David Gauke: Cameron’s values in government may be out of favour, but they are not wrong

13 Apr

David Gauke is a former Justice Secretary, and was an independent candidate in South-West Hertfordshire at the recent general election.

The Government’s announcement that it is undertaking an independent enquiry of the Greensill Capital affair is unlikely to bring much cheer to David Cameron. He has endured weeks of bad publicity, and there is little chance that the story is imminently going to ‘move on’.

Whatever the rights and wrongs of the former Prime Minister’s actions – and he has acknowledged making mistakes – the furore is all the more painful because his reputation as Prime Minister was already at a low ebb. Critics of his economic policy accuse him of inflicting austerity which, they argue, were unnecessary, stunted growth and damaged public services; he is castigated by Remainers for calling and losing the Brexit referendum and by Leavers for being a Remainer; some on both sides accuse him of deserting his post by resigning the morning after the poll; his electoral successes have been surpassed by Boris Johnson’s thumping majority in 2019. Not unrelated to this, neither the man nor his political values appears to have much influence on the modern Conservative Party.

Defending Cameron’s record in office is deeply unfashionable. So I will do so.

Let us start with the economy. There are few defenders of ‘austerity’ in today’s public debate. Labour still want to argue that the electorate got it wrong in 2010 and 2015, just as they tried to do in 2017 and 2019 (which, incidentally, suggests that this might not be a guaranteed route to success). Johnson, meanwhile, is not temperamentally an austerian and enjoys the opportunity to demonstrate that he is new and different from recent Conservative history.

The economic debate has also moved on. Governments have been able to borrow vast sums of money in the last year without much of a risk of a sovereign debt crisis. Central banks have played a more active role, debt servicing costs have fallen and international organisations have advocated expansionary fiscal policies. This may all go wrong at some point – there is more reason to worry about inflation than for many years – but it hasn’t gone wrong yet.

None of this means, however, that the concerns of fiscal conservatives back in 2010 should be dismissed. The global financial crisis had resulted in substantially higher spending and permanent damage to tax revenues. The risks of a sovereign debt crisis – with consequences for inflation, debt interest costs and consumer and business confidence – were not imaginary. The IMF and the OECD advocated that countries needed to have credible plans to put the public finances on a sound footing, and many countries did just that. In short, the balance of risks and the expectations of the markets in the years after 2010 were very different to where we are now.

Did fiscal consolidation significantly hamper our economic recovery? It is true that economic growth in 2011 and 2012 was disappointing (although not as bad as it appeared at the time when the ONS early estimates suggested that we had had a double dip recession), but it is worth remembering that the independent Office for Budget Responsibility put this down to the lasting effects of the banking crisis, higher commodity prices and the Eurozone – not fiscal consolidation.

Looked at in the round, over the 2010-2016 period, the UK had the joint highest growth for a G7 economy, level with the US. It was also a period of rapid jobs growth, with the highest employment rate in our history and income inequality falling. Had the Brexit referendum gone the other way, there is every reason to believe that the post-2016 UK economy would have been characterised by high economic growth, rapidly rising living standards and strong public finances, as opposed to us falling to the bottom of the G7 league table.

Were public services were unduly damaged? Difficult decisions had to be made, but many of them were unavoidable given that the spending plans that we inherited were based on an over-optimistic, pre-crash assessment of what was affordable. It was possible to drive greater efficiencies and find ways of getting more for less. The British state has been placed under enormous strain in the last year by Covid but there have been some real successes. Just looking at two areas where I have some familiarity through Ministerial experience, HMRC was able to introduce the furloughing system in a matter of weeks, and the Department for Work and Pensions was able to cope with an extraordinary surge in benefit claimants. Neither would have been possible without reforms undertaken by the Cameron Government.

Having said all that, we relied too heavily on spending cuts over tax rises. It was politically easier at the time to cut spending rather than raise taxes and, as time went on, we got the balance wrong. Some areas of government spending – justice, for example, or social care – were squeezed too hard. But a period of spending restraint was necessary and inevitable and too many of Cameron’s critics fail to acknowledge that.

