John Redwood's Diary
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Who is running Brexit policy and what is it?

If you listen to Sir Martin Donelly, former Permanent Secretary at the Department of International Trade and friend and supporter of Ollie Robbins, senior civil servant negotiator for the UK,  the UK has to accept that the Withdrawal Agreement is as good as it gets and sign it.

So we can guess there is a senior strand of advice and opinion within the current civil service which says the UK must seek to change Parliament’s mind and get on with signing up to the Withdrawal Agreement they have negotiated. Doubtless they will help the PM get some clarification or side document to the Agreement over the backstop to try to secure its passage on a second attempt.That would sign us up  to the 21 months or more of very expensive talks, submit us to  the Irish backstop which looks like a device to get us to stay in the customs union, and place us at a huge disadvantage in trying to negotiate a so called future partnership.

Much of the civil service  work as I understand it from press reports and Ministerial statements has been to map all the contours of our current relationship with the EU and try to replicate them whilst claiming we have in some technical sense left the EU. This of course has all been under the guidance of Ministers, and Ministers have to take responsibility for what the civil service does as soon as they sign the work off. There does not seem to have been any effort to design and table a Free Trade Agreement, and our best trade negotiator Crawford Falconer has been kept well away from all the EU talks.

This strand of opinion gains considerable support from the Chancellor and the Secretary of State for Business. They have expressed their continued regrets at our departing the EU and have made clear their opposition to leaving without a Withdrawal Agreement. They have exuded hostility to WTO Brexit and do not look as if they are trying to smooth our passage in that eventuality. They keep in touch with a limited  number of leaders of large international businesses and seem enthusiastic every time one of those speaks out about alleged dangers of leaving. Indeed we can read reports that they encourage businesses to accentuate the negative. Many of the scare stories say we will have trouble importing, yet the government has not set out just why and how it will mess up our ports.

Within government we also have figures like David Liddington, Deputy Prime Minister and Gavin Barwell, Chief of Staff at Number 10 with strong Remain pedigrees who wish to reach out to Labour to find a compromise across Parliament to delay or water down Brexit.

The Prime Minister herself seeks to balance these Remain forces with the much larger number of pro Brexit MPs on the government and DUP benches. She herself always rules out staying in the Customs Union and single market, as stated in the Conservative Manifesto and by both sides in the referendum. She says she does not want No Deal but it has to be there in case there is no agreement which is better. She never wavers in saying we will leave on 29 March.

She has also rubbed out the clear red line in the Manifesto that nothing is agreed until everything is agreed, and forgotten the promise to negotiate the future partnership in tandem with the withdrawal agreement to maximise leverage and read across.

The problem is the warring factions around the Cabinet table and in Whitehall, where it appears there are more who wish to delay or thwart the will of the people than there are believers in just leaving in March. Parliament has rightly decided the Withdrawal Agreement is a bad deal – or indeed no deal at all, as it does not relate to the  future partnership. Most of the time the  PM works with the big majority in her party to get us out of the EU on time. When she does she wins the votes. When she tries to reach out to the small Remain group of Conservative MPs and listens too much to those forces in government that still cannot be reconciled to a proper Brexit on 29 March, she stumbles and loses votes. She should now set out a vision of how we will spend the money, use the new powers and settle a new trade policy if we just leave on 29 March.

The Irish border

Attitudes to the Irish border sum up the differences between Leave and Remain.

To Leave there is no problem. The current Irish border is a complex international border, handled with the minimum of fuss.It is a Vat, Excise and currency border. These fiscal and financial requirements are handled away from the border, mostly electronically.If there are to be customs we could do the same with those.

It is a border requiring co-operation against smuggling, which already occurs. It is an anti terrorist border, without the need for border posts. There is action by police on both sides of the border to combat crime. We have a common travel area to ease the movement of people, which will continue after Brexit.

It will become a border for issues of quality and compliance for food and goods.As both sides currently meet the same standards and wish to do so after Brexit to sell to each other, we can continue with compliance checks away from the border with electronic manifests detailing what is on a truck and where it has been or will be tested.

