UK Economy

John Redwood Excerpts

Wednesday 29th June 2016 Commons Chamber

[John McDonnell]

To be frank, we need to move on now. I expressed my concerns about some of the over-exaggerated claims at the beginning of the campaign that turned people off. We now know, however, that many of the claims made on both sides are unfortunately coming true.

The leave vote in last week’s referendum has left us all with an immense series of tasks, and the economic situation is a major challenge for us all. Let me run through some of the headline items that we know about over these last few days: the UK’s triple A credit rating has been lost; the pound fell to a 31-year low; sterling markets have been in turmoil, as have stock markets here and abroad; the FTSE 100 index registered the biggest single-day fall since the bankruptcy of Lehman Brothers in 2008; employers, most notably in the financial services, are already looking to relocate jobs, with a quarter of all those employers saying that they have introduced a hiring freeze; and shares in UK banks have fallen dramatically. These are not comments, but realities, and this is just an outline of the situation that now obtains.

[John Redwood (Wokingham) (Con)]

Will the hon. Gentleman welcome the fact that the bond markets did the opposite of what the ratings agencies suggested? They said that the price of bonds should go down and the cost of state borrowing should go up, but I am very pleased to tell him that the opposite happened: bonds are at a new all-time high and, according to the market, we have record lows of borrowing costs. Does this not prove that the markets actually had a huge vote of confidence in respect of state debt and state creditworthiness?

[John McDonnell]

It proves the chaotic nature of the market at the moment.

Let me look ahead. Most major forecasters have revised their expectations of future growth sharply downwards. There is a major loss of capacity and the potential for permanent damage to the UK’s growth prospects cannot be ruled out. We await an official assessment from the Office for Budget Responsibility, as the Chancellor announced in his statement on Monday morning. I think that an initial assessment should be given sooner rather than later, but ongoing close monitoring would be welcome, with regular reports to Parliament to ensure that that is happening. There is a prospect that the OBR will report at least a serious worsening in the public finances.

--- Later in debate ---

[John McDonnell]

We are short of time and a lot of Members wish to speak.

Whenever aviation expansion takes place, it will be judged on the criteria that the Labour party has set, which include the environmental impact and the impact on the wider economy. We await the proposals from the Government and we will then take our decision.

The referendum vote has forced a debate on the best course for our economy and for economic policy. It is unlikely that a simple return to business as usual will be possible or even desirable, but there are immediate steps that can be taken to calm market volatility and to limit the shock to demand. It is incumbent on the Government to take those necessary measures and Labour, in the national interest, will support measures intended to stabilise the economy when they protect households and businesses.

On monetary policy, of course authority rests with the Bank of England to intervene to preserve the stability of banks and the wider economy. Governor Mark Carney’s Friday morning statement was important in helping to stabilise the immediate situation. However, some interventions by the Bank will require authorisation from the Government. To ensure the success of those interventions, it will be helpful if the House is kept as fully informed as practicable of those authorisations, with regular updates.

On fiscal policy, with the expected slump in demand, the Government’s present fiscal charter is, to say the least, increasingly anachronistic. With the Chancellor having missed two of his three targets—on debt and on the welfare cap—he will now have to suspend the deficit target. The charter’s restriction on investment spending in particular is impossible to defend. For the regions, a squeeze on Government investment could be especially damaging.

Last year—this was raised earlier at Question Time— over £10 billion was provided in regional development funding by the EU. That was concentrated on our most deprived regions and places that needed it the most. What steps are the Government taking to ensure that that essential funding will now be made good? What structures are being put in place to liaise with elected mayors, local government leaders and regional bodies to address the loss of EU funds?

The UK currently holds a 16% stake in the European Investment Bank, which last year disbursed a record £6 billion in investment for the UK. That includes £l billion for social housing. What steps are the Government taking to maintain current programme funding? What plans do the Government have for the UK’s stake in the European Investment Bank?

[John Redwood]

Will the hon. Gentleman give way?

[John McDonnell]

May I press on? I have taken a significant number of interventions and I am worried about time.

Significant uncertainties have been created for those trading with Europe, including manufacturers that are reliant on extended supply chains across the EU. What measures are the Government putting in place to support supply chains that are threatened by the severance of those ties and the falling value of the pound?

Exit from the EU threatens the UK’s continued status as a global financial centre. A number of major banks have already put in place plans to move jobs from the UK. They are fearful of the loss of their European Union passport that allows them to win business across the EU. We need to know soon from the Government how they will ensure that those passport rights are retained. I hear that one French negotiating position is to offer EEA status with some controls on freedom of movement, but the loss of bank passporting rights. Clearly that is a move to encourage bank migration from London and it is unacceptable. The resignation of Lord Hill as Finance Commissioner means that the UK currently has no voice at Commission level to argue the case for UK finance. What steps will the Government take to ensure that the voice of UK finance continues to be heard in Europe? May we propose to Government that, as a matter of urgency, they establish a working group to monitor the ongoing threat to the UK’s financial stability, working with representatives from across the financial services industry?

It would be wrong not to mention the threats that have been made to community cohesion following the vote to leave. I was very concerned to hear about the attacks on the Polish community. Any such attacks must be condemned outright by the whole House. I have a Polish community in my constituency. The Polish War Memorial nearby at Northolt stands testimony to the sacrifices of Polish pilots during the second world war. I have attended many meetings at the Polish centre in Hammersmith, which was disgracefully attacked. I send my message of solidarity to that community and to anyone else suffering from the rise in racism. What mechanisms will the Government put in place with local government leaders and city mayors to protect these communities, to help to overcome these divisive actions and to resource the programmes that will be brought forward?

We will get through this period of uncertainty, as Britain has done many times in the past. There are real strengths in our economy, not least our talented and dedicated workforce. None the less, volatility continues and grave uncertainties remain about the UK’s future relationship with our European partners and the wider world. The future direction of Government strategy is not yet determined, but Labour is prepared, in the national interest, to work with the Government and our parliamentary colleagues on both sides of the House to ensure that the best interests of the British people are secured. I commend the motion to the House.

[The First Secretary of State and Chancellor of the Exchequer (Mr George Osborne)]

I very much welcome this opportunity to update Parliament and the country on some of the economic challenges that we now face. I welcome the hon. Member for Salford and Eccles (Rebecca Long Bailey) to her new position as shadow Chief Secretary. I will not welcome all the new members of the Labour Front Bench because it would be a bit like the presentation of the Bills that we just saw, but it is very good that the shadow Chancellor is still in place, and he has 80% of the support of the Conservative parliamentary party to remain there.

May I respond to this sober debate with a message of reassurance and realism? I say at the outset that because this is a challenging time and this is a good opportunity for the House to discuss these issues, we are not going to seek to divide the House on the motion today.

That message begins with the reality that I have never shied away from telling the country the truth, as I have seen it, about our economic challenges, and we do now face very significant economic challenges as a result of the referendum decision last week. I do not resile from any of the concerns that I pointed to before the referendum, but I want to provide reassurance that we are about as well placed as we could possibly be to meet the challenges that lie ahead. The shadow Chancellor was correct to raise problems such as low productivity growth, which bedevil many western economies, but the British economy has been the strongest advanced economy in the world in recent years. We have the highest employment rate in our history. The capital requirements for our banks are 10 times higher than they were before the financial crisis. Inflation is low and stable, and real wages and household disposable incomes have been growing. These things did not happen by accident—they happened because over the last six years we took difficult, sometimes painful decisions in order to rebuild our economy, to strengthen our banks and to put our public finances in better order. We said we would fix the roof—and thank goodness we made the progress that we did.

While I personally gave everything to campaigning for a different outcome, we saw a clear result in the referendum. I accept that result and the Government accept that result. Now we need to implement that decision and deliver for the British people on the instructions they have given us.

[John Redwood]

As the 10-year cost of borrowing has fallen from 1.4% to under 1% and the rate for 30-year money is now under 2%—record lows—does that not mean that there will a windfall element from lower interest charges? Will the Government consider funding the debt longer at this advantageous time for borrowing?

[Mr Osborne]

My right hon. Friend is right to point to the fall in UK gilt yields, but there has been something of a flight to safety. In the last six years, we have made UK Government debt a safe haven in stormy waters, and on this side collectively we can take enormous pride in the fact that we have done that. It is very different of course from the situation six years ago when yields were increasing in the face of economic difficulties, whereas here they have come in.

In terms of the financing of the debt, I have already on a number of occasions over the last six years changed the skew of the Debt Management Office’s debt plan and made sure we have more longer-dated debt than we would otherwise have had. One of the reasons why international investors and others have confidence in the UK gilt market is that we do not chop and change all the time every week, so while my right hon. Friend makes a very good point, I do not think we should immediately respond to the events of the last week by changing our financing remit. Indeed, the message we need to be sending very clearly is one of stability and reassurance. That brings me to the plan I believe we should now follow.

