It is good news that the UK government welcomes US digital companies here to invest, create jobs and provide the technology all our businesses and households need to live an on line life. Most commentators have welcomed it.

Few news outlets have read what was agreed or provided much commentary on what it means. The formal Agreement signed by the President and Prime Minister is  a Memorandum of Understanding  between the two governments. It is non binding. It contains no pledges of money. It is a statement of good intent for the leading departments and institutions of the state on both sides of the Atlantic to co-operate more fully in the named fields of quantum computing, nuclear energy, AI, 6G  and digital development. It is an important statement from the top of both governments, but it now needs a lot of detailed work by the institutions and departments to identify the projects, the research areas and the procurement where common working will help both sides. It could lead to some good developments, as both sides have technology advances that the other would like to share and develop together.

There was then the press statements that the two had agreed £250bn of investment passing both ways across the Atlantic, suggesting £150 bn would come from the US to the UK. £150 bn is a significant sum for a £3 tn economy. £100 bn is useful even for a £23 bn economy. The £150 bn however, is not all new money and is not one year money. Microsoft accounting for £22 bn is a multi year programme, much of it already committed. The bulk of it is a £100 bn commitment by Blackstone to be spread over ten years. Google’s £5b includes a data centre already well advanced.

It’s a well know government technique to ask the private sector what it is going to spend, to gross it up by taking estimates of future years and announcing one large number. That can be good for morale and gives the businesses their day of extra publicity for what they are doing. This was one of the bigger and better lists, and no doubt the focus of President and Prime Minister on technology helped to direct more efforts to this crucial area of strengthening what the UK does and what it buys in this sector where the US dominates. It was notable that the projects mentioned for investment in the pharma sector were ones where UK based groups will invest more in  the US, reflecting the US attraction of this investment and the damage the NHS procurement has done to keeping and expanding investment here despite the government wanting to boost the sector.

The whole event was a timely reminder for those who thought about it of the dominance of Nvidia, Alphabet, Apple, Microsoft, Meta, Amazon and the other US tech giants. The UK will continue to be very dependent on these great US companies, with every business and home needing their systems, their chips, their cloud storage, their apps to run their daily lives. The EU is even further behind the US than the UK is in these crucial areas of the digital revolution. The UK should ask itself why it has not done better, why some of its best ideas and companies have been sold early to the US and why now we depend on the US ability to turn billion dollar companies into trillion dollar companies. 9 of the 10 largest companies in the world by capitalisation are now US, with the tenth being Taiwan Semiconductor that has substantial  capacity in the US and supplies the US industry. Nvidia alone has a larger market value than all  the London stock market companies added together.

 

I have been warning for months that state spending is too high, that taxes are at such high levels some are losing the Treasury income, that state productivity has fallen too far, that the Bank of England is losing too much money and that net zero policies are de industrialising us at an accelerating pace. The latest news reinforces these views. The August figures showed state spending up 9.2% on the year, borrowing at £18bn for the month well above budget forecasts, a new round of industrial plant closures, and in August CGT, Inheritance tax and self employed income tax receipts were  down on last year.

There was one hint of better news. The Bank of England has at last seen some of the damage its bond sales are doing and announced a cut back in sales from £100 bn a year to £70 bn a year. More importantly they sneaked out that they would be selling far fewer long dated bonds where the losses are much greater than on the shorter dated bonds. Slowly they turn their policy without apologising for all the losses so far. They do now accept their sales can have a negative effect on the market, forcing the government to pay a higher rate for new borrowings.

The remedies for these obvious problems are not difficult. It does not requite the government to cut pensioner fuel allowances, remove payments from the disabled or cancel the triple lock on the pension. These policies anger the public and split the governing party in Parliament. Let’s take taxes. If the government avoided more increases and got the rates down on the ones that have done most damage to more jobs, more investment, and to business success they would have more revenue, not less. Everyone apart from a few egalitarians who do want to drive rich people out of the country would be happy. The better off would pay more tax as the economy grew faster.

