In confirmation that the rise in western inflation is mainly to do with rising commodity prices, especially oil, German CPI inflation today hit 1.9% compared to the UK’s 1.6%. It confirms that inflation in the UK is not special to UK and  has not been  caused by sterling weakness and Brexit.

A country needs good allies, some friendly countries and many trade partners. Theresa May is doing a good job renewing our networks, and showing she has influence with allies.

A country cannot run its allies or control their governments. It can try to influence them, and work to common standards. I think the USA is a strong enough democracy to sort out the concerns about the temporary travel ban. It has already been modified following court and political action. The Vice President himself called the original version unconstitutional. The UK has established it does not apply to UK nationals flying from the UK.

It is   not feasible for a country to provide a permanent running commentary on all the decisions and views of all its allies and certainly not of all its trading partners. There are many features of undemocratic regimes we do not like, yet we carry on trading with them. Some of us  did not like the USA’s use of Guantanamo Bay for detention without charge or trial, but we kept our stance as an ally of Mr Obama’s USA. A UK company has recently signed a contract to supply arms to Turkey, a NATO ally. Are we happy with all Turkey’s policies?  The EU has been helping Turkey build frontier walls . Are we content with that? That after all is being done our money and in our name as an EU member.

Today many say we have to take a further view on Mr Trump’s policies. What do you think the UK should say and do?

There are some on the continent who seem to think the UK will have to pay to leave the EU, based around negotiations over how much of the continuing liabilities of the EU the UK must pay. This is all nonsense.

There is no power in the EU Treaties to impose an additional one off levy on a state as it leaves the EU. Nor is there any power in the Treaty to demand any continuing budget contributions after departure. This is wise, as of course once a state leaves it leaves behind the judicial authority of the EU which would be the means of enforcing any such payment. Article 50 is clear. Once the state leaves  it has  no further rights and benefits, and no further duties or obligations.

It is of course true the Treaty does not prevent the EU accepting a payment volunteered by a departing state if it wished to pay one. However, the UK could not make such a payment legally under our own law and system for controlling public spending. Ministers can only authorise spending and sign cheques for approved expenditure under UK legislation and with Parliamentary authority for the budget provision that covers the payments. Ministers have proper authority to make the annual contribution payments to the EU, required by the Treaty as incorporated into UK law by the European Communities Act.  They have absolutely no authority to make one off additional payments to the EU, and would have no authority to make contributions after we have left and have repealed the 1972 Act.

They will also find that if they wanted to make a payment as overseas aid to the EU it would not qualify under our Aid budget criteria, as the EU as a whole is too rich. The only way UK Ministers could authorise a leaving payment would be to put through an Act of Parliament specifically authorising such an ex gratia  payment. I can’t see many Conservative MPs wanting to vote for that.

Being in the EU is a bit like being a student in a College. All the time you belong to the College you have to pay fees. You have to obey all the rules of the institution. When you depart you have no further financial obligations, and you no longer have to obey their rules and accept their discipline. If you liked the College rules you can still apply them to yourself voluntarily. The College does not on your departure say we have borrowed money to improve the College while you were her so you will have a continuing bill for servicing the College debts. It does not say we failed to make proper provision for the future pensions of the people who taught you, so we will send you additional bills for their pensions. All your rights to reside and learn at the College cease, and all your duties to pay and obey cease. So it is with a country’s membership of the EU.

One of the most disappointing things about the high strategy of the EU has been its approach to Eastern Europe. Today there remain substantial problems on the eastern frontier of the Union.

In Turkey the President is seeking referendum endorsement for more centralised power. The President wants more control over the appointment of Judges, the ending of the office of Prime Minister and general rights to run the country as he sees fit. The EU clashed with the President over the recent coup attempt and they have been critical of his record on human rights. It looks as if after years of offering Turkey the prospect of membership of the EU, Germany and the others are cooling on the idea. Last year’s promise of accelerated progress in achieving Turkish accession has been replaced by a distinct distancing. Instead of it being possible to get over the obstacles, EU sources seem more inclined now to play up the difficulties in the way of membership.

On the one hand Mrs Merkel and some of the other leaders seeking re election at home may find it convenient to distance  themselves from their previous decision to speed up Turkish membership. On the other hand they face a big problem anyway, thanks to the EU/Turkey Association Agreement. This creates freer movement of people from Turkey into the Schengen area of the EU. The Turks are becoming unhappy about the lack of EU support for them in their task as acting host to more than 3 million refugees from the Middle East. Were they to encourage many of those people to head westwards into the EU Mrs Merkel would have a major problem on her hands.

In Serbia the EU has also been negotiating possible membership. Last week Serbia was to initiate a new train service into Kosovo, which had emerged from the various talks with the EU over how there could be some rapprochement between Serbia and Kosovo after their separation in 2008. The decision of the Serbian authorities to implement this idea with a train that had painted prominently down its sides the message ” Kosovo belongs to Serbia”  led to a furious exchange with Kosovo. Serbia had to  accept  the train would not be allowed over the frontier. Clinton and Blair are remembered fondly in Kosovo for assistance in their struggle with Serbia. What is the EU going to do about the tensions that have flared again between these two?

