John Redwood's Diary
Incisive and topical campaigns and commentary on today's issues and tomorrow's problems

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Lockdown arguments

The Telegraph is writing the history of the pandemic lockdowns before the official enquiry gets underway. Today I provide an opportunity to comment on the stories so far.

I joined the group of MPs who wanted a solution more like Sweden, with fewer restrictions. I voted with them against the more extreme controls. I pressed for better protection of care homes, drawing attention to the discharged patients  from hospitals as possible carriers of infection. I pressed for isolation hospitals for covid, and for use of the Nightingales. I wanted the full  use of the contracted private sector hospitals for non covid work.

I and the group of MPs challenged the data, drawing attention to the important difference between dying with contact with covid and dying of covid. We pressed successfully for Parliament to meet, in hybrid form at first and then got the proper restoration. The Opposition supported all the lockdowns and urged more and longer. They did not press for early restoration of Parliament which some of us wanted to question and scrutinise government and experts more.

I have no comments on what Mr Hancock has saying and doing. I need to concentrate on todays issues.

More investment

The Chancellor needs to look to the investment figures. They are likely to decline this year. A hard pounding from windfall taxes and price controls to be followed by a 31% rise in business tax should push investment down and put big companies off investing here.

Yet  what we need is a surge in new investment to raise more capacity.

We need more domestic oil and gas. There is plenty to get out, saving imports and cutting CO 2 but high and erratic taxes and regulatory enthusiasm for imports over domestic is costing us dear.

We need more transport capacity. Crowded roads and poor junctions need alleviating with more bypasses and freer flowing main routes. Rail investment is dominated by an ill  judged HS2 which is cost and no benefit this decade. We need more local and de bottlenecking  improvements along with digital signals to raise capacity.

We need more steel capacity as we keep closing plants thanks to overtaxation

We need to grow more of our own sustainable timber

We need to put in more market garden all weather growing capacity. instead we offer wilding grants to stop farming.

We need more electricity generating capacity from reliable sources. Where are the contracts for Small Nuclear reactors? Where the new combined cycle gas stations to keep the lights on when there is no wind?

We need more reservoirs  to meet the demands of rising population

We need more grid capacity to convey wind power from Scotland to users

We need more ship and aircraft building capacity to meet defence and civilian needs

We need to rebuild our fishing fleet

Much of this can and should be done with private capital. To do it we need lower and stable tax rates. With it we will receive more revenue.

A few more complex corporation tax offsets will not fix this. It needs commitment to low and stable tax rates to grow the taxable capacity. On current policies businesses taxes will shrink.

 

The Protocol needs an exit route for the UK and should leave us in charge of our laws and taxes.

I have tabled questions to the government about their proposed changes to the Protocol.

I want to know how many EU  laws will still apply to Northern Ireland. It appears the EU decides this and the UK can do nothing about it. The so called Stormont  brake does not apply to these laws, which we cannot amend or remove. I and my colleagues have given the government solutions to border issues which do not need NI to be under EU law.

I want to know from the  Treasury if various VAT rules remain place from the EU as the EU says or if we take back control of VAT as the UK says. If there are EU powers what are they?

I want to know if the EU also retains some controls or influence over our Excise taxes as the EU says.

I want to know if any exit  route from the Protocol is available to the UK if iit does not work out.

It would be a bad idea to lock the UK into EU laws and controls with no unilateral way out.

I am also concerned that the Stormont brake would not work. The UK legal establishment has shown itself very supportive of EU rights and powers and might well be reluctant to accept there was sufficient reason  to veto an EU law. The use of a Treaty format limits Parliament’s ability to accept or refuse new laws in the way it can for domestic legislation.

Brexit is all about making our own decisions about laws and taxes. Clearly parts of the UK establishment still wants to make that as difficult as possible.

 

The subsidy/tax merry go round

The western economies that have prospered from vibrant free enterprise sectors with competition driving change, quality and value are being subjugated by large scale interventions from government. The US, the UK and the EU are moving towards more managed models, with the state introducing price controls, windfall taxes, subsidies and regulations to have more say over what is bought and sold, where and how things are made and over what people are allowed to buy. State spending and taxes rise as the state takes money from people and companies to give back to people and companies. The energy sector has been particularly prone to this during the energy crisis, with widescale adoption of income support, price controls and company subsidies alongside windfall taxes, redirection of energy purchases and a major drive to change the way energy is generated or provided.

Energy is not alone, however. The price of money was taken way down by state and Central Bank action, only to be priced up again when the predictable inflation broke out. Housing is more and more regulated with more controls over landlords and higher taxes, leading to a contraction in supply and more upwards pressure on rents.  The state is deciding to ban products like diesel and petrol cars and certain types of heating. Governments are using sanctions, origin rules and other methods to change the patterns of trade.

Each of these individual actions is introduced to tackle a problem or to pursue a general policy goal,  but taken together they can put people off going into business and can deter companies from making the large investments they need to make to provide sufficient capacity. UK gas and oil stays under the sea as policy prefers to import. The electrical revolution requires a massive expansion of grid capacity but so far this has not been forthcoming. This leads to windfarms with no ability to sell their power and companies looking for the power they need to expand their activities.

The subsidy/windfall tax balloon raises state spending and may also raise state borrowing. Governments are underwriting more risks that should reside in the private sector. Businesses ask governments now for grants and loan guarantees before committing to battery plants, EV plants and new energy provision. Governments need to rein in some of their excesses in these areas. They are likely to cut supply and make it more difficult to find the homes , the power and the transport they need.