First, it involves ensuring financial stability, and that is precisely what we have been doing in the past few days. In the run-up to the referendum, the Treasury worked closely with the Bank of England and the Financial Conduct Authority to put in place robust contingency plans for the immediate impact of a leave vote. I met the Governor of the Bank of England to discuss it on a number of occasions, and the Financial Policy Committee and the Monetary Policy Committee both had special meetings to discuss those contingency plans. The Prudential Regulation Authority—essentially, our bank regulator—worked systematically with each major financial institution to make sure they were financially sound and prepared for whatever the outcome of the referendum was going to be. The Bank of England pre-announced additional liquidity auctions to support the banking sector. People will have seen this week from the result of those auctions that that liquidity has been provided. Over the last few days, we have been working closely alongside Finance Ministers and central bank governors across the G7 nations and the nations of the European Union to make sure that we are monitoring developments closely and are ready to respond. The president of the European Central Bank updated the European Council yesterday—the Prime Minister reported on that to the House earlier—but it has to be said that the update was not particularly rosy. Let us be clear: these contingency plans were designed to prevent disorder in markets; they were not designed to stop markets adjusting to the new economic reality.

I can reassure the House today that our major banks are resilient. Capital and liquidity remain strong, and this morning we have seen greater stability in the major banks’ share prices, and the currency markets are continuing to function effectively. But there have been significant adjustments, and we have to be realistic about the impact of the referendum on the financial markets.

UK Economy: Post-Referendum Assessment

John Redwood Excerpts

Monday 23rd May 2016 Commons Chamber

[Mr Gauke]

If the hon. Gentleman wants a positive case, let us put it this way: according to the shock scenario we have set out, in two years’ time, the UK economy will be 3.6% bigger if we stay in the EU than it will be if we leave. He criticises and wants to re-fight the Scottish independence referendum. May I just remind him—I suspect it will not be for the last time—that the Unionists won that referendum?

[John Redwood (Wokingham) (Con)]

Why does the forecast leave out the very beneficial impact of spending another £10 billion, which we would get back in contributions, on our own priorities, jobs and services, which would boost the economy by 0.6%? Why does it leave out the impact of the lower interest rates and the big injection of liquidity that the Bank of England says it will grant the economy around the time of the vote?

[Mr Gauke]

First, the report is for the next two years. As my right hon. Friend will be aware, even if we vote to the leave the European Union, we will continue to be members of it for those two years as we negotiate our departure. During that two-year period, we would continue to make contributions to the EU budget. May I also point out what the International Monetary Fund has said? It said that, essentially, if the economy shrinks by 1% or more, any fiscal gain from ceasing to make contributions to the EU will be wiped out by lower tax receipts and greater costs. Indeed, under the central scenario set out in the report, the public finances will be £24 billion worse off as a consequence of our leaving the EU.

On interest rates, the assumption in the report is for no changes to fiscal or monetary policy. I point out to my right hon. Friend that one of the predictions in the report is that we would see the pound falling in value and inflation increasing. The Monetary Policy Committee has made it clear that it would have a difficult trade-off to try to get the economy going at a time when there would clearly be a slowdown. At the same time, the pound would be falling and inflation would be rising. In those circumstances, the safest thing to do is to make no assumptions on what monetary policy would be.

Section 5 of the European Communities (Amendment) Act 1993

John Redwood Excerpts

Wednesday 23rd March 2016 Commons Chamber

[Mr Gauke]

The important point here is that the United Kingdom is not obliged to converge with other EU member states. If I remember correctly, the terminology dates back to the Maastricht treaty, and this is a part of the process that originates from that. The UK is not subject to any sanctions as a consequence of our participation in this process, nor are we required to take any directions from the European Commission in respect of our economic policies.

[John Redwood (Wokingham) (Con)]

But surely the purpose of tabling the numbers to the Commission is that it puts it under what it calls “surveillance”? It can then make an adverse report. It is very clear that the intention is that our budget deficit should never be more than 3% of GDP. I note that, for the first time in some time, the Government will at least get the budget deficit below 3%. I am in favour of doing that anyway, but is it not the case that they have to do that because that is what convergence is all about?

[Mr Gauke]

It is the case that the provision dates back to the Maastricht treaty—no doubt my hon. Friend the Member for Stone (Sir William Cash) can provide further details on its history—which was incorporated into the European Union (Amendment) Act 1993. That requires us to submit a report. The important point for the House is that this does not give the European Commission the ability to impose sanctions on the UK. I am in complete agreement with my right hon. Friend that the UK should not have excessive deficits, but that is a matter ultimately decided by this House, this Parliament and the elected Government of the United Kingdom.

--- Later in debate ---

[Sir William Cash (Stone) (Con)]

I have already made my point about the inaccuracy embedded in the report and need not repeat any of that; I am sure that the Minister heard what I said. In a way, it is an impossible situation for him, but that does not remedy the inaccuracy, and I need to hear what the Government propose to do. It may be inconvenient or fortuitous, but the reality is that it is there. The approval by Parliament of these documents for the purposes of onward submission to the European Commission simply cannot be conducted on the basis of the documents under consideration. I will now park the issue, but I am inclined to vote against the Government this evening on account of the inaccuracy, because it just does not make sense. I will be glad if the Minister tries to put things right in some manner, even if only orally, but he may be unable to do so. It is perhaps just as well if I leave things as I have just stated.

What I really want to refer to is the question of national debt, which I mentioned in an intervention. The problem is that the stability and growth pact, the convergence criteria and the 3% are important because they are the basis upon which countries decide whether to run their economies in line with European law or to be cavalier, and there are massive problems in the European Union relating to all that. My right hon. Friend the Member for Wokingham (John Redwood) mentioned that we are just about on the cusp of 3% at the moment, but that is simply not the case in other countries, which raises an important question. For example, the Italians are in dire trouble and are in an enormous battle to try to get some wiggle room into the stability and growth pact, which has led to extremely bad relations with Germany.

In 2003-04, however, nobody blinked an eye when it suited Germany to play around with the pact and not comply with its provisions. Italy is in difficulties and Greece remains in monumental difficulties, infringing the rule of law in Europe as expressed in the stability and growth pact and the convergence criteria, but Germany insists that everybody else obeys the rules until it does not suit it to do so. I find that difficult to accept. In fact, I do not accept it; I reject it. Either there is a rule of law or there is not. The bottom line is that there is a great deal of talk in the European Union about the rule of law, but unfortunately Germany does pretty much what it wants

[John Redwood]

I remind my hon. Friend that, even today, when Germany would say that she is very virtuous in having no budget deficit, she still has a much bigger proportion of debt to GDP than the 60% criterion and no obvious means of getting back down there.

[Sir William Cash]

My right hon. Friend is, of course, right about that, as he really understands all these things. There are massive problems with the whole of this European project, not only because of the inconsistencies but because of the laying down of requirements and obligations that are, in effect, disregarded when it suits certain countries but not when it suits others. The performance required under section 5 relates not only to the accuracy of the figures, to which I have already referred, but to social, economic and environmental goals, as set out in article 2 of the treaty, and a range of submissions in respect of article 103, which deals with economic growth, industrial investment, employment and the balance of trade.

I am happy to agree that the Conservative Government have managed to retrieve the appalling situation that faced us before 2010, but that does not alter the fact that we are talking about a debt level of £1.5 trillion when it is actually very much more than that. I have suggested that if we include the pension liabilities, it could be as much as £3 trillion to £4 trillion. One really has to take that on board, because if someone running a company conveniently parked an element of required debt, the auditors would never give them a clean bill of health. I do not see how pension liabilities can legitimately be off balance sheet, given the scale of this debt and the fact that all those public pensions have to be paid.

I want to move away from that issue, and I would be interested if the Minister would be good enough to refer to one these points in his reply, if he has time. I want to refer now to another aspect of this paper being presented to Parliament for its approval. Page 19 is headed: “Economic opportunities and risks linked to the UK’s membership of the European Union”. What follows on the whole of the page is a litany of reasons why we should stay in the EU. All the arguments of those who say, as I do, that we should leave are dismissed, and I find it tendentious. I have already criticised the three White Papers on the grounds that they lack accuracy and impartiality, which I was promised by the Minister for Europe when I put the point to him during a ping-pong between the Lords and the Commons on the duty to provide information under sections 6 and 7 of the European Referendum Act 2015. Yet, here we are, confronted with exactly the same problem. It is not just that there is inaccuracy embedded in this document, which I am bound to say I do not think the Government can get out of, but there is inaccuracy that conflicts with the provisions of those sections. There is a real list of problems here.

I should also mention the reference on page 19 to the virtues of the single market. I voted for the Single European Act in 1986 but I did table an amendment to say, in effect, that nothing in the Act shall derogate from the sovereignty of the United Kingdom Parliament. Things have moved on enormously since those difficult days, because if I table an amendment now to preserve the sovereignty of the UK Parliament, you, Mr Speaker, will allow it to be debated, and the Clerks of the House of Commons will not raise the difficulties that I was faced with then. In a nutshell, I was told by the then Speaker, and indeed by the Clerk of Public Bills, that I was not allowed to move such an amendment—it was as bad as that. Mr Enoch Powell came up to me in the Lobby and said, “I see that you have put down this amendment, and I agree with you.” As in so many other matters relating to economics, he was not exactly wrong.