To Remain it is a series of insoluble problems that require Northern Ireland to stay in the single market and customs union. To the Republic of Ireland and the EU it is an opportunity to advance the island of Ireland agenda for government of all matters commercial. They query a series of detailed and sensible proposals using existing technolgy and practices to avoid a more intrusive police and government presence at the border.

The UK government should repeat that after Brexit it will not impose watch towers and an army of inspectors on the border.It will use existing technology and practises to collect revenue and check goods, and will continue full co-operation with the Republic as now. The Republic can then work with the EU to decide how best to run their side of the border, knowing the UK will be helpful and positive about ensuring a smooth outcome.

The EU talks are not going anywhere – let’s table a free trade agreement

It’s been good having three days off from Brexit on this blog. Parliament and the UK media need to remember there are many important tasks and debates we need to have about problems in our country that should not be driven out by endless and repetitious arguments about the terms and timing of our departure from the EU. I seek to  make sure my work as an MP is not unbalanced by Brexit which takes up too much Parliamentary time.

Over the last few days there has been little progress with the UK Parliament’s wish to see the Withdrawal Agreement renegotiated. The EU appears to rule out removing the backstop from the Agreement, which in turns seems to rule out Parliament approving it. For some  of us it is far more than the backstop that is wrong with the Agreement anyway. Why would we want to sign a one sided agreement giving the EU all it wants, without anything firm on the future partnership which might contain things we want?  Far from leaving the EU signing the Agreement means delay in taking back control of our money, our laws, and our borders, with genuine issues about whether we would ever be in full control given the backstop and the financial commitments.

The  best approach from here is straightforward. The government has to tell the EU there is no chance of passing the current Withdrawal Agreement, whatever might be offered by side letters, reassurance, clarifications or strengthening of the Political Declaration about a possible future agreement. It is also true many MPs do not want to leave with no agreement, so the government should table a comprehensive free trade agreement. Under GATT rules if the EU agrees to talk about this the UK can then leave the EU on 29 March without needing to impose new tariff and non  tariff barriers on EU exports to us, and the EU would do the same for our exports to them. There is a period of up to 10 years to agree a final text of a replacement Free Trade Agreement. There is now a private sector draft, but the government itself could scissors and paste EU/Japan and EU/Canada as the starting text.

Any kind of Withdrawal Agreement would leave the UK very exposed. There would be endless more months of rows with the EU, and rows in Parliament over how the talks should be handled by the UK. Meanwhile  the EU could legislate any way it wished to damage UK interests as leverage, whilst continuing to charge us large and unspecified sums for the privilege of more talks.

 

New homes and the changing High Street

In some parts of the country house prices are high and affordable homes for sale are in short supply. Home ownership has been falling as a percentage of all households, as more young people decide they cannot manage the deposit and the interest on the mortgage, or find they cannot borrow enough to get started on the housing ladder.

Despite this home ownership remains the preferred tenure of most people. There are many people in rented accommodation who would like to buy, whilst anyone in a home of their own can sell up and rent if they wanted to. It makes sense for most people to want to own. Over your lifetime it is considerably cheaper to buy than to rent. As you approach retirement if you own your own home you look forward to the mortgage paid off and no rental payments. You just have to put up with the Council tax. If you are in rented property you know that as a pensioner on a lower income than when at work you will face your highest housing bills of your life, as rents continue their upwards march. If you buy one house and stick with it you might be paying mortgage payments for 20-25  years. If you rent a property you will be paying rent for 60-70 years or more.

If you own you can improve and decorate your home as you like, and you can borrow against its value. It may help you build a business. The only downside of owning is you, not the landlord, are responsible for repairs. Most UK houses are of sturdy brick and tile construction and do not need major structural work over their lives.

So the question is how can we encourage or help more people to help themselves by buying?  We need to work on both perceptions and realities. Some think a home is not affordable but maybe it is. Whilst it is true that homes cost a much higher ratio of income today than 40 years ago, interest rates today are a lot lower than they used to be. As a result the early years of mortgage payments are not so different from past experience. Clearly there is a risk if rates went up again, but modern mortgages usually allow a fixed rate period to get you through the early years whilst your pay rises to make it all more affordable. For others in some parts of the country homes are not easily affordable even allowing for lower rates. This requires expansion of supply of sensibly priced homes.

