This is my latest Conservative Home article.

 

Since  March 2021  I have been telling the Treasury that their forecasts were far too gloomy. They underestimated growth, understated tax revenues and wrongly ballooned the likely level of borrowing. I was not surprised when the Chancellor had to report much better news and confess how wrong the budget forecasts had been , though even I was surprised that the latest figures just before the 2021-2 year end show that they borrowed  an almost unbelievable £105,000 million less than planned! Keeping tax rates down, cutting Stamp duty and going for growth produced a much stronger economy than they expected. The extra tax revenues poured in thanks to more spending and more housing transactions.

 

So why change a winning formula? Why did the Chancellor fail to stress the successes and turn instead to more gloomy forecasts? Why did he think these mean  he had to put National Insurance up, freeze Income tax thresholds and get ready for a huge increase in company tax rates next year? Once again we were treated to some bizarre figurework from the OBR and Treasury. Clearly upset by how much better the revenues were than expected they  presented the costs of servicing the state debt in a  new way designed to sensationalise it . It looked as if they  hope that the government would be panicked into tax rises in the name of debt control. They decided to add to the legitimate and affordable cash costs of paying interest on the outstanding debts to savers and other investors the  non  cash costs of the indexation of the index linked debt. This only becomes a liability on maturity of any  given bond and will simply be refinanced by rolling over the real  value of the debt when it comes due. They did not put any offsetting figures into the account to show how much the state will benefit from the high inflation the Bank has now created or allowed, as it  will reduce the real costs of refinancing or paying back the majority of  the debt that is not index linked.

 

The government needs to understand that the cost of living crisis is going to be difficult for many people. It needs to do more to offset the effects of runaway energy price inflation, rising food costs and price hikes in a wide range of other goods and services. This is not the time to be taking more money off people through a National Insurance hike. It is not the time to insist on VAT on domestic fuel. It is the time to be more generous in offering a cut in petrol and diesel taxation which otherwise will rake in far more revenue than the original plans. Given the magnitude of the official forecasts for the hit to real incomes  now coming the Treasury should at least have given back more than 1% of GDP. This was eminently affordable given the great performance of the public finances over the most recent year. Instead the Chancellor spent less than 0.5% of GDP in tax remission, leaving most of his revenue windfall untouched.

 

The danger now is of the opposite effects. The hit to real incomes will slow growth. Many people will be unable to afford discretionary goods and services after they have met the food and energy bills. The fast recovery of health output credited to the state last year on the back of free test programmes and massive roll out of vaccines will slow dramatically. Higher taxes will knock confidence and higher inflation will worry consumers. The economy is going to slow sharply. Instead then of a revenue bonanza from better than expected growth we will experience a slowdown in extra tax receipts. More people will qualify for top up benefits and income support. The Treasury will learn the hard way that higher taxes can lead to bigger deficits and fewer good options for economic policy.

 

The official figures tell us that tax as a percentage of national income was at 33% in 2019 and will be at 36.2% by the end of this Parliament. That is a substantial rise in the tax proportion. It comes from the upwards movement of rates for companies, the freezing of personal allowances and the introduction of the National Insurance/social  care tax proposals. It will cut the growth rate and lower average take home pay. It will damage private sector investment, which is already disappointing despite the offer of a temporary super allowance. Businesses look at the coming hike in company tax rates and are put off.

 

I am glad the Chancellor wants to be a tax cutting Chancellor and admires Nigel Lawson who definitely was a tax cutting Chancellor. He slashed the rates of Income Tax and company tax and the extra money rolled in as a result. It would be a great policy to follow now. People want to know the government is on their side at a time of income squeeze. They will see that external events have  created strong upward pressures on oil and gas prices and may understand government cannot protect us from all such pressures. They will be less understanding of why at the same time the government shifted from a successful relatively low rate of tax policy to higher tax rates. They will blame the government for taking money away that they need to pay the higher bills.

