The Daily Telegraph had a good article on 11 things the government has done which impede growth. They included the National Insurance tax on jobs, the farm and small business tax, the Non Doms tax and the tax on selling too many petrol cars. There is the Minimum wage, public sector pay and the employee rights law. There is the net zero policy, educational reform, Council tax and migration.

Unfortunately I need to add some more to this useful list. There is the reduction of pensioner spending power from the fuel grant changes. There is the planned introduction of the carbon border adjustment mechanism.This effective tariff will make essential imports dearer so it is a tax on UK consumers. There is VAT on schools which is closing some private schools with loss of jobs. There is the planned give away of the Chagos pushing up public spending and taxes to pay for it. There is government endorsement of huge Bank of England losses from needlessly selling bonds, losses that have to be paid by taxpayers. The selling helps keep longer term interest rates higher.

There are the additional regulatory costs and taxes hitting landlords, leading to a reduction of rented accommodation. There is the ban on new oil and gas wells. There is support for anti car and van traffic management and road reduction schemes which mean service providers book fewer appointments., allowing for the traffic congestion.

The Uk is the fourth largest trading nation in the world.Just 41% of our exports  go to the EU and 59% to the rest of the world. Services makes up 56% of our trade, and goods 44%.

The Uk has attracted £2079 bn of inward investment. Just 31% of that has come from the EU and 69% from the rest of the world. The top three investors in the UK are the USA, Jersey and Luxembourg. Our trade with and investment from the rest of the world is growing more quickly than with the EU, as it did in our later years in the EU.

Our trade with the EU is in heavy deficit, as when we were in it. In the  last year the deficit was £98 bn. We are in good surplus with the rest of the world at £79 bn last year.

Our export growth since Brexit of 64% in cash terms is real growth of more than fifth. There has even been real growth in exports to tge EU despite our slower growth with them continuing. Our fastest growth is in service export’s to non EU. That can be assisted by more trade Treaties with non EU countries that include good Services chapters. The EU never bothered to negotiate good services provisions as France and Germany wanted to favour industrial and food products.

What goods does the UK  government think we could sell more of if we accepted more controls from Brussels?

Three of our past leading exports to the continent have been oil and gas, refined oil products and petrol and diesel cars. The government is busily closing down all three of these industries. They want to stop us making things using gas, so our steel industry closes this year. Sky high energy prices have already throttled back ceramics, glass, aluminium, building materials. There is little left to boost goods exports as net zero policy drives us to import more.

The government says we might export more food if we changed the rules. Surely the easier priority is to grow and sell more food at home, where the Common Agricultural Policy hit Uk market share in milk, beef, fruit, veg and other basics.

We would not benefit from joining the customs union. It would make us impose tariffs against the rest of the world, where our trade is growing faster. It would be another boost to the huge import volumes we already buy and another boost to their huge trade surplus with us.

I read today that the Chancellor is going to take on the ultra greens in Labour and insist on more building. She wants to change planning law so net zero arguments cannot stop new homes, data centres and other developments.

She needs to understand that to get growth the UK also needs a lot more cheaper energy. She needs to explain to Miliband that the more renewable power the UK has added, the higher the price of electricity and the more we rely on imports. The UK will not catch up with the US with electricity four tines the US price. We have not solved the big  problem of storing wind power. On very windy days we pay a fortune to get somec wind farms to shut down. Sone developments cannot  go ahead in this country because they cannot secure an electricity supply.

We need to put in more gas fired plant while we wait for that nuclear we have been promised.

 

The Chancellor yesterday used a Goldmans forecast to propose the Bank cut interest rates six times by the summer of next year. She says she believes in Bank independence, so this was a silly thing to say. She will argue she was quoting someone else but she chose to quote one of the forecasts expecting more cuts because  she wanted to make it clear she wants rates down. She has been damaged by the surge in the ten tear rate to 4.9% recently, well above the short term one day spike in the ten year  at 4.38% which she said crashed the economy in 2022. The knock on to mortgages is not helpful for a  government wanting a 50% plus rise in housebuilding.

Too many MPs misunderstand Bank independence. It is only independent to fix the overnight base rate or MLR. It is otherwise wholly owned by the state, its Governor is appointed by the government and answers to them and to Parliament’s Treasury Committee, and it has a full indemnity against losses on its bonds. It needed Government approval for all its QE bond buying.

In recent years I have not called for it to lose its independence over rates, and I have not provided a running commentary on what rate it should set. I see the theory, that a panel of experts with a main task of keeping inflation  to 2% should be able to do a better job than elected politicians wanting lower rates to help win an election.

