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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Finding England’s voice

 

The debate about the future of Scotland raises an even bigger debate – what will be the future of England? More and more people in England feel we are getting a raw deal, as the political classes concentrate on improving the offer to Scotland, and burnishing special arrangements for every part of the union of the UK except that of England.

I have tabled questions again asking who speaks for England?  When can we have the policy of English votes for English issues applied in the Commons? Why don’t Labour  MPs for Scottish seats recognise the long term political danger of voting for or against English matters when the same issues about Scotland  are determined by the Scottish Parliament in their own constituencies?

The last General Election saw the Conservatives win a comfortable majority in England. Because Labour MPs for Scottish seats intend to vote on English issues as well as Union issues, the Conservative leadership had to set up a coalition government for England as well as the Union. England now has to accept policies which were defeated in the English part of the General Election as a result. Conversely Scotland gets exactly what it votes for in big areas like education, health, local government, law and order and the environment because these matters are now determined by the Scottish Parliament. Scotland can be on the losing side in a General Election but still get much of the government  it wants through devolution. England can be on the winning side in a General Election, and still end up with a government it does not want thanks to the presence of Scottish MPs at Westminster. (All this of course is subject to the increasingly stifling impact of the EU on all parts of the UK)

England’s sense of grievance is sharpened by the persistent attempts of the EU and its Labour and Liberal Democrat supporters to deny the existence of England and to seek to split us up into a series of meaningless regions. They want Liverpool to accept government from Manchester, Sunderland to accept government from Newcastle, and Exeter to accept government from Bristol, as they seek to steamroller city identities into convenient regional administrative units. In my own case they  cannot make up their mind whether my area is the Thames Valley, the rest of the South-east,  Wessex, the south or some other monstrous bureaucratic birth.

England is the part of the UK least happy with the EU relationship. English voters will want to use any change in the Scottish relationship as further reason to change our subservience to the continent. More English people now want to have a voice, and for us to have more say over our own affairs, if everyone else in our union is allowed such freedom.

Catalonia, Crimea and Scotland

 

The Spanish Parliament with the support of the EU has decided that Catalonia will not get a legal referendum on whether to stay in the Spanish state or become independent. The Crimea has just had a referendum which the EU condemns as illegal, and the Ukrainian state with the support of the EU failed to offer Crimea a legal one. The Crimea has left the Ukrainian union regardless, with the help of the Russian army. The EU is right that this was not done legally or by agreement, but maybe wrong to imply a majority of the Crimean population would have voted NO to the move in any legal referendum.  Maybe Catalonia will now hold its own referendum, creating a clash between the Catalan and Spanish governments.

Scotland has been given a legal referendum on whether to stay in the UK or not. The EU does not seem to approve of that process very much, threatening Scotland if she dared to vote to be independent. All this implies the EU does not believe in the democratic self determination of people. They need to change their mind and be more accommodating, as do the European states who wrongly seek to block the free expression of opinion about identity within their current territories.

There is a paradox about the EU’s approach. In the earlier days of its long journey to superstatedom the EU seemed to encourage regional government and regional identities. It saw this movement as a way of weakening the member states from below, and claiming greater affinity to the people of the EU by identifying the EU more with the regional interests. As the EU has grown in power and taken more control over the member states, its enthusiasm for regional identity has waned where  it looks like becoming a movement for new smaller independent states.

I believe in the democratic self determination of people. I am glad we are about to see what Scotland really wants. We should then accept the verdict and get on with implementing the consequences either way. Allowing a vote when there is a serious question to answer is an important part of democracy which the EU seeks to stifle. Continuous referenda on the same subject until  one side gets its way, having lost in the past, is not such a good idea. Indeed, when the EU is forced into referenda that is their style: to keep on voting until they get the answer they want.

Official figures don’t always tell you the whole story

 

Yesterday we learned that the official figures for inward migration from the EU had been understated in the last decade. An additional 356,000 arrivals have been added to the numbers for the period 2001-10, with 10,000 fewer in 2011. Apparently they undercounted children and people arriving at regional airports.

It is always unfortunate when official figures need substantial revision. Honest mistakes or careless compiling can look like something more sinister to those who worry about the underlying reality the figures seek to capture.  In this case the errors were all ones of understatement, at a time when many people were worrying that the figures were too high anyway.