 

As the Treasury needs more revenue they need to help the private sector grow the economy to deliver the extra cash. They already get a windfall tax on home produced oil and gas in the form of a doubled corporation tax rate on such activities. They should make extracting more oil and gas at home a high priority with every government assistance to get it done. That will bring in a lot of extra revenue as well more well paid jobs. Then the Treasury needs to be more positive in support of domestic process industry which is struggling to stay alive against the background of such elevated energy costs. That too could be a net win on revenues.  I will urge the government again to dump the gloomy Treasury fiscal rules and substitute just two key aims and controls. One should be to take the 2% inflation target seriously. That means the Treasury helping government do more to eliminate supply bottlenecks at home. The other should be a  growth target to galvanise public policy to support expansion of jobs and investment.

 

We need an update on the Spring Statement urgently. It would be better to head off the worst of the income squeeze before it sets in and people have to pay the high bills.

Like most westerners I blame Russia for the murderous assault on Ukraine and for the violent siege tactics now being deployed to try to wrestle territory away from those who live there who wish to remain self governing. Russia’s troops have been killing civilians in frustration at not being able to occupy and overwhelm as easily as they expected. Proof of this will be used as evidence of war crimes.We are all appalled at some of the scenes we are now being shown.

Like most westerners I would like to see an early truce and a negotiated settlement. I understand how difficult this will prove as the two sides have such a different view of the rights and wrongs of the situation, and neither side has yet been able to achieve enough by force of arms to enforce their settlement on the other. Ukraine has fought bravely but cannot rid themselves of Russian troops and artillery on their land. Russia has failed to capture any of the major cities on its list and has shown it lacks the ability and force to maintain control over areas it has thought it had conquered.

As peace talks continue the aims of the two sides remain incompatible with each other. Ukraine wishes all Russian troops to withdraw, to be followed by discussion of the government of those parts of Ukraine which Russia has occupied and a referendum on a possible new constitutional settlement. Russia is holding out for Crimea to become part of Russia, and for new governing arrangements for a swathe of territory from the Russian border to Crimea that would give it control or substantial influence. That is why the fighting is likely to continue.

There seems to be a bit more flexibility over the ability of Ukraine to choose its own allies and international policy. It seems unlikely NATO will offer membership to Ukraine any time soon, having notably refused to come to Ukraine’s assistance with any NATO forces. Russia’s aim of excluding Ukraine from NATO might in practice occur. The issue of EU membership also hangs over the conflict. The EU intervened in Ukraine to help topple the elected Ukrainian President in 2014 when he wished to walk away from the draft EU/Ukraine Association Agreement and be closer to Russia. This was the background to Russia’s annexation of Crimea and civil war in Donbas. Today Ukraine has applied for formal membership and the EU needs to respond. The EU says it sees Ukraine as part of Europe and talks of Ukraine’s European destiny in terms that implies in due course it does want Ukraine as a member state. This is a complication for a Russia which dislikes the expansion of the EU as well as of NATO close to its borders.

I read that the government is debating amongst itself how much additional commitment to make to new nuclear and new wind energy as it responds to the current energy crisis. As one of the few that has been advising successive governments over the last ten years of the pending energy shortage and the need for more national self sufficiency I am glad they are now actively discussing these matters. It is quite clear today we import too much and have too little spare margin to keep the lights on and the wheels of industry turning.

I have no objections to government making a substantial commitment to new nuclear . It could well make a good contribution to our needs in fifteen years time.  It needs to do so understanding three crucial matters.

1. Whatever it now does nuclear will represent a considerably smaller part of our electricity output in 2030 than today because all but one of the existing stations  are scheduled to close, with only one new plant coming on stream. Nuclear agreed in principle today will not be producing any power this decade.
2. To bring off this nuclear growth the UK will need to rebuild our nuclear industry and secure good intellectual property under out control. We should not want to have the Chinese or others controlling the IP and capable of using it as leverage over us.
3. The state will need to be involved in financing. A way would need to be found  to ensure some competitive discipline and genuine risk for the private sector partners to avoid the taxpayer ending up with plants that are much delayed and massively over budget bankrolled by the taxpayer.