When it comes to spending the key to the whole precarious economic policy framework is productivity. The latest figures show public sector productivity is still well below 2019 levels, with an 8.8% fall since then for the biggest public service, the NHS. The first year of this government saw Ministers award many groups in the public sector big pay awards without asking for any smarter working. Bonus schemes often pay out despite productivity falling or failing to rise. Many of the complaints leading to strikes in the state sector relate to conditions and terms of employment rather than pay, which better management could tackle by working with the Unions. The state sector usually records higher sickness rates than the private sector, which implies low morale and bad management as it is unlikely the public sector is permanently prone to more sickness. It requires some strong Ministerial leadership, by the PM, by the Cabinet Office and by each departmental Minister to improve this.

I am preparing a guide to show how Ministers and CEOs within the public sector can lift productivity substantially. AI may well in the future give us greater wins, but the immediate task must be to get back up to 2019 levels of efficiency and quality which was done with no AI at all.

Roughly half the country earns too little, does not own a home, has little or no savings and lacks access to a good pension scheme. The better off half pays most of the Income tax and all the wealth taxes on capital gains, buying homes and shares, inheritance legacies and dividend income.

People with conservative views want to create an opportunity society where more by effort and work can increase their earnings, accumulate savings, buy assets. Those who cannot do this through disability or other impediment should get benefits and state provision to a decent standard.

Labour offers redistribution. Why they say should the rich get away with owning homes and  shares, and earning more. They must be taxed. As there are not enough super rich to tax to cover all the bills, the higher income and wealth taxes have to be imposed on the better off half of the country.

There are two big problems with this approach. The first is many who are on lower incomes are not jealous and want to be upwardly mobile. Many low income people think it right that great footballers or successful entrepreneurs earn fabulous salaries.

The second is all those who have worked hard and saved do not wish to pay  higher taxes or have their wealth confiscated. In the 1970 s when Labour imposed a 98% tax rate on so called unearned income many left the country to avoid the expropriation of their savings.

Labour today has pushed income and wealth taxes too high. August figures for receipts show Capital Gains tax, Inheritance tax and self employed Income tax down on the previous year following the tax rises put through by the Chancellor. This is a warning sign.

I have always  argued that the rich have to pay most of the tax, but you need to set rates and taxes that they will stay to pay. Lower rates do bring in more revenue. Today the rich are leaving in large numbers. The better off not so rich have plenty of ways of legally avoiding tax. They are refusing to sell shares and second homes sitting on big gains. They turn down opportunities to do more work. They decline to set up new businesses, create new jobs or make higher risk investments.

If the government carries on looking for more ways to tax the better off half they will find the taxpayers strike can get worse whilst all abide by tax law. I have avoided the high Congestion charge in London since it went up by never driving on CC streets during the controlled hours. There are plenty of other things that entail paying  tax for people to stop doing.

Prior to the Brexit referendum the great and the not so good thundered that the UK would lose influence and be isolated if it dared to leave the EU. The grown ups told us it would be cold outside with no-one interested in who we are or what we thought. It was yet another of their false forecasts.

In  the 2025 survey of countries with the most soft power the UK comes in third place after the superpowers USA and China. It is two places ahead of Germany, the best placed EU country. When we were in the EU prior to 2016 Germany was ahead of us in the rankings. It always seemed likely to me that the UK would have more influence if it wishes to exercise it once out. For example, we could not  have our own trade policy whilst in the EU and had to stand down from our place around the table of the World Trade Organisation for the EU to represent us. They did so in a protectionist way, wishing to keep high tariff barriers in a number of areas. Now we are out of the EU we can be a good influence for freer trade with our own voice at the meetings. This is even more important now the US has gone protectionist in retaliation against China and the EU.

As the second biggest member of NATO we have good influence over defence matters. As a leading member of the Five Eyes grouping of the US, Canada, Australia and New Zealand we have access to the best intelligence in the free world. Our language and cultural reach is wide ranging. President Trump understood this well when he drew attention to UK achievements alongside the USA, now the leader of the democratic  world. There is a vital partnership of the English speaking nations, led by the US and UK, including our friends in the Commonwealth and the US’s allies.

It is possible however, to undermine this soft power success. The present government is coming across as a soft touch government. The EU re set negotiations are humiliating, with the UK giving more and more away with still no sign of anything positive we might want. Giving away the fish for some alleged improvements to access for farm products was a very expensive bad deal, but to add freedom of movement to it as well would be a disaster.  Giving both the Chagos islands and a huge wad of money over 99 years to Mauritius when the international courts have no authority to make us inflict such self harm is craven. Setting out to establish a coalition of the willing for Ukraine was ill judged without US backing, but it became feeble when it appeared that President Macron had taken on the leadership of  the UK’s  bad idea. Announcing with a fanfare we will smash the gangs and then showing the government just lets many more illegals in looks weak.

