My critics have complained that in recent years I have urged the UK to make and grow more of the things it needs at home. I have been accused of resiling from a belief in free trade all assumed I had. Let me reassure. I accept that free trade does increase the prosperity of all embracing it. My problem with it has always been that so few practise it. There are many countries and big companies that see a nation or company that practises free trade as weak, an opportunity to exploit. It is important not to be a naive free trader.

My own industrial experience reminded me how difficult it is to find others who play by free trade rules. When I helped take an industrial group into China to sell product there to our global customers who were establishing factories we soon found product circulating copied from ours without permission and even found a case where someone else’s product was being sold in lookalike packaging with our brand name on.  When we sought to take one of our technology advances into Germany, offering to joint venture with them to gain wider access to their market there was no deal. The players bought single copies of our product to see what they could learn and apply to their own without needing our assistance or joint investment.

Many US and UK companies have had difficult experiences with China, where joint ownership structures and investment vehicles are required and used to transfer technology. Today we see how dangerous it is for countries and companies that have come to rely on Russian energy or other  necessities. There is a sudden disruption to supply brought on by bad conduct by the counter party country.

The UK promotes free trade where it can, and works closely with the WTO to bring it about. The UK also needs however to be worldly wise and cautious about trusting some foreign jurisdictions too much.  If they are  not themselves equally pledged to play by the rules and accept the give and take successful free trade needs we should not make it easy for them to cheat. EU managed trade was not  very free or fair for us in many areas including  fish and farm products. We should promote multilateral free trade, whilst taking care to build sufficient national resilience in crucial areas that are especially prone to disruption.

The U.K. government launched a scheme to grant entry to Ukrainian refugees who wish to join family here in the U.K. They will have somewhere to stay, they have people to welcome them and they may well speak English to ease their lives here. I strongly support this policy.

The U.K. government have listened carefully to what the refugees crossing the land borders out of Ukraine want. Many want to be given temporary accommodation and support near to the Ukrainian border, so they can return home easily once the fighting  is over. Many of them are women and children who want to be rejoined with their husbands, brothers, fathers who have stayed at home to fight. They want  as soon as possible to return to their own homes. I support the generous approach of the U.K. to assist the host states near to Ukraine with money, supplies and expertise. This is the way we can help the most refugees in the way they want. They want  to stay in a country closer to and more like their own.

The U.K. is now drawing up a third scheme to offer 3 year visas to refugees without family contacts. This scheme will harness  the generous spirits of U.K. citizens who want to offer free accommodation to Ukrainian refugees. I would be interested in your thoughts on this scheme.

My questions about the emerging shape of this scheme include

Why a 3 year period? It is a long time to be out of your country and we all hope there will be a peace long before then. If there is no peace why limit it to 3 years.

What provision would be made if we are talking large numbers to ensure there are enough school places with special teaching to overcome the language barrier? What extra capacity will be added to GP and hospital services?

If it is based around the free offer of accommodation by U.K. home owners what legal agreement will there be to ensure security of tenancy for the refugees? In what circumstances could the U.K. citizen back out of the offer? What fall back accommodation does the state have? Will there be any stipulations about the standards of the accommodation?

 

Russia’s economy will suffer badly from the sanctions now imposed. Many companies are pulling out of their businesses in Russia, stopping trade with Russia and looking elsewhere for supplies. The  ruble  has collapsed making imports so much dearer. Russia cannot access a lot of foreign exchange.

These  sanctions also impose costs on us. Wild price movements in energy have just made the cost of living problems that much bigger. The  war will disrupt the grain trade and is propelling some food prices up. Russia is likely to look to China to work round the banking  sanctions and to find new markets for its energy and other commodities. The much higher prices in world markets will increase Russian revenues and will be paid in hard currency by those who want the oil and gas.

The government needs to adjust its tax policies for these new developments. There is an even more compelling need to ease the squeeze.