It was the decision to hold a referendum on the UK’s membership of the EU and then lose it that hangs most heavily over Cameron’s reputation. It will, unfortunately, always be for what he is remembered and, for many Remainers, this will never be forgiven. The referendum result created huge uncertainty and will, in my view, inflict lasting damage to the UK. But we should not kid ourselves that had he adopted a different approach our membership of the EU would currently be assured.

The Conservative Party was moving in the direction of being a Vote Leave Party – in part because of the fear of UKIP peeling off Tory votes – and the decision to offer a referendum was motivated both by a desire to win the 2015 general election by winning back UKIP voters but also by a recognition that a post-Cameron Conservative opposition would, in all likelihood, favour Brexit.

The best chance of staying in the EU, Cameron concluded, was to settle the issue early with a decisive Remain victory – the longer the issue was left, the greater the chance we would leave the EU. As it turned out, he was wrong to believe that he could deliver a Remain victory but he may have been right that this was the best chance of defeating Brexit.

As for the criticism that he should not have resigned following the poll, one lesson of the last five years is that the referendum did not tell us what exactly ‘Leave’ meant. I do not believe it is plausible to think that the European Research Group would have allowed the leader of the Remain campaign to define the answer.

More broadly, much of his political approach has stood the test of time. In wanting more women and ethnic minority MPs, caring about climate change and the environment and introducing equal marriage he took positions that were controversial at the time but have aged well.

Yes, Johnson’s majority in 2019 – and continued strength in the polls – exceeds anything achieved by Cameron, but it is not clear that a political strategy based on white voters without post-16 academic qualifications is the right long-term strategy for an electorate that is becoming more diverse and better educated.

Cameron represented fiscal conservativism, social liberalism and internationalism. These values may be out of favour but they are not wrong. It is too early to say to what extent his personal reputation will – in time – recover but the dismissal of the achievements of his Government is undeserved.

David Gauke: I’m a convinced Remainer – but believe nonetheless that the EU has mishandled its vaccine policy

27 Mar

David Gauke is a former Justice Secretary, and was an independent candidate in South-West Hertfordshire at the recent general election.

At Thursday’s virtual European Council meeting, the EU stepped back from imposing a vaccine export ban. This is just as well.

At a time when all nations face the same enemy and seek to apply the same solution, the case for international co-operation is overwhelming. We all know that maximising the production and take-up of the vaccines is the way out of the Covid crisis, and we all know that using global supply chains should be the swiftest way of producing the vaccines we need. Talk of export bans makes this task harder.

For some on the Remain side of the Brexit debate, there is an instinctive desire to defend the EU and cast the UK as vaccine nationalists or selfish panic-buyers and AstraZeneca as contract-breakers, arbitrarily favouring one customer over another.

It is, however, an unconvincing case. In contrast, had the EU proceeded to block vaccine exports to the UK, its behaviour would have been indefensible.

If one believes in open markets, removing trade barriers, building up trust between trading partners and honouring contractual obligations, one should be prepared to be critical of EU behaviour contrary to those values, regardless of where one stood on the subject of Brexit. I am sure many Leave voters who share these values must, from time to time, hold similar views about some of the actions taken by the UK Government.

Some have defended the proposed export ban stating that others are doing it. It is not much of a defence, but it is true to say that the US – under both Presidents Trump and Biden – has used legislation to prevent vaccines manufactured in the US from being exported. The Indian Government has also stepped in to prevent the export of doses. On the charge of vaccine nationalism, the US and India are guilty and the EU, as yet, is innocent.

The charge that the UK has a de facto export ban is, however, nonsense. There is a clear distinction between an entity not being provided with vaccines because the export has been blocked by government action, and an entity not being provided with vaccines because it has no right to it because they have already been acquired by someone else.

Underlying the EU case is a confusion between the entity producing the vaccines and the country in which the vaccines are produced. Some EU leaders have argued that it is not right that a large proportion of ‘EU vaccines’ have been ‘exported by the EU’. As the Taoiseach, Micheál Martin, pointed out earlier this week ‘these are not European Union vaccines… these are vaccines paid for by other countries that are manufactured in Europe.’

Is it right for the EU to characterise AZ as the villains of the piece for failing to fulfil its contractual obligations? When this row first blew up in January, the Commission argued that once the procurement contract was published, it would be clear that AZ was in breach.

