Better roads

The government is currently consulting on a network of A rods that have strategic importance, to supplement the national network of motorways and trunk roads. These strategic A roads will continue to be local roads under the control of the local Highways Authority – a County or Unitary Council. They will be able to bid for substantial funds for major improvement schemes for these roads. I have been a keen advocate of such an approach. The Transport Secretary has secured extra money for later in this Parliament to provide assistance with these works.

The government has set out in its Consultation document a suggested map of routes that could be included. These tend to be large A roads where there has already been some substantial upgrades and improvements, dual carriageways and recently de trunked routes. The main aim is to choose roads with substantial current road usage, that link substantial settlements. They also need to consider the role of busy routes where they act to take some local journey pressure off an adjacent national highway. I would also trust they will consider roads that may not currently have very high usage, but given likely growth in development will be hitting those levels within the planning period of this initiative.

You might like to look at what is being proposed for your local area and to make some observations to your Council. Councils also need to consider what improvements they would wish to propose once some local roads are designated. Some will need extra capacity by dualling, some better junctions to improve safety and flows, some will need bypasses round settlements and bottlenecks.

On Friday I spent time with Wokingham Borough Council, one of the two local Highways Authorities in my constituency, discussing their response to the Consultation. They too welcome the general approach. The government has set out an indicative map of routes, but is open to persuasion to add or delete roads from the draft. In my area they have proposed designating the A 329M/A3290 Bracknell to Reading route, the A 33 Reading to Basingstoke road, and the A4 into Reading from the east, a relatively recently de trunked road. I have suggested adding the A 327 and the A 329 to these routes, where some major improvement works are already underway with the Winnersh, Arborfield and Shinfield by passes. Wokingham Borough is considering the case for a B road, the Earley peripheral, as well. Anyone with thoughts on this locally should write in to the Council and copy me in to the submission at Parliament.

Mr Redwood’s contribution to the debate on Housing Supply

John Redwood (Wokingham) (Con): I beg to move,

That this House has considered the supply of homes and affordable homes to buy.

Home ownership has been people’s preferred way of living and enjoying their home comforts for many years. All the surveys tell us that an overwhelming majority of UK people are either pleased to own their own home or would like to own their own home, and the reasons for that are obvious. Owning a home makes people free of landlords’ special rules and regulations. They are free to do in their own home anything that they wish, subject only to the rules of decency and their conduct towards other people in their home and towards their neighbours. They are also free to amend, decorate and improve the inside of their home in more or less any way they see fit, subject to safety standards, while suitable improvements can be made to the outside, subject to planning consent.

For most people, home ownership has also turned out to be an extremely good investment. Not only does a home represent security for themselves and their family, and a place where they can create and enjoy their own environment; it is a store of growing value. Since 1980, house prices have risen by 7% a year on a fairly steady basis. There have been a few setbacks, most notably during periods of recession. The last severe setback was a 7.6% fall in 2009, on the back of the banking crash. However, that tells us something very interesting: even when shares and the values of banks were crashing dramatically, the average home did not fall in value much against the background of the average steady 7% growth. It is therefore not surprising that 86% of our fellow citizens want to own their own home; it is perhaps more surprising that fewer and fewer currently achieve that goal.

Home ownership reached its peak as people’s preferred form of tenure at 71% in 2003. Since then, there has been a sharp decline. Now, only 64% of our fellow citizens own their own home, according to the official figures. I submit that those figures overstate the reality. Because of the way the figures are calculated, if an adult with a job still lives at home with their parents, they do not count as a separate household. They are not in a rented household, so they are invisible in the totals, even though they are, to all intents and purposes, in a rented household under somebody else’s rules, although they may not pay any rent to their generous parents.

Dr Rupa Huq (Ealing Central and Acton) (Lab): The right hon. Gentleman is making an interesting point. To illustrate it, I asked the Library for the home ownership figure for Ealing Central and Acton. Apparently it is 46%, not 64%. Does he accept that there is a bigger imbalance in London, and that things are worse than the global figures he is quoting? Apparently, the average price a first-time buyer pays in the London Borough of ​Ealing is £490,421, on an average salary of £27,000. Does he accept that the inflated house prices in London are part of the problem?

John Redwood: I very much agree, and I will go on to look at how we deal with that, at the Government’s answer and at what more can be done. The hon. Lady is absolutely right that the figures exaggerate the homeowner percentage. Given the way the figures are calculated, if a group of young adults co-rent and share a property, for example, that does not appear as a whole series of independent rented households, but as one rented property. The figures therefore understate the number of people living in the rented model compared with those living in the owner-occupied model, because it is measured by housing units rather than individual households. The Government should bear it in mind that we are probably dealing with more people whose aspirations are not being fulfilled, rather than fewer, because the overall 64% figure undoubtedly overstates the reality.