Here the changes in shopping may be of help. We live in a world where there is too much shop space for the amount of retail business transacted through stores. On line purchases are now 30% of all non food retail activity, and growing. Competitive pressures between big chains has boosted the amount of floorspace on offer. There is plenty of evidence that well known retail names are  now considering cutting the number of stores they run and reducing their trading area. This represents an opportunity for conversion or replacement of their space with housing.

In some cases it could  be the out of town retail park that is surplus to requirements. These would make suitable sites for comprehensive redevelopment as housing. In other cases it will be the end of the old shopping centre that has been bypassed by new space elsewhere at the heart of the town or city. These properties too can be subject to change of use to reflect the altering pattern of demand.

There are many other ways of finding sites for more affordable homes for sale that I might cover in future articles. Meanwhile it will take people to want to transform these older shopping areas to help add to the supply, and imaginative policies to help individuals who want to take on the task themselves of creating a home out of former commercial premises. There are now good examples around the country of blocks of flats springing out from within old commercial buildings. My flat in London started life as an office block.

 

More money for police and Councils

Yesterday the government presented it budgets for the police service and for local government for the 2019-20 financial year starting in April. The amount of money granted from central government goes up, as does the amount of money they are permitted to spend including local taxation. I was pleased that Wokingham Borough at last got some recognition that it has been receiving very low amounts per person for several years compared to most Councils, and has received some catch up money. West Berkshire too also got an above average increase, reflecting the low budget it has been given in recent years.

The questions to debate are how should this additional money be spent? How much extra should Councils and Police Commissioners raise from local taxation within the limits allowed? How can we be sure that extra cash committed buys us service improvements we want, and helps pay for the staff in these services to be empowered to work smarter and raise productivity?

Councils are gradually equipping themselves for the digital age. Residents are encouraged to pay their Council tax through regular bank transfers rather than through  a manual counter service in the Council offices or a postal based system with cheques. Benefits are being moved onto universal credit with scope to make it cheaper as well as easier to work out entitlement and  make the necessary payments. Much of government is about taking money off people in taxation and giving it back to people, sometimes the same, sometimes different people, in the form of benefits. This can gradually be more automated to make it more accurate and cheaper to administer.

Residents have three main experiences of their local Council. There is the tax bill, which they want the Council to keep under control, as it can be a large item in family budgets. The second is the refuse collection system, which every house has to use under the Council effective  monopoly.  People usually want regular weekly collections, and appreciate kerbside collection of recyclable materials as part of the service.  The third is the road system which everyone uses to get about. It is essential to get to work, school,  shops, leisure activities and social events. People want the roads to be well maintained, have sufficient capacity to avoid traffic jams and sensible designs to minimise accidents.

The education service is  very important to those with school age children, and social services can be vital for those in need of assistance with living in their own homes when disabled or elderly. Most of us are happy to help pay for good quality education and social care as part of our contribution to a decent society.

The issue before us is are we spending the right amount, and are these services delivered with the right degree of quality and with sensible cost awareness?

 

The EU/UK volte face on diesels

EU/UK policy of many years was to encourage the diesel car as part of the solution to excess CO2 . Diesels are more fuel efficient so less CO2 is generated per mile travelled than a petrol vehicle. The UK was particularly keen on this policy, and successful at attracting substantial new investment in diesel car engine manufacture and diesel car assembly. Jaguar Land Rover, for example, moved to producing a range of vehicles where two thirds sold were diesel. The UK became a centre for excellence and research in passenger car diesel technology.

More recently the EU has discovered that its emissions tests were not stringent enough to prevent higher levels of Sox and Nox from diesels, and that these gases do create problems in the air we breathe. The EU has now set more severe standards and tougher tests to enforce them, so the modern Euro 6 diesel car engine is around the same as a patrol engine car when it comes to unpleasant exhaust gas and particulates, with both types of engine now hitting high standards of cleanliness.