The contract was published and it established no such thing. Without delving too far into the complexities of contract law, if AZ were failing to allocate vaccine doses to the EU in accordance with its contractual obligations, it would be open to the EU to seek legal remedy. Given that the EU is not doing this suggests that the Commission has little confidence in its legal position that AZ is in breach of its contractual obligations.

Did AZ agree better terms for the UK than for the EU? This may well be the case, and would be consistent with the Commission’s lack of confidence in its legal position. Does this mean that the UK engaged in sharp practice in the deal it got? No. First, competently negotiating a contract is no sin. Second, the UK – and the UK taxpayer – played an important role in developing the vaccine, first with Oxford University and then with AZ. This engagement enabled AZ to ramp up its production following an agreement signed in May 2020, months before the AZ/EU deal. This early ramping up of production, by the way, has probably helped not hindered the EU.

There is a comparison to be drawn with Germany and BionTech. Germany supported BionTech, which developed the vaccine that is being manufactured by Pfizer. In contrast to the UK and AZ, Germany did not nail down priority supply either for itself or for the EU.

As a consequence, many Pfizer doses are manufactured in a country that refuses to export to the EU or is exported from the EU to those who have placed an order. It would have been perfectly reasonable for Germany (or the EU) to say “we’re funding the research and development and agree to purchase the first X million doses”. But neither Germany nor the EU chose to do so. Again, that is not the UK’s fault.

The botched procurement by the EU is the route of many of the problems. The Commission was focused on the wrong issues in the circumstances, worried about the price and liability in the event of vaccines causing harm. Speed mattered and gambling large sums of money at an early stage was the right thing to do, as the UK demonstrated. The Commission, perhaps because it does not have its own tax base on which to call, was more hesitant.

Many a commentator has speculated that, had the UK still been part of the EU, we would now be stuck in the EU slow lane. However, it is inconceivable that a UK Government seized of the need to make rapid progress on this front would have surrendered control over the vaccine programme.

In all likelihood, an alliance of the UK and Germany would have ensured member states retained control, resulting in greater urgency in vaccine procurement. As members of the EU, we were a consistent voice of scepticism towards greater integration and, in this particular matter, our absence has been to the EU’s detriment.

Where does that leave us? The EU is well behind the UK in the vaccine rollout, it does not appear to have a legal remedy against AZ (presumably because AZ is fulfilling its ‘best endeavours’ contractual obligations) but the relationship between the EU and AZ remains toxic. The immediate threat of an export ban has dissipated but EU politicians are under immense political pressure. Until this pressure eases, the risk of a foolish intervention by the EU remains.

This incident also emphasises that our relationship with the EU matters. On this occasion, the European Commission has behaved very badly in the same way that I think the UK has behaved very badly over the Northern Ireland Protocol. But we must do more than just apportion blame. We have to make this relationship work because, if we do not, both sides have the capacity to do the other side a lot of harm. More often than not, the smaller party – in this case, the UK – will come off worse.

On both moral and legal grounds, the UK is in a strong position in the vaccine dispute. But the wise approach would be to reduce tensions. The national interest would be served by making some contribution to helping them out, even if the Commission doesn’t really deserve it.

David Gauke: Is Britain really set to become a low tax, less regulated, free trading, buccaneering country?

13 Mar

David Gauke is a former Justice Secretary, and was an independent candidate in South-West Hertfordshire at the recent general election.

Conversations about tax policy can take unexpected turns. It was during one such conversation in the late 2000s – I was the shadow tax minister at the time and developing our plans for corporation tax – that a senior tax lawyer at a city firm recommended a series of books on naval battles.

Peter Padfield’s Maritime Trilogy is, in truth, somewhat broader than that. Padfield alternates accounts of the most important maritime confrontations since the Spanish Armada with a broader account of the social, economic and constitutional development of the great powers.

His central argument is that there is a distinction to be drawn between maritime nations – with linked strengths of sea-fighting, trade, financial innovation and constitutional constraints – and land-based empires. The later relied on closed domestic markets, rigid hierarchies and centralisation, the former distinguished by liberty, flexibility and enterprise.

It is an analysis that many British Conservatives would share and, the argument goes, makes the UK well suited to the era of globalisation. We are historically and culturally accustomed to trade and with that comes a recognition that trading partners have other options. Our prosperity is dependent upon those partners wishing to continue to trade with us. Political stability; the rule of law; paying our debts; limited government; competitive and predictable taxes – all qualities that are necessary to succeed as a maritime nation and in the era of globalisation.

