jaguar adopted the slogan Grace, space, pace  which the cars had in abundance.

If the rebrand is to succeed Jaguar are going to have to come up with a game changing stunning design and a great specification. They will need to wow. For £100,000 they will also need to convince there will be no battery life, range and recharging problems. Somehow I expect they will produce another “safe” range of SUVs and a GT saloon  that look much like others. The true brand produced icons of style in the XK, E type, XJS and F type, and the saloons including the Marks 1 and 2, XJ and the S type. They were brilliant and competitively priced. We are told the new brand will be dear.Can it be beautiful?

I can give them some good news. As someone who has bought their cars in the past I will not be buying an electric one and would not be spending £100,000 on a vehicle. So their wish to get rid of me worked.

Whenever I ran a business I always found it easier to get more business from people who had been customers before or who still were customers, along with their circle of friends and family. That to Jaguar’s consultants would  just show what an old fashioned view I had.

Inflation rose sharply last month to 2.3%. 4 months into the new government and growth has tumbled from 0.5% to 0.1% a quarter. Inflation has risen from the target level of 2% they inherited.

It’s true it is still relatively early days for the government. They have used up  just 7% of their maximum stay pre election so far. The problem is they now need faster growth to make up for the loss to date, and lower inflation. The higher inflation should impede the Bank from cutting interest rates faster.

The inflation was primarily their decision to use the regulatory system to put up fuel bills a lot instead of changing the system or cutting fuel taxes. Indeed the government is wedded to dearer energy. It has increased the tax  on oil and gas, demanded we extract less to keep domestic gas prices up, and backed more renewables which need carbon taxes and subsidies to get them started. Far from cutting our bills by £300 their policy means dearer energy .

Putting up public sector wages without productivity deals is also inflationary. I am all in favour of people being  better paid,  but  if you are to be paid more you need to help your employer work smarter and win more business. In the public sector you need to help drive other costs down.

Wes Streeting does  talk about NHS reform. He needs to get on with it. Yvette Cooper talks of stopping the boats to cut pressures on hotels and house rents, but so far has allowed numbers and bills to go up. Controlling inflation requires better control of government costs including the runaway nationalised trains and ultimate bad bond investor, the Bank of England.

The Conservatives recognised it was unrealistic to suppose we can ban new petrol and diesel cars in 2030 so they put it back to 2035. I gave one cheer,  then told them they also needed to scrap the £15,000 fine per new  petrol or diesel car sold above a maximum. They introduced a target of battery cars to be at least 22%  of the total this year rising to 80% by 2030.

The new government has brought the ban on new petrol cars forward to 2030. It has not yet revised up the percentage of battery cars, though presumably it wants a target to hit of 100% in 2030. This is unlikely.

This year with just one a half months to go battery car sales are at 18% instead of 22%. They do not seem to be heading for 28% next year. Fining manufacturers for making good petrol cars people want to buy is a disgrace. It is leading some car companies to think of manufacturing elsewhere. The industry is in crisis talks with Ministers this week,

The government should not fling more subsidy at battery cars. It should not fine car companies for consumer reluctance to buy battery. It should end this tyranny of false targets. This policy will helped industrialise the U.K. and provide a further big boost to imports. Why?

The Chancellor wants U.K. Pension funds to invest more in U.K. companies and infrastructure. Pension funds would need to be persuaded such investments would make them better returns at acceptable levels of risk.

She needs to study just how U.K. pension funds came to be dominated by bond investment, and to review the LDI pension fund bond collapse of autumn 2022. Regulators and the advisory industry directed Trustees of funds to more U.K. bonds based on the doctrine that U.K. government bonds were assets that matched their liabilities. They also regarded them as low risk, as no one thinks a future U.K. government will fail to pay the interest or fail to repay the capital on the maturity date.

You can argue that far from being a matched asset a conventional long government bond means a fund  does not match the inflation in liabilities all the time the member of the fund is still working. The pension liability for such a member  will be rising in line with their wages. On retirement the pensioner would like pension increases to keep in line with prices. Often  Trustees can only afford  lower or no increases. Conventional gilts can only  match a defined need for cash that does not increase with inflation.

You can go onto argue that an investment in a spread of properties or shares can match liabilities better. Over the longer term these assets will provide increasing rent or dividends that should keep pace with inflation. This will be reflected in  rising asset values. You could however experience sharp falls in bear markets and need to keep sufficient cash or safer assets to pay a couple of years bills without needing to sell depressed real assets.

In 2022 many pension funds owned more bond than they could afford to pay for to give them  greater future cash flows to match estimated liabilities. When The Bank changed policy from cutting interest rates and buying bonds to the opposite the bond market fell sharply. As prices of bonds fell so pension funds had to put up more cash to the geared bond funds they had bought into to protect the funds from the growing losses, as the bonds were bought on margin. The pension funds often had to sell bonds they owned outright to pay the extra  bills on the bond funds which needed money to pay their debts.A fund might buy  six times the amount  of Bond  it could afford, only paying say 10% of the full price. When the price fell it had to pay more.