The reference to the single market has to be weighed against whether it has achieved its objectives. Page 19 says that the single market is full of virtue and is entirely necessary for the United Kingdom.

Section 5 of the European Communities (Amendment) Act 1993

John Redwood Excerpts

Wednesday 23rd March 2016 Commons Chamber

[John Redwood]

Does my hon. Friend agree that £12 billion of the £58 billion deficit with the European Union is the money that we have to send to it and that we do not get back? It is payment in order to buy its imports. One does not normally have to make a contribution to a country in order to import things from it.

[Sir William Cash]

It has been said in the past that the House of Commons is the only lunatic asylum that is run by the inmates, but I think we pale into insignificance compared with the European Union. This just does not work. I ask the Minister to make a note on the piece of paper in front of him to remember to answer my question relating to that deficit and surplus issue, because every time I raise it I get no answer. Although I agree that we will continue to trade and to co-operate with Europe—we want to do so and they want to do it with us—when it comes to this question of the need to stay in the single market, it simply does not stack up. This document is put forward for approval by Parliament, so we are entitled to an answer to that question.

--- Later in debate ---

[John Redwood (Wokingham) (Con)]

I share the concern of my hon. Friend the Member for Stone (Sir William Cash) about page 19 and that is the main reason I have entered this debate. It is an unfair exposition on the opportunities and risks linked to our membership of the European Union and I do not think it accurately reflects what the OBR has been saying. I am pleased that the OBR has now spoken for itself and put on the record the important point that it does not believe that in the five-year forecast period, were we to leave, there would be a decline in economic output or activity. Like many forecasters, the OBR believes that the net impact would be quite small. Of course, in line with others it has said that there could be volatility in currency and asset price markets. All I would add is that there has been massive volatility in those markets in the years we have been a member of the EU, so it would be somewhat outrageous to claim that that would suddenly stop were we to leave the EU, but I cannot see that it is a particularly damning point.

My hon. Friend has gone on at some profound length about what is wrong with page 19. I hope Ministers will look again and realise that it is not a fair exposition of the OBR’s position. Linking the OBR’s position with Christine Lagarde’s comment, which is obviously a comment made for the “stay inside” campaign trail rather than for normal commentary purposes, gives a misleading impression.

I wish to make some more fundamental points about the figures and the document before us this evening. Let us start with why we are doing this at all. It is a completely pointless exercise, but it is legally required by the treaty and the framework of law under which we live. It is a great pity that in the renegotiation this, along with dozens of other things, was not sorted out because if, as the Minister says, the Government can ignore the advice and the policy laid down by the European Union to control the deficit and get the debt down, what is the point of the Government having to table 300 pages of carefully selected documentation, go through the surveillance procedure, on some occasions receive a report saying that their policy is not good enough or they are not converging in the way that the European Union wishes, and the Government then saying, “Well, fortunately, there is no penalty on us so we will ignore that”?

It is strange to belong to a club, accept the rules and then, when we do not like the rules, say, “Of course, we didn’t really want any of that and fortunately we have been opted out of the penalty bit of it.” It is a strange exercise. I suspect that the official machine of the Government, which goes on whoever is in office, is quite guided by all this. There is probably a wish on the part of officials to get the British Government policy and the figures closer to the convergence requirements. It is high time the European Union itself had an honest debate about the most pressing and most difficult target it has set—the target that all member states should keep their stock of debt to 60% of their national income.

Practically every member state is way above that, and some of them violate the target by having more than double the level set down by the European Union. Why does that body think it is sensible to persevere with a target that none of the member states wish to keep and none of them are trying to reach?

[George Kerevan]

May I add that the rule that sets the 60% target also states that member states in breach must have a rectification programme and bring their debt level, whatever it is, down by five percentage points a year, which this Government have significantly failed to do and significantly will fail to do for a long, long time?

[John Redwood]

All the Governments are failing to do that, and it is even more pressing and difficult for a country such as Greece, where the penalties do apply because it is in the euro scheme. Despite all the best efforts of the European leadership, the European Central Bank and others, and very cruel and difficult expenditure cuts that Members in this House would not have accepted for the United Kingdom, Greece is still miles off getting anywhere near the stock-of-debt target and it has struggled until recently to get down to the deficit target.

We need to ask fundamental questions of our European partners about why we go through this routine and what malign influence it has on some economies and some economic performances around the European Union, which should be a matter of common concern all the time we remain in that body. The Minister says this is not a new exercise and it is not much of a burden on the British state; it is just one of those things, and we send in figures that we produce for other purposes. That is not quite true. The introduction to the document clearly has to be written, the selection has to be made, it is clear throughout the document that it is written for domestic purposes and for the purpose of forwarding it to the European Union, and we try to produce figures that we would not otherwise produce in order to conform with the workings of the European Union.

Next, I would like to highlight the figure for the convergence criteria and the so-called treaty deficit on page 186 of the report. That shows that in 2016-17, if all goes well and these figures work out, for the first time in many years we will get below the 3% target to 2.9%. That makes my point: we would not have to calculate that treaty deficit, think that it was significant or use it as part of the guidance for the British economy if we were not signed up to this surveillance and management system within the European Union. The Minister has to bear it in mind that there is actually some subtle guidance in the European policy. I think that many of my constituents would find it quite surprising that we have to table 300 pages of detailed financial and economic information in order to comply, and that that is then put through a scrutiny and surveillance process.

The next figure that I would like to highlight is on page 156, which shows how much in “expenditure transfers” we have to make to the European Union institutions—in other words, how much money we send that we do not get back. We see that the November forecast for 2016-17 was £10.7 billion, which is a very considerable sum, and that the March forecast, just four months later, has gone up to £11.8 billion. Between the autumn statement and the current Budget there is an increase of £1.1 billion in next year’s expenditure transfers to the EU institutions.

That figure of £1.1 billion is very close to the figure that the Government had pencilled in for disability cuts. I do not know about you, Mr Deputy Speaker, but I would rather not have the disability cuts and not pay £1.1 billion extra to the European Union. Why can we not make those kinds of choices? The reason, of course, is that we are signed up to membership of an organisation that thinks it knows better than we do how to spend our own money. I think that people in the United Kingdom are getting very frustrated at being told that we have to be very careful about our priorities, only to discover, if they get guidance from these complex figures, that the European Union can take £1.1 billion extra off us for next year without a by-your-leave. That leaves us struggling to find that money when we try to make the Budget add up, ending up with options and choices that I am sure Ministers did not really want to make, and which Parliament, in its wisdom, has decided should not be made.

I draw the House’s attention to some very important figures on page 205 that the Government are sending to our European partners and masters about projected net migration into the United Kingdom. I was very happy to campaign with my right hon. and hon. Friends at the previous general election on a sensible and sensitive policy of controlled migration, wishing to get it down to the tens of thousands by the end of the Parliament. It was a very popular policy, because I think that people liked the idea that there would be a fair system offering sensible rules so that people could understand it before deciding whether or not to come to our country. Interestingly, the forecast that we are sending to the European Union shows that the level of migration will stay much higher than the Government’s target—it shows 256,000 in 2016, declining to 185,000 in 2021. There is also a further projection in which net migration stays considerably higher, actually above 250,000 in every year.

I think that matters, because the Government’s intentions are very clear: they would like to get net migration well below these forecast figures. Why, then, is the forecast so high? I think that it is very simple: the forecast is that high because the European continental economies, particularly in the south of our continent, are performing very badly and have created mass unemployment on an extremely worrying scale, so the UK, which has a more successful economic policy that is generating a lot of jobs, is acting as a magnet for people who are otherwise without hope of employment.

That policy is making it very difficult for the United Kingdom Government to hit their very popular target on migration. I hope that when this document is submitted Ministers will follow it up by pointing that out to the European Union and saying that they have a solemn promise to keep to the United Kingdom electors, who helped elect them to government, and that this set of EU policies, creating joblessness and therefore triggering a lot of foot-loose migration around the European Union, is making it very difficult to honour that promise.

It also leads us to worry about the quality of some of these forecasts, because I am sure that the Government wish to get the level down, but there is a great danger that the variant of a much higher level has been put in, because actually that is what they are afraid will happen. I hope the Minister will consider that when he replies and that if we are going to go through the process of submitting our homework on economic matters to the European Union to be marked—by sending it 300 pages of figures—we will also say to it, “You are making it impossible for us to meet our legitimate wish to create more jobs to mop up unemployment in our country and to get wages up, as we would like to, because your failing economic policies in many parts of the euro area are bringing a number of migrants into our country that makes it impossible for us to meet our targets.”

