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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Let’s stop negotiating with ourselves

There are endless discussions in some of the media and in Parliament about what concessions the UK should offer. Why don’t they understand the negotiations may go on for 19 more months? The EU has not yet made a sensible offer or explained how it wishes to maintain full tariff free access to our market with no new barriers. Why do they keep on recycling the same old stale stories, and the same old failed lines from the Remain campaign?

Some people are in danger once again of mistaking media noise for change of policy. The government’s policy of Brexit was clearly laid out in the Article 50 letter, the supporting Act of Parliament, Lancaster House speech and White Paper. it is not changing. It is now embodied in the EU Withdrawal Bill.

If the media had any interest in news rather than olds they would go off and interview the other member states about their negotiating aims and their attitudes towards the EU approach so far. They would go and ask German car companies, French dairy farmers, Dutch market gardeners, Danish pig farmers and the rest what they want the EU to achieve on the trade front.

There is no need to offer the EU any money over and above our legal obligations. If you have to pay to trade the cheapest way is to adopt WTO tariffs, and then negotiate away the tariffs with countries outside the EU to get us even better access to their markets and to cut import prices. If you had to pay a fixed up front sum to trade related to the volume of your trade they would be paying us more than we pay them, which is extremely unlikely. We are offering them free access to our market.

The UK voters were very clear when they voted to take back control. Taking control of our money was the central feature of the Vote Leave campaign. There are plenty of good uses for that £12bn net saving. it would be a good idea if the media had a few interviews with interested parties on how we should spend that money, or whether we should give some back to taxpayers.

There is no sign of the government weakening its line on the money, as the Foreign Secretary has recently made clear in his vivid if unorthodox language.

Brexit and sloppy journalism

Some newspapers and BBC commentators, led by the Evening Standard seem to think everything revolves around Brexit if it is negative. They either avoid the positive or dismiss it as happening despite Brexit.

It has become a lazy habit of mind. Since Brexit, if the pound goes down, it is because of Brexit. When the pound goes up they tend to ignore it. After Brexit they delighted in the short sharp markdown of the Stock Market. When the strong upwards move commenced in the FTSE100 they said they had not meant the FTSE 100, the larger stocks, but had meant the FTSE250 which more accurately captures the domestic economy. When that too surged they switched to another topic.

They quietly dropped their recession forecasts for last winter, and tiptoe round the excellent jobs figures which have continued to show good new job generation throughout the post Brexit vote year. Instead they shifted their forecasts from recession to slowdown, and shifted the date from soon to later.

Using their methods I should be arguing that since the Brexit vote the Stock market is up sharply, showing improved confidence in our future prospects. I should point out that business has given a resounding vote of confidence in post Brexit UK in the most positive way possible, by hiring many more staff. I would point to the continuing very high levels of inward investment, to the growth in new housing being built and sold , and to high levels of consumption as all marvels of the vote. There we have it – the Brexit vote has brought us more jobs, more homes, more inward investment, more business confidence. The main complaint I now have from anti Brexit business is a worry they will not be able to recruit all the labour they need in future. In other words they plan to stay here and invest and grow here.

I do not do so because I think the impact of Brexit is exaggerated. Just as joining the EEC and then the single market did nothing to raise our growth rate – indeed it went down – so leaving the EU will have little economic impact. What it will do is important politically, giving us the power back to shape our own destiny and have a better economic future if we wish to make the changes necessary to bring that about.

The Brexit Bill and the bill for Brexit

The government is pressing on with Brexit preparation. Labour now say they wish to amend the Bill and maybe even vote against it. That’s strange as they put an identical Bill into their Manifesto. Their overriding request that all EU employment rules become good UK law will be met by the Bill as drafted. The government can win the votes without them if needed. Their own Leave voters will be right to ask why they are doing this after their promises, and after their vote to send the Article 50 letter.

There are still too many UK interests wanting to give ground on paying money to the EU. The legal position is clear. We only owe our regular contributions up to the date of departure. We do not have to pay extra to trade. If they insist the only way they can make us do that is by imposing WTO tariffs. That would be a far cheaper route for us than them, and far cheaper than any of these so called bills they have been talking about.

Under WTO tariffs the UK government would gain around £12bn of tariff revenue at the expense of UK consumers, which it could give back as tax cuts.

Owning a home

Today I have been granted a debate on how more people can become homeowners.

A large number of people who rent their homes would like to be owners. Over a lifetime it is much cheaper to buy and hold a home of your own than to rent one. A person can be free of the mortgage to buy after say 25 years, leaving them without mortgage payment or rent for the rest of their lives. There are maintenance costs still to pay, but no rent rises and service charges.

A home owner has other advantages. Homes often go up in value, giving the owner an appreciating asset. This can help raise finance for other purposes, leaves something to pass on to another generation on death, or helps pay the care home bills in a home of their choice if the individual has to go into a care home at the end of their lives. There is more flexibility in switching between homes if you need to move areas or alter the amount of accommodation you have, than if you rent from a social landlord.

The issue today I want to encourage is how can we help more people into home ownership? I will of course state again that better controls on the numbers of people coming in to the UK will ease the demand pressure on our housing market. I will consider ways of more homes being built.