The EU view of the Protocol Agreement

The EU on Monday released a statement on the political Agreement with the UK over Northern Ireland.

It made clear ‚ÄúThe EU plant and animal health rules remain applicable‚ÄĚ in NI

It states there will be “ a set of new and existing safeguards including SPS inspection facilities and labelling “ for food trade

Pets will need a chip passport and a statement they are not going to the EU to enter NI from  GB

Goods going to NI will need new labelling

EU VAT¬† ¬†rules still apply in NI with ‚Äú new flexibilities‚ÄĚ

‚ÄĚThe European Court of Justice remains the sole and ultimate arbiter of EU law‚ÄĚ

EU laws will still apply  in single market areas to Northern Ireland.

 

I am asking how the EU will determine which EU laws to apply, if and how our freedom to set taxes will be limited, and why the UK government wants to embed the Protocol permanently into law.

Will there be any way to modify or exit the Agreement if it does not work out as hoped?

 

Raising the VAT threshold

The VAT threshold determining when a business must register to charge VAT, is stuck at £85,000. This was the level Ministers were told the EU required. With rapid inflation this is now a small amount. If a business makes a profit of 10% it has to register when it reaches £8500 of profit. Many small businesses  now seek to keep their turnover below the ceiling, putting off taking on extra business. They do not want the extra costs of setting up a VAT system, reporting to HMRC, and dealing with VAT inspections when they want to be growing their business and serving customers. Some businesses look for ways to exceed the turnover threshold by accepting cash and  not declaring any of that transaction for tax, so there is a loss to the tax authorities.

At a time when we need growth and when we need extra capacity of many kinds to supply more and help curb inflation, it would be a good idea to raise the threshold. Putting it up to £250,000 would be a big win, allowing many more businesses to do a bit more without the tax complication, and reducing tax evasion. Overall there would be more revenue growth as the extra business generated produced more taxable employment, more purchases of VATable items used by the businesses and their customers, and more profits tax on the successful businesses.

No deal is better than a bad deal

It was a great pity the government did not stick with its mantra, No deal is better than a bad deal,  when Mrs May was  negotiating our exit from the EU.  It is as true today over the Northern Ireland Protocol.

Two  week-ends ago   I read that a deal had been agreed and that we would hear it on the Monday and vote on it on the Tuesday. Nothing happened. Ministers assured us there was no deal. They told us they were still negotiating, yet various forces were briefing the press otherwise.

The same thing happened this week-end. I read we are on a 3 line whip today for an NI deal. There was no such thing on the whip sent out to Conservative MPs.

Clearly Ministers would like a deal, and are working on one. They  now say they will not sign a deal which fails to tackle the issues over who governs Northern Ireland as well as the trade issues. Let me briefly remind you what the big ones are:

1 Does the deal remove all EU barriers to GB to Northern Ireland trade?

2. Does it remove all EU laws from economic activity taking part entirely within NI if that entails sales to NI, to the rest of the UK or to non EU countries?

3. Does it restore the UK’s right to settle all tax and state aids policy in¬† NI?

4. Does it restore the supremacy of the Good Friday Agreement, as set out in Article 1 of the Protocol, allowing the restoration of Stormont by gaining the consent of the Unionist community to these arrangements?

 

It would be a bad idea to settle for partial success, as the EU’s aim will be to get the EU to accept a¬† binding Agreement, leaving us open yet again to EU laws and legal challenge as we always were when in the EU.

The need for more self employed

In early 2020 there were over 5 million self employed. The most recent figures show this has slumped to 4.3 million, a fall of 14%. This has occurred at a time of continuing low unemployment. It took place against a background of changes to Treasury rules for companies employing self employed contractors designed to reduce the numbers. There were also early retirements from self employment brought on by lockdowns.

Self employment growth is essential to healthy growth in an economy. Self employment can expand capacity quickly where it is needed. It can produce more innovation and better value than large companies can manage quickly or at all. Many self employed people provide great service. They have to take full responsibility for their actions and for their customers’ satisfaction.

The latest  variant of IR 35 rules makes it more difficult for people to start up as self employed, and puts larger companies off hiring them. Of course there should be rules against people who simply work for one company entering into an arrangement that is designed to create tax advantages for themselves and or the company compared with a proper employment contract and PAYE salaries. Nor do we want to see people forced into less job security by employers who want to strip them of some benefits whilst keeping the benefits of their work.

What we do want is the ability of people who choose to do so to offer their services to a range of companies and customers without tax rules getting in the way. We need a pro self employment revision to the tax code, which was better before the 2017 and 2021 changes.

The new Wokingham constituency

The new Wokingham constituency loses its wards in West Berkshire, Earley and Shinfield. It gains Remenham, Wargrave, Ruscombe, Hurst, Twyford and Charvil from Maidenhead, and Wokingham Without, Finchampstead North and Finchampstead South from Bracknell. These are places that are in Wokingham Borough and have in the past been in the Wokingham Parliamentary constituency. I represented the Northern wards and Wokingham Without when first elected to Parliament.

The new seat will no longer include wards from two different Unitary Councils, and will no longer include places that look towards Newbury. It will mean no ward has a boundary with Reading.

 

Wokingham Conservatives Selection Council

The Wokingham Conservatives Selection Council last night passed a motion to adopt John Redwood as their candidate for the next election.
The Selection Council comprised representatives from the different parts of the new Wokingham seat. It did not include representatives from the parts of the present constituency that pass to  new seats being formed.