Some interesting Taxpayers Alliance figures

This year the government will spend £11,763 per person, or £40,958 for every family in the UK. The Taxpayers Alliance have been going through the government figures and bringing out some of the highlights. Amidst all the debate about rates of change in financial provision, arguments about whether a cash increase is still a real cut, and an overlay of debate about austerity, we often lose sight of just how much money and resource the public sector commands.

Each one of us has an average state debt of £24,444 and a share of £22,754 in the public sector pension liabilities. This does not of course include future state pension payments, which will fall to be paid for from future tax revenues. Total spending this year does include this year’s pension payments as they are met on a pay as you go basis.

England receives less spending per head than the other three devolved countries and provinces in the Union. (2014-15 figures, two years earlier than the other figures). The lowest spending is in South East England at £7756 per person. That is 69.8% of the Northern Ireland figure, 74.7% of the Scottish figure and 78.3% of the Welsh figure. No English region gets as much as Wales, which in turn gets less than Scotland.

The largest individual budgets within the totals are welfare and the NHS, which between them make up half the total spend.

It reminds us, as the TPA wishes to do, that a great deal of progress can be made by spending the money more wisely and by lifting productivity in the public sector as part of the campaign to improve productivity generally in the economy. It also reminds us that more can and will be done to get more people into work and into better paid jobs, to whittle away the need for welfare reliance.

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What is the EU negotiating position?

So many critics of Brexit in the UK have dominated the debate, that it has been mainly about the UK’s position. More interesting and more useful for us as a country is to explore what is and should be the EU’s position? How easy will it be for the 27 to agree one? How quickly will tensions emerge between the member states who need goodwill and trade with the UK, and some in the Commission who want to make a political point that no country should be allowed to leave?

The aim of the EU is pretty clear. In their make believe world they want to try to make the terms of exit difficult so the Uk suffers on exit. There is of course no way they can do that. All they can do is damage the member states who remain. Their problem is the UK gets such a poor deal out of the EU that leaving even without an agreement is much better than staying in. On leaving we save our big net contributions, we get back control of our own laws, and will be the winners from the modest tariffs on our exports against the much bigger tariffs on their sales to the Uk under WTO rules. We will be free to lower tariffs with the rest of the world, to buy cheaper food from emerging market countries helping them and us, and be free to regulate and promote business as we see fit.

The EU of course talks in a contradictory way about Brexit. It both argues it is better to stay in, and argues if we leave more might want to leave! So which is it EU? Is it so good in the EU that any other country would be mad to leave? Or is it so bad that once we have dug the escape tunnel others will want to use it? One of these propositions must be wrong, or possibly both. Their cruel and unpleasant rhetoric about punishment, like their many threats to us all the time we were in the EU, makes it less easy for them to strike a good deal for their member states.

The member states are altogether friendlier and more circumspect. No member state government has said it wishes to impose WTO levels of tariff on our exports to them, because they know it will be more damaging to their exporters. They not only sell us more in total than we sell them, but the rest of the EU sells much more of the agricultural goods and cars that can attract higher tariffs, whilst we sell many goods and services that remain tariff free under WTO rules. Most of them understand that their many exporters to the UK do not want the EU and their government getting in the way of an important trade.

Of course the EU would like us to make contributions into the budget, but no other country outside the EU and EEA does and there is no need to do so to trade with them. If they want us to contribute to export to them why not they pay to export to us? Of course they would like us to continue to generate lots of jobs for their unemployed workers. That is something we wish to limit. Of course they would rather we accepted all the same laws and rules as them. There is no need for us to do so for all the trade we do at home and with the rest of the world.

I want us to be friendly and generous in our offer for after exit. We should tell them we want to stay friends, to maximise our mutual trade, and carry on without tariffs and new barriers. They also need to know there is no way we can or should offer to let them control our migration policy, or to carry on placing levies on our budget. I suspect the member states will welcome our friendly and helpful approach, but if they don’t it will still be good news for us.

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The Commons votes for an Article 50 letter

As I have explained before, Parliament could always debate and vote on leaving the EU any time it liked. Yesterday the Opposition got round to tabling a motion on Article 50 and we had another all day debate on the EU as we have several times since the referendum in government time.

The Commons voted by a majority of 373 to send a letter before the end of March, as I assumed it would. Only the SNP and LIb Dems voted in any numbers against.

I trust the Supreme Court will now understand two things. One is Parliament can and does debate and vote on what it wishes. Two, there is a very large majority for carrying out the wishes of the UK voters and sending the notification of our departure
The Supreme Court case is even more of an irrelevance after yesterday.

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Who are you kidding, Mrs Merkel?