Soft power  requires us to be good  at diplomacy as well as having a great back story of past achievements and a modern cultural flowering. If we go on like this we will get a reputation as being a big soft touch. That  will prove to be a good way to undermine our reputation for soft power. It will weaken our economy and make it difficult to do good deals.

 

This article is also being published by Facts4eu today.

It was good yesterday to see UK ceremonial at its best. It was good to hear King and President united in speaking of the common heritage and shared destiny of two great nations of the English speaking world. The UK and the US have done much to promote democracy, freedom, technology and prosperity.

On a train journey I overheard a loud conversation by some businessmen on a day out. They were laughing and joking about the stupidity of the latest MPs and Ministers to be on the wrack for sleaze allegations. After a  bit one of them got more serious. He pointed out that the kind of things the MPs were typically brought down for happened from time to time in their businesses. Should they do more to stop them? What should their attitude be to lax conduct which maybe they just allowed to pass? Who were they to throw the first stone against the MPs?

Don’t  get me wrong. I am not here to excuse criminal behaviour by MPs. A few MPs have been crooks. They steal public money. A few hit people in fights when drunk, or misbehave sexually, or take banned drugs. They should of course be charged and prosecuted. They should expect rougher treatment than the minority of the public doing such things, as they are in the limelight and meant to provide a better role model.

Every party wants to stop such people becoming MPs. Each has vetting procedures. Unfortunately they rely quite heavily on self reporting, which a true crook or bruiser is unlikely to do accurately. Vetting can only look backwards. Some of the MPs who get caught abusing others or robbing from the system only take this up after being elected. References are meant to help guide, but candidates can often choose their own referees. There is not going to be a perfect vetting system that  stops a few bad apples turning up in the barrel of candidates.

Most MPs who get into trouble do so for conduct that falls short of criminal charges. The advent of an Independent regulator has brought more rules. More rules lead to more rule breaking, from ignorance, sloppiness or the wish to subvert them. Some are trivial. Someone on an income of more than £100,000 a year is a  few weeks late in registering a small fee for an article or tv show. The fee did not influence the way they thought or voted. Someone in a debate failed to declare an interest because it was not on their mind and not directing what they said. Some are disagreements about what rules say or intend. Some are genuine concerns which do lead to justified accusations  of hypocrisy and sometimes expose  wanting to use the platform of Parliament to pursue personal interests. Some get drunk and behave badly or say stupid  things.

The public especially dislike hypocrisy. An MP rails against tax cheats but uses every loophole they can find to avoid tax. An MP lectures us all on net zero but has no intention of buying a heat pump and runs a petrol car.  An MP argues for higher taxes on drinks and certain foods, but has a well known weakness for them that they can afford to indulge. An MP likes imposing low speed limits on people, only to break the limits themselves. An MP demands more housebuilding and infrastructure, but not near where they live.

Some MPs get caught out for relatively small sums of money. Some fall for a sting where a media group or hostile interest offer  them money for disguised influence. Some overextend their lifestyles to “fit in” and grasp at dubious cash. When they register it others think they were wrong to take it.

I will look subsequently at how an MP can behave well to avoid being referred to the Commissioner on Standards.

Labour in Opposition campaigned vigorously against individual Conservative MPs and Ministers, accusing them of breaking rules, being hypocrites and behaving badly. It seemed they were out to recreate the sleaze campaign they ran against the members of the governing party of John Major. It looked as if Lord Mandelson, architect of that approach in the 1990s, was advising or backing Sir Keir to do the same in the 2020 s. It is therefore  a fitting irony that Labour, fresh from its moral pulpit in Opposition, should this week be brought low by their need to sack Lord Mandelson for his own personal conduct. The endless allegations and enquiries into Conservatives filled the media and papers for much of the last Parliament. Now it is Labour’s turn for full scrutiny.

Most of the public understand that any governing party will have people who are too casual about applying the laws and rules they impose when it comes to their own conduct. Some will make genuine mistakes, some will be so busy they miss deadlines to declare and explain, some will let office go to their head and take liberties. There will be a smattering of crooks who get through vetting, or who become  crooks faced with new temptations. So it has proved with Conservatives, Lib Dems and Labour in the successive governments I have witnessed.

