John Redwood's Diary
Incisive and topical campaigns and commentary on today's issues and tomorrow's problems. Promoted by John Redwood 152 Grosvenor Road SW1V 3JL

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Spending and the case for social care

The government is currently looking into how we provide and pay for social care.

Today we have a mixed scheme. The general principle behind it is if someone needs meals and housing, these are  normal costs they should pay for out of their incomes and pensions. If someone needs medical treatment or a stay in hospital, this is something that comes free under the NHS guarantee.

If someone needs help at home with everyday activities then they have to pay. If they are on a low income with few assets then the state pays. The value of their home is not taken into account when working out if they can afford the home care.  If someone has to go into a care home then they have to pay if they have income and assets. The state pays when the assets have largely gone. The  value of their former home is part of their assets for this purpose, and they have to sell their former home to pay for the care home. Of course if they have  a partner that still needs to live in their own home this does not apply.

Some think this is unfair, as it means if an elderly person needs to go into a home they lose their home and its value if the fees so require. Conversely if an elderly person can stay in their own property, they keep the asset and get more help with the care costs if on a low income.

I do  not think we should change this general approach. It would be too dear to offer people free care home provision so they can leave their former home to their children, whilst it would be too tough to demand people living in their own homes to have to pay a levy on the price of their home. No political party has come up with a popular way of making this fairer and easier. Some have suggested taking some of the value of the home for the person continuing to live in it, by way of an additional death tax, whilst putting some cap on the amount of the  value of the former home someone needs to spend on care home fees. I would be interested in views on it,  but still think it too difficult to sell the idea of what will be called a new death tax over and above IHT.

I want some additional money to increase the quality and quantity of social care, for people of all ages and disabilities. Better care is a good in its own right, where many of us are happy to make a contribution through taxation. It will also reduce more strain on the NHS by getting people back home more quickly after hospital treatment.

Spending and investing – what about transport?

The government has been playing catch up on transport capacity. A successful growing economy since 2010 needs more road and rail capacity than we enjoy. The outgoing Labour government at the end of the last decade slashed what remained of the roads budget as part of its efforts to cut excessive borrowing, after a long period when in office it had done little by way of new road construction. The present government has committed to the very expensive HS2 rail project which will bring extra capacity on the north south route, and to cheaper capacity expansion through digital signalling. It has started to raise the amount of road investment, but it remains low by pre 1997 standards and in relation to need. There is a missing two decades of investment to make good.

Now is a good time to spend on additional road capacity. Borrowing rates are very low, and motoring contributes far more in taxes than is spent on road provision. The Transport department has announced an intention to create a local strategic network of A roads to take more through traffic locally. This will require a substantial increase in the financial provision to pay for the schemes needed. In the short term a programme of improving junctions could increase safety and reduce congestion. It is also going to take road widening and  by pass provision to complete the job.

The national route network also needs extra cash. Successive governments have failed to complete the south coast highway or  the A 303 to the west country. There is a shortage of capacity on the Southampton to Birmingham haul road, the A 34, and on the main routes to the east cost ports. There are similar shortcomings in the north. Some extra investment  should be spent on augmenting local and national road improvement.

 

 

Spending more – what about defence?

The UK is a leading country in the world, with a seat at the Security Council of the United Nations. As such it has responsibilities to contribute to UN peace keeping and peace making missions, and to humanitarian interventions around the world. The UK is also a leading member of NATO, a crucial defensive alliance for the western democracies. The UK is the second largest spender on defence after the USA in the alliance, and agrees with President Trump that the non US partners need to make a larger contribution to their own defence than they have been doing. The UK has agreed to spend 2% of its GDP on defence, which means that each year as GDP rises defence receives a cash and a real increase in its spending levels.

