John Redwood MP

I was surprised to read in the Sunday press that some people think it a good idea to divert overseas aid to Eastern European members of the EU to “buy” a better  deal with that organisation.

As I have explained before, there is no Treaty power to require a UK leaving payment above and beyond completing our annual payments to their budget for the period of  our continuing membership. Nor is it legal under WTO rules to pay for more favoured trade with a particular country or group of countries than the rest. Payment for trade under WTO rules takes the form of accepting tariffs, and these have to be limited to the current mfn schedules the EU has agreed.

The trade choice is for the rest of the EU to make.  The Uk would be quite happy to carry on tariff free. That will help the rest of the EU more than us. It would mean registering our current trade arrangements as a Free Trade Agreement at the WTO. Or we can trade under mfn arrangements under the WTO. Most of UK trade will be tariff free, whilst EU sales of agricultural products would suffer heavy tariffs into the UK. The UK could agree lower or no tariffs with other cheaper suppliers of food around the world through the WTO process. I have  said it is in the EU’s interest to accept the tariff free offer, and they may  do so after much huffing and puffing.  I have also always said that they might decide to harm themselves by accepting WTO terms instead. Under the general WTO arrangements the UK will be fine.

The overseas aid  idea also falls well foul of the overseas aid rules. The Eastern countries in the EU do not qualify for overseas aid under the international definition, as they are too well off. UK Ministers  by law have to hit the 0.7% Aid target under international definitions, so they could not switch this aid money to Eastern Europe unless they repealed the 0.7% requirement. It would not be easy to achieve repeal, given the likely fact that all the opposition parties would oppose repeal other than perhaps the one UKIP MP. The government might be able to persuade  enough Conservative MPs to get it through the Commons, but the Lords would be likely to have a big majority the other way. As it would not be a Manifesto pledge, and does not stem directly from a referendum, the Lords might become  very difficult.

In circumstances where the EU Commision and one or two large countries were  not wanting a free trade Agreement with the UK for political despite their interests in having one, it is difficult to see how offering to send money to Eastern countries would buy a change of heart.

The media have been running two popular causes in recent days. The campaigners want the government to spend more on social care. Campaigners also want no business rate rises in places where property prices have risen. This highlights the perpetual tension. How do you raise enough money for good purposes without overtaxing the people and businesses which generate so much of the national income?

Taxing work and enterprise is never a popular idea, nor helpful to promoting growth. It is a necessary evil as the country wants to have decent public services. The skill is how do you raise enough from those who earn the money without doing too much damage to enterprise?

The decision to  tax business property is commonplace around the world. The political difficulty in the UK comes from the need for periodic revaluations of properties. In the areas where these have risen a lot businesses face large increases in rates bills. In the areas where values have gone down other businesses benefit but are not so vocal about the changes.

Is this a good system for taxing  business? If you did not raise business rates, how would you replace the revenue?

I favour setting income and profits  tax rates that people and business will pay and can pay, to avoid too much damage to incentives and to keep business and enterprise at home.  I have no problem with the principle of business rates but would be interested in comments on the current levels.

The advent of Mr Trump on the world diplomatic scene is making some big changes.

Mr Trump has in many ways a very conventional US view of the world . He sees his main allies as the UK in Europe, Japan in the Far East, and Israel in the Middle East. He tells Israel he wants them to reach a settlement with the Palestinians, but he no longer insists on what that settlement might look like. He warns China on trade,and is friendly towards Taiwan. He  condemns the harsh words and warlike gestures  of North Korea. He is keen to tackle the persistent large trade surpluses run by China and Germany, which he sees as disrupting the world economy and fair commerce.  He wants a world of bilateral relations between nations, rather than complex diplomacy between jostling regional power blocs. The US has traditionally  been suspicious of international bodies taking too much power, and has often found itself in disagreement with the liberal consensus that tends to dominate in those institutions.

The biggest change he is proposing in US foreign policy is the reappraisal of the strength and helpfulness of the EU. Where Mr Obama saw the EU as a benign force, and looked to Mrs Merkel to be his best ally in return for his support for the supranational body, Mr Trump is concerned. He sees the dangers of an inadequately resourced European defence activity that weakens NATO further but still expects US military capacity to be the guarantor of the peace. He is concerned about the low level of the Euro allowing Germany to build a colossal export surplus. He sees how the current level of EU integration is creating a force against it in rising independence movements around the continent. He is doubtless not impressed that the IMF has run up large bills lending to the weaker member states of the Eurozone, when the zone overall is rich enough to  be able to handle its own financing.

The figures for the last three months compared to a year earlier still show good growth and no retail price inflation, with both volume and value figures up 4.6%. Add in motor fuel where oil prices have soared and volume growth is 3.8%. read more

One of my main arguments for the UK to leave the EU was to allow the rest of the members to complete their union free from the UK seeking to hold them back. Anyone looking at the state of the Eurozone can see that the poorer parts of the zone need larger financial transfers from the richer parts. The way the system works at the moment is through the so called Target 2 balances. The latest figures show that Germany now has a huge  deposit of Euro 796 billion with the European Central Bank. This is lent out interest free for as long as it is needed to the large deficit countries. Italy, Spain, Greece and Portugal are the main beneficiaries.  In a normal currency Union the equivalent region to Germany would simply send more grants to the parts of the Union needing more money. These balances may well become an important part of the German election debate over how much money Germany should share with the rest of the Union, and how that should be organised.

David Cameron felt he had to keep the UK out of the Fiscal treaty that wanted to start to address this issue. The UK always made clear as a member it did not wish to see a bigger EU budget and did not wish to send more of its cash to the poorer high unemployment regions of the south of the Eurozone. The rest of the EU with the possible exception of a few richer Northern countries did want a growing budget with more solidarity recognised in higher transfer payments.  It was increasingly difficult to be in the EU but not be in the Euro, the central feature of the EU. The UK was also reluctant to work on a European defence identity or common armed forces, was out of the Schengen common borders and an opponent of the planned political Union with an EU Treasury and more common taxation. The UK public had always been told the EU was just a glorified free trade area which should  be good for our exports. In practice it was a customs Union with many and growing features of a full economic, monetary and political union, which was better  for their exports to us. It stopped us having free trade agreements with many other parts of the world.

One of the strange things about the UK debate since the decision to leave is the wish of some  to argue both that the UK will lose out badly from leaving, and that we have to be punished to make sure we do lose out. The Commission and some in other member states who keep on saying they need to demonstrate we will lose from departure argue a contradiction. If, as they say, belonging is such good news, leaving is punishment enough. If, as they imply, belonging is such bad news, then of course they need to replicate as many of the undesirable features of  belonging as they can on the departing state to stop it doing better! It makes it a highly negative approach. Pessimism rules, and a few  suggest revenge is  their favourite dish. They will of course discover revenge is a boomerang. They cannot hurt us because we are shaking off their controls but they can hurt themselves by imposing high tariffs on their agricultural exports to us and higher taxes to make up for our lost contributions. They should also remember that their own Treaty makes it clear they have a legal obligation to get on well with a  neighbouring state and to trade with it.

I find the delay in the EU acknowledging that all UK citizens legally settled in the rest of the EU can stay there is shocking. Surely these officials and politicians understand that no decent country expels legally settled law abiding citizens from its jurisdiction?  The UK has no wish to  expel EU citizens legally here in the UK. What is holding  back the rest of the EU saying the same? This should not  be a negotiation. This is not something the UK wants and has to pay for.  This is just basic decency, and international law.