During this major switch of approach the passenger car  diesel engine has moved from environmental poster product to environmental problem. The politicians who were keen to encourage diesels, are now keen to stop them even though they have now set much tougher standards for diesel engines which they think are fine. There is  a competition to see which town or city can be more severe on diesel vehicles by imposing bans or extra taxes. The UK Treasury decided to impose much higher Vehicle Excise Duty on new diesels, especially for expensive vehicles, as part of it attempts to get more people to buy an electric car.

The result of this change at EU and UK government level is entirely predictable, and was indeed forecast here. There has been a collapse in the sale of new diesel cars, with more motorists deciding to put off buying new until a new more stable legislative approach to car engines has settled down, and other motorists unable to afford the tax rises placed on new vehicles.

In the UK it is especially perverse. The government claims to want a bigger and more vibrant motor industry here in the UK, and is very worried by any possible threat to it. Yet at the same time its policy has done serial damage to the diesel car sector, the very sector they had most praised and had done most to build up in previous years.

Nissan drew attention to these issues in its recent decision not to go ahead with new assembly and extra capacity for a diesel vehicle at Sunderland. It will make what it needs in Japan instead. Car makers experiencing a big fall in diesel car sales are shorter of cash, profit and sales than they wished, so of course they are going to cut their investment plans. The problem for the UK is government action which has been so successful in building a diesel car industry is now leading the attack on it.

Sleeping rough

Most people agree we need to do better when it comes to helping people to have a bed for the night and a roof over their heads. There has been a rise in rough sleeping in recent years. The government agrees, has provided more money and announced new initiatives to get the numbers down.

The state can provide hostel spaces. It can do more to provide temporary housing for people whose lives have run into difficulties, whilst they get themselves back into work or a better routine for living on benefit whilst they seek employment. The problem it encounters is that so often rough sleeping is not just an issue of someone short of cash or temporarily out of a job, of someone who has fallen out with their family or suffered from the cancellation of a tenancy. It is often a deeper seated problem to do with drugs, drink, or mental health issues.

Where the person understands the problems they are in sufficiently to want help it is easier for the state to offer that helping hand, and a scandal if it does not. Where a person fears the state hostel because it would require them to volunteer to get off  drink or drugs, or to conform to rules they do not like, the state has to decide how far to go in requiring people to leave the pavement bed.

The state has powers if the person is mentally ill and can be sectioned. It has powers if there is any suggestion of disorder or criminal offences. Each time there is a difficult judgement to be made about someone who is vulnerable and living in a way which the rest of the world worries about.

These complex cases are beyond most of us who are concerned and would like to help, which is why we expect the state to use its considerable resources and legal powers to act instead of us. Many people do find accommodation or could find accommodation within their own network of family and friends. There we can all help when need arises. When a member of my family lost their job and home together, I provided them free board and lodging in my spare bedroom at home whilst they  found another job. After a few months  they were  able to take on the financial commitment of a new home. Many families do the same.  Most people sleeping rough are someone’s son, brother, nephew, father (or daughter, sister, niece, mother)  whose families might be able to help. Most families or networks of friends have someone in them with a spare room.  Where the person’s problems are such they cannot get along with any former family member or friend then the state needs to step in as the last resort with the powers that might be needed.

Any family that has an estranged family member sleeping out could at least help the state help them, if they can no longer help them within the family. More knowledge of the circumstances and problems of the person must be helpful to those trying to decide what measures are needed to persuade that person to go back to a life which includes a bed and bedroom.

The UK should lead freer trade worldwide

I have made two consistent requests of the UK government whilst I have watched the negotiators reach an Agreement Parliament could not possibly accept. I have asked that the UK tables a comprehensive free trade agreement with the EU and says we should negotiate it once we have left, allowing both sides to avoid any new barriers or tariffs whilst we negotiate it. I have also asked that the UK tables its own schedule of tariffs for April 2019 assuming the EU refuses all co-operation. These tariffs should be lower than those imposed by the EU on the rest of the world, thereby cutting our tariffs on the bulk of our trade whilst imposing them on EU trade for the first time as we have to under WTO rules.