Those are just a few brief comments on an extremely complex set of documents and numbers, which show that, while we stay in this body, we need to engage much more and to get some change so that there is honesty in the targeting and an understanding of the damage that some of the targets and policies are creating. However, it will not be a surprise to hon. Members to learn that I think that the simplest thing would be for us to leave the European Union so that this is the last one of these documents we ever have to produce. We can then take control of our own money, banish austerity, spend the £10 billion on things that we want and leave the European Union free to get on with its political union, which is clearly what it will need to do to try to deal with the mass unemployment, the lack of cash transfers and the inadequacy of its regional policies.

I hope tonight’s debate will be of use to the general public and that they will understand that we can take back control, spend our own money, and have prosperity, not austerity. That is what we will get if we leave the European Union.

Budget Changes

John Redwood Excerpts

Monday 21st March 2016 Commons Chamber

[Mr Gauke]

As the hon. Gentleman says, there will be a statement from the Secretary of State for Work and Pensions, and we also have two further days of Budget debates. As for changes to the fiscal position, in view of the oil price changes of recent months, I think we should look at the consequences for Scotland if it had been independent.

[John Redwood (Wokingham) (Con)]

On 9 December, the Government issued a policy document announcing an increase in VAT on energy-saving materials from 5% to 20% to raise £65 million in the first full year. May I take it that I can now welcome the Government’s decision not to go ahead with that proposal? I would dearly love it if they did not proceed with it. Also, how are they going to deal with the fact that the European Court and European VAT law require us to impose this very unpopular tax?

[Mr Gauke]

The decision was taken some weeks ago not to proceed with any changes to VAT on energy-saving materials in this Finance Bill because new evidence had emerged and we no longer believed that we needed to go ahead with what was previously suggested. It is also the case—the Prime Minister will say something about this later—that because the European Commission and other member states are willing to agree to our arguments about the need for greater flexibility on VAT rates, we do not believe that these changes will be necessary.

Budget Resolutions and Economic Situation

John Redwood Excerpts

Wednesday 16th March 2016 Commons Chamber

[John Redwood (Wokingham) (Con)]

I remind the House that, in the Register of Members’ Financial Interests, I have declared that I advise an industrial and an investment company.

I support the main measures in the Budget, and the thrust of the Budget statement. I strongly welcome the tax reductions. I am very pleased that the Chancellor is making progress in implementing our promises to take more people out of income tax altogether, and to take people out of 40% tax when they are on relatively modest incomes in comparison with the costs of housing and living in many parts of the country. The more progress we can make in that regard, the better.

I am delighted that I, and others, made representations on behalf of the North sea oil industry, that those representations have been well heard, and that substantial changes have been made. It is important for us to do all that we can to give that industry, which has been hit by the very low oil price, some momentum and some hope for the future. I am also very pleased about the capital gains tax changes, because I have campaigned for them for some time. I think we will find that they bring in more revenue, not less.

It is interesting to read the forecast in the Red Book that, by 2019-20, there will be a substantial increase in revenues from CGT at the lower rate, but there will be a period of no increases for two or three years. I find that a surprising profile, and I think it draws attention to an underlying problem. I do not think that the economic models and the tax forecasting system used by the Office for Budget Responsibility are fit for purpose. The OBR was obviously very wrong about the impact of the reduction in the 50p rate to 45p: there was a big surge in revenues which was not in the original forecast figures.

This is the background against which we meet today. Many of the changes that the Chancellor has had to make are simply a result of the OBR changing its mind over the very short period between the autumn statement and today, and deciding that the economic outlook is not as good as it thought it was at the end of last year. We have to ask why it has reached that conclusion.

[John Pugh (Southport) (LD)]

Does the right hon. Gentleman think that the OBR has been any better at predicting the economy than the Treasury was before?

[John Redwood]

I do not think that there is very much difference. All economic forecasters experience difficulties in getting their forecasts right, but some of us are more humble about our expectations than these official forecasters. I think that the danger of having an official forecast is that too much credibility is given to it, and big decisions are then made on the back of it. When official forecasters are zinging the forecasts around every three or four months, it becomes difficult for any Chancellor to run a stable medium-term policy involving, for example, important spending items that matter a great deal to our constituents.

I urge the Chancellor to be a little more sceptical about the wisdom and virtue of the OBR forecasts. The one thing of which we can be sure is that, over the period during which we have had the OBR, it has always been wrong, but what is stunning is the degree of the error. The OBR itself kindly points that out to us on page 234 of its very readable book, saying that, on average, it has revised the underlying borrowing forecast by £46 billion for the review period in question on each occasion. Given that the figure is an average, it is clear that the forecast revision has been considerably higher. The OBR tends to make its biggest revisions in autumn statements, but it has given us quite a whopper on this occasion. When a Chancellor must face a £46 billion revision every time he has to do the sums, it makes the task of stable economic management much more difficult. This is one of those instances in which an idea that was intended to produce more stability has proved to be destabilising.

The same can be said, I am afraid, of the current Governor of the Bank of England. The Governor of the Bank of England is meant to provide stability and wisdom, but we have now heard four different mantras from this Governor about when interest rates are going to rise. That is a very important statistic, which informs the forecasts of the OBR.

First of all, the Governor said that interest rates would probably go up when unemployment fell below 7%. When it tumbled rapidly below 7%, the Governor changed his mind. I am glad that he did, but the fact remains that he changed his mind. He then said that when real wages started to go up, interest rates would probably go up as well, and I am pleased to say that almost as soon as he had said it, they started to go up. Then he changed his mind, in that he had apparently not meant what he said.

The Governor then said that the turn of the year, 2015-16, would be a witching hour, when interest rates might have to go up. Well, we roared through the end of the year and the beginning of the new year, and they did not go up. Again, I was pleased about that, because I think it might have been unhelpful if they had. However, that shows that people and institutions who should be good at providing stability can be very destabilising and very misleading, and it is all noise that the Chancellor has to deal with.

The one good thing about all this is that when these ridiculous forecasts are made by the OBR and the Governor of the Bank of England that we would be worse off if we left the European Union, we can completely ignore them. We know that those people are always wrong about the things in which they are meant to specialise, so why should we believe what they say about something that is more important?

[Graham Jones (Hyndburn) (Lab)]

Will the right hon. Gentleman illuminate us on the section of the Chancellor’s speech that dealt with the European Union? Will he share his thoughts with us?

[John Redwood]

I think that I am doing that now. The Chancellor quoted the OBR, and the one thing that I disagreed with profoundly in a very good Budget was the OBR’s forecast on what would happen with Brexit. [Laughter.] It is not funny. Labour Members might learn something if they listened. They have obviously closed their ears to any idea that an independent Britain could be rich, prosperous and free, but many of us think that we will be more rich, prosperous and free if we leave the EU.

[Sammy Wilson (East Antrim) (DUP)]

Will the right hon. Gentleman give way?

[John Redwood]

I want to develop the argument a little more. As has already been pointed out, the forecast contains very worrying figures about the balance of payments deficit. And of course, were we to leave the EU, we would immediately have £10 billion at our disposal that we would no longer have to send abroad to be spent in rich countries on the continent. That is the net amount that goes to the continent. So our balance of payments would immediately improve by £10 billion a year if we did not have to make those contributions.

To cheer up Opposition Members even more, and to get them to change their vote, I can tell them that we and they would have the pleasure of spending £10 billion a year more in our own country—[Laughter.] Why is that funny? Why should not British taxpayers who have to pay £10 billion not have the advantage of spending it on things that they want instead of it being spent on new roads in France or Spain? I think my taxpayers want it to be spent here. That £10 billion a year could more than banish the austerity that Opposition Members claim has done some damage to our country. Looking at the figures, we can see that real public spending has gone up all the time under the coalition and the Conservative Government, but not by as much as it went up under previous Governments. If we had that £10 billion back to spend in the United Kingdom, we would have a better profile on public spending and on tax reductions.

[Neil Carmichael (Stroud) (Con)]

Can my right hon. Friend be sure that any figure he quotes is accurate, given that he has just rubbished the OBR and the Bank of England? Presumably he has a list of other British institutions to which he would give the same treatment.

[John Redwood]

But of course. I have checked the Government’s very own net contribution figures, and it is very likely that they have got those figures right, because even the Government can count how much they have spent and how much they have had to give away to the rest of the European Union. That is the damage that is being done.

On the balance of payments, I would urge my right hon. Friends on the Front Bench to do more work on getting the balance of payments deficit down. Obviously, they will not all agree with me about taking the quick easy hit of getting our £10 billion back to make a big reduction in the deficit, but we need to understand that that deficit is entirely the result of an adverse goods trade with the rest of the European Union. We are in profit with the rest of the world and we are in profit in services, but we have a colossal manufacturing deficit with the rest of the EU. Some of that relates to the way in which France and Germany get round the EU rules to make sure that they can buy French or German products, whereas we in Britain apply the EU rules extremely fairly and end up buying a lot of foreign products from the continent.