Similar problems arise if economic figures for growth, jobs and wages have to be revised down, or numbers for unemployment, inflation and other bad news have to be revised up. We learned this week that in an effort to harmonise our economic numbers with the rest of Europe we will witness upwards revisions to our apparent savings rate to reflect those in final salary pension funds, and to our output to credit us with the benefits of R and D being undertaken. It serves as a reminder that all these figures are approximations dependent on assumptions about what you count and what you leave out. All are also prone to understatement as it is difficult in a complex economy capturing all the activity for inclusion in official figures.

What does emerge is the casual way the past  migration figures were compiled, relying on surveys and not on counting people in and counting people when they left. It will come as a surprise to many that when you have a border system with everyone having to show a passport and visa where necessary people have not  not been counted in and logged. The government is trying to remedy this defect so our border control system can have more ability to furnish us with accurate data, and to remind people whose visas expire that they should leave.

Having accurate data is important for a variety of sensible purposes. We need to know how many people need housing, how many children need school places, how many people may need to visit a Dr or hospital. In the last couple of years Wokingham and other places have been playing catch up, trying to add to the school and surgery provision to deal with the extra people we now have in our community. More accurate figures sooner from our border system might have helped make provision earlier, as well as informing a better debate on numbers.

 

 

 

 

thousands

 

Calendar year

Revised Net migration estimates

Original Net migration estimates

Difference

2001

+  179

+  171

+    8

2002

+  172

+  153

+   19

2003

+  185

+  148

+   37

2004

+  268

+  245

+   23

2005

+  267

+  206

+   61

2006

+  265

+  198

+   67

2007

+  273

+  233

+   40

2008

+  229

+  163

+   66

2009

+  229

+  198

+   31

2010

+  256

+  252

+    4

2011

+  205

+  215

–   10

Source: Office for National Statistics

Unpicking the United Kingdom?

 

I spent last year ignoring the forthcoming vote on Scotland’s future, as the opinion polls showed strong support for no change to the current position. More recently I have taken an interest, as the polls have narrowed. I  have also commented that the “Better together” campaign is a bit  negative  in some of its content and tone, and might be more successful if it was positive and sought to ally feelings to “facts” about economic matters.

So maybe today I should ask what will happen and what should happen, if the unlikely event occurs and the Yes campaign wins for splitting the UK.

The first thing that should happen is all MPs representing Scottish seats in the House of Commons should withdraw from all business relating to the rest of the UK, especially business relating to the negotiation between the rest of the UK and Scotland. The government should pass a Bill excluding Scottish MPs from rest of the UK business if there is no voluntary agreement to this

The second thing is a negotiating team of senior Ministers should equip themselves to negotiate on a wide range of matters that need settling between the two new countries. This will include splitting the state debts and assets, sorting out responsibility for banks and money, the transition to a new currency for Scotland, the transfer of benefits, pensions and other state liabilities to Scotland for their people, and the trade and border arrangements which will apply following the split.

The third thing is to notify the EU of the need to change our relationship with the EU. Our partners will probably deem the rest of the UK to be the successor state to the UK, but they will want to cut our number of MEPs and our votes around the table. The rest of the UK will need to cut our financial contribution, and may as well regard the exit of Scotland as triggering  a much more fundamental renegotiation of our relationship. There will have to be Treaty changes anyway. It would accelerate the task Mr Cameron has set himself for a future Conservative government, and give rise to an IN/Out referendum on possible rest of the UK membership of the EU. Whilst as a Unionist I would prefer a willing Scotland to stay with us, as an Englishman I can see advantages in being able to sort out this wider EU relationship sooner and from a different bargaining position where England’s view is more central.

 

The Death of Britain?

 

In 1999 I wrote a book asking this question. I hear that people are reading it again. I stand  by my conclusions then, now tested by 15 years passing.  When I wrote the summary I said

“Can the UK survive devolution, European integration, reform of the Lords, slimming of the monarchy, proportional representation?

Will Scotland  now seek to shatter the Union by demanding full independence? Will the new House of Lords be anything more than a rubber stamp full of the friends of the PM? Would the abolition of the pound mean common taxation and political union with France and Germany?

….Viewing the Blairite revolution as the agency for wider changes  coming from the agenda of France. Germany and the European Commission, I  ask the questions: are these changes inevitable, are they desirable, and what will they mean for us here in Britain? In the name of the people, the people’s right to a voice and justice is being damaged. More and more decisions are being made behind closed doors, in quangos and in Brussels. ”

I enjoined people to fight the battle to save the pound, the one part of the scheme we could prevent because we were offered a referendum. The last decade and a half was not in vain, because we won the battle of the currency. If we had lost that Britain would have been well and truly dead and buried.