Mrs Merkel over the last year let in around 1 million economic migrants and refugees. Many Germans disagreed, and social and political tensions followed.

This week Mrs Merkel says that was a mistake, and wishes to ban the burka if the law allows. So she has shifted from a very liberal position to picking on a group of people and forcing them to change their clothes.

Mrs Merkel, the architect of much of the EU’s troubles over open borders, and of the EU/Turkey Agreement, now wants to look like the anti immigrant parties which she normally condemns. I doubt many will believe her or warm to this new policy. Her liberal supporters will be appalled by what she has said. Those who want proper control of borders will see this gesture politics is no substitute for proper controls of numbers of economic migrants. They will also doubt she will ban the burka, given the caveat. It looks like a desperate move.

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The state of the UK economy

Let me quote something I agree with:

Since the crash of 2008-9 “The proportion of people in work moved to its highest level on record, nominal wages are up 17%, real GDP is up 15% and the UK has consistently been one of the strongest economies in the G7. All major income groups have seen their income and wealth rise”.

That was the Governor of the Bank of England.

Here’s something else he said that I also agree with: “Growth appears to have been materially better than we had expected in the summer. Households appear to be looking through the Brexit-related uncertainties at present. For them, signs of an economic slowdown are notable by their absence. Perceptions of job security remain strong. Wages are growing at around the same modest pace as at the start of the year. Credit is available and competitive. Confidence is solid”.

In other words, the Bank now agrees that growth in 2016 is good and unaffected by the referendum.
There is a residual of the Bank’s pessimism of the summer in the lecture. He now says that he still expects inflation to come through and cut real incomes, which could turn off what so far is a consumer led growth rate and recovery. He bases this on the fall in the pound, which he did predict. He acknowledged in the lecture that the pound is up 6% since early November, so the pressure is abating. The Bank needs to research why retail prices were down 0.7% in the year to October, when much of the fall in the pound occurred in 2015 and early 2016. it looks as if highly competitive world markets for goods and highly competitive retailers with too much shop space in the UK are keeping prices down despite the long term fall in the pound over the last eighteen months. It looks as if some price rises may come through in the new year, but it is also the case there is a strong competitive headwind against bad ones.

The Roscoe lecture was clearly the Governor’s wish to be in line with present government policy and with the run of good figures about the economy in recent months. He praised the decision to relax the fiscal constraints a bit. He agrees that a range of measures is needed to boost productivity as the Chancellor has advocated, which is the way to higher real wages. The most notable omission from the lecture was any mention of high levels of migration, which must be having an impact on wages and the labour market, and is having an impact on public attitudes.

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The Supreme Court and the High Court of Parliament

In the very week that the Supreme Court solemnly considers a case about whether Parliament should debate and vote on an Article 5o letter or not, Parliament holds a debate and a vote on just that topic.

I have explained endlessly to those interested that Parliament can any time debate and discuss Brexit. Indeed, it has chosen to do so on many occasions since the vote, despite the lack of any news as the government awaits the moment to start the process and to announce its negotiating aims. It has not yet had a vote on the procedure for the reason the Opposition did not want one and did not table a suitable motion to hold one.

Treaty issues have long been left to Ministerial prerogative by Parliament for the simple reason that you cannot handle a negotiation successfully with 650 different voices all setting out a position. As this week’s Opposition motion states, it does not help for Parliament to demand that government reveal its bargaining and fall back positions. When Ministers are negotiating Treaties Parliament debates and votes as it sees fit, but leaves all the work and the detail to Ministers. Parliament does not usually want to undermine the national interest by demanding information helpful to those we are negotiating with.

Throughout our time in the EEC/EU Ministers have regularly used prerogative powers to bind us into EU decisions, regulations and judgements which Parliament has been unable to vote on or prevent. Many of these have adversely affected our right to be a sovereign and free people. It was curious that the High Court of England thought that was acceptable yet using the same prerogative powers to bring the right to self government back was not.

I hope the Judges understand three basic points. The first is the referendum was the decision. Government made that clear in Parliament and in a leaflet to all voting households. The second is Parliament can debate Brexit any time it likes, and has done so extensively already. The third is Parliament needs to make up its own mind on what it wants to vote on, and is free to do so.There can be plenty of votes on the Repeal Bill.

The main method of taking the UK out of the EU is the repeal of the European Communities Act 1972. This will be a thorough Parliamentary process, ensuring MPs are fully engaged.

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Representing Remain

I take seriously the need to bring the country back together after the Brexit vote. I have spent much of the last five months seeking to look after the interests of Remain voters.