Rt Hon Sir John Redwood MP (Wokingham) (Con): To ask the Secretary of State for Health and Social Care, if he will set out the range of assumptions of virus spread and severity of illness used in his covid-19 response planning.

Maggie Throup, Parliamentary Under-Secretary for Health and Social Care: The Scientific Advisory Group for Emergencies (SAGE) provides advice to the Government on its response to the COVID-19 epidemic. Its operational subgroup, Scientific Pandemic Influenza Group on Modelling (SPI-M-O), modelled potential scenarios for the Omicron variant using a range of assumptions on indicators. These include parameters such as the transmission advantage and intrinsic severity of the Omicron variant over the Delta variant. SPI-M-O modellers use contemporaneous academic studies when setting their assumptions.

Such modelling is regularly updated to reflect changes in assumptions as and when more detailed studies are released. Where there is uncertainty in a parameter value, sensitivity analysis is used to explore the range of impact and inform the Government’s response. Given the large number of assumptions made for the parameters that feed into the modelling, the latest underlying assumptions used by SPI-M-O academic groups is available at the following link:

https://www.gov.uk/government/publications/spi-m-o-chairs-statement-on-covid-19-19-december-2021

The UK Health Security Agency (UKHSA) also informs the scientific advice presented to the Government. The UKHSA undertakes studies and risk assessments on selected emergent variants, assessing transmissibility, immune evasion, growth advantage and infections severity based on available data from the UKHSA and academic partners. Variants are selected for assessment on the basis of growth, and the number and type of genetic mutations present. Risk assessments are updated regularly until stable assessments are reached and are available at the following link:

https://www.gov.uk/government/publications/investigation-of-sars-cov-2-variants-of-concern-variant-risk-assessments

Detailed analyses of the indicators are published in the Technical Briefings, which are available at the following link:

https://www.gov.uk/government/publications/investigation-of-sars-cov-2-variants-technical-briefings

Rt Hon Sir John Redwood (Wokingham) (Con): The Home Secretary has a lot of support on the Government Benches for the compassionate and sensible way in which she is going about this. Will she confirm that she is listening both to what the refugees want, which is often not a long-term settlement a long way from Ukraine, and with regard to the security issues that this all poses?

Priti Patel, The Secretary of State for the Home Department: My right hon. Friend is absolutely right. I must emphasise that every single crisis requires a bespoke and unique response. There are two very big calls coming from the region and from our counterparts. First and foremost, they are asking for help on security measures right now; that consistent theme is coming over. That comes down to checks—they are undertaking checks—but they are also very concerned about wider security issues, some of which I simply cannot discuss in this House, for clear reasons. The second point—even the Ukrainian ambassador made this point to me yesterday and I hear it every single day from my counterparts—is that there is a call to keep people in region. There is a big demand for that, and that is where the wider aid effort has to focus, in addition to the work that we are doing on humanitarianism.

 

 

The government will be a big winner from the sky high oil and gas prices. The profits of the U.K. producers will be swollen . The U.K. charges a windfall rate of Corporation tax on these profits at twice the normal rate.

Then there is the big surge in petrol and diesel prices. Over half the pump price is tax, so that will be another big win for the Treasury.

With General inflation heading for 7% all those items that attract VAT will also be chipping in more tax .

If the government gets around to substituting U.K. gas for Russian and Qatari imports that will also be a big boost to the receipts.

Indeed if you added all these up you would probably be close to another £12bn of tax raids on voters, enough to cancel the National Insurance rise.

The Chancellor must change his mind on  the big tax raid in April when real incomes will be badly hit by energy prices. He is more than £ 50 bn better off than budget this year already, and now has the further windfall.

He should accept he is overtaxing and start to do something to cut the burdens. Otherwise he will go down in history  as architect of one of the worst hits real incomes we have seen.