We all know from our own experiences that many under-35s not only cannot afford to own a home, but find it extremely difficult to afford a rented home in London and the south-east because rents are extraordinarily high. They may still live with their parents, but it would not be their preferred way of proceeding; it may not be their parents’ preferred answer either, but family loyalty and love come before individual preferences, given the financial positions people find themselves in.

That decline in official home ownership—from 71% to 64%—is more pronounced when looking at the age-related figures. According to the official figures, 54% of under-34s owned their own house or flat in 1996, but that fell to just 34% by 2016. We have gone from a majority of the under-34s being able to afford their own home—so we know it can be done—to a minority of around a third in the more recent figures.

 

For most people, the financial case for owning is extremely strong. By definition, at the moment it may be cheaper to buy a house and pay a mortgage at very low interest rates than to pay rent, because rents are so high. Looking at it over a lifetime, it is obviously much cheaper and better to make the effort and buy a house, if people can, because they may have only 25 years of paying the mortgage, whereas they may have 50 or 60 years of paying rent, which will cost an awful lot more. Rent is a good way to keep people poor.

Siobhain McDonagh (Mitcham and Morden) (Lab): To give the right hon. Gentleman a picture, in my office in Portcullis House, I have Ross, who bought his own home and pays a mortgage of £600 a month, and Dan, who pays £650 a month to rent a room in a flat. For the first it is an investment; for the second it is an impediment to ever owning his own home.

John Redwood: That is a very powerful individual illustration that bears out my general point that maybe half of people today would be no worse off month by month if they were able to get a deposit and buy a property, compared with renting. If we look forward 30, 40 or 50 years, they should be massively better off, if for no other reason than that the mortgage stops once it has been repaid, whereas rent carries on.

Worse still is the cruelty of renting for those in old age, when the rent will be at its maximum, because rents are likely to carry on inflating as they have done in ​recent years. Not only is rent paid for many more years, but people are charged the maximum rent when they are deep into retirement and least able to pay it, and when they will worry about how far their pension will stretch to meet their daily bills. That leaves out of account the possibility that, if someone buys a property, its value will go up, which is an added bonus. As I pointed out, that has been true since 1980. It might not always be true, but if it were true again over 25 years, the owner is the double winner: they pay less by purchasing rather than renting, and their asset rises in value.

That rise in value gives homeowners more freedoms. If they buy early enough in life, that asset is there, normally rising in value, as possible collateral if they want to raise a loan for some other purpose—to help their family set up a business or whatever it may be—but it is not there for the person in rented accommodation. It is undoubtedly true that a person who manages to buy a property is, rightly or wrongly, usually treated as a better proposition for loans and business activities, which is another injustice for the person continuously paying rent.

I detect some cross-party agreement, which is excellent, that home ownership is the preferred form of tenure for many people—for very good reason—and that we need to make more efforts to get people into it, to deal with their high rental costs.

Siobhain McDonagh: Does the right hon. Gentleman agree that the other advantage of owner-occupation is security? In the private rented sector, where an increasing number of families with children are living, a landlord simply needs to secure a possession order for eviction. That has become the main route for the eviction of families, leading to children being insecure and living in temporary accommodation, far away from their homes and schools, with all the consequences that holds for public services.

John Redwood: I entirely agree, and I mentioned security for families at the beginning. That is a point well made.

We need to ask what we can do. House prices in many parts of the country, most especially in London and the south-east, are extremely high, and it is very difficult even for someone on average earnings, let alone below-average earnings, to raise a sufficiently large deposit, meet the requirements to raise the loan and meet the interest payments on it. One driver of these very high house prices is undoubtedly the big imbalance between demand and supply in housing. I know the Government accept that and are trying to work on the supply side. If more houses can be produced, all other things beings equal, that should help ease the house price pressures.

There is also the question of demand. I think all of us wish to be generous to refugees and to invite in people of talent who can make a good contribution to our community. There is everything to be said for allowing companies investing here to bring in their executives and so forth, but Government Members feel there has to be some control on overall numbers. When we are being generous, as we should be, we have to take into account the strains being put on the housing market, which may mean that the people coming here cannot ​get the quality and price of housing that we would regard as important for the lifestyles we wish for all the people in our country.

We need to look at the number of people who need housing vis-à-vis migration, as well as supply. I know the Government are considering that and will be freer on it in due course, once we come to debate in the House of Commons a UK migration policy that meets demands for decency and labour mobility for business, but that also understands the stresses placed on housing and other services if we have very large numbers. Those stresses run the risk of us not being able to offer people the standards we think are appropriate for anyone settled here in our country.

The Government have attempted to tackle the housing problem by driving the construction of more homes and to tackle the issue of affordability by working particularly with first-time buyers on how to get the first deposit and raise sufficient money to buy what are expensive properties. I welcome the Government’s initiatives. They are all well-intended, and some have been doing good things. My main purpose today is to raise two questions. Can the initiatives that already exist be beefed up and better advertised, so that we get more people to use them? It is still slower than we would like. Secondly, are there new initiatives we should add to them, given the general imperative to get on with solving the housing scarcity problem in general and the shortage of affordable housing to buy in particular?