It was in this spirit that the Prime Minister’s first big speech following our departure from the EU was at the Old Naval College in Greenwich where – in extolling the virtues of free trade – he talked of recapturing “the spirit of those seafaring ancestors immortalised above us whose exploits brought not just riches but something even more important than that – and that was a global perspective”.

So how are we doing? Are we on course to be the open, outward-looking nation of which the Prime Minister spoke? Are we becoming a more flexible, enterprising, maritime nation?

My last column assumed that corporation tax rates would increase and argued that this would be a mistake. When I heard Government ministers defend the rise by saying that our corporation tax rates remained the lowest in the G7, I was reminded of my conversation with the tax lawyer.

The lawyer’s argument (which I found persuasive) was that we became economically successful from the 1690s onwards because our model was more like that of a small country dependent upon foreigners choosing to trade with and invest in us, taking inspiration from the Dutch rather than the French. Our modern tax system should seek to emulate this, he argued, encouraging international businesses to locate activities and investment in the UK. Our rates may be lower than other G7 economies but, if we see ourselves as nimble and competitive, our ambitions should be greater than that. A better corporate tax regime than France is not a proud boast.

How about freeports? The name could not be more evocative of our trading and maritime traditions. But the evidence suggests that they will achieve little other than displacing activity from one part of the country to another. And if we were really ambitious about a deregulated, low tax, low customs solution to our economic woes, why give these advantages to some places, why not everyone?

The emphasis on freeports reveals an approach to the levelling up agenda that I worry is more about creating grateful localities in exchange for pots of spending rather than a clear sighted vision for improving productivity. The suspicion must be that the preference for ad hoc ministerial decisions over a more defined industrial strategy will lead to a less economically rigorous approach. The suspicion will linger that party political considerations will be to the fore.

There is one surprising, if qualified, bright spot. We are becoming more open to talent. It was already the case that the requirements to get a work visa were much less restrictive than previously, and the Chancellor’s announcement on the skills visas is worthwhile. The qualification, of course, is that it is still much more bureaucratic for EU citizens to work here than it was – which brings me to Brexit.

Our history as a maritime nation is one often identified by supporters of Brexit – like the Prime Minister in his Greenwich speech. Even the word ‘Brexiteer’ evokes the naval escapades of buccaneers (although the Oxford English Dictionary also defines ‘buccaneer’ as ‘a person who acts in a recklessly adventurous and often unscrupulous way’). Liz Truss tops the ConHome Ministerial popularity charts largely on the basis of her energetic advocacy of Global Britain and for free trade as a benefit of Brexit.

The reality is that Brexit involves the erection of trade barriers with our largest market, as January’s appalling trade numbers suggest (although, to be fair, a clearer picture will only emerge over time). Given the Prime Minister was willing to agree to the Northern Ireland Protocol, it even involves trade barriers within the UK.

While good progress has been made by the Department of International Trade in completing free trade agreements with third countries, these have primarily rolled over existing agreements that we had as members of the EU. There was a flurry of excitement last week when the US dropped punitive tariffs on UK products that were in place because of a longstanding dispute with the EU over Airbus and Boeing. Brexit supporters rushed to declare it a triumph due to our new status, the Trade Secretary wrote a self-congratulatory piece in The Daily Telegraph. A day later, the US announced that it was dropping the punitive tariffs against the EU, too. The search for a trade benefit from Brexit continues.

What about regulatory flexibility? It is nearly five years since we voted to leave the EU, but there are still no bold plans to regulate in a different way. Plans to review workers’ rights have been dropped on the basis that this would be politically unpopular.

If the hard Brexit delivered by the Government has made trade with the EU much harder, the combative manner of our dealing with the EU has not only reduced trust but even undermined a key attribute for a trading nation – the rule of law. Having threatened to breach international law for three months over the autumn, Lord Frost has now decided to extend the grace period before internal checks come into place – unilaterally changing the terms of our agreement with the EU. A second breach of an international treaty only recently agreed begins to look like a habit. It does nothing for our reputation for trustworthiness.