The UK needs several important capabilities. It needs an expeditionary force, so that it can intervene decisively, usually with allies,  where there are events like the invasion of the Falklands or Kuwait that require a swift and effective military response. It needs a similar ability to project force over distance to assist with peace making interventions in regional wars as sometimes in the Middle East, and to have humanitarian capability to assist victims of flood or disease or other disasters. Above all the UK needs a strong defence to protect these islands, which includes the insurance of a nuclear missile shield to deter aggression.

The government has found the money for two large carrier ships and attendant planes. It is proceeding with the renewal of the submarines which contain the nuclear deterrent, which need to have a continuous at sea capability to be effective. It has reduced the size of the surface navy, the army and the airforce as it has sought to adjust to tighter budgets in the last twenty years.

Extra money would be welcome to expand the surface fleet needed to complete and protect the carrier groups, and to provide flexible task forces for humanitarian purpose and to provide home defence. It could  be used to relieve the pressures for a smaller army, which stretches UK ability to respond positively to the demands of allies and the UN to contribute to missions. It could add to the number of aircraft, as we resume a maritime reconnaissance ability and strengthen the heavy lift capability. To be a successful expeditionary power we need eyes in the sky and the ability to move  people and equipment rapidly to trouble spots.

Spending increases: the case for schools

The government has admitted that schools in areas like Wokingham get too little per pupil compared to the average, and too little in absolute terms. They have under pressure given us a modest uplift. Some of this has come from changing the formula to limit the losses of the lowest paid areas. Some has come by way of a general increase for all schools.

More needs to be done. Schools need to be able to recruit and retain  enough good teachers , and teachers deserve a professional salary to reflect their training, commitment and responsibilities. I would like to see a bit more cash provided overall, with a further improvement in the formula for the lowest paid areas.

Schools have considerable discretion over their budgets. The state needs to ensure the average and the minimum level of per pupil funding is sufficient for a well run school to do a good job. Some schools are better than others at getting  value for the money they spend. Some are better at attracting great teachers who encourage high standards and motivate pupils well. In such a decentralised system there are limits to what the central government can achieve. We look in particular to the teaching profession to set standards, to innovate, and to manage the school budgets well.

I see the Secretary of State is challenging the Treasury on this issue. There is money available without raising tax rates. Cutting some tax rates woukd also bring in more revenue. The government continues to collect more tax than Treasury forecasts.

We do need to spend a bit more

Starting today I want to run a series of articles looking at how we could best spend the additional money coming from growth and from the savings in our EU contributions.

The NHS does need more money. There is the need to provide for the rising numbers of patients, partly the result of rapid growth in population. Even after a new migration policy has been put in place there will be some growth of population we need to provide for.

Under new arrangements with the EU after departure we need to make sure that if we continue with state payments for care in each other’s territory there is a fairer recharging by the UK to the EU for the care we deliver to EU citizens in the UK.  If there is no agreement then we need to require payments or insurance on EU citizens here, and to offer  a way of reimbursing UK citizens needing care on the continent.

The government has accepted the case for more money, and even accepted a general level of increased payments. Over the summer it is vital this is turned into a positive programme. The government should not sign off on any extra money unless and until there is a costed proposal that cannot be covered by existing budgets, and which will raise the quality and quantity of care delivered.

Ministers are talking about setting the Chief Executive of NHS England proper targets and requiring performance against them to justify extra cash. These targets need careful choosing and enforcement. It also needs to be clear that failure to hit agreed targets will result in financial penalties for the highly paid top team. If they wish to be paid far more than the PM, more like the private sector, there needs to genuine performance related risk for them

I do think we need more money to expand operating theatre capacity, provide extra medical teams for hospital treatments, and expand the numbers of GPs.

Improving delivery times

I am delighted so many people have suddenly become interested in the issue of speedy delivery of raw materials, components and finished goods. Some are so interested they think it is the topic which should determine our approach to Brexit.  I want to ask the question what actions could we take to cut down delivery times more if people think this is such an issue.