It is also the case that the very dear energy that European policies require and enforce is doing a lot of damage to our steel industry, our ceramics industry and other high energy-using industries. It is a great tragedy that, despite higher domestic demand for steel, we are still unable always to use British steel in British public sector contracts. Surely we ought to have a fix to create more demand for our own domestic industries.

We also import massive amounts of timber, despite having a big state sector involvement in the timber industry in this country. Why cannot more be done to cut more of the timber we already have as a state resource to meet our domestic demand, along with replanting and extending the planting, given that many people would like more forests? Why cannot we have more managed timber, with the state having an influence over it? We could also do more with the tax system to encourage more private forestry. We have rather good growing conditions here, compared with some of the colder Nordic climates from which we import timber at the moment.

We also import energy, but we have no need to do so. We are an island of coal, oil and gas set in a sea of coal, oil and gas. We also have lots of natural renewables, particularly lots of potential water power. Why cannot we create an energy policy in which we do not need to rely on importing timber from Canada, electricity from France and energy from Norway?

I am pleased that the Budget is starting to tackle the issue of the oil industry offshore through tax changes. We need to do other work on that, and we also need to get on with gas extraction onshore. We will probably find further oil resources when we are prospecting for shale gas in the shale sands. We need to start bridging the gap on energy before it becomes even more damaging to our balance of payments.

[Mr Prisk]

On encouraging greater exports, would my right hon. Friend acknowledge that one of the challenges that small and medium-sized firms face is the availability and pricing of mid-sized capital to enable them to pursue longer-term export plans?

[John Redwood]

I am not sure that the cost of capital is a problem. The Government have already done certain things to try to deal with that through the investment bank and so forth. It is often the case that medium-sized companies probably need equity investment but are reluctant to give away control. That is a cultural issue that we have to deal with. Certainly for bigger companies there is nothing wrong with the long-term cost of borrowing if they have access to the bond market, because we have exceptionally low interest rates at the moment.

I am all in favour of the Government pressing on with large infrastructure projects if they make economic sense. The main ones that we need to reinforce are broadband and extra energy capacity. We are short not only of affordable energy but of energy of any kind. We do not want our economic recovery—which we have rightly been told is the fastest in the advanced world, on the historical and prospective figures—suddenly to come up against the constraint that there is not enough energy available to fuel the recovery.

EU Referendum: Timing

John Redwood Excerpts

Tuesday 9th February 2016 Commons Chamber

[Mrs Main]

Well, we have heard a lot of unadulterated nonsense already. I am amazed that we are invoking the dead. Lady Thatcher, apparently, is speaking from the grave. In her speech in Bruges in 1988, she said:

“We have not successfully rolled back the frontiers of the state in Britain, only to see them re-imposed at a European level with a European super-state exercising a new dominance from Brussels.”

I say hear, hear to that. I am sure we will hear a lot of ridiculous comments. A lot of nonsense will be proposed—that we cannot possibly exist outside—

[John Redwood (Wokingham) (Con)]

Is it not the case that if the best that the “stay in” side can do is scares, trying to tilt the playing field and invoking the dead when they believe the opposite, we have nothing to fear and we will be leaving?

[Mrs Main]

My right hon. Friend is right. We need to make sure that we have an informed debate. The European Communities Act 1972 gives EU law precedence over British law. Let us not fudge the matter. If the public wish to stay in on that basis, fine. If they do not, they vote to leave. If they want to bring back those competences and the authority that Lady Thatcher was talking about, the date cannot come soon enough.

I make a plea, however: may we please have the argument, not the scaremongering, not the fear factor, not the suggestion that we would be moving the borders to Kent and we would have camps that we cannot control of migrants pushing their way across Europe to come and knock on a British door? That is nonsense. It is fear; it is phobic, and I am disappointed that those arguments are coming out now. Let us talk about what the argument means. To me, it is all about control by this Parliament, rather than being controlled by 28 other Parliaments via an unelected bureaucrat in Brussels.

--- Later in debate ---

[Ian Paisley (North Antrim) (DUP)]

As many Members have said, this is one of the most important constitutional questions that perplexes our nation, and the referendum provides probably a once-in-a-lifetime opportunity—it is certainly a once-in-a-generation opportunity—to shape where the nation goes. That is why it is essential that we have a full, frank, proper and considered debate about all the issues that affect our membership of the European Union.

A rushed referendum will only threaten to present to the public a debate that is shaped according to the most baseless of arguments, namely that of “Johnny Foreigner” versus “What will we get out of the European Union?” That is not the way to have this debate, but unfortunately it appears that it is in the Government’s interests to have a debate shaped according to that base argument. If only a limited amount of time is made available for the debate, we will not be able to deal with the issues that affect all our constituents, including issues to do with trade, the rural economy and the social agenda, and, indeed, the very important issue of immigration.

[John Redwood]

Does the hon. Gentleman agree that the “stay in” side is worried that it does not have enough disinformation and nasty scares to last until September?

[Ian Paisley]

I have no fear that it will promote all those nasty issues, but we should be proud of the fact that we can present a cohesive argument that will convince many people who are at present wavering on the vital questions. That is why we should take time to have a proper debate.

I, like most Members in this House, but probably more than some, am familiar with “Never, never, never” speeches. We witnessed one such speech in this House on 3 February, when the Prime Minister made self-fulfilling “never” prophecies, none of which is even on the agenda. For example, there is not going to be a European army and the United Kingdom is not going to adopt the single currency. That has been ruled out by the people, but none the less the Prime Minister has nailed the arguments of this debate to solid winds that were never up for grabs in the first instance.

Over the next few weeks, we are going to be fed a diet based on soundbites, not on substance. My right hon. Friend the Member for Belfast North (Mr Dodds), supported by the right hon. Member for Gordon (Alex Salmond) and others, has stated very clearly that we want the debate to be based on sound, substantive arguments, because the public—our public, our electorate—expect much more. Although I accept the universally expressed view that the public can deal with multiple choice questions, that is not what is at stake. What is at stake is that we have a cogent, clear and sophisticated debate that deals with all the issues.

Some Members have argued that the reason we can rush into this is that the issue of security has already been dealt with and we need to get on with it, but the European Community, which is now known as the European Union, has singularly failed on the issue of security decade in, decade out. It failed to give this kingdom a clear position on the Falklands. It failed to give the UK support whenever we tried to purchase weapons for the Royal Ulster Constabulary in the 1980s. It failed Europe in its lacklustre response to Kosovo. It failed the middle east when we were dealing with Kuwait 1, and it has clearly been an abject failure in recent weeks and months when we as nations have been trying to deal with the important issue of immigration. We should have a proper debate so that the public can be reminded of the catastrophic failures brought about by the EU week in, week out.

Domestically, it is important that we talk about the potential opportunities if Britain exits the Union. At present, my constituents are not allowed even to consider the prospect of what farming would be like post-common agricultural policy. The fact of the matter is that it is our money that is being spent on our farmers by European bureaucrats. I want to have a debate that allows us to focus on where the money comes from—it comes from here—and how we could better spend it if we were not tied to European policy, but we will not have the opportunity to get into the nitty-gritty of that debate and my farmers will go to the polls on the basis of the fear that they could lose their subsidy when that is not right at all. We should have the opportunity to deal with that.

The Northern Ireland Affairs Committee is currently trying to address some of the issues. Every single witness—there have been six or seven to date—has indicated, as my right hon. Friend the Member for Belfast North said, that this is going to be decided not by whether it will affect terrorism, but by trade and other issues. We have only brushed the surface of border security in that inquiry so far, yet it is a key issue, given that we are the only part of the United Kingdom that, if we leave Europe, would have a land border with a nation that is in Europe. We need a proper debate about that, but we are not being given the time. I implore the Government to listen and, in the same way as they have ruled out other dates, to rule out June and suggest a more acceptable date, probably in the autumn.

Bank of England and Financial Services Bill [Lords]

John Redwood Excerpts

Monday 1st February 2016 Commons Chamber

[Richard Burgon]

I thank my hon. Friend for her intervention, and she is correct. It shows what disregard the Chancellor has for the taxpayers’ coffers and the public purse—he is also showing that in his numerous meetings with Google and their shoddy outcome. Financial stability and the effective regulation of our banking and wider financial services industry are vital in ensuring that the sector serves the interests of the whole economy, does not hurt ordinary people or small and medium-sized businesses, and delivers vital investment that our country needs for long-term growth. Getting the balance of regulation right is an important task for any Government, one that Governments around the world have failed to fulfil in the past decade. It is a task that has been attempted since the bankers’ crisis of 2008, but today the Government are threatening to set back this task.

The context of the Bill is vital to understanding our concerns, and the reasonable concerns and demands of the public. We are eight years on from the economic crisis—the bankers’ crisis, which brought the financial services sector and the country to its knees. Banks that were too big to fail were bailed out by the state.

[John Redwood (Wokingham) (Con)]

The hon. Gentleman was not here then, so he can form a dispassionate view. What has he learnt about the mistakes the regulators made under Labour, when we saw all those excesses that he is now talking about?