The attributes of an outward-looking, open, trading nation are ones to which we should aspire. But in terms of our openness to trade, competitiveness on tax and adherence to the rule of law we are going backwards. In terms of the State telling businesses what they should do and where they should do it, we are becoming more centralised and more arbitrary.

For years, many in the UK have characterised the EU as centralised, interventionist, uncompetitive and protectionist. It would be a sad irony if our departure from it makes us more like the type of inward-looking, land-based power that we once used to disparage.

David Gauke: My Budget advice to the Chancellor. Raise income tax, not corporation tax.

27 Feb

David Gauke is a former Justice Secretary, and was an independent candidate in South-West Hertfordshire at the recent general election.

If there is one tax that the Chancellor is likely to increase when he stands up to deliver his Budget on Wednesday, it is corporation tax. Speculation that the corporation tax rate is going to rise has been running for months and if the Treasury wanted to dispel such speculation it could have done so. In contrast to George Osborne’s time as Chancellor – when reductions from 28 per cent to 17 per cent were announced – Rishi Sunak is expected to announce a Corporation Tax rate in the region of 23 to 25 per cent.

Is this a good idea? My view – as the Minister of Tax throughout the Osborne Chancellorship – is that it is not. But it is worth examining the arguments for and against such an approach.

The first argument that will be made is that we might not need tax rises at all. I wish that this was true but sadly this is unrealistic. It is true to say that we can live with higher levels of debt than was the case in the past. Interest rates are low and likely to remain so. Even if they increase, the long dated maturity of our debt gives us a chance to respond. The markets are happy to lend to us, the risk of a sovereign debt crisis is remote. The Covid crisis is the type of event in which governments should be willing to borrow and the consequences can and should be dealt with over a long period of time. In short, we needn’t be in a hurry to pay off the Covid-19 debt.

Even accepting all of this – that ‘this time is different’ – there is still an issue. Even after we are put the economic consequences of Covid-19 behind us, the OBR forecasts a deficit of £100 billion or 4 per cent of GDP. Our debt to GDP ratio would continue growing. Given these forecasts assume tight control over public spending that will be hard to deliver and the significant demographic challenges that face the country in the 2030s, some kind of fiscal tightening in the form of tax rises will be necessary eventually.

The second argument is that now is not the time. I would agree that now is not the time for a fiscal tightening. The economy is currently shrinking and unemployment is likely to increase substantially in the months ahead. The markets are not jittery so there is less of a pressing need to take action. Nonetheless, the Government could increase some taxes without engaging in a fiscal tightening if long term tax increases are accompanied by short term tax cuts or spending rises. So one can announce and even implement tax rises without engaging in an immediate fiscal tightening.

There is also a political issue. Delaying action on fiscal consolidation might make economic sense but it would push tax increases into the last years of a Parliament. Leave it a year or so and the Chancellor might find that his Parliamentary colleagues – not least the Right Honourable Member for the marginal seat of Uxbridge and South Ruislip – might become rather resistant. Now might be the last chance to take action.

The third unconvincing argument is that cutting corporation tax has not cost us any money and increasing it will not raise you any money. Look at how corporation tax revenues have increased since 2010, the argument goes. Sadly, life is more complicated than that. Yes, rates have fallen and revenue has increased but corporation tax receipts reflects where we are on the economic cycle (in 2010, businesses were not making much by way of profits and if they were they had big losses to offset). Furthermore, the post-2010 reforms were Lawsonian in their approach in broadening the base at the same time as lowering the rate (so these were not simply cuts). In addition, lower corporation tax rates have unintended behavioural changes in that more people pay themselves through companies (diverting tax revenues from income tax and national insurance contributions). To put it another way, increasing corporation tax rates really will bring in more revenue.

So, to summarise, it will be necessary to increase tax revenue, it is reasonable to make a careful start on that process now (albeit in a way that does not tighten fiscal policy in the short term) and that increasing the corporation tax rate will bring in additional revenue. I could also add that, of all the potential revenue-raisers, this is likely to be politically less painful than other options. Even businesses will not squeal much because, for many of them, making a profit appears to be a remote eventuality and paying more tax on those profits would be a relatively nice problem to have.

It would still be a bad idea.

Why? If we are going to raise more in taxes – and we are already at historically high levels – we need to have a debate about which taxes are least damaging to economic growth. Over the long term, corporation tax ranks as being one of the worst.