It still leaves open the question how can we assist all those first time buyers who do not have access to the bank of Mum and Dad?

Trading opportunities

On Monday I asked the Prime Minister to update us on the work the UK is now doing to have a better set of trading arrangements after we leave the EU.

She confirmed that the UK is working on transferring the current EU trade agreements with other countries to the UK as well as to the rest of the EU on exit. The two most important are with South Korea and Switzerland, with another 50 with other smaller trading partners. There is every prospect of this happening smoothly. So far no country who has signed one of these Agreements has said they wish to cancel it with the UK or with the rest of the EU as a result of our exit. Why would they? It makes no sense to put up barriers where you have successfully negotiated them down. The new EU/Canada deal will start coming into effect over the next year. That too can novate to the UK and be the basis for an enlarged Agreement in due course.

She also confirmed that the UK is working on a new Agreement with the USA and with Australia, where the EU does not have one. There will be other countries too where the UK can make progress in preparing a deal prior to exit to speed up signature after exit. The Prime Minister went on to say that the UK was also working on proposals to help the WTO speed more free trade worldwide.

Some remain negative about trade prospects outside the EU, afraid that the EU will impose new and difficult barriers on us. The good news is no EU member state has said it wants to impose tariff barriers on its exports to us, and therefore on our exports to them. Nor has any member state said it wants to stop its people and businesses getting access to the money, investment and financial advice that London provides.

Some on the continent have said they want to repatriate dealings in the Euro to the continent. This is a silly statement. All the time they want the Euro to be a serious global currency like the dollar, widely used around the world, they have to allow non EU centres to make a market in it. How would the EU stop people buying and selling Euros or Euro denominated bonds outside their area? And why would the world then take their currency seriously?

We will doubtless face another year or more of posturing. All the time interests in the UK try to force the UK to weaken its position over the future relationship there will be voices on the continent demanding we do so. They cannot believe their luck that so many in the UK establishment are still out to weaken the UK’s clear, optimistic and positive proposals on movement of people, future trade and collaboration.

The battle for Mosul

We have been told regularly by the BBC that Mosul has been recaptured from ISIL. They did that story again over the week-end.

Like most people I condemn ISIL for the tyranny it exerts on communities it infiltrates or conquers, for its brutality and its treatment of subject peoples. If they are now defeated in Mosul that could be a precondition for something better. Mosul rests at the northern top of Iraq, near the head of the Tigris valley to the south with its richer agricultural lands. The issues now are what price victory, and what political settlement will follow?

The pictures from near the front line show that most buildings are either damaged or demolished by the heavy firepower used to kill or clear ISIL fighters from the city. The economic work of the city has been destroyed for the time being, and many people have fled the violence and the lack of basic services needed for a normal life. Restoration will require immediate recovery to put in an electricity and water supply and start to recreate functioning shops, food supply and the other urgent needs. It will take time to tempt people back and help them rebuild.

Assuming the government of Iraq has both the capacity and the will power to initiate this work there can be some recovery. The central question is how can they ensure in future that ISIL or similar terrorist and extremists groups do not start up all over again? Can they settle a population back in Mosul and find a way of governing which gains sufficient consent to work? The Iraqi civil war has proved to be deep seated, with irreconcilable communities feeling the central government does not speak for them. It has proved to be a polity that allows or nurtures extremism in places where the central government loses control. How that government now behaves as it surveys the rubble of its military victory will determine whether something better can emerge from the bitter fighting.

Housing and planning

Last Tuesday the Communities Secretary of State made a speech about the need to build more homes and to provide more affordable accommodation. His intention to get many more homes built was clear. His local government audience had mixed feelings about the message and the means to bring it about.

Some local authorities do not have up to date local plans. The Minister was right to stress to them the continuing need to do this. Developers and owners of property look to the Council to set out in a plan which areas are protected, where development may occur, and how the Council will provide infrastructure to support new development. There is a need for some new development in most communities, and a need to relate this to the roadspace, public transport, schools, health facilities and the rest that are available.

The problems come more when there is an extant local plan. The Council may decide to concentrate the development of new homes in a limited number of places. This makes it easier to provide the services and transport links, and protects more residents elsewhere from additional development they may not want. A Council may set out enough space for the likely or required build rate.

If the developers who own or control these chosen sites do not then build at a fast enough rate to meet the targets, they or others may put in for planning permission elsewhere in the area. The Council will turn it down as against the plan. Then the Inspector on appeal may grant it on the grounds the Council is not hitting its build rate!

Because we have created such artificial scarcity by inviting in many migrants and not building enough homes, this gaming of the system can be profitable. The conversion of brownfield or greenfield to development land usually results in a big uplift in values, so why wouldn’t a developer want to exploit it?

The UK is both wedded to a planning system, and very critical of its results. This is another difficult disagreement between developers and Councils. I am exploring ways that we can reconcile these differences of view and approach between Councils, Inspectors and developers. We need to control development in a sensible way and bring demand and supply for new homes into better balance.