[Richard Burgon]

I thank the right hon. Gentleman for his intervention. At the time, Conservative Members were calling for even lighter regulation, but what is clear, and what I will illustrate, is that Labour Members have learnt the lessons of the banking crisis but that this Bill shows they have not been learnt by Conservative Members. Eight years on, bankers’ behaviour and bankers’ bonuses remain in the news. Court cases and institutional fines continue, with hundreds of millions of pounds-worth of fines issued, yet still only one person is in prison, despite all the damage done. Despite a series of commissions and reviews, there remains too little evidence that the lessons of the bankers’ crisis have been learnt. We should all know that the public remain angry at what a number of top bankers did to our economy and our society.

European Union Referendum Bill

John Redwood Excerpts

Tuesday 8th December 2015 Commons Chamber

Amendment 5 deals with the report that we would like to see published on these negotiations, and amendment 6 deals with the broader issues on what being “in” and “out” might look like. This cannot be a complete exercise. If the country votes to leave the EU, there would be a process of extracting ourselves from it, and no one can say with absolute certainty what the outcome would be like. However, we have examples of countries that trade with the single market, but are not members of the EU—one thinks of Norway and Switzerland. I do not want to go into the detail on those today, but those examples are out there and we can already see what the obligations on those states are, even though they are not members of the EU and do not have representation in the European Council, the European Parliament or indeed in other decision-making bodies.

[John Redwood (Wokingham) (Con)]

It seems to me that the Opposition are yet again falling into the trap of thinking that it is possible to trade with the EU only if we have a special arrangement with it, like Norway or Switzerland. Yet all the world’s countries trade with the EU, and the very badly drafted Lords amendment invites comment on all those different arrangements, many of which have no special deal at all.

[Mr McFadden]

I am not saying that the Norway example is the only one out there. There are others, but Norway is a real live example, which I think is relevant to our debate. Moreover, some in the campaign to leave the EU have drawn attention to it as a model, while others have drawn attention to Switzerland as a model. It would be good to understand from the Leave campaign exactly what model they seek to support. It is right that in advance of the referendum, the Government should publish as much information as possible so that the voters are clear about what is involved.

The amendment proposed by the hon. Member for Stone calls on the Electoral Commission to be the marker, as it were, of the Government’s homework, but the Electoral Commission has said clearly that it does not want to do that. It accepts that there is an appetite for more detailed information, but it states that

“we would not have the capabilities to do so…nor the required expertise to judge a report to Parliament”.

That is very clear.

[Mr McFadden]

I respect the right hon. Gentleman’s views on this matter, but I am afraid I disagree with him. The amendments are not asking the Government to stick a finger in the air and speculate on what the UK’s arrangements would be after withdrawal. Amendment 6(b) shows that this is about

“examples of countries that do not have membership of the European Union but do have other arrangements with the European Union”.

That is not speculation; those examples already exist. We can study the obligations on countries subject to these arrangements. They have been there for some time, and those countries have negotiated specific details with the European Union. That is not a matter for speculation; it is out there for us all to see.

I am pleased that the Government have, in effect, accepted requests that we made in Committee and on Report in the House of Commons. It is important for voters to be clear about the renegotiation, clear about the results of that renegotiation, clear about what being in the European Union is like and what it requires, and as clear as possible about what being out might look like. A referendum is a choice between two futures, not an opinion poll on only one future, and that is why the amendments are important. It is right for us to have access to reports of this kind, and it is right for the maximum amount of information to be made available to the public on what will be a crucial choice for the country.

[John Redwood]

I put my name to the amendments tabled by my hon. Friend the Member for Stone (Sir William Cash) because I thought that Lords amendments 5 and 6 were ill considered and unwise, and that we needed to debate them for that reason.

Lords amendment 5 is easy to deal with and I have no particular problem with it, because it states the obvious—namely that, when the negotiations have been completed, the British Government should share their view of the outcome of those negotiations with Parliament and the people. Well, of course they will: it will happen naturally. There will be a statement, and I dare say there will be a written text as well. I therefore think that the amendment is an unnecessary addition to what was a simpler Bill before their lordships got hold of it.

Lords amendment 6 is far more worrying, because it is so sloppily drafted and because it leads to all sorts of arguments that are properly arguments for a referendum campaign rather than for good legislation to set up the referendum. The first part of the amendment says that the Government must publish information about the

“rights, and obligations, that arise under European Union law”

from our current membership. As has already been remarked, if that were done properly it would result in a very long book, given that we are now subject to so many legal restrictions and obligations as a result of an extremely voluminous consolidated treaty and thousands of directives. I think that to fulfil that remit properly, the Government would have to set out all the directives, and explain to the British people why there are now very large areas of law and public practice that we in the House of Commons are not free to determine as we see fit and as the people wish. While that might be a useful thing to do, I fear that the Government might fall short because they might not wish to give a comprehensive list of our obligations, and it is not good law to invite people to do things that they do not really intend to do.

I look forward to hearing the Minister clarify whether he will be publishing a full list of the thousands of legal restraints that now operate on this Parliament in preventing us from carrying out the wish of the British people, and also on the British people, who must obey these laws as they are translated into British law, or else obey the directly acting laws. Of course, all these laws, and our own laws, can be construed by European justice through the European Court of Justice, which, rather than this court of Parliament, is now the true sovereign in our country because we have submitted ourselves to the ultimate judgment of the European Court.

[Sir William Cash]

Does my right hon. Friend attach the importance that I attach—and the Electoral Commission itself has attached—to the fact that the reports proposed by Lords amendments 5 and 6 should be produced on the basis of both impartiality and accuracy? We remember the review of competences: it was a whitewash. If these reports were anything like that, we would be significantly misleading the public, would we not?

[John Redwood]

Indeed. That is why I share my hon. Friend’s concern about Lords amendment 6, and fear that the Government might fall short of the full remit. Will they spell it out to people that we cannot control our own borders, our own welfare system, our own energy system and energy pricing, our own market regulations, our own corporation tax or our own value added tax, because all those matters have been transferred to the superior power of the European Union? That should be the very substance of the referendum debate about whether we wish to restore the full sovereignty of Parliament for the British people, or whether we wish to continue on the wild ride to political union that the EU has in mind, which will mean that even more powers are taken away.

The second part of Lords amendment 6 states that the Government must set out

“examples of countries that do not have membership of the European Union but do have other arrangements with the European Union (describing, in the case of each country given as an example, those arrangements).”

I have not read or heard anything so woolly for a long time. The amendment refers to all the countries that are not in the European Union but have some kind of arrangement with the European Union without even specifying a trade arrangement, although the Opposition seem to think that it relates to trade.

The Opposition try to perpetuate the myth that our businesses and people would be able to trade with the rest of the European Union only if we resubmitted ourselves to some of the powers of that Union through some kind of arrangement like those entered into by Norway and Switzerland. Have they not heard that America is a mighty trading partner of the European Union that does not have one of these special trading arrangements, and certainly does not pay a contribution to the European Union in order to sell goods and services to it—nor does China, nor does India, nor does Canada, and nor does Australia—and have they not heard that some individual countries have free trade agreements with the European Union which are arguably better than the arrangement that we have as members of the EU, because they do not have to pay anything like the very large levies and contributions that we must pay for the privilege of trading from within the internal market?

[Mrs Main]

My right hon. Friend is making a powerful point. On the basis of what he has said, the debate will be about how “arrangements” will be defined in the report, and, indeed, that could potentially be open to challenge.

--- Later in debate ---

[John Redwood]

That is another reason why I am very worried for the Government. I do not wish them to get into legal trouble over this sloppy drafting.

Those of us who have decided that we wish to leave the European Union have been invited to predict what the Leave campaign will announce when it is finally recognised and officially up and running. I think it would be pretty safe to say that we will not want to recommend either the Norwegian or the Swiss model, because, in our view, the United Kingdom is a far bigger country with a different set of relationships around the world, and one that will have senior membership of the world’s main bodies including the World Trade Organisation. We therefore think that there will be a British solution to our relationship with the European Union, which will not, for example, include paying any contributions to that Union in the way that we currently have to.

[Peter Grant]

The right hon. Gentleman has given examples of a number of countries that he would not want Britain to be like in the event of an EU exit. Will he give an indication of the countries that he would like us to resemble more? That might help the Government to decide which countries we should be compared to in the information that they publish. It is easy to say who we are not going to be like; will the right hon. Gentleman tell us who he thinks we should be like?

[John Redwood]

I have already done that. When the hon. Gentleman studies the report of the debate—if he is still interested—he will see that I have dealt with exactly that point with great clarity.

There will be a British answer, but it will be closer to the answer of those countries that trade very successfully with the European Union without accepting the need to pay money into the EU by way of special contribution, and without having to accept great legal impositions. Of course, anyone who trades with the European Union must meet its standards in respect of the goods and services that it wishes to buy, just as when we trade with the United States of America, we must accept its standards for the goods that we wish to sell to it. However, that does not mean having to enter into a common Government arrangement of any kind, and it does not mean having to pay special taxes in order to trade, because most of the world trades perfectly successfully with the European Union countries without having to do any such thing.