There are two advantages of tabling a draft Free Trade Agreement. The first is the EU has indicated that would be easier to agree with the UK than a half in half out arrangement of the kind the present UK negotiators seem to want. The EU has free trade agreements with various smaller countries already and has just managed one with Japan. Our draft should be based on the best of the EU/ Canada and Japan agreements, so we can say to them we are only asking for what they have already granted to others. They and we might then want to add some more to that.  The second is we could then under Article 24 of Gatt/WTO  agree to no new barriers  pending agreement. This would be especially advantageous to the rest of the EU given their huge surplus with us in food and cars, where tariffs would otherwise be imposed.

The ERG is working with experts to produce a full legal text draft. I look forward to its early publication, as then the government could just table that one if they still have not drafted one of their own.  The government could itself produce a scissors and paste version of the EU/Canada or EU/Japan treaties to get the conversation started. I hear there will be a launch of a comprehensive FTA text on Wednesday.

I have also repeatedly asked for publication of our own tariff schedule.I think EU tariffs are in some cases too high. I would want us to remove all tariffs from imported components so we can say to industrialists based here it will be cheaper to make things once we have left. I would like us to remove tariffs on food we cannot grow for ourselves. I would suggest lowering other food tariffs a bit. It is an important judgement to balance consumer interests in no tariffs with farmers interest in some tariff protection, which would for the first time extend to protection against EU as well as non EU produce.

The publication is essential for two reasons. The first is we may well leave with no Withdrawal and future partnership agreement in March, so farmers and traders need to know what the tariff regime will look like when they decide what to grow and what to buy from world markets.  It would also be a timely reminder to the big food exporting industries of the rest of the EU that they will face tariiff barriers in default of a Free Trade Agreement, which might make them keener on a Free Trade Agreement.

The government should also tell us how it will spend all the extra tariff revenue it could collect. A mixture of spending increases and tax cuts would provide a welcome boost to the economy, jobs and wages.

 

Another round of Project fear

It is strange to read stories coming from people in or close to the government telling us leaving without a deal will be bad, saying the government has  not done all it needs to do to leave on March 29, and playing up any bad economic or business news that comes along. Normally governments are guilty of putting too optimistic a spin on events. Not this one, who often seem to prefer the EU spin line against us.

Most of it is Project Fear re heated. It was that very Project Fear  replete with precise and wildly wrong forecasts for jobs, house prices, growth and business for 2016-17 that did much to lose the vote for Remain. Most of us want sensible optimism not remorseless and inaccurate pessimism.

The Prime  Minister and government has had 2 years 7 months to get everything ready to leave on March 29. They have  told us officially they can do that, though there are plenty of leaks, hints, statements of individual off message Ministerial opinion saying the opposite. The PM has always  been consistent in saying we will leave on 29 March with or without a deal. She has always said you cannot take no deal off the table as it is important to the negotiation, and has always said we can just leave  if necessary. She of course would much prefer a deal, but has difficulty persuading MPs her  Withdrawal Agreement is acceptable. It is of an expensive invitation to another 21 months of talks about a future relationship. This prolongs the uncertainty for business and delays an economic boost from spending our former EU contributions on our priorities.

It is clear the planes will fly, the trucks will pass through Calais and Dover  in good time and there will be no food or drug shortages. I am not going to stockpile anything.  It looks as if the  pressure for a second referendum has abated, which anyway cannot be held before 29 March now. The Remain forces in Parliament  now want delay. They have failed to say what we could agree after March that we have been unable to agree in the 2 years 9 months since the vote, and failed to spell out why the EU  would let  us have a delay to renegotiate and on what terms. The UK has no plans to offer candidates for the European parliament so will not be part of the full governance arrangements of the EU from that date. We need to get on with leaving.  I am still pressing the UK government to offer a free trade agreement and use of Article 24 of the GATT to avoid tariffs and other new barriers when we leave in March

 

Working throughout February

I had no plans to take a holiday and was intending  to work as normal when Parliament planned a February recess. I am very willing to attend Parliament to do anything to ensure a smooth exit from the EU on 29 March on any dates between now and then.