The Business Secretary needs to think again. Industry runs on gas. You need lots of gas to make steel, fertiliser, ceramics, cement, bricks, tiles and many other materials and products. In due course there will be ways of using more electricity from renewable sources, but todays factories run on gas. U.K. factories face heavy losses and closure at current gas prices, made higher by the UKs high carbon tax surcharge. He should come up with action to ease the squeeze on industry.

He should also understand that plenty of gas trades at contract prices, not at current spot global market prices. US gas prices are much lower than current U.K. prices thanks to policies that have promoted domestic gas production. Most of the US gas has to be sold to domestic users, delivered by pipe. The US lacks capacity to convert it all to LNG and export it in tankers, so domestic demand is the main determinant of prices.

He also needs to refresh his memory that increasing the supply of something does lower prices if other things stay the same.

The U.K. needs to produce all the gas it can to help Europe cut its dependence on Russian gas. The U.K. should buy no Russian gas itself, and should also stop buying imported LNG from  elsewhere as soon as we are producing the gas we need. Delivering it by pipe to ourselves is cheaper and produces much less CO2 than bringing it in on ship after compression.

 

 

Please see below the slides from my lecture at All Souls College, Oxford, titled ‘There is no Independent Central Bank’:

Slide 1 – Three common propositions

The main Central Banks are independent.

They are staffed and led by experts in economies and markets which means they will get it right.

Were the politicians and government departments to have more of a role in the conduct of monetary policy it would be badly run.

The last 30 years experience demonstrates all three of these propositions are false.

Slide 2 –  Policy changes affecting the Bank of England

1997 – The Bank of England is said to be made independent. It loses control of regulation of individual major banks to the FCA. It ceases to issue UK government debt which is given to the Treasury.

1998 – new Bank of England Act to confirm changes and keep Bank of England under Parliamentary control and supervision.

2003 – Chancellor of the Exchequer changes target for inflation from RPI at 2.5% to CPI at 2%, a looser target.

2008 – Chancellor of Exchequer overrides Bank of England interest rate setting, ordering a reduction in rates as part of a concerted G7 action to rescue collapsing markets.

2012 – New government legislates again through the Financial Service Act, confirming Treasury powers of direction over the Bank in Part 4.

Chancellor signs off successive programmes of Quantitative easing which are under joint control.

Treasury guarantees Bank of England balance sheet risks in bond portfolio.

Slide 3

The government plays politics with the Bank and the Bank plays politics for the government.

The government exercises its right to select a new Governor of the Bank when needed and uses the appointment process to employ someone compatible with their aims.

The Bank usually keeps its economic forecasts close to those of the Office of Budget Responsibility and Treasury, despite these often being wrong.

The Bank backed Remain heavily in the referendum campaign, producing forecasts that were so one sided it lost a lot of support from the majority Leave side.

Slide 4 

The Fed has a dual mandate to support employment and keep inflation below target.

The Fed Chairman has to report regularly to Congress and is therefore under pressure to respond to their priorities.

The Administration appoints the Board members, subject to ratification by Congress.

The Biden Administration is busily appointing Board members that reflect Democrat priorities.

President Trump took the Fed on in  public and forced a change of policy from monetary tightening to promotion of growth.

Slide 5

The ECB does not have a single country sovereign to report to, which could make it more independent.

However in practice it is very conscious that it is a major driver of European Union and therefore has to be  very political to assist integration.

ECB President Draghi’s ‘’Do whatever it takes’’ saved the Euro and Eurozone.

The ECB’s development of the Target 2 balances system has allowed the big cash transfers needed within the Eurozone without them going through a much bigger EU budget.

Slide 6

The Bank of Japan works closely with the Japanese government.

Its long standing QE programme and low rates has been part of the government’s 3 arrows policy to boost the economy.

It has continuously failed to get inflation up to 2%.

Slide 7

The Peoples Bank of China makes clear in all its policy statements it is an arm of government

It openly supports the thought and policies of President Xi

It takes direction from  the Communist party representative on its Board and fits into the successive government Plans.