I took seriously their fears about possible economic damage from the vote. The Remain campaign concentrated on setting out the possible short term and longer term economic damage they saw. I am pleased to report that now almost six months after the decision there is no visible damage to jobs, output, confidence, house prices and earnings. It is true the pound is down a bit more after the vote, though it has rallied strongly against the Euro and the yen over the last month. The biggest part of the substantial devaluation since June 2015 occurred well before June and well before markets thought Leave would win.

I have spent time setting out in articles and interviews why there is no need to experience any short term economic damage. I have discussed with Ministers actions that can help power more growth, more jobs and higher incomes. I have proposed various ways of ensuring we build more homes and create more better paid jobs. I have been pleased that the government has abandoned the severe deficit reduction policies of the previous government, and is using more realistic – even pessimistic – figures for future revenues and borrowings, In the last Parliament the government regularly failed to hit its revenue targets and so had to borrow more than planned.

I am happy to take up any specific worries or issues Remain voters in Wokingham have. My aim is to help the government build new and better trade relationships for the UK with the world as whole. I want to see a UK open to talent, investment and ideas from around the world. I am pleased to report that so far since the vote jobs are up, pay is up, housebuilding has increased, car out has increased, inward investment continues and the markets are higher now than on June 23rd. Now comes the task of negotiating good future friendly arrangements with the rest of the EU. We will continue to trade, have many collaborations, do much with our EU neighbours after we have left. The aim is to be richer and freer. We will also be better Europeans by allowing them to get on and complete their union which most UK voters did not want to join. I was struck in the many debates I did during the referendum by how practically all the Remain spokespeople said they did not wish to join the Euro, or Schengen, or the political union or the common army.

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The wider message

Quite often contributors write in asking why I don’t publish my views more widely, or even suggesting this site is a way of keeping things unpublished! I always explain that this site is designed to publish the views for those interested, including the media. This week has seen me write different articles on the general economic themes from this site for the Guardian, Observer, Independent and Telegraph, so I do use other publications when these are of offer. I am always willing to write a unique and new piece for such papers.

I was also asked to appear on Newsnight on Friday. I had already committed myself to the Wokingham Living Advent event and to hosting the Floods Minister in Wokingham so I had to turn it down as Wokingham comes first.

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That Treaty deficit – Maastricht and austerity

This week I have written a bit about the severe austerity policies followed in parts of the Eurozone, and pointed out the impact these have had directly and indirectly on UK policy. The results were obviously at their most damaging when we were in the Exchange Rate Mechanism and had to hike interest rates at a time when the economy clearly needed lower rates. Again the Euro crisis added to the dangers of the banking crash in 2008-11.In recent years there has been no comparable EU control mechanism directly acting, but the shadow of Masstricht hangs long and steady over the UK government’s fiscal stance. My critics pretend it is otherwise and say I should not associate the EU with austerity policies.

I would ask them to look in each Red Book the government produces. This document has to be sent to the EU to comply with the requirement as the UK is part of the EU economic semester, and has to file its fiscal plans with the Commission. They in turn analyse and comment on them, recommending remedial action where necessary. We are meant to be bound by their two clear controls. They want us to limit state debt to 60% of GDP, and to keep the budget deficit below 3%.The last 3 governments have been breaking these rules, but have clearly wanted to be able to say to Brussels that we are trying to get the deficits down and in due course the debts. Labour set out a course to bring the deficit down, then the Coalition and the pre Brexit Conservative government made complying with the Maastricht deficit rules and starting to get the debt down as central to its aims.

Each Red book has a table which shows where we are under the Stability and Growth Pact. They have to show the progress or lack of it being made in bringing down state debt to 60% of GDP. They have to show the “Treaty deficit”, the budget deficit under EU definitions. They have to show the cyclically adjusted Treaty deficit, as countries are allowed some leeway in a downturn.

The Treasury do not put these numbers in for show, and do have to report and defend them to Brussels. There can be no doubt that cutting the budget deficit and in due course cutting debt is an EU requirement which successive UK governments have taken seriously. Some clearly want to do this for domestic reasons as well, but it is simply wrong to deny the requirements and pressures that stem from the common EU policy. There is abundant evidence that in the Euro area where the pressures to conform are greater, the austerity policies have done damage to employment and output. I have every reason to associate austerity policies with the EU, as their scheme builds them in to all the deficit countries.

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Visit of Floods Minister

On Friday night Therese Coffey, the Parliamentary Undersecretary of State at the Environment Department responsible for flood protection, was the guest at the Wokingham annual Conservative dinner. Whilst it was mainly an enjoyable occasion, I was able to remind her that there is outstanding business for the Environment Agency to help improve Wokingham’s flood resilience. She agreed to a meeting to follow up, and also heard from local Councillors of how they see the problem.

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  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

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