Through the help to buy ISA, the Government are offering a £3,000 top-up to someone who can save £12,000 for a deposit on a house. Although £15,000 is a lot of money for someone on a low income who is trying to save, it is not a lot of money for a house deposit. I wonder whether, through the Minister, the Chancellor might think a little bit more about those figures. The more help that can be offered, the faster someone can get a deposit and the better that is for their ability to access the housing market.

The Help to Buy equity loan scheme is admirable, but it is limited to new homes only, and I wonder why. Most people buy a second-hand home. By definition, the stock of those homes is massively bigger than the new supply in any given year. I know it would be a lot more expensive if we opened up the scheme to a wider range of houses, but it would also be a lot more useful, because many people buy a second-hand home as their first home. Indeed, for some, the pleasure of buying a first home is in buying a second-hand home that is not in great shape, so that they can put their stamp on it. It may be a way to have a more affordable home, because they may wish to spend their own time and effort on improving the house, rather than spending money to get others in to improve it for them. It might be worth looking at whether we can provide more of a bridge for people who want to buy second-hand homes.

The affordable housing fund was set up to generate more construction of affordable housing. Again, that is a great initiative. I would like the Minister to give us more up-to-date information on how many homes that scheme might achieve and what the current approved build rate under it is. One issue with the affordable housing fund is the cost of building the properties and the quality to which they are built. I am all in favour of really good-quality construction, and modern homes are built to a much higher standard in many ways than ​older homes. However, one way to match the need for higher quality and affordable cost may well be to build on the initiatives of the house building industry, by having more construction in the factory before things are brought to site. None of us wish to recreate the old prefabs. They were a necessary and welcome development in the immediate post-war crisis, when so much of our cities had been devastated by bombing, but they are not the kind of thing we want to build today. People want elegant, well-insulated homes that meet all modern standards.

Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op): The right hon. Gentleman talks about prefabs and the old style. In my constituency the Peabody housing trust developed as a millennium product pre-built buildings on Murray Grove. People are still living there now, and very happily so. There is a modern way of developing that could be cheaper. Does he think the Government should consider that?

John Redwood: I agree. There is not a public-private sector divide, in my view; it is something the private sector is beginning to adopt and needs to look at just as much as the public sector. If done well, it can improve the quality. Indeed, some of the most expensive properties that individuals can buy are modular German or Swedish houses, which are imported in kit form and put up in a week or two on a suitable piece of concrete, on a nice plot of land, at quite a high price, with extremely elegant finishes.

The reason we can both drive quality up and drive cost down is that in the factory environment we can engineer and produce the larger parts of the house to very high specifications and very low tolerances, so that they are very accurate. When the houses are then on site, they are in very good order and we do not need all the site labour. We do not have problems when it rains, because it is all being done in a controlled environment, where dust and dirt can be controlled and there are not the wrong wet or dry conditions. We can have perfect conditions for manufacturing to a high quality. The more we can achieve in the factory, and the less we have to do on site, the more we speed up the build time. Months can be taken out of the build time, and if we take out time, we take out cost.

I hope that more can be done. Persimmon, for example, is producing very high-quality homes for private sector buyers. Its Space4 factory does quite a lot of prefabrication work for a number of homes in its range. I hope there will be more initiatives. I mention that to the Government because, through their affordable housing fund, they have the money and they are the customer, as well as the final customer for the property. They can therefore use that intelligently, as a buyer, to drive the process in the way I have suggested, so that we get quality up and cost down—a double benefit.

The Government have a rent to buy scheme. I would like to hear a bit more about that and whether it can be made more generous. The idea is lower rent when someone takes on the tenancy, to give them more scope to save for a deposit. They then have the right to move in and switch from renting to buying. That is an excellent idea.

I think that the Government could do more on their own estate and on brownfields in general. That is partly a planning issue and partly an investment or encouragement ​issue. By Government, I mean local as well as national, because the two need to work in partnership, which often requires national Government to lead the way. A large number of properties, particularly in our towns and cities, are currently in use but are in decline, or the buildings may be empty because their use has terminated. Given the pace of change in retail, there will be redundant retail space, and given the pace of change in office employment and some industrial employment, there will be redundant older buildings. Older warehouses and industrial plants have been elegantly converted into homes, for example in docklands. When those buildings are down on their luck or become free, we must ensure that the public sector does all it can to make permits and proposals available so that people can transform them.

Perhaps the Government could look at a scheme to back individuals who want to transform a property of their own—a sort of modern homesteading scheme for which they can be given support if they want to take on a poor property—or if a group of people want to take on a larger property and convert it. We could have more action to deal with dereliction, which is often close to valuable real estate in some of our leading cities, but we need to back that with an initiative. It should not always be large companies that eventually get around to doing that and taking all the property; there may be an opportunity for individuals, smaller businesses, co-operative arrangements or whatever to take on property problems and turn them into opportunities.