I hope that the Minister will appreciate that those of us who are on the Leave side have read the words that the Lords have actually written, rather than the words that the Opposition wish the Lords had written, and have noted their vagueness. It would, I think, be extremely foolish to specify the Norwegian example—which is not an example that anyone I know wishes to copy— rather than considering some of the larger countries, Commonwealth countries and others that have perfectly good trading arrangements. It would also be wrong of the Government, in answering this exam question, to confine themselves to the issue of trade, given that trade is mentioned nowhere in the draft law that is before us. We do need to consider the political arrangements that we have with EU countries, through NATO and so forth; we need to consider such matters as pipeline agreements, aviation agreements, and all those other arrangements that are clearly covered by this sloppily drafted piece of law.

My final worry with this clause is its asymmetry. The Opposition have shown us how they wish it to be asymmetric. They wish the leave side in the referendum to hypothesise about what our relationship with the EU will look like in two or three years’ time, whereas they do not seem to think it is incumbent upon the “stay in” side to similarly hypothesise. I would not mind betting that there will be even more change if we stay in, because if we vote to stay in, the rest of the EU will take that as an excuse to demand that the UK conform to many more parts of the Union than we are currently prepared to.

We know from the Five Presidents’ Report of the EU published this summer that as soon as our referendum is out of the way by 2017, they wish to press on with their move to capital markets union, full banking union and, above all, political union. We on the Leave side will be asking those who want to stay in to describe to us how Britain would relate to the political union and the very much stronger union generally which the euro members envisage. We should be in no doubt that the euro members wish to use the institutions of the EU as a whole for their own purposes, and it would be very difficult for Britain to be alongside but only half in—in the EU but not in the euro.

I would therefore like to see a symmetrical request. It is important to spell out what staying in looks like, as I believe that staying in is a wild ride to political union. That may not be possible or to the Minister’s liking when dealing with this clause and whether we leave it as it is, but I can assure him that it will be a very important part of the referendum campaign from the leave side.

[Peter Grant]

I welcome the fact that the hon. Member for Stone (Sir William Cash) is inclined not to press at least one of his amendments. It seems to me that there is, and will be, a need for information about the likely consequences of an in vote and of an out vote. I do not think it is right that that should be left entirely to individual campaigns, because we already know that there are arguments about who runs the campaigns and how they are going to be funded, and by definition they will tell at best one half of the story. It is perfectly in order for the UK Government to publish appropriate information that sets out the background to the referendum. A survey done about a month ago indicated that the EU member state whose citizens are worst informed about what the EU actually means is the EU member state whose citizens are going to have a vote as to whether or not they are going to leave. We cannot allow that to continue; we cannot allow the referendum to come upon us with a significant number of our citizens not really understanding what they are voting for, not because they cannot predict what the future might be if we leave, and not because they cannot predict what the future might be if we stay, but because they do not actually know what the present is. Too many people do not understand what the EU does for good or for bad right now. If we simply leave this to partisan partial campaigns, people are going to end up confused rather than better informed. Incidentally, it is one reason why this might be the time to extend the franchise, because we think that 16 and 17-year-olds do not understand it, but that their lack of understanding probably puts them less far behind adults than in most other election campaigns. That vote has been and gone, however, so we will leave it at that.

I do find it a bit surprising and ironic—I will not go as far as to say hypocritical—that, as we saw when the Bill went through its earlier stages, so many Conservatives express the concern that during a referendum campaign a Government might publish information that was a wee bit one-sided. Most Members would not have received what a number of SNP Members received shortly before the referendum last year, which was a glossy full-colour booklet published by Her Majesty’s Government making sure that we understood the wonderful benefits that accrued to us from membership of the United Kingdom. The UK Government recently advertised for a post, in the Department for International Development of all places, whose main job would be to persuade the Scots how lucky we were to be part of the Union. As long as that kind of stuff goes on, I do not think that we need to take any lessons from anybody on the Government Benches about the dangers of letting Governments get involved in a partial way in a referendum campaign.

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[Mr Mak]

I thank my hon. Friend for his intervention. I was just finishing my response to my hon. Friend the Member for North Dorset (Simon Hoare). I hope that through debates in this House we shall be able to take a lead on the issues. I welcome emails from people on all sides of the argument.

[John Redwood]

Surely the point that the British people fully understand, which is why they now wish to leave the EU, is that concerns about migration, jobs, taxation, the £10 billion that we have to pay to the rest of the EU, which we cannot have as tax cuts or extra spending, and our inability to form our own welfare laws are vital concerns, and they are all European issues.

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[Mr Lidington]

Amendment 6, as it currently stands, was tabled by my noble Friend Baroness Anelay, following debate in the Lords, as a way to try to build consensus in that House to enable it to give passage to the Bill.

Perhaps it would be useful for me to explain, in response to comments made in this debate, how the Government interpret the obligation imposed on us by the amendments and how we would propose to see those obligations implemented. By “rights”, as set out in amendment 6, we mean rights that the United Kingdom has as a member state of the European Union, and also the rights granted to individuals and businesses as a result of our membership, such as access to the single market. By “obligations”, we mean the things that our membership of the European Union commits us or obliges us to do. Most obviously, this is at member state level, but there would also be implications for businesses or individuals. An obvious example is our obligation as a member state to transpose EU law in particular areas and to accept the primacy of the EU so long as we are a member of the European Union. The duty written into amendment 6 does not require the Government to set out information about every single right and obligation. Such a report would not be meaningful, and the purpose of the duties is to provide useful and relevant factual information to allow for greater public understanding.

Amendment 6 requires the Government to describe some of the existing arrangements that other countries that are not EU members already have with the EU.

[John Redwood]

I do not understand how the Minister can say that only some of the obligations are mentioned. Surely the Bill as drafted says “the obligations”, which must include all the legal requirements on individuals, companies and the state, as well as the massive contributions and legal supremacy involved. I hope that he is going to mention that nothing is said about trade. He must not limit himself to the trade arrangements but must also look at the defence arrangements, the political arrangements, and all sorts of other arrangements.

[Mr Lidington]

The amendment refers to “rights, and obligations”, not to “the rights and obligations”. It gives the Government the discretion to select for presentation the rights and obligations that we think will best aid public understanding. I want to make it clear that our purpose in recommending acceptance of these amendments is that they should enable us to provide for greater public understanding. I completely agree with my right hon. Friend that membership of the EU touches on matters other than trade or economic policy. I am sure that the relative balance of advantages and disadvantages that arises out of EU membership on all those issues will be a matter of vigorous debate during the referendum campaign, but we do not envisage that debate taking place in the context of the obligation placed on us by amendment 6.

Lords amendment 6 is about providing factual information on the basis of which the public can take an informed decision. It is also about describing some of the existing arrangements that non-member countries already have with the European Union. We think that that is a better course of action than for the Government to attempt to hypothesise about what the United Kingdom’s future relationship with the EU would be in the event of a vote to withdraw, because that depends on assumptions made about not only the future intentions of the British Government, but the likely response of other European countries.

National Insurance Contributions (Rate Ceilings) Bill

John Redwood Excerpts

Tuesday 3rd November 2015 Commons Chamber

[The Financial Secretary to the Treasury (Mr David Gauke)]

I beg to move, That the Bill be now read the Third time.

We have now reached the final stage of this House’s deliberations on this Bill, which implements our manifesto commitment not to increase national insurance contributions—NICs—for employers and employees. On Second Reading, hon. Members were reminded of the Government’s strong record of significantly reducing the burden of NICs on employers. At Budget 2011, my right hon. Friend the Chancellor of the Exchequer announced a £21-a-week above-inflation increase to the employer NICs threshold. In 2014, we introduced the employment allowance to support businesses and charities across the UK by reducing their employer NICs bills by up to £2,000 every year, and this has already benefited more than 1 million employers. The Government are now going further; hon. Members will recall that the Chancellor announced at the summer Budget that this would be increased to £3,000 from next April. From April 2015, the vast majority of employers employing under-21s were lifted out of employer NICs. This NICs exemption will be extended to cover apprentices who are under 25, supporting employers to provide young people with valuable workplace skills. The Bill enacts the Government’s commitment to provide certainty on NICs rates for the duration of this Parliament. Hon. Members will be aware that the commitment contained in the manifesto was not to increase the main rates of income tax, VAT or NICs. The Finance Bill contained measures to deliver that commitment for income tax and VAT, and this Bill delivers on that commitment for NICs.

Let me now deal with the detail of the Bill. First, it provides that the rate of class 1 NICs paid by employees and employers must not exceed existing rates. Secondly, it has been the convention that the level of the upper earnings limit for NICs is aligned with the level of the higher rate threshold for income tax. This Bill formally limits increases to the UEL so that its annual equivalent amount cannot exceed the level of the HRT for income tax. Both the restriction on NICs rates rises and changes to the UEL come into force on Royal Assent of this Bill, and apply until the start of the tax year following the date of the first parliamentary general election to take place after Royal Assent.