I have no objections to the government encouraging more offshore wind farms. I would accept more onshore windfarms as long as landowners and Planning authorities had a veto over locations, and  could share in the revenues as compensation.  The government needs to understand that whilst windfarms could be put in much more quickly than nuclear, they too will not solve our current energy shortage without tackling three problems they pose.

1. On Monday wind energy supplied just 1% of our electricity. On Saturday writing this wind was only supplying 5% of our electricity. If you are going to rely on more wind there has to be breakthroughs in storage technology to allow you to harvest the wind power when it is not needed and supply it when the wind is not blowing.
2. If you press ahead with more wind energy you need to understand that will still leave us short of total energy, as renewable electricity only accounts for around 5% of our total energy. Most energy is still needed as gas to heat our homes and fuel industry,  and as petrol and diesel to fuel our trucks and cars. We cannot rely on more renewable electricity all the time most of our transport, heating and industrial energy is not electrified. It will take time for the electrical revolution to convert every home, factory and  vehicle to allow electricity to take more of the strain away from directly used fossil fuels.
3. If you encourage more renewable power you need to allow more back up power generation for the times when the wind does not blow. All of this entails more cost.

The governments energy policy needs to back more domestic oil and gas for the current decade, all the time people have gas boilers and petrol cars.

The January trade figures were disappointing, showing a marked fall in exports to the EU which has caused some concerns by those who did not study the figures. The ONS has decided to change the basis for compiling the import and export figures, and by its own admission there was a one off hit to reported exports to the EU by delaying the dates of record.

During the first year after leaving the EU customs union both exports and imports were higher for non EU than EU. In the first half of 2021 we had a welcome balance in total trade, with a strong services surplus offsetting the usual large goods and food deficit. EU trade continued to be in deficit and the rest of the world in surplus. In the second half the trade deficit we were used to in the EU returned, with a total deficit of £24 bn for the six months. The top five imports are vehicles, medicines, gas, non ferrous metals and oil.

The strains on the balance of payments will increase this year given the high oil and gas prices. It  underwrites the need to extract more of our own oil  and gas. The government has said it has now shifted policy on this and I  look forward to the executive decisions being taken to make this a reality. The UK offsets a substantial part of the vehicles deficit by strong exports of UK made vehicles mainly to non EU markets. It will be important to invest in and retain a strong car industry as EVs become more common. It should be a welcome challenge to the UK motor  sector to seek to make and sell attractive products to home consumers  that can substitute for the high volumes of EU  vehicles still coming in.

The balance of payments was still sandbagged in the last quarter of 2021 by a large £5.8bn payment to the EU. One of the big balance of payments wins from Brexit will be the ending of these payments. It is a pity the UK offered such an attractive deal to the EU on payments after exit, as this has slowed down getting the benefits.

 

Dear Constituent

This month the price of gas and electricity will shoot  up, following a period of price control. I have been arguing that the government does more to help offset the impact of these higher bills on living standards.

I was pleased the government did offer a reduction of Council tax to many. It adopted the advice I and others offered to make a cut in fuel duty and to remove VAT from green products that can help cut energy use and bills. It  has sought to delay some of the rise in bills. In the Spring Statement it raised the threshold for National Insurance, abating some of the impact of the National Insurance rise the government is imposing.

I do not think this is sufficient offset so I am pressing for more action. I wanted to see the cancellation of the National Insurance rise and the removal of VAT on domestic fuel.

I am also pressing for changes to energy policy to increase the supply of domestic energy to ease some of the shortages. I am hoping some of my proposals will be included in the Energy statement we are expecting soon from the government.

 

I am very worried about the cost of living pressures and will continue to press for more action to ease the impact. Government needs to bend all its powers to controlling the  inflation, cushioning  the  impact and increasing supply where there are shortages. Pensions and benefits will need further review as prices rise, and the tax burden needs to be reduced.