A different take on the summit to the BBC

Last night the BBC summit report was bizarre. It was anti UK, anti Mrs May and anti the USA. It was from the Merkel fan club. So here’s some balance, reporting on Mrs Merkel as the BBC do on Mrs May and Mr Trump.

“Mrs Merkel chaired the summit badly hampered by her lack of authority at home. She failed to win a majority at the last election and has to govern in coalition with her main political enemies, the SPD, the German Labour party equivalent. She soon faces another election when she is widely expected to fail again to win a majority. She visibly lost control of the streets of Hamburg, the city hosting the summit, and had to break off from chairing the sessions to deal with the problem of many injured police and civil disturbance on a worrying scale.
Aiming for a diplomatic triumph, she had lectured the USA on the need to reach an agreement with the others and set the whole summit up as a device to tame Mr Trump. Instead she failed to get his buy in to her wishes.
Her main policy of promoting the end of carbon fuels was seen as burdening the world with dear energy. As a result China has insisted on being able to expand her carbon energy use and the USA has refused to join the Treaty to limit it.
It emerged from detailed questioning that the EU/Japan trade deal is far from agreed, with continuing rows over the enforcement mechanisms and limited progress on tariff reductions.
Meanwhile Mr Trump confirmed the work now underway to create a US/UK trade deal and expressed enthusiasm to get it through quickly.”

In search of trade deals

In a dramatic coup de theatre the EU decided to announce a possible trade deal with Japan. They did so with the sound of clicking cameras at the Hamburg G2o summit in prospect. They did so to embarrass Mr Trump, who has turned his back on the elaborate and contentious multi country Trans Pacific Trade Partnership. They did so to tell the UK that after years of no progress the EU with its Canada deal and it is possible Japan deal is at last willing to pursue more free trade worldwide.

I would be delighted if the EU did do a proper trade deal with Japan. When we leave the EU both we and EU have to confirm that each of the EU trade deals will still apply to the two splitting parts. There is every likelihood that they will. Only the third country as the co signatory could prevent each trade deal novating, passing, to both the rest of the EU and the UK naturally. Why would they wish to reverse something that is in their interest and which they willingly signed. So if before we leave the EU already has a Japanese deal, all well and good.

If you read some of the smaller print about the Agreement, you see that so far it is fairly narrow, with plenty of remaining issues to sort out. It does not unfortunately look likely that there will be an EU/Japan deal signed and operating by March 2019. They have not, for example worked out how any disputes will be resolved. Japan favours existing arbitration. The EU ants the ECJ involved. Sound familiar? The EU has sort of promised to remove the 10% tariffs on Japanese cars into the EU market, but it wants to spread the reduction over a number of years and reserves the right to go slow or cancel if too many Japanese cars turn up. Japan for her part has promised some opening of her food market for some EU dairy products.

Any progress is welcome, and should be welcome to the UK leaving the EU. The lack of agreement over important issues, and the narrowness of the positives imply this was an announcement put out for dramatic diplomatic effect at this summit.

Meanwhile Mr Trump could not have been clearer. He wants a good trade agreement between the US and UK as soon as possible. That’s left the gloomsters who reject the democratic choice of the Uk saying that we can do nothing to advance this before we have left! Why not? The only thing we cant do is to sign the Agreement we are working on. When will they start working on our side for a change?

What’s the point of a summit?

Mrs Merkel wants compromises to make the G20 “a success”. Compromises are not always a good idea. The world can accept different countries having different views and running different systems, as long as they are not threatening to another. The pictures from the summit are certainly not the ones she had in mind when she approved the substantial spending to act as host. The decision to have this meeting of the powerful in a normal city environment has placed huge strain on the German police, and has provided a worrying set of images for the easily distracted media who turn their attention to the violence on the streets rather than to the tired cliches of the communique.

There is of course an important role for personal diplomacy between national leaders. They can sometimes cut through or change the decisions and moods between countries. This is more likely to be achieved through bilateral state visits, bilateral government meetings or even by personal phone call. There are fewer cases when summits achieve this, though in the margins of the official agenda national leaders can have bilaterals to fix pressing problems. Global summits work best when there is a major issue which needs a co-ordinated or collective response. During the period of madness by the Central Banks in the western crash of 2008-9 the meeting that agreed concerted interest rate cuts despite the resistance of the so called independent central banks was an important example of political leaders using an opportunity to shift a policy for the better when their institutions were doing damage.

This summit has an agenda much like past summits. The US is unwilling to sign up to the Paris climate change targets, taking the view that if they did they would be legally bound. In contrast the EU has a history of agreeing to targets it does not enforce, and China sets targets that allow it to go on growing its CO2 output. The countries will agree to further action to tackle tax abuses, but then Mr Trump will fly home to seek to press major tax reductions through the Congress with a view to repatriating more business and profits to the USA.

The world economy on which our prosperity depends is not going to be much affected by this meeting. Crucial to its future is continuing success in China in avoiding banking problems and the hard landing China’s critics have been forecasting for several years. The extent of Mr Trump’s reflationary package and how much he can get through Congress matters a lot. The main thing to hope for is this summit does no harm to growth, sensible credit expansion, and the adoption of the new technologies that are revolutionising our work, play and social fabric.