Corporation tax is a tax on profits. Profits are the return on investment; the higher the tax on profits, the lower the rate of return. All other things being equal, the lower the rate of return on investment, the less investment you get.

There is also a tendency to think that corporation tax is something that is paid by, well, corporations. At one level that is true but – to state the bleeding obvious – all taxes are paid by people in the end. Corporation tax is ultimately paid by shareholders in lower dividends, consumers in higher prices and employees in lower wages. There is plenty of evidence to suggest that in an open economy like the UK, it is the workers who lose out the most. Investment goes elsewhere, productivity does not increase as quickly as it would otherwise do and, in the end, wages and salaries reflect productivity.

It is no coincidence that, in the era of globalisation, corporation tax rates have fallen around the world. I spent much of my time as a Treasury minister trying to persuade international businesses to locate more investment and activity in the UK as a consequence of the competitiveness of our corporate tax system. We were starting to see success but there was always a question as to whether the UK was truly committed to corporation tax competitiveness in the way that, say, the Republic of Ireland was. Given the current speculation, it was a fair question. On top of Brexit, a sharp hike in corporation tax rates will be yet another blow to our international reputation as a place in which to do business.

If we need more tax revenue – and we do – we have to make use of our big, broad-based revenue raisers – income tax, national insurance contributions and VAT. The manifesto pledge made in 2019 not to increase the rates of these taxes was unwise at the time but it was made in good faith. However, much has happened since and the Government would be justified in recognising that. Attempting to fill the fiscal black hole by swingeing increases in corporation tax will reduce business investment and damage our international competitiveness. Not for the first time, the politically expedient choice will come with a painful economic cost.

David Gauke: Ten years for lying on a form. Misguided, disproportionate – and characteristic of our cavalier approach to sentencing.

13 Feb

No one is going to be sentenced to ten years imprisonment for lying about where they have travelled from. Such behaviour might be reprehensible and, in the current circumstances, it may be justifiable to make it a criminal offence which, on occasion, may need to be punishable by imprisonment. But ten years – on a par with threats to kill, non-fatal poisoning or indecent assault – is evidently disproportionate. Even Michael Ellis, the Solicitor-General, who is not exactly a signed-up member of the awkward squad, has let it be known that he questions the “credibility” of the sanction.

I make this point not as a sceptic of measures to control the spread of the virus nor as a critic of Matt Hancock. Some of his Parliamentary colleagues appear to take out their frustration at the existence of Covid-19 and all that this entails on our way of life on the Health Secretary. Implicit in some of the criticisms he receives is the view that, if only someone else was in charge, we would all be going about our business unimpeded by lockdown restrictions. This is obviously nonsense.

On the big issue about the need to suppress the virus until a vaccine became available, Hancock got it right. Not everyone in Government can make that claim.

Nonetheless, the proposed maximum sentence is far too long. It also revealed an attribute that is not unique to one Minister or one government but which has been prevalent in our politics for nearly 30 years – a cavalier approach to sentencing policy.

Before making my case, let me set out some data. When I was Justice Secretary, I asked for information as to how large our prison population was compared to other European countries. For every 100,000 people in in the Netherlands, 61 were behind bars. In Denmark it was 63, in Germany it was 76, in Italy it was 99 and in France it was 104. In England and Wales it was 139.

This high prison population is a relatively recent phenomenon. In 1993, we had approximately 45,000 people behind bars. Fifteen years later, we had reached 83,000, which is roughly where we have been since (the current exceptional circumstances has resulted in a fall to 78,000, but is forecast to rise rapidly over the next few years).

The increase in numbers has not been driven by higher levels of criminality, but by tougher sentences. Speak to experienced judges, and they will tell you of how someone who would have been sentenced to five or ten years in the 1980s would now get ten or 20 years. Our prison population has risen not because there are more criminals or that more criminals are getting caught, but because our criminals are locked up for longer.

Quite right too, many will say. Longer sentences tend to be very popular. Even this week’s announcement polled well – 51 per cent thought it ‘about right’ and 13 per cent thought it ‘not harsh enough’, according to YouGov. That does not make it a good policy.