On brownfield sites and in urban redevelopment there is generally scope for central and local government to have a bigger vision—some are good at that, but some are rather slow—and to use it to identify suitable sites for more affordable housing for sale.

Dr Huq: There is another level in London—the Mayor of London. The right hon. Gentleman was asking for more up-to-date statistics. A press release today from the Mayor announced 50,000 new affordable homes, 1,823 of them in Ealing, with two thirds for first-time buyers and one third at social rent levels. I am curious to hear from the Minister whether the Government will also commit to social rents. On the whole, does he welcome that breakdown, which might go towards counteracting the feeling of many young people that the housing ladder is being kicked away from them?

John Redwood: As I have said, I am pleased with any initiative that provides more affordable housing for sale. London is the centre of the crisis, because it has the most unaffordable housing for most people, but it has considerable scope for the sort of developments that I have been talking about, where there are brownfield areas or property that needs change of use or that can be extended or improved where suitable schemes could work.

I cannot sit down without mentioning my constituency, which has its own housing issues. I live in part of the country where quite a lot of people would like to buy a home. My council, Wokingham Borough Council—my constituency also includes parts of West Berkshire Council—feels that it has done more than its fair share by identifying large sites for new house building and our building rate in the constituency is almost 1,000 homes a year, which is a very fast pace of change to accept.​

The council wants two things to make that a bit more tolerable. First, it wants reassurance from planning Ministers that the housing will be in places only where the council is making provision. It is making plenty of provision, but there is a temptation for inspectors to grant permission for houses not where the council is planning, so not with the road, school and health facilities that we would like.

Secondly, as the Minister will recognise, given the phenomenal pace of change, the council needs financial help to put in the infrastructure. It is no good getting the private sector to finance a lot of new homes if there is no extra primary school, doctors’ surgery or, above all, more road space, because our roads are now totally congested. The local council had to put in three new primary schools in a hurry a couple of years ago when the numbers had built up and changed rather rapidly because the new people coming in to buy the new homes had rather more family members than had been anticipated when the first forecast was run. There is a real issue with maintaining a decent quality of service and finding the money for it.

When a council or area is co-operating, the Government, in turn, should co-operate with it and local people and provide infrastructure and some sort of order and pace to the development, because otherwise the pace of change becomes disruptive and difficult and turns people against the whole idea of more housing, which nationally we clearly need. There need to be fair shares.

 

I obviously welcome the Government’s initiatives to promote more prosperity and development in the north, because that suits us as well. We have been carrying a lot of the brunt of development and growth. Growth and jobs are welcome in many ways, but they must be at a sensible pace. We on our side of the argument would like to see fairer shares across the country, just as much as many Members representing seats further away from London would like a bigger share of the growth that the country is capable of.

Perhaps a more contentious note is the right to buy. I am an enthusiast of the right to buy because it is a good way for people to acquire their own home, but I wonder whether the access arrangements are sufficient. Why do we limit access under the right to buy to post-1997 houses in some cases? Are the discounts large enough? I do not buy the argument that selling a socially provided house reduces the supply. The number of houses remains exactly the same after the transaction with the same people living in them as before it took place; it is just that the form of tenure of the one that is sold changes and there are all sorts of restrictions on resale to ensure that they are still properly used and the system is not exploited.

Under the system we are now developing, which I welcome, if a publicly owned house is sold and someone takes out a private sector mortgage, the state gets a receipt. I want that money spent on producing another house, so that right to buy can become an ally of more housing provision because the money can be recycled. That is what developers do: they undertake a development with their capital and then sell it on because they need the capital to do the same again and to build more houses. The state should be more agile at doing that. It should be recycling the capital and thereby fulfilling more people’s wish to be homeowners by allowing them to transfer from renting to purchase.​

My final comment about the state sector—it is not specifically within the Minister’s remit, but is part of the general housing problem—is on the provision of service housing. I have always favoured the idea that we should try to replicate the opportunity to buy within the confines of service life. I think that the way to do that is by having a home base concept in all the services, so that a soldier, sailor or airman knows what his or her home base is and has quarters or property there.

There should be an option: either they buy private sector property nearby, perhaps with help from the Government and their services employer; or, if they are in the military estate, there should be a proxy arrangement whereby they can take a mortgage on their quarters, flat or house. They would have the financial interest in it, but they would have to sell back to the state when they cease to be in the military and would do so with the benefit of any rise in house prices by some suitable index or local arbitration. While they are in the services they would be collecting the money for a deposit and participating in the housing market, which they are otherwise debarred from by virtue of their service tenure and need to rent service property. That could help. I do not like to see people coming out of the services after 20 years with no deposit and having rented service property all their life, and then local authorities say, “Well, you’re not our responsibility because you haven’t lived in our area long enough or at all”, so they find it very difficult to find housing. We need to do better by our service personnel.