The Regulators should ask themselves how this all happened. It should have reminded them that far from being safe you can lose very large sums if you own long dated bonds when interest rates go up and bond prices fall.

Brexit is a huge opportunity for farming in the U.K. We are out of the Common Agricultural Policy which directed too much subsidy to the largest and more profitable farms. It damaged our dairy  industry by not allocating us enough milk quota, and our beef industry by too prolonged a response to BSE. It led to a big decline in the proportion of home produced food during our membership. They paid grants to remove our orchards.

On exit government promised farmers the same level of subsidy out of the EU as in it, with a planned redistribution away from the large corn estates. Unfortunately the government decided to allocate much of the money via the ELMs scheme, rewarding not growing food rather than growing it. Large estates could turn over more land for wilding and take the cash. Many family working farms wanting to maximise food output  did not qualify or did not bother to apply for grants.

I and a few other MPs lobbied strenuously for grants ,subsidies and affordable finance to promote more and more productive food production instead of ELMs. Some  schemes were introduced but the sums remained small compared  to the environmental grants.

The latest government attack on family farms with their ill thought through IHT proposals has understandably raised the opposition of the farmers. Family farms may well have to be broken up or sold to richer larger landowners and companies to pay the death taxes.

We need policies to promote the retention of family farms and to  encourage more investment in food growing. Why do government want us to import much of our food as well as much of our energy and manufactured goods? When will they support growers and makers so we can earn a living as a nation and increase our national resilience?

The Governor of the Bank should have apologised for the high inflation of recent years when he spoke at the Mansion House.

The Bank has one overriding duty,to keep inflation to around 2% per annum. It allowed inflation to hit 11%. It consistently told us inflation would not rise anything like that amount. Being unable to forecast inflation meant the Bank could not follow a good policy on interest rate levels or size of its bond portfolio.

The Bank spent 2021 creating more Central Bank money and keeping interest rates very low. It then was surprised when this produced the predictable inflation. It lurched in 2022 to hiking interest rates and selling many of the bonds it had bought at ridiculously high prices at the much lower prices it was creating.

The Bank claimed the inflation was caused by the Ukraine war which it could not predict,seeking to sidestep all responsibility for the bad forecasts and bad inflation outcome. This excuse does not work. U.K. inflation hit 6% or three times target before Russia invaded. The Swiss, Japanese and Chinese Central Banks which did not create so much extra money and buy more bonds presided over inflation which stayed around 2% despite the oil price surge that did follow war time decisions. The Fed and ECB made similar mistakes to the Bank of England and also ended up with higher inflation and wrong forecasts.

The Bank needs urgently to review its past errors. It should stop selling bonds at huge losses,a policy no other Central Bank is following. It is burdening taxpayers and intruding on fiscal policy.

The Governor implied in his remarks at the Mansion House that trade and the economy had been damaged by Brexit. He failed to look up the figures which show our exports up by more than 50% since 2016, well ahead of price inflation over the period. He failed to mention the huge success of our services exports, catapulting us from fourth place in the world to second place in the table of service exporters. He failed to read the excellent pieces by Fact4EU that set out the successes by country  or to consult the ONS detailed numbers.

Let me remind him from the ONS. 11 of the top thirty export destinations are EU and 19 are rest of the world. We export three times as much to the USA as we export to Germany, our largest EU trade partner.  Our trade with the rest of the world has been growing faster than our trade with the EU now we are out, as it did when we were in the EU. The main reason is we excel at services and the EU does not buy enough of those. They sell better into English speaking countries with UK styles of law and business process. In 2023 our exports to the EU amounted to £356bn and to the rest of the world £505bn, 41% EU and 59% rest of the world.

More importantly our trade with the rest of the world delivered a £75 bn trade surplus in the year to August 2024, compared with a continuing massive deficit of £100bn with the EU. Brexit has not prevented the EU continuing to export large quantities of energy and goods to us, as they remain tariff free under the Free Trade Agreement we have with them. Services now account for 55% of our global  total trade.

It would be good to export more goods and energy. The main reasons growth in goods has been slower is not Brexit but the UK’s industrial and net zero policies. Two of our top six goods exports are oil and refined oil products. The UK government is pursuing a rapid run down policy for our North Sea and onshore oil and gas prospects and refining  so that acts as a headwind to growth in goods trade. A third leading area has been cars. Accelerated switching to electric vehicles by government policy before the UK has the ability to design and make enough good affordable  EVs is again hitting export volumes. We do not produce enough electricity as policy is to close coal, older nuclear and some gas planets before there are sufficient replacements. Instead of exporting electricity we become a net importer when the wind does not blow and the sun does not shine.

The Governor when analysing reasons for slow growth since the 2008-9 crash of the economy should look at the erratic and error strewn Bank of England policies that allowed and created a big inflation to be followed by a credit crunch.