Commenting on devolution I said ” The end result will be a more divided, more factious, more overgoverned, more overregulated UK…It will not reconnect the people with the politicians. It will confirm the public in their view that politicians by and large do not solve problems, do cost too much and are good at misleading the public in their own interests”

I concluded the book by saying  ” Labour’s constitutional blueprint is nothing more than a plan for the destruction of UK democracy. It threatens splits within the kingdom. It threatens transferring far too much out of democratic control. It gives far too much ground to the federal plan on the continent. It dares to do all these things in the name of democracy, when the result will be less.”

Today we are facing the consequences of those bad decisions. We are trying to resolve the question of Scottish independence, because devolution did unsettle not solve the problem. We have to tackle the problem of excessive powers passing to Brussels. We are living with the consequences of quangos like the Environment Agency controlling large parts of our lives. We need a new settlement, which gives people back their power to sack accountable MPs and so change the government. In turn MPs need to take responsibility back for governing the country so they can serve the country well. .

 

 

Taking the speed out of High Speed II

 

           The Commons Environmental Audit Committee is not reknown for its sense of humour. So when they said in their recent Report into HS2 that they would like “the government” to “examine the scope for requiring a reduced maximum speed for the trains until electricity generation has been sufficiently decarbonised” they were definitely not joking.

           A High Speed train that goes slow? Now there’s a novel idea. The government, after all, could say it has recently switched its case for HS2 away from speed towards “capacity”, so agreeing to put some speed limits on the new trains would not upset that aim too much.  So why has the Committee reached this conclusion?

                We are told that trains travelling at 225 mph use three times as much energy as a train travelling at 125 mph. We know from using our cars on motorways that cruising at 70 mph  uses more fuel than cruising at 50mph, but we of course are stopped from doing anything like  current train speeds. That’s partly a safety judgement, and partly an environmental one.

           It’s no good saying these are electric trains, so that makes them just fine for environmentalists worried about CO2. A lot of our electricity is still generated from fossil fuels that emit substantial CO2. The more fast trains we run, the more CO2 we will let out into the atmosphere. The Committee also worried about the impact of the new train route on ancient woodland, but did not press on the question of the environmental impact of this railway on urban areas, especially in London. That too could be quite considerable.

            People who had not thought through their CO2 accounting rashly assumed trains would be better than cars and planes from the environmental point of view. They had also failed to consider carefully the impact of a new line and the carbon cost of the construction.  The CO2 output of the finished railway  all depends on how many passengers use the trains, how much energy people use up getting to and from stations, how heavy the trains are and how fast they go. Trains like cars and planes require energy to drive them, and much energy to build them. CO2 accounting is not a simple case of trains good everything else bad.

           Nor is the safety case as overwhelming as some believe. Trains travelling at very high speeds are dangerous. As a result the lines have to be completely isolated from any external intervention by people, plants  or animals, to avoid items on the line and to avoid any clash with pedestrians, cycles, children playing and anyone else who would be at risk. Motorway carriageways  too are segregated from cycles, children playing,and  traffic coming in the oppposite direction so they like railway lines are a lot safer than general roads. The speed limit placed on cars at 70mph, allied to rubber tyres with grip and steering systems to avoid collisions means cars have a better chance of keeping safe if a motorway is disrupted somehow. Trains are more likely to plough to disaster at high speed if a train track gets disrupted, as can happen at level crossings or through unplanned access to the tracks by others. Speed limits help reduce accidents on roads, we are told. The same must be true for trains.

 

 

The UK’s financial services are mainly regulated by the EU

 

In recent years there has been an avalanche of new regulations from the EU governing banking, financial services and insurance. I attended a seminar last week to catch up with the latest developments. It was a long meeting.

We are witnessing the early developments of regulation from the main European Supervisory Agencies (ESAs).

UCITs V has been developed to regulate investment funds. CRD IV is to regulate bank capital. The EU is working on a Bank Resolution and Recovery Directive, and on proposals for bank structural reform. The banking ESA is undertaking stress tests on banks and is seeking extra powers including binding arbitrations.

The Single Resolution Mechanism (SRM) will propose  a resolution mechanism to be approved by the Commission, to be triggered by the ECB. The Resolution fund will be paid for by all the Euro member states, but will be 60% mutualised within two years of its establishment.

The EU is working on changes or improvements to its anti money laundering legislation, on payments, benchmarks, and KIDIP consumer protection. It is backing the Asset Quality Review (AQR), and will allign EU leverage ratios for banks with Basel III international agreement.  The SSM, the new banking supervisor in the ECB, plans 1000 staff to supervise the main EU banks.  There will be a single rule book for banks across the single market, not just the Euro area. The system of living wills for  banks will be incorporated into the new system.