Slide 8

Slide 9 – Current inflation rate against 2% target

USA  – 7.5%

Eurozone – 5.8%

UK – 5.5%

Japan – 0.5%

Slide 10 – Three major economic disasters inspired by Central Bank advice and thinking 1990-2021

a) The Exchange Rate Mechanism collapse 1992

b) The Great Depression and banking collapse 2007-9

c) The Euro crises 2011-14

And now the Big inflation 2021-3

Slide 11

The consequences of political intervention have been mixed. Clearly Turkish override of the Central Bank and changes of Head have led directly to currency collapse and rapid inflation. Governments have debauched currencies in countries like Venezuela, Argentina, Zimbabwe where central Banks have not been able to exert more control.

In western societies the political intervention in the 2008 banking crash turned round the disastrous situation the Central Banks had created by deflating their bubble too quickly

President Trump was probably right that Quantitative tightening was too tough when he talked the Fed into a more neutral policy

Governments were right to encourage Central Banks to be very accommodative as an offset to lockdowns during the intense period of the pandemic

It is clearly true that governments are more likely to intervene helpfully when Central Banks are being too tough than when they are being too easy and risking too much inflation.

Slide 12 – Why do Central Banks often get it wrong?

The Western Banks base their work on a model of output and capacity. These concepts are flawed and difficult to measure in a complex globalised economy.

The Banks are too influenced by the consensus. The consensus rarely spots turning points.

The people on Bank Committees rarely have superior insights into markets.

Seeking judgements by Committees rarely gets it right, as Committees tend to an average or blended view. Often in markets you need to choose between two more extreme options to get it right.

Dear Constituent

Many of you will be sharing my horror at events in Ukraine. The daily scenes of death and destruction, of mass movements of people fleeing the violence are harrowing. They are a constant reminder of why war is wrong. They are what happens when politics and negotiation fail.

Some of you write wanting the U.K. to enforce a no fly zone over Ukraine to stop aerial bombing. This  would mean declaring war on Russia, as a no fly zone would require contesting Ukrainian air  space with the Russians. Escalating the war in this way would be full of hazards. Nuclear powers  taking each other on requires restraint by both sides over first use of nuclear weapons. NATO could of course defeat Russia at likely great cost to life and property but the U.K. alone would be stretched. Our allies led by the USA  do not want to take  NATO to war with Russia over Ukraine. A successful No fly zone after a bruising set of air battles would not end the ground artillery and missiles raining down on Ukraine unless a victorious NATO airforce went on to bomb Russian forces in difficult urban locations with likely deaths of the very people we wish to help.

Some of you wish to see more rich Russians in the U.K. sanctioned, with confiscation of assets. Ministers  are keen to do this to all cronies of Putin who might still have some influence  over him, and to those who came by their wealth through crime.  They do need to proceed according to the rule of law. Many rich Russians living peacefully in the U.K. are neither Putin supporters nor criminals. The government should sanction those where they have a good legal case against them. This can take time to research and establish.

Some of you want a generous offer to those fleeing the violence. The government is expediting entry to the U.K. to those with family here who wish to come to stay. The needs and wishes of the hundreds of thousands crossing into Poland and Romania is to be housed and fed  near to Ukraine with a view to returning to their homes as soon as possible. Many are women and children temporarily separated from their menfolk who have stayed at home to fight. The U.K. is offering substantial financial and practical aid to assist with the temporary camps. The U.K. will keep its support under review as the situation develops as needs and wishes may change.

The U.K. did lead a stronger response from NATO with deliveries of weapons to help defend Ukraine before others and by working with US Intelligence to reveal the true nature of Putin’s plans to encourage preparation against the onslaught. The U.K. is striving to do all it can as a good ally short of declaring war to pressurise Russia to end the violence and helping brave Ukrainian defenders hold off the attacks.

 

Yours sincerely

John Redwood