We have often discussed the EU’s approach to Ukraine and their role in the run up to the illegal annexation of Crimea by a Russia which both saw an opportunity and felt a threat to its naval presence in Crimea. There are no signs of any resolution of this dispute either.

The EU has to be careful not to overstretch. Its long and weak eastern frontier is the source of instability, at a time when the western countries are wanting to turn their backs on migrant flows and the problems of the Middle East for electoral reasons. I was interested to see that meanwhile, out of Schengen and soon out of the EU, the UK is seeking to build a good trade relationship with Turkey for after our exit.

 

 

The US briefing is very positive for the first Trump/May meeting. They have happy memories of President Reagan’s achievement, and fond recollections of the part Margaret Thatcher played alongside the US. Together they pursued and won the Cold War. Together they faced down the opposition of many Europeans to the Star Wars initiative which brought the USSR to the conclusion they could not longer compete without major reform. Together they cut taxes and promoted growth.

I remember well the day I took a translation of one of Mr Gorbachev’s speeches to Margaret Thatcher. At first she could not believe that Gorbachev would have made statements in favour of free enterprise economics in the way he did. Once she accepted the source, she realised the opportunity that dialogue might bring. It was the reward for the strong stance she and the President had taken in earlier years, as the failing USSR strained every sinew to try to keep up with the space and arms race. It did so only at the expense of a huge expenditure of resource from its relatively low income per head. It fell behind when computer and digital technology and its related creativity came to the fore.

The UK will want to argue that today is a different global agenda and Mrs May and Mr Trump are different people from the then Prime Minister and President. Where Reagan and Thatcher had to deal with the cold war, the armed threat to the west from the USSR, and the plight of the countries of Eastern Europe under Soviet control, President Trump and PM May have the complex threats of terrorism and aggressive movements in several countries around the world. Where the Soviet Union prevented the movement of people in Eastern Europe under threat of death for those who tried, today we have the worry of excessive movements of people fleeing economic failure and civil war elsewhere.

There are some similarities. In the USA Mr Trump like Mr Reagan does want to cut and simplify taxes on a large scale. He does want to pump up the US growth rate as Mr Reagan did. All US Presidents are persuaded to say the US/UK relationship is special, but only a few mean it. Ronnie did. I think Mr Trump will too.

A BILL TO

Confer power on the Prime Minister to notify, under Article 50(2) of the Treaty on European Union, the United Kingdom’s intention to withdraw from the EU.

Be it enacted by the Queen’s most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:

1 Power to notify withdrawal from the EU

(1) The Prime Minister may notify, under Article 50(2) of the Treaty on European Union, the United Kingdom’s intention to withdraw from the EU.

(2) This section has effect despite any provision made by or under the European Communities Act 1972 or any other enactment.

2 Short title

This Act may be cited as the European Union (Notification of Withdrawal) Act 2017.

Some commentators are surprised. The new President is doing exactly what he said he would do. The worldly wise well educated pontificators  who confidently predicted Mr Trump would metamorphose in office to someone more like the various well honed expert politicians he defeated are having to change their minds.

Mr Trump told us he did not accept the idea that the US has to place climate change at the centre of its industrial and economic policies. References to that set of policies and beliefs have been taken down from the White House website. Instead Mr Trump has taken executive actions to make it easier to exploit US hydrocarbons and transport oil to market by pipeline. He understands cheap energy is an essential underpinning of an industrial strategy.

He told us he would get US corporations to invest much more in the USA. There has been a procession of business leaders in to see him to be asked to step up their domestic investment. Doubtless they have been told they will get tax cuts and regulatory changes to make the US more competitive. They will also have seen the reputational damage if they do not make suitable statements about their commitment to US manufacture. The car makers are now planning more capacity in the USA.

He has said he wishes to control inward migration, and to tackle the problem of foreign criminals operating in the USA. He has made some executive orders and is investigating his further options over the Mexican frontier.

He expressed hostility to multilateral trading agreements that he thought were not fair on the USA. He has pulled the USA out of the Trans Pacific Partnership, a complex large agreement which was not ratified by Mr Obama. He has begun the process of renegotiating NAFTA where he thinks Mexico has un unfair advantage. As this is ratified he will need to deal with the Congress on how to proceed.

The critical commentators will probably shift their ground from proposing he will change, to arguing the realities of government  and the limits on Presidential power will now prevent him doing much of what he promised. It is true his tax cuts require action and goodwill by Republican Congressmen and women. Repeal of Obamacare and changes to existing trade treaties will need the approval of the legislature. Mr Trump is at his most powerful in his early days as President, and all the time there is a Republican majority in the Senate and Congress. He may again surprise his critics by being able to cut deals with the legislators to secure tax cuts, Obamacare change and other important items in his manifesto.