The aim will be a comprehensive system of consumer and professional market regulation in all financial areas. Every area will need to conform to the general rules against financial crime and money laundering. There will then be differing individual requirements sector by sector depending on the type of business and the nature of the customers.

Increasingly the UK regulators will be enforcing EU requirements. I mention this in a neutral spirit, but if we wish to have a well informed debate about the relative powers of the Uk and EU governments it is always now wise first to ask what are their respective powers and responsibilities. In the area of financial regulation the EU is clearly now in charge.

The EU is also  keen to increase its involvement in taxation. The UK has declined to join the scheme to introduce a Financial Transaction Tax, but other countries will go ahead without us. The EU is also planning to require more exchange of information over savings taxes, extanding the range of current proposals, as they wish to move closer to common savings taxation.

The UK says that as it is not in the Euro area it can still have its own distinctive system. Yet developments show that in so many ways membership of the EU as a non Euro member still sucks us into the general movement towards EU control.

One law for everyone

 

Some of the comments coming in about the behaviour  of the European  governing class remind me of King Lear’s discovery:

“Even a dog’s obeyed  in office…

Plate sin with gold,

And the strong lance of justice hurtles breaks;

Arm it in rags, a pigmy’s straw doth pierce it…”

I think things have improved a bit since Lear’s day, but at least it shows it is not a new problem.

18,965,000 people know the Euro is not working

 

Imagine the howls of protest from the left if a pro free enterprise group had taken over the government of the EU and were presiding over mass unemployment on the current scale. Yet today, with the big government brigade in charge of the EU, it is apparently acceptable that 18,965,000 people of working age are unemployed in the Euro zone.

No-one in the EU government seems to get cross about it. They do not seem to do any of the obvious things you would do if you wanted to bring unemployment down. Instead of making it easier for business to generate jobs they think up new ways to  tax and regulate. Instead of mending the banks and easing money policy they prolong the agony brought about by broken banks and demand they lend less. Instead of creating an energy market with prices that match our leading world competitors, they happily pile on more and more cost and tax to energy to make us as uncompetitive as possible.

The prospects have been even worse for the young. Almost one quarter of people under the age of 25 are out of work in the Euro area. In places like Spain and Greece half the young generation are workless. Still no-one seems to wake up in the EU government and ask why, let alone propose doing something that might make a difference to this lamentable state of affairs.

The EU goes about its business of feather bedding the governing class and leaving the many to fend for themselves in  a malfunctioning economy and currency union that sensible people warned them could not work. When we hear from this elite that letting people vote and have their say, as in Switzerland on migration, is dangerous, it is no wonder so many people in the UK have had enough of their arrogance and incompetence.

This year’s unsurprising shortfall in Capital Gains tax revenue (-23%)

 

The Treasury have been too optimistic about how much extra revenue they will get from a big hike in the rate of Capital Gains Tax. Indeed, it is coming in this year £1.2bn down on last year’s forecast, or a whopping 23% shortfall.  Just as they underestimate the extra revenue you get in from Income Tax rate cuts, so they exaggerate the extra revenue you get from tax rises.

In 2011-12 Capital Gains Tax brought in £4.3bn. This fell to £3.9bn in 2012-13 with   the continuing  higher rate, as I predicted but as many sought to deny. That was  a fall  of 10% in revenue. Not to be downhearted, the Treasury decided this was a one off event. They forecast a healthy rise in CGT this year to £5.1bn in the 2013 budget. A year later, in Budget 2014, the forecast for the year just about to end slumped from £5.1bn back to the previous year’s £3.9bn, still 10% lower than 2011-12.

The Treasury do not seem to understand CGT. People with assets have considerable scope to delay or cancel sales if the prospective  tax bill is too high. Sometimes they can find offsetting losses to take if they do wish to sell something sitting on a profit. People with flats in London they do not use very much any more decide to keep hold of them as they do not want to pay all the CGT. People with shares sitting on good gains delay sales, and phase them when they have offsetting losses and allowances to cushion the tax bill. Assets which could be better used by others are not sold on.

The rate at which you would maximise CGT revenue is likely to be a low rate because it so easy for people with assets to avoid this tax quite legally. It is not tax avoidance to sit on an asset you no longer need because it stands on a big gain. Gordon Brown seemed to understand this, and took CGT down to 18% which may well be near the optimum rate to maximise the revenue. People wanting the public sector to spend more should worry that CGT is too high to maximise revenue at the moment. The Treasury needs to improve its model to forecast this tax more accurately.