I agree teasing out hypocrisy and criminal behaviour by governing party MPs is a part of the process of Opposition. I do not however think Labour was right to believe  that its heavy handed sleaze campaigns against a few malefactors and some unlucky people caught in the crossfire won them the 1997 and 2024 landslides. Their misunderstanding of this has distorted their approach to Opposition, left them unprepared for government this time round, and in a quandary now the sleaze allocations are a rising tide hitting themselves.

The Major government was brought down by joining the European Exchange Rate Mechanism and putting the country through a needless inflation followed by recession. The Johnson/Sunak government was brought down by the Bank of England money printing and big inflation of the covid era which Ministers allowed and by the disruption to growth their covid policies induced. The fact that Labour supported the Exchange Rate Mechanism and the money printing policies that destroyed the Conservatives just made it more difficult for them  to follow an economic policy which works once they got into office. The electorate rightly blames a government for visiting on them bad policies, even when these are urged by the Opposition as as well.

If you decide to campaign on a ticket of offering sleaze free government you need to do a lot more homework on who you appoint and how you control them. If Labour still believe sleaze free government was the important offer, then they have failed miserably. 5 MPs elected as official  Labour candidates are currently under investigation by the Parliamentary Commissioner for Standards. 5 Ministers have left the government following allegations about their conduct. A Homelessness Minister was accused of bad treatment of tenants, a Treasury Minister accused of financial wrongdoing, and a Transport Secretary had failed to declare a past fraud offence. 2 Ministers resigned in protest over government policy. They have now lost their very political appointee as Ambassador to the most powerful country in the world, and have had a dangerous reshuffle of Ministers  highlighting their weaknesses.

Reform is discovering that these mishaps can happen to them as well as to parties of government. They would be wise to give a no sleaze pledge a miss. Two of the five elected in 2024 have lost the whip. Rupert Lowe was thrown out by the party amidst serious allegations which he has vigorously denied. James McMurdock has gone independent following issues about his financial and business affairs. Meanwhile they have gained two replacements, one from a by election and one from an MP changing his mind about which party he supports. They seem to have their own version of the government’s one in, one out policy.

My conclusion is Oppositions need to concentrate on planning and promoting how to make things better so they are ready for government. They should expose bad behaviour by Ministers and other senior people in government but avoid claims that in future human foibles, mistakes and bad conduct will all be banished.Labour’s failure to plan a positive future when in Opposition and to work out how to  have fast growth and low inflation is hurting us all.

 

As Number 10 and Number 11 argue over taxes and how to get enough revenue to pay  for an expanding low productivity public sector they should take advice on why they are presiding over a collapse of industry.

It is their actions that are running industry into the ground.

1 They ban all new oil and gas exploration and new wells and production. It is imports only with an accelerated run down of a once flourishing industry

2. They will ban all new petrol and diesel car manufacture here in 2030 leading to factory closures now. It will be imports of nearly new  only soon.

3. They sacrificed the ethanol industry in their recent tariff deal with the USA likely to lead  to closures

4 They have watched as their penal energy prices, carbon and emissions taxes close down two refineries and will close olefins   production. Again they prefer we import all those.

5. They have kept quiet about the closure of a large fibreglass plant where dear energy was an important reason.

6. They back policies that mean the closure of our remaining blast furnaces  at Scunthorpe to go over to steel recycling instead but now also say they will protect the jobs there for the time being with large subsidies. For how long?

7. They make pharmaceuticals an industry for growth. 3 of the largest companies have suspended or cancelled  UK investment because the NHS will not buy sone new drugs and pays  too little for others.

8. International Paper is closing plants here thanks to high energy costs and other considerations.

9.The ceramics industry has lost two factories recently owing to dear energy and tax rises.

10. The governments farmers tax and lack of support for growing food means we rely on increasing volumes of imports.

 

 

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Welcome to the Mod Cons podcast.

In this week’s episode we speak with Sir John Redwood, former minister and Margaret Thatcher adviser.

Jamila talks to Sir John Redwood about Jeremy Corbyn’s new party, his vision for Brexit Britain and why we need to cut tax.

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