We need, however, to see that the practice has not followed the theory. The Bank took us on a wild ride, debauching our money with ultra low rates and massive bond buying, driving inflation up to 11% or 5.5 times target. It then crashed the economy, selling bonds at huge losses and driving rates up.  It blamed the inflation  on war and energy, ignoring the fact that inflation was 3 times target before the war, and ignoring the way Japan, China and Switzerland kept inflation near 2% despite war and dear energy.The Bank has proved hopeless at predicting the inflation  rate it is meant to  control because its economic model is poor.

If the Chancellor really wants growth she needs to change Bank  policy on bonds where they are not independent. The Bank has cut deep into fiscal policy with its losses . Meanwhile Mr Trump will try to lecture  the  Fed into lower rates, after they too have given the US a nasty inflation and are now restricting credit.

 

The public sector is around 10 % less productive than in 2019. There has been a big expansion of staffing in the civil service and public sector administration despite more spending on computerisation. The Treasury suggest this is a loss of around £24 bn.

I looked at ways of getting this loss back. The government suggests spending more on AI might help.  Getting back to 2019 levels of output does not need AI as there was no AI in 2019.

The government needs to introduce an immediate recruitment freeze. As people leave the service posts needs to be amalgamated or abolished. People should be promoted on merit to bigger roles.

The state where it is appointing people to highly paid roles like the Head of the Post Office, HS2 or the Bank of England should earn most of the high pay as bonus, only paid if they deliver. The Head of the Post Office should deliver profits,  it losses. HS2 should be on time and to budget. The Bank should deliver 2% inflation.

People in the civil service should stay to see projects through or to undertake a role  for long enough to do it well and repay the state for the training and experience.

The public sector should run quality systems, treat complaints seriously and manage out mistakes.

Today in my lecture at 11 am at All Souls  College and on zoom I will set out a range of policies that could boost growth in the UK. I will not have time to discuss the current conflict within the UK government.   between the pro growth Ministers and the Net  Zero Secretary.

The Bank of England response to the Chancellor’s call for Regulators to help with growth was interesting. The said if the government removed  the need for them to promote green investment and promote anti climate change policies and  loans the economy would grow faster. Through the PRA they regulate commercial banks and need currently to worry about the balances of lending vis a vis decarbonisation.

The PM and Chancellor have promised to speed up planning permissions for investments in everything from grid pylons to datacentres. Quite often delays and even refusals result from the ability  of environmental campaigners to object on net zero, wildlife and landscape grounds. They are thinking of limiting this.

Several airport expansion plans have been delayed or shelved under an environmental imperative. The Chancellor is reported as wishing to override these. The UK needs more international travel capacity to boost trade and investment as well as to grow the holiday business.

Will the government make these changes and tell Mr Miliband to live with that reality? Will President  Trump’s priority for growth over net zero have any influence?

It will be available on Zoom tomorrow. Details on www.asc.ox.ac.uk under events.

Tomorrow I give my lecture at All Souls Oxford on how to promote growth.

Chancellor Reeves would be well advised this week to be studying the US model. The US has outgrown Europe and the UK all thus century so far, and is forecast to grow more than twice as fast again this year. President Trump is determined to up their growth rate further.

Central to doing so, he has made his peace with the US tec giants. Regulations and taxes will be adjusted to assist their growth. The policy has got off to a great start with the announcement of a $500bn 4 year investment  by three of them. This compares with our Chancellor claiming a£600 m gain from her China visit spread over 5 years. The US announcement was 1000 times size of the UK!

The US will expend her oil and gas industry. We will close ours down. It will cut taxes. The UK has just put them up on business daring to employ people. The US welcomes billionaires and millionaires. The UK criticises them and taxes them out of the country.

It is going to take sone changes for the UK to grow faster than the US.

 

 

Several Executive Orders on Monday start to tackle  the high costs and overextension of US government. These are not getting the attention they deserve. Our Wastefinder General  Rachel could read and copy some of these.

1 Pause all overseas aid payments for up to 60 days, only allowing them to go ahead after review to see they are value for money and further sensible policy aims.

2. Freeze all hiring of administrative staff into government. Require Heads to draw up productivity raising plans using natural wastage to cut numbers. Prohibits use of outside contractors to get round ban.

3.  60 day ban on any new regulations, allowing review of whether anything is necessary in future.

4. Removal of barriers to increased oil, gas, minerals and coal production

5. Exit from Paris climate change Treaty to cut costs of net zero.

6. Establishment of Department Of Government Efficiency in White House reporting to Chief of Staff. Every department and governmental body to have a team of four senior people promoting greater efficiency.

7 Return to in person working

8 Recruitment and promotion to be based on merit only. DEI departments to be wound down.

This is a big agenda. It will be interesting to see if the senior managers can reflect these clear aims in workable plans to shrink the state.