Those are some thoughts for the Minister on how to improve and beef up the initiatives to get more people enjoying the benefits of home ownership. We seem to agree that the benefits are generally there. If we in politics can bring a bit more joy into people’s lives and give more of them the things they would most like, it would be a worthwhile day’s work. I offer it to the Minister in that spirit.

The Treasury short term forecasts are wrong again

The Treasury’s short term forecast said fear of Brexit and Brexit would raise the government borrowing rate, depress sterling, lower share prices and tip output and sales into recession.

As the markets now rate the chances of Brexit at 35% compared with thinking it totally improbable earlier in the year you would expect around 35% of the adjustments the Treasury forecasts to have taken place. So what has happened?

Government 10 year interest rates have fallen from 2% at the start of 2016 to 1.14% yesterday, instead of rising as predicted.

Retail sales are up 6% year on year in May, including a strong May itself, instead of keeling over owing to waning confidence. The May figures are higher than pre Referendum levels and growing faster.

Industrial production is up 1.6% year on year in the last figures, instead of falling.

Sterling is at $1.46 compared to the low of $1.38 at the end of February. George Soros is likely to be wrong with his prediction of a large fall in sterling, which many have been trying to create by their words and by selling our currency for weeks without success.
FTSE 100 index was at 5537 on 11 February, and is now 6200. UK shares have followed a similar pattern to other advanced share markets without showing a worse Brexit linked performance.

The Treasury can’t even forecast three months at a time and get it right. They just know how to scaremonger to get it wrong.

It is most unpleasant to watch the UK’s authorities trying to talk the pound down and shock people into losing confidence. Instead of the government seeking to reassure and to stress what is going right, they seem to be watching for any negative figure which they can light on and publicise as evidence of Brexit damage.

Some weakness in housing sales reflecting deliberate policy actions to hit the top end property in London and Buy to Let is attributed to Brexit. Unfortunately for the Remain campaign as we get close to the vote instead of plunging into recession the economy generated more jobs, retail sales accelerated and industrial output expands. Interest rates fall in the markets and real incomes expand.

The economists who use the same or similar models to forecast a poor outcome after Brexit belong to the school of thought that you must put gloom into the forecast. That means you get gloom out. Brexit so far has not hit confidence nor jobs. I see no reason why A pro Brexit vote should do so. Our trade is not at risk and the UK will still be a good place to invest.

A first step towards a referendum on the EU

 

Yesterday in Parliament we voted for a referendum on the EU before 2017. No Labour of Lib Dem MPs opposed it, though their parties told them not to vote for it.

During the debate the critics of a referendum trotted out the usual lies and false threats. They implied that the rest of the EU would refuse to trade with us if we left or if we insist on a new relationship. These MPs declined to understand that we buy more from them than we sell to them, that the Germans have said they will want to carry on trading with us, and no-one serious in the UK is suggesting disrupting our trade. Our trade is anyway governed by international rules today, so the EU will need to abide by them come what may.

They also argued that a referendum would create uncertainty for business. A good answer was that on such an argument we should not hold General Elections either, as they create uncertainties for business. Democracy is vital, and every MP should be upholding it. As so many Labour and Liberal MPs voted for Nice, Amsterdam and Lisbon, the very least they could do is let the UK voters decide whether they wish to stay in this undemocratic arrangement or not.

What came across yesterday was the tiredness and the feebleness of the pro EU arguments. There was a stubborn unwillingness to grasp the essential truth that as the Uk does not intend to join the Euro we need a new relationship with the EU which is fast becoming a federal state designed to stand behind the Euro. It was also bizarre that they spoke against a referendum yet refused to vote against one!

It was a good first day for the Bill. The Commons expressed a strong wish to see this Bill to the Statute book. The Lords would be well advised to understand the strength of feeling in the Commons that the UK voters need a say on this vital issue. They would also be wise to grasp that Labour is not happy with its policy of indecision. If Labour is serious about wanting to win in 2015 they will need to rethink their policy and welcome the idea of renegotiation and a referendum.

To the lonely Lib Dem MP who told us the electors are more concerned about jobs and prosperity than the EU, I say he should realise that most people in the UK now understand that one of the great impediments to more jobs and prosperity is the EU itself, with all its extra costs, taxes, rules and its deeply damaging Euro. The recession in Euroland is holding back the UK. We need to fix the EU relationship I n order to generate more jobs – how else, for example, do we get the cheap energy our business and consumers need?

Letter from the Minister for Immigration, 28 February 2013

Dear Colleague

The latest migration statistics were published today and I thought it would be helpful to pass on the details, which show the effect our reforms are having on net migration to the UK.

The key points are:

– Today’s statistics show another significant fall in net migration – down almost a third since the election.