 

Yours sincerely

John Redwood

 

 

Rt Hon Sir John Redwood MP (Wokingham) (Con): How will the poorly performing schools get the brilliant teachers and better professional development that the Secretary of State rightly wants, because that is what they need?

Nadhim Zahawi, the Secretary of State for Education: My right hon. Friend is absolutely right. We endowed the Education Endowment Foundation when the coalition Government came into office, and I have just announced a further endowment for the next 10 years. It has evidenced the qualifications and quality of teacher training that are required, whether in the early careers framework, initial teacher training or later in life in professional development, and we are following that evidence and scaling up half a million teacher training opportunities. That has never been attempted, certainly in my time in Parliament; it is a huge scale-up of teacher training and that is what we will deliver.

 

I am continuing my questions to the Health department to highlight the  lack of specific costed plans to deal with the waiting lists and quality of service issues that worry people. I am urging the Treasury to make the grant of extra cash conditional on clear plans to deliver more and better service, which in turn will need suitable workforce plans. The answers below confirm there is plenty of management work to be done to set out what additional better service they are promising and how they will spend the extra money they have been granted.

The Department of Health and Social Care has provided the following answer to your written parliamentary question (146529):

Question:
To ask the Secretary of State for Health and Social Care, in the absence of a manpower and recruitment plan, what steps the NHS takes to forecast its spending needs for the year ahead. (146529)

Tabled on: 24 March 2022

Answer:
Edward Argar:

NHS England and NHS Improvement published the ‘2022/23 priorities and operational planning guidance’ on 24 December 2021. This is supplemented by technical guidance on the associated financial assumptions on which the National Health Service should plan. Individual systems plan spending for the year against allocations in response to this guidance and submit plans to NHS England and NHS Improvement to aggregate into an overall NHS financial plan. We expect the NHS to manage their spend within the overall budget in the Mandate.

The answer was submitted on 29 Mar 2022 at 13:13.

 

The Department of Health and Social Care has provided the following answer to your written parliamentary question (146531):

Question:
To ask the Secretary of State for Health and Social Care, how often he meets the Chief Executive of NHS England to review progress with reducing waiting lists and other matters. (146531)

Tabled on: 24 March 2022

Answer:
Edward Argar:

My Rt hon. Friend the Secretary of State for Health and Social Care meets regularly with the Chief Executive of NHS England to discuss a range of issues, including progress on reducing waiting lists.

The answer was submitted on 29 Mar 2022 at 13:15.

 

The government is offering us a new energy policy. It wants  a new long term plan for its aim of getting to net zero by 2050, and a shorter term plan for the current decade to keep the lights on and to provide affordable energy as we await the technologies and investments in a greener future.

The government is likely to back substantial increases in nuclear provision for after 2030. By 2030 nuclear output will be well down following the closure of most of the existing fleet of stations, with only one major new opening. It will need a big rate of build to turn this round for the 2030s.  The government will also favour more wind generation. This can only work if at the same time the government and the market invest in storage and usage technologies that overcomes the intermittent nature of wind power. This week wind has been as low as 1% of our electricity generated, leaving us very reliant on gas and coal. Even if we had doubled current wind capacity it would have left us mainly dependent on fossil fuels to keep the lights on. Some combination of large scale battery storage, pump storage schemes, the production of green hydrogen and the location of energy using businesses close to wind arrays which can handle intermittency will all be needed if the country is to rely on more wind power. It is unlikely investment in batteries and hydrogen will be sufficiently advanced this decade to avoid the need for reliance on gas and other fossil fuels as transition fuels.

The short term plan is easier to work through. There is an overwhelming case to produce more of our own fossil fuels at home. It cuts carbon dioxide output substantially to do so. It generates a big windfall in tax receipts instead of sending huge sums in tax to foreign countries and in cash to  companies who export to us. It generates jobs here at home. It cuts down transmission losses. The government needs to work closely with the domestic industry to grant the permits and tackle obstacles to the necessary investment in more output.