Mr Obama came to office promising to shut Guantanamo, pull out of Afghanistan and press for peace in the Middle East. He got wobbled off all of those and defined his Presidency by securing a deeply unpopular healthcare reform. Mr Trump needs to make sure when he spends his political capital with the legislators he buys something worth having which makes them and him more popular.  Tax cuts might well do just that. The replacement for Obamacare may prove more divisive and difficult.

 

 

Surveys of opinion can be unreliable. In July 2016 the CBI survey showed a dreadful minus 47, compared to a minus 4 in January 2016. At the time I thought it an odd reading predicting a downturn we would not experience, as time proved to be the case.   Today’s survey shows a surge to plus 15 for this January, implying good growth to come. It’s a great turn round in sentiment from ultra pessimism last summer.

More reliable order book figures show plus 15 this January, compared to plus 5 last January. This is a better indicator of more growth to come. Why are some forecasters still expecting a big slowdown?

 

 

Yesterday Opposition MPs shed crocodile tears about the need for a sovereign Parliament. They were under the misapprehension that Parliament has no proper role in the Brexit process. They seemed to think only unelected Judges could uphold the sovereignty of Parliament against a government determined to implement the wishes of the electors as expressed in the referendum.

Let me explain a few home truths to them. The first is we do not currently have a sovereign Parliament. That was the main point at issue in the referendum. All too many MPs in recent decades have voted away the powers of Westminster, passing authority on issue after issue to the EU. The public voted to reverse that. I have spoken out against the puppet Parliament we currently suffer from. All too many laws, budgets and policies are determined in Brussels in ways the UK Parliament cannot gainsay.

Any opposition there is  to implementing the wishes of the people should properly concentrate on the Parliamentary process. It should not need to go to the courts. The courts themselves need to be careful not to think it is their job to set the Parliamentary agenda. If there was a big body of MPs who wanted to reverse the decision of the  referendum and thwart the will of the people, there are ways they can seek to do so. The opposition parties have days allocated to their choice of business. They could use any one of those to hold a debate and a vote to prevent Brexit. They can use government debates on the EU which are available in abundance to make their case. They can make it during the various Statements the government issues. They can seek Urgent Questions on matters they rank as important. They can use their seats on the Brexit and European Affairs Committees to put their case. They can oppose the repeal of the 1972 European Communities Act when we get to it, when there will be government led votes which they can vote against.

The fact that they have chosen to do none of these things tells you that they rightly judge they must not been seen to deliberately seek to countermand the decision of the voters in the referendum. The Commons voted 6 to 1 in favour of a referendum, described as transferring the decision to the people by the government introducing the Bill. How can MPs who voted for the referendum go back on its central promise to let the people choose?  Both the Remain and Leave campaigns in the referendum agreed the people would decide.

If only more of these Opposition MPs would grasp that we do not currently have a sovereign Parliament. What a cruel irony that some Members of Parliament pray in aid the idea of a sovereign Parliament, whilst doing all they can to stop one being recreated. At least the Supreme Court was right to tell the Scottish Parliament that our membership of the EU is a matter for the whole UK and for the UK Parliament. Scotland does  not have a veto on this national decision.

 

The government has published its Green Paper designed to boost industry and productivity, and to spread investment and prosperity more widely around the UK.

One of the main improvements   I have been seeking is improved public procurement. The paper stresses the need for change in this area. The public sector buys all too many items from overseas, when acting as an intelligent customer and partner of UK business would allow it to buy good value goods and services here in the UK. The public sector would then benefit from the taxes levied on that business activity and on the incomes of the employees involved, and there would be a saving on the balance of payments.

The Defence department has ordered a large number of Ajax light tanks from Spain. Given the long term production runs needed the government could have worked with a UK company and design. It is importing steel for our new submarines on the grounds that our industry does not make the right specification. Surely it could have been worthwhile to discuss with our steel industry how they could invest in transforming their base steel into the required material?  We are importing large quantities of building materials and components for the UK public housing programmes executed by Housing Associations and Councils. This again is work that could be done at home.

In our overseas aid programme large sums are sent to foreign institutions, charities and companies to spend for us. I want to see us concentrate our aid activities on specialist areas like disease eradication and the provision of clean water. If we did we could have sufficient purchasing power to allow companies to invest in producing the vaccines and water plants here in the UK instead of importing them from other rich countries. Overseas aid is best spent in the country you are helping. Where that is not possible it should be spent on things we are good at here.

The Green Paper also covers R and D, skills, infrastructure, start ups, exports, affordable energy, world leading sectors, spreading investment around the whole UK and creating institutions to assist. Tax cuts would  also be a big help in generating enterprise and growth. Ensuring proper competition and preventing take over by large groups wanting to reduce competition will also be essential.