– Net migration was 163,000 for the year ending June 2012, down from 247,000 in 2011 – a fall of 84,000. This is a positive sign that we are on the right track to bring net migration down from the hundreds of thousands to the tens of thousands by the end of this parliament.

– Of total immigration, 55% was from nationals outside the European Economic Area (EEA), 30% was from nationals inside the EEA and 15% was returning British citizens.

– For the 12 months to December 2012, the latest period for which stats are available, the overall number of visas issued fell by 10% (to 507,701) to the lowest 12 month total for which comparable data is available.

– For the year to December 2012 there were 20% (52066) fewer student visas issued compared to 2011.

– At the same time, there was a 3% increase in sponsored student visa applications for the university sector demonstrating our reforms have deliberately favoured universities and a 9% increase in study visas issued for Chinese nationals.

– There is no limit on student numbers; universities can apply their own language tests; and graduates can stay and work if they get a graduate level job. We continue to have a great offer to international students.

– Family visas are down by 10% in the 12 months to December 2012, compared to the same period to December 2011.

– There was a 3% increase in visas issued for skilled individuals under Tier 2 showing we are attracting the brightest and best to the UK.

– The total number of grants to extend to stay has fallen 12%. This fall was largely due to a fall in study-related grants. Our selective immigration system is breaking the link between temporary and permanent migration.

As well as reducing the overall numbers we also want to make the system more selective.

We have reformed all the routes of migration to the UK to make the system more robust and to bring net migration down to sustainable levels in the tens of thousands. We have reformed the student route, rooting out colleges failing to fulfil their immigration duties and closing the post-study work route so that only graduates offered a skilled job will be able to remain in the UK after their studies to work.

We have introduced a cap on economic migration at a level which does not hurt businesses and ensured that non-European unskilled workers cannot come to the UK. We have guaranteed proper transitional controls for any new EU accession states.

To tighten up the family route we have introduced an income threshold for anyone wanting to bring to the UK a foreign spouse from outside Europe, increased the minimum probationary period before non-European spouses can apply for settlement from two years to five years and abolished the right of immediate settlement for foreign spouses where the couple have been living together overseas for at least four years.

To ensure migrants to the UK can integrate better into our society we have strengthened the English language requirement and are enhancing the ‘Life in the UK’ test, which new migrants must take, to put British history and culture at its heart.

These latest figures show that the reforms we have introduced across all the major routes of immigration are working and that we are starting to see the impact on net migration. This government believes that net migration is still at unsustainable levels and that it will need to come down further. We have robust policies to make that happen and we will be unstinting in pursuing them.

Yours sincerely
Mark Harper MP

Wokingham Times

I voted for a referendum on the EU when we decided to test Parliamentary opinion on the topic towards the end of 2011. At that juncture none of the three main parties wanted one, and we lost.

However, we lit a flame for freedom that day. We have returned to the issue in meetings with the Prime Minister and other senior members of the government. On 23rd January David Cameron made an important speech. It included the promise of a referendum on the question of whether we should stay in the EU or leave should he win the 2015 General Election. UK politics and our relationship with the EU will not be the same now that offer has been made.

Some of you ask me why we cannot get on with it and have the vote soon. All the time the Labour and Lib Dem parties are against we do not have the votes to get it through the House of Commons. Mr Cameron also thinks the UK should first seek to negotiate a new relationship with our partners that reflects the mood in Britain, and the needs of the countries that are not in the Euro and do not wish to join the much closer union they now are creating. Armed with the results of that negotiation, UK voters can then make a better informed choice about whether to stay or go.

Some say the rest of the EU will refuse to negotiate a new relationship with the UK. I think that misreads the situation. Already several countries are acknowledging that there need to be changes in the EU to deal with the lack of democracy, the excess of interference by the EU in member states, and the lack of economic success. As sensible German commentators and political figures have admitted, were the UK to vote to leave the EU Germany would want to negotiate a free trade agreement with us, as Germany sells us so many goods at the moment.

There are those who want to scare us into believing we cannot change our relationship. They say if we do not put with the current EU we will lose trade access and lose jobs that depend on selling products into the continental market. Some of these people are the very same people who warned us that if we did not join the Euro we would lose the City of London and all the jobs that go with it. Many countries sell successfully into the EU without being members, and the rest of the EU values doing business with us. I cannot see how any of that is at risk, just because we want to change things for the better.

Some also say overseas companies wanting to invest in Europe will not come to the UK if we are unhappy about our membership of the EU. Again we were warned that the Japanese car factories would pull out if we did not join the Euro. They are still here, and have expanded a lot in the last decade.

I am glad Mr Cameron has spoken up. He was right to say we do not wish to join their political and tax union. The UK is an island nation, open to the wider world. We want to be friends with our European neighbours, and trade with them, but we do not wish to be governed by them.