There can be more help to encourage people and businesses  to improve the energy efficiency of their homes , offices and factories. The public sector could undertake substantial investment in energy savings measures to cut its footprint.

If the country is to succeed with the electrical revolution the government wishes, it will take a new generation of affordable and attractive home heating and vehicle products to wean the public off their current reliance on gas to heat homes and petrol and diesel for their transport and deliveries.

The Department of Health and Social Care has provided the following answer to your written parliamentary question (119388):

Question :To ask the Secretary of State for Health and Social Care, what estimate he has made of how many additional health professionals he needs to recruit to NHS England in 2022-23. (119388)

Tabled on: 07 February 2022

Answer:
Edward Argar:

The Department has made no specific estimate. In July 2021, the Department commissioned Health Education England to work with partners to review long term strategic trends for the health workforce and regulated professionals in the social care workforce. The Department has also recently commissioned NHS England to develop a workforce strategy which will set out its conclusions in due course.

The answer was submitted on 22 Mar 2022 at 11:16.

 

This is a strange reply. How can the NHS have put in a large demand for extra  cash when it has no idea how many extra  people it needs or wants? Wages and employment costs are its main item of spending.

How can it claim to have a serious working plan to get the waiting lists down if it is not recruiting a decent number of doctors, nurses and other medical professionals to carry out the operations and treatments needed?

What do the senior managers administrators  do that prevents them from knowing how many staff they need? What signal does it send to medical schools and potential students that the near monopoly employer still does not have a plan to recruit more staff?

 

The Department of Health and Social Care has provided the following answer to your written parliamentary question (119392):

Question:
To ask the Secretary of State for Health and Social Care, what forecast he has made for the likely increase in staff costs for 2022-23 for NHS England. (119392)

Tabled on: 07 February 2022

Answer:
Edward Argar:

A forecast has not yet been made. The Government is seeking pay recommendations from the independent Pay Review Bodies (PRBs) for most public sector workers not in multi-year pay and contract reform deals. Remit letters were issued to the PRBs in November 2021. As the PRBs are independent, the Government cannot pre-empt the recommendations, which we expect to receive in May 2022.

The answer was submitted on 22 Mar 2022 at 16:18.

 

This reply confirms that the NHS had not forecast the detailed spending needed to get waiting lists down when it was agreed to impose a tax and send that cash to the NHS. I find this surprising. Surely NHS managers need to know staff numbers and staff costs before submitting a bid for more money for waiting lists?

 

This reply does not detail how much land the UK government will pay for to  convert away from growing food. Given the enthusiasm for more domestic food and the supply difficulties in the global system we need to make sure we have the land available to expand UK food production. The UK does less than most overseas Agriculture departments to support domestic supply.

 

The Department for Environment, Food and Rural Affairs has provided the following answer to your written parliamentary question (141109):

Question:
To ask the Secretary of State for Environment, Food and Rural Affairs, what estimate he has made of the amount of land that will be taken out of agricultural production as a result of schemes and plans for wilding over the next two years. (141109)

Tabled on: 16 March 2022

Answer:
Victoria Prentis:

Wilding or re-wilding is the restoration of ecosystems to the point where they are more regulated by natural processes.

Although appropriate only in certain situations, this is something the Government is already supporting through projects such as peatland restoration funding or agri-environment schemes. Defra is also in the process of reviewing and developing an approach to rewilding that takes into account environmental and land use priorities. We will initiate ten Landscape Recovery projects between 2022 and 2024 that will, among other things, help restore wilder landscapes. The focus of these will be on large-scale sites where there are opportunities to significantly enhance the landscape to deliver a wide range of environmental outcomes.

Over the next two years it is expected that the amount of land moving from agriculture production into wilding projects will have no substantive impact on food production.

The answer was submitted on 24 Mar 2022 at 16:12.