Lets take a complex supply chain. The company concerned needs imported components from India and from Slovakia to meet an automated manufacturing   system. The typical delivery time from Slovakia by road transport is four days. The typical delivery time by sea transport from Mumbai is 20 days. Immediately when we look at this issue we see that the short time it takes to get through the port of Dover from Slovakia or through the port of Southampton or London Gateway from India  is tiny compared to the lengthy time it takes by sea or road.  The sea journey is probably a bit more predictable than the road journey, as it is less open to congestion and delays. The sea journey does also need two road transport journeys to get to and from the ports involved, whilst the road journey from the continent needs a short sea crossing to tackle the English Channel.

The investment needed to cut journey times and unreliability includes investment in the road networks involved. I do not know all the details of the road congestion from Slovakia on the continent, but can vouch for the delays and unreliability the shortage of capacity from Dover or from Southampton to a factory in say Birmingham can  cause. This would seem to be a more sensible worry than the idea that after Brexit lorries will face unacceptable delays at our ports.

We need to remember that the bulk of our trade with the EU is imports, not exports. That means the crucial port movements occur in UK controlled ports. It is the UK authorities  who will have the task of checking standards and tax liabilities, as they do today whilst we are still in the EU. We have no reason to set up a complex system at the port which will cause more delay or so called friction. We can continue to use Authorised Economic Operators. electronic manifests and on line assessment, tax collection and clearance of most cargoes. Trade within the EU today requires complex calculations of VAT, other transaction taxes, quality and safety checking and other compliance. Most of this occurs away from the port. We have no need to make it too difficult when we are  out of the EU.

The EU offers some helpful guidance

Whilst the EU carried on with colourful and misleading language about parts of Brexit, its document issued today also showed it is beginning to want to look after the business interest on the continent and help with sensible business continuity. In particular it confirmed that  current contracts which span the exit date will of course remain valid with parties fulfilling them. It thinks the UK should   be part of the Common Transit Convention to speed transport crossing borders. It gets close to saying the UK out of the EU will of course have high standards of data handling so there will still  be close arrangements for data transfer.

One of the welcome features of the short document was the repeated statements that much of what needs to be done to keep trade flowing is down to individual companies and member states, who are likely to want it to work well. The EU comes close to suggesting member states roll over certain permissions where the UK  will still meet the same acceptable standards after exit.

The WTO global trading model and Mr Barnier – time for the media to mend its language

There is a lot of bad and misleading language used about Brexit. Apparently Mr Barnier is about to embark on his own version of Project Fear, claiming the so called “No Deal” option will be difficult. The UK government will  make sure all is ready to depart without a Withdrawal Agreement if necessary. Why would the UK want to sign such a one sided Withdrawal Agreement anyway? What is Mr Barnier offering to make it worth our while?

Let me attempt to adjust the language to be more  balanced and descriptive.

“No Deal” is the WTO global trading option. Far from being without trading rules and without a working system for importing and exporting, the UK would rely on the WTO system for its EU trade just as it relies on that system for the bulk of its trade today which is conducted with non EU states.

“Crash out” are the words often used by Remain to describe leaving without paying the EU £39bn for the privilege of leaving. As we do not owe them any money, most people would call that just leaving, not crashing out. We will not crash, and will have lots more cash.

“Fall off the cliff edge” is another fatuous phrase they use. There is no cliff edge. Planes will fly and lorries will move through ports the day after we leave just as they did the day before. We will carry on trading and travelling, investing and being tourists in each other’s countries, as we do today in numerous non EU countries.

 

The EU talks about a “disorderly Brexit” if we leave without a Withdrawal Agreement. That means we leave without paying which annoys them but is good for us. The EU will find that people, companies and global rules will work just fine. The continental exporters to the UK will make sure they can still sell to us as they sell to other countries not in the EU. There is nothing disorderly about the way EU states trade with non EU states.