Mr Grayling on work experience

Dear colleague

I am writing firstly to thank those colleagues who have been so vociferous and helpful in the debate we have had over the past few days over the work experience scheme. I also wanted to give you a bit more information about where we have got to with the scheme.

One of the great ironies of the campaign against the scheme was that, whilst we are undoubtedly doing some difficult and controversial things in welfare reform, the work experience scheme is not one of them. It is a voluntary scheme that is extremely popular with those who take part, around half of whom come off benefits afterwards. We know that a substantial proportion are staying with the employers with whom they do the placement.

Over the last week we have worked hard to demonstrate that the campaign against the scheme is being orchestrated by anti-capitalist demonstrators, with not a little help from some trades unions. We have also won the overwhelming support of commentators in the media.

When I met employers yesterday, they were very clear that they will absolutely refute any suggestion that unpaid work experience is a bad thing, and that they believe strongly in what we are doing. They did, though, want us to ease the conditionality regime for the scheme if they were to continue to take part.

In reality we make very little use of sanctions on the scheme – fewer than 1% of participants have faced penalties, normally for serious offences such as theft, racist language in the workplace and abusive behaviour. Since the scheme is oversubscribed, getting people to take part has not been a problem.

However we have agreed to allow people who sit down with their employer at any stage of the placement and say that they want to leave to do so without penalty. A JobCentre Plus adviser will then clearly sit down with that person and see if they require any additional intervention to help them with their job search. I should stress that the sanctions regime remains in place and those who commit serious breaches in their workplace will face penalties.

We are now working to build up the scheme. We have already added three major new firms to the scheme this week – Airbus, Hewlett Packard and Center Parcs. Around 200 smaller firms have also come forward to express interest in supporting the scheme in the past two weeks.

This is something that all colleagues can help with. JobCentre Plus staff are working around the country trying to find employers who will offer placements. They would welcome your help in encouraging local firms to participate. So if you have ideas, or contacts who are willing to take part, please do get in touch with your local JobCentre Plus manager, or email me so that I can put you in touch directly.

We know that this approach makes a real difference to unemployed young people, and every extra opportunity can help – particularly for those from the most deprived backgrounds who don’t have the necessary contacts to find their first piece of experience in the job market.

Thank you again for your support.

With best wishes

Chris

All at sea in a sea of debt

 

            You cannot ignore the government debt markets for long. They have a way of muscling into the economies and the political stories of western Europe.

             We need to get up to date with the interest costs each country faces for borrowing money for ten years:

Greece   29.02%

Portugal   11.28%

Ireland    8.2%

Italy    6.97%

Spain   6.65%

Belgium    5.21%

Austria    3.74%

France   3.63%

Germany  1.98%

                The first three countries in the list are in special measures. They are in receipt of subsidised loans from the EU and IMF, as no-one thinks they can afford to borrow at current market rates. An early return to normal borrowing does not look likely, especially for Greece.

                Germany and the EU Commission are using the crisis to strengthen  controls on the budgets of these countries. Yesterday Mrs Merkel had to warn Greece that their conservative opposition party had to sign up to the austerity package as well as the government, before the EU would release the next tranche of money they need to pay the bills.  Germany is working closely with the EU authorities on measures to tighten and enforce budgetary discipline on Euro area members.

                Italy, Spain and even Belgium are now in the zone where they could be forced in to seeking subsidised loans from the EU/IMF combination. Italy has already submitted to IMF surveillance of its budget, and has imposed a technocrats government on itself at the request of EU leaders. Spain has just elected a new conservative majority government on a platform of imposing greater austerity, but this has not yet impressed the bond markets who want proof that the deficit is going to come down and stay down. All three countries are going to need to impress and deliver some better figures to get their market rates down.

               France and Austria have now detached from Germany, and have to pay considerably more than their German neighbours. France’s credit status remains AAA officially, but the markets are now treating it differently from Germany and the UK.   Yesterday, for the first time, the markets even dared to question the safe haven reliable status of German debt. Around one third of the 10 year bond offered at 1.98% was left without buyers. More in the markets are now asking how safe Germany’s  credit status will prove, if Germany is dragged into offering more  support for  the weaker parts of the zone.

                Germany has for the time being ruled out the issue of Euro area bonds, backed by all the Euro area governments. This might  enable the weaker areas to borrow at a much lower average rate than they can command. However, Germany did sign up to the EFSF. This is a   Luxembourg company with the power to borrow using the credit standing of the Euro area countries. This vehicle has struggled to raise large sums at rates close to Germany’s, implying  some technical and marketing difficutlies with Euro area debt anyway.

              Mrs Merkel is right to say you cannot solve a debt crisis by borrowing more. Her critics are right to say you may not get growth in the weaker countries if all you do is cut spending. This might keep the deficit high as tax revenue falls. It should fall to experts who like the Euro and think it can be easily saved to tell us all how you pull off the trick of encouraging growth in the depressed southern countries without ballooning the deficits further through fiscal stimulus.  QE, changing  bank regulation, devaluation and the other tools being tried in the US and UK are  not open to Euro area economies who no longer control their own money, exchange rate or banking system.