This Bill provides certainty for employers and employees: that the NICs rates that affect millions of employees and employers across the UK will not rise for the duration of this Parliament; and that the UEL will not exceed the HRT for income tax.

[John Redwood (Wokingham) (Con)]

My hon. Friend will agree with me that more jobs would be a very good thing and that better-paid jobs for people are a very good thing. He is saying that there will not be any increases but he is presumably not ruling out cutting taxes on jobs, because the less we tax, the more jobs we might have.

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[Rebecca Long Bailey (Salford and Eccles) (Lab)]

As we have heard, this Bill enacts the Conservatives’ manifesto pledge not to increase NICs in this Parliament. It is part of their wider pledge to cap income tax, VAT and national insurance contributions. The Bill contains only three substantive clauses and, as we have heard, no amendments have been tabled for consideration today. Clause 1 creates a “tax lock” for employee NICs, capping the rates of employee class 1 NICs to 12% and setting the additional percentage to 2% for the duration of this Parliament. Clause 2 freezes the rate of employer NICs by setting the maximum secondary percentage payable by employers at 13.8%. By doing so, it also fixes the class 1A and 1B contributions. Clause 3 links the upper earnings limit to the higher rate income tax threshold by setting out that it shall not exceed the weekly equivalent of the proposed higher rate threshold for that tax year. In practice, that means that employees stop paying class 1 national insurance contributions at the 12% rate when their income reaches the higher rate income tax threshold. Thereafter, the rate of national contribution is 2%.

As the Minister is aware, my Labour colleagues are not opposed to the principle of maintaining the rates of national insurance contributions. Indeed, it was Labour that, on 25 March, first committed to halt any increase, and I am pleased that the Conservatives heeded our wise advice. It is just one of our many pre-election pledges that the Chancellor has chosen to implement.

However, without wishing to repeat what has already been said by my colleagues in previous debates, I question the need to implement legislation that forces the Government to keep their own election pledges—surely they should do that anyway. The Chancellor also seemed to share my sentiments back in 2009 when he stated:

“No other Chancellor in the long history of the office has felt the need to pass a law in order to convince people that he has the political will to implement his own Budget.”

Indeed, he went on to suggest that only two conclusions could be drawn from such an occurrence:

“Either the Chancellor has lost confidence in himself to stick to his resolution, and is, so to speak, asking the police to help him, or he fears that everyone else has lost confidence in his ability to keep his word”. —[Official Report, 26 November 2009; Vol. 501, c. 708.]

[John Redwood]

I thought that the previous Labour Government enacted legislation to bring down the budget deficit, because they could not trust themselves with the money, and they were perhaps wise about that.

[Rebecca Long Bailey]

The right hon. Gentleman makes an important point, but I am citing what the current Chancellor has stated.

I question which of the scenarios the Government feel is applicable. The Government have argued during the passage of this Bill that legislation is required to ensure that the market has confidence in their keeping their election promises. It leads to the question why the Chancellor thinks that the electorate and businesses will not simply trust his word. In addition, the Government promised before the 2010 election that they would not raise VAT, but then proceeded to do quite the opposite. Indeed, in the previous Parliament, the Chancellor raised taxes 24 times despite waxing lyrical about creating a low-tax, high-pay economy. The director of the Institute for Fiscal Studies said of the most recent Budget:

“The figures are quite clear though—this was a tax-raising Budget.”

Perhaps the Chancellor has lost confidence in himself. That is not surprising given that he has missed all of his deficit reduction targets for the past five years.

I fear that legislating in this manner is only a political gimmick to convince the market and the electorate that the Government are not increasing taxes when, in fact, tax policy measures in the Budget are expected to raise £5.1 billion by 2018, rising to £6.5 billion by 2021.

Putting that issue to one side, I must once again stress my concern that the Government are severely limiting their options should the economy take a turn for the worse. This summer, the Bank for International Settlements stated simply that this is

“a world in which debt levels are too high, productivity growth too weak and financial risks too threatening.”

The feeble recovery that we have seen thus far is built on private debt, which leaves us with a ticking time bomb. The IFS predicts that house prices will rocket across the whole of the UK, most drastically in London, leading to levels of household debt exceeding those of 2008 at the time of the credit crunch.

The warning signs are there and I harbour grave concerns that the Government are simply not paying attention. My sentiments are shared by many commentators, including the director of the IFS, who said that it would be

“extreme to tie your hands for such a long period of time with the main rates of the three largest taxes.”

Particularly worrying is the fact that the Chancellor’s spending plans are predicated on

“a forecasted rise in revenue yield from NICs.”

That fact was highlighted by the hon. Member for Dundee East (Stewart Hosie). However, should the yield be less than forecast, due to an economic downturn, what will the Chancellor do? He cannot, according to his own legislation, raise VAT, income tax or national insurance contributions. Would further cuts be imposed on public expenditure at precisely the time economic stimulus would be needed?

In Committee, the Minister assured us that, in such a circumstance, the measures before us today would not endanger the fund or be an excuse to undermine the NHS. However, he did enter the caveat that such an assurance was predicated on the Government making “difficult choices” on public spending and

“identifying savings in the welfare budget”.––[Official Report, National Insurance Contributions (Rate Ceilings) Bill Public Bill Committee, 27 October 2015; c. 18.]

I fear that what he meant was that far from legislating on their election promises on the Government’s tax credit work penalty, they have ripped them up within months of taking office.

In conclusion, we will not oppose this Bill as before the general election we also committed to capping national insurance contributions. However, it is not an effective use of precious parliamentary time and resources, and I do hope that the Minister will bear that in mind for the future.

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[John Redwood]

(Wokingham) (Con): I welcomed the manifesto pledge and am very pleased that we know that for five years there will be no increases in the major tax rates. I listened carefully to the Labour response, and one of the worries expressed was what would happen if there were a cyclical downturn or if the economy hit a bad time because of a world recession or something similar. As I am sure the hon. Member for Salford and Eccles (Rebecca Long Bailey) knows, it is common policy between the major parties in this House that if that happens we will normally borrow more. If revenues fall because people have lost their jobs and are not earning so much, and if costs have gone up because more people are out of work, which we do not foresee and do not wish, it is quite sensible to borrow a bit more to help the economy through the difficulties. Fortunately, the official and external forecasts say that we can look forward to several years of continuing progress and growth, as we have had since 2009, so, we trust, the problem will not arise. I think that that answers her point.

[Stewart Hosie]

The right hon. Gentleman would be right in normal circumstances, but we now have the fiscal charter. Given that it has a rolling four-quarter on four-quarter comparison, if forecasts begin to fall the automatic stabilisers might not necessarily kick in in the way that he has described, which was traditionally the case.

[John Redwood]

I think that we would make a judgment at the time, but fortunately we do not have to make that judgment now. If we should get into that awful position, I am sure that there will be a lot of debate in this House. The hon. Gentleman and I might even share the same view, or we might have a difference of view. We would have to judge it on the figures and on the merits of the case.

On this side of the House, we regard having more people in jobs as a very good thing and want to promote better pay, particularly for those whose pay is very low and needs topping up with benefits. I buy into the Government’s vision that we want more people in work and more people in better-paid work, with less benefit top-up needing to be paid. They should be better off as a result of these changes.

In the course of proceedings this afternoon on this Bill and on the European Union (Approvals) Bill, we have been told that not enough time has been allocated to debate tax credits. I recall that we have had three major debates on that subject quite recently, and three votes, and the House has come to the same view on each occasion. This is another such opportunity. I note that Opposition Members have not come to the Chamber, but it seems to me to fall quite within the remit of the Bill, which is about how to tax work and what people keep as a result of work, to discuss tax credits as another part of the equation. I see the Bill as an important part of the Government’s strategy of making work pay.

We regard work as a good thing, as I trust all parties do, and we do not really want to be taxing good things. Unfortunately, however, we live in a world where we need a lot of revenue, so we end up taxing good things as well as bad things. However, where we have the chance to shift the balance, surely it makes sense to tax the good things less, such as work and earnings, so that people can have more opportunity of finding a job and of keeping more from a better-paid job. We can then find less desirable things that we are more prepared to tax, as well as running sensible value-for-money government so that the overall demands are not too great.

The danger, if one went down the route of opposing the Bill, is that it might become all too easy to put an extra 1% or 2% on national insurance. One might say that people would not notice it, but it would have two immediate adverse effects. First, there would be fewer jobs as it is a direct tax on jobs and, secondly, employees would be worse off because of the effect on their contribution and we would have to find more money under our scheme for tax credits or other top-ups.

In conclusion, it is excellent that my party intends to keep its clear promises to keep these tax rates down, which I fully supported and campaigned on. We must see it as part of the wider debate, and today is another opportunity to debate national insurance in the context of tax credits. If we keep taxes down or reduce them more, there is more scope to deal with the tax credit problem.