The use of this pejorative language is silly and misleading. The proponents of the EU say they wish to defend the international rules based system. Presumably their beloved EU does just that. In which case, as a law abiding member of the World Trade Organisation, the EU will not be able to discriminate against the UK after we have left and will not be able to impose new additional tariff or non tariff barriers. The EU has to treat us as it treats all other most favoured nations under WTO rules.

As the bulk of the UK’s trade with the EU is imports, I assume even Mr Barnier will understand they need continued decent access to the UK market. The good news for them is we are offering that, as long as it is reciprocal and within WTO rules.

Trade is mainly about companies and individuals, not governments

The good news is governments  need to promote and tolerate trade as well as unfortunately doing their best to harm it. Governments like to tax trade, with excise duties, VAT, other sales taxes and customs dues. This both harms it, but also gives them a rationale to want to promote more of it at the same time.  They like to regulate it for a variety of good and bad reasons. They rightly want to stop people selling dangerous items that could be misused and want to supervise the safety of everything from planes to drugs, but they also often want to control the style, performance and method of manufacture of things where variety might not be harmful.  The EU both poses as an advocate of more trade within its zone, and acts as an impediment to more trade outside the zone by imposing a barrage of controls and taxes on items coming in from non EU sources. The US objects to VAT on its sales into the EU, as well as to the higher tariffs like the ones on food products.

In the never ending UK Parliamentary debates on trade the advocates of us staying in or rejoining the EU customs union, or inventing a customs union with them similar to one we are leaving, never give up and never find any new and convincing arguments. Three times Parliament voted down staying in the customs union by a large majority. Last night Parliament voted it down yet again by a small  majority. As someone who likes Parliamentary democracy and thinks things should be settled here by lively debates and votes, I am also allowed to ask how many more times do we have to make the same decision? I want this Parliament to tackle issues like housing, economic growth, real wages and the other things that matter to voters, but its ability to do so is constrained by so many MPs wanting to go over the same old topic day after day.

I am an MP who wants business to succeed and wants to see more prosperity and more better paid jobs in the UK. So why don’t I want a customs union? Let me have one more go at replying to the tired old statements of the Remain campaign that we hear daily in Parliament on this subject.

1  Remain claims that industrial business operating Just in Time supply chains with imported components will not be able to work efficiently  from outside the Customs Union!

a) Many businesses today in the UK operate Just in time systems with components coming in from the USA, Japan, China and other sources that are outside the EU. Some JIT systems operate well with seaborn deliveries from outside the EU. They know how to get their products through the docks in London or Southampton just fine. The products have been many days at sea and the short time taken at the port is minor compared with total travel time.

b) Both EU and non EU components come in under a system of Authorised Economic Operators. They file electronic manifests of the consignment, and the calculation of any  VAT, customs dues ,excise and other taxes occurs as the goods transit. The lorry driver at the port does not have to wait whilst they work out the payments and pay them by cash or card in a queue of trucks. There has been a long standing system of TIR trucks, with sealed cargo sections that have permission to cross borders because the authorities know what is in them.

c) Both the EU and the UK are members of the WTO. Its Facilitation of Trade Agreement covers the main issues requiring member states to minimise friction at borders.

2. Remain claims that any non EU system of imports will be too expensive and administratively difficult, especially given rules of origin which require specified proportions of local content.

a) The current EU system also requires substantial electronic paperwork and complexity. The EU levies VAT which requires great detail about process and where value was added, with issues over transfer prices. It also needs to police rules of origin. Importing from outside the EU need not be more onerous, and once out of the UK we will design our own system which can be friendly to business.

b) The information the authorities need to police and tax is very similar to the information the company needs to supply to its customers and counter parties. If you are supplying a component for a complex machine like a plane or vehicle you need to send great detail about how and where the components was made, what the tests results were, and  what its price is. Modern manufacturers require individual component traceability in case something goes wrong . It means the information the authorities need is already known to the company  and in its computer, so a simple computer programme can extract and present the relevant information for transit papers.