               It may be that many overborrowed western economies have to rein in spending to get their deficits and debts under control.  That is going to require political leaders who can find the words to get people to believe it is the only option, and then offer them the hope that after a short sharp adjustment things can start to get better again. The danger of the current drift in Euroland is we will end up with bigger cuts and less hope.

Deficit reduction delayed?

 

             The statement yesterday from Mr Cameron that cutting deficits was difficult was taken by the media as a sure sign that the government will report slippage in its programme of getting the deficit down. The FT led with the view that it will now take well into the next Parliament to eliminate the stuctural deficit. I doubt they would have written that without good sources telling them.

           This is a defining moment. It is such a contrast with the stalwart recent performances of junior Treasury Ministers in the House  and on TV saying that the government intends to eliminate the structural deficit this Parliament. This, after all, was said to be the  fundamental point in the Coalition agreement. This was the priority which they just had to achieve to stabilise the economy.

             I have been arguing for 18 months two main economic points. Firstly, I urged the Coalition  to curb public spending plans  in the first two years when they needed to. Their unwillingness to do this was always going to make getting the deficit down in due course more difficult. They needed a lower cost starting point. I suggested a spending freeze in Year One, instead of the 5% increase we got. This would have created a lower base for the subsequent years, when the same percentage increases could have occurred as planned by the government.  It is always a good idea to get the bad news out of the way at the beginning of a recovery programme. You can carry people with you more easily if there is just one difficult round of changes. This would have saved £150 billion over the five years, making the borrowing amounts more sustainable. They could even have increased spending a bit more than planned in the last two years on this model.

           Secondly, they need a growth strategy, which has to centre around sorting out the banks, and cutting costs on business through regulatory and tax changes. Dealing with  Northern Rock and creating a new banking competitor in the North East will help at the margins. Sorting out RBS is more fundamental, as it is many  times the size of Northern Rock.

             The government will probably claim that much of the extra borrowing they now need to write into the accounts comes from lower growth. They always said that they would use the fiscal stabilisers. Any lower growth rate brings less revenue and more spending. They will borrow to cover that. It makes the briefing that they also plan to delay correcting the structural deficit by say three years more difficult to grasp, as that will mean more borrowing on top of the extra borrowing to take care of the cyclical disappointments.

                It probably means they are expecting more quantitative easing. The only way they can hope to keep the cost of borrowing down is to lend to themselves by money printing and through the bond merry go round.  The government sells a new bond to the private sector, who sells a second hand bond to the Bank of England. Private sector buyers of UK government paper will be concerned to read of the delays in the much advertised deficit reduction strategy.

                The truth is the deficit needs to be brought down. To do that they need to spend less. When I helped lead the turnround of a near bankrupt company we had to take strong action at the outset. We did, and it worked. We saved most of the jobs and created a good business. At the beginning we had to stop all capital expenditure, We stopped  all purchasing unless we had completely run out of the items concerned so we could destock rapidly, saving cash.  We had to cut costs everywhere. We were particularly  tough on new hiring. We could not afford any external consultants.

                The government needs to get a stronger grip on its spending. It could stop all new hirings, other than valued professionals like nurses, doctors and teachers. It could speed up its reduction of quangos and the administrative overhead. It could spend less on external consultants, as recent MOD disclosures have shown. It could cut the number of new projects until it has better control on spending levels. It could defer the new high speed railway. It could delay rises in overseas aid. It could go back to demanding  a better EU budget deal for the UK.  There are many options for cutting the rate of increase in spending.

             If we are going to have the language of public sector austerity it would be wise to have the reality as well. The government was right to say it needed to cut the deficit by cutting spending. The issue remains how.

             I forecast some time ago on this website that lower growth was likely. This I thought meant that instead of borrowing £451 billion extra over 5 years (June 2010 Plan) the government would borrow £520 billion, with the possibility it might end up borrowing more. It seems possible  from the tone of the press yesterday we will be at least at £520 billion in the Autumn Statement.

Bankers bonuses bashed

 

              I read last week that City bonuses reached a peak of £11.6 billion in 2007-8. The forecast for this year is  £4.2 billion.

               Many will welcome this collapse. Some will say the bonuses are still too large. It is a fall of almost two thirds from the high.

                The Treasury will have very mixed feelings about it. They will be relieved it will reduce the number of embarrassing questions about City pay. They will  be worried that Income Tax revenue from this source will be £3.7 billion lower at current tax rates than if the 2007 level had persisted.

                   It was interesting to hear the PM say last week that he now intended to defend the City from Brussels regulatory attack. This is a change of emphasis, and probably reflects the growing realisation in Whitehall that the UK is still very reliant on tax revenue from the City.