We have to ask ourselves, when it comes to increasing the time people are imprisoned for any offence, why we are doing it. The first argument is deterrence, but there is little or no evidence to suggest that, say, the threat of ten years in jail is more of a deterrent than five years.

The second argument is about incarceration protecting society from reoffending. But, again, the evidence tends to be weak to support this (and, by and large, the more serious the offence, the less likely the chances of reoffending).

The third argument is about society articulating its feelings of repugnance at particular behaviour by the severity of the punishment. I certainly do not dismiss the need for our criminal justice system to reflect our shared sense of outrage over particular crimes. This is a legitimate factor in determining sentencing policy. However, as a society, in recent decades we have become noticeably keener to articulate our feelings of repugnance.

This process often starts with a targeted announcement that applies to only a small number of criminals. To give an example, a minimum sentence of 30 years for murder involving firearms or explosives was imposed in the 2003 Criminal Justice Act. This applies, thankfully, to very few cases but it made the minimum sentence for knife murders look low, so that increased from 15 years to 25 years in 2009, after a high-profile case. And then when it comes to determining the appropriate sentence for other offences – such as attempted murder, or grievous bodily harm, or possession of a weapon – judges will take that minimum sentence for a more serious crime as a reference point.

Consequently, we have a ratchet effect. There is a high-profile crime; there is tabloid outrage over the leniency of a sentence, the Government increases the maximum or minimum sentence for that specific crime, sentences for lesser crimes increase accordingly – by which time many offenders face a longer stretch and the prison population rises yet further.

I am acutely aware that trying to step off this escalator is enormously difficult. In my own time as Justice Secretary, I tried to resist routinely inflating sentences for serious offences, rather than going as far as trying to reverse the trend for the previous 30 years.

Instead, I focused on trying to keep minor offenders out of prison. These are people who are frequent offenders where the focus has to be rehabilitation. Prison – with the inevitable disruption to family life, accommodation and employment – makes that much more difficult. The evidence points to non-custodial sentences being much more effective in reducing reoffending. Politically, there is widespread support for such an agenda and – although my policy of scrapping most short prison sentences has been dropped – there is very good work being done by my successor, Robert Buckland, and prisons minister, Lucy Frazer on this front.

Nonetheless, the Government’s Sentencing White Paper, published in September, as well as containing many excellent policies on matters like Community Sentence Treatment Orders, also contains a long list of measures that will mean sentences become even longer.

No doubt these poll well – even better than locking people up for ten years for giving inaccurate information as to their recent holiday travels – and those who will face lengthy imprisonment are deeply unsympathetic individuals.

There is a constant pressure on Ministers to be seen to do something, to demonstrate their abhorrence at criminality and to take the side of the victim. But where does this end? If – when faced with an individual crime that cuts through to the public or a crisis that requires the creation of a new criminal offence – the reaction of Ministers is always to impose a yet more draconian prison sentence as a form of virtue signalling, or to win a political arms race, sentences will become disproportionate, our prison population even more of an outlier and the burdens on the taxpayer (assuming we want a secure and humane system, which we should) unsustainable.

Yes: ten years for lying on a form is a bad policy. But this is not the first time that a misguided and disproportionate sentencing policy has been set out in order to liven up an announcement and show that the Government is being tough. And it certainly will not be the last.

David Gauke: The UK, the EU, vaccines – and future relations. Here, jingoistic politicians. There, Trumpian ones. Bodes badly.

29 Jan

David Gauke is a former Justice Secretary, and was an independent candidate in South-West Hertfordshire at the recent general election.

Will the new, post-Brexit relationship between the UK and the EU run smoothly? Will the Trade and Cooperation Agreement (TCA) provide a foundation on which a closer relationship is constructed (albeit still much more distant than the one we had), or will it provide the means by which the UK diverges from the EU?

The first few weeks after the transition period have confirmed many of the predicted difficulties of a hard Brexit. Businesses have struggled with red tape and trade with the EU is much reduced.

Whatever the Prime Minister claimed, the TCA does not address non-tariff barriers in the same way as the Single Market, and the erection of trade barriers will have a long-term economic impact. Northern Ireland is adjusting to a border in the Irish Sea, and it must finally be occurring even to the DUP that campaigning for Brexit and against a deal that kept Northern Ireland and Great Britain closely aligned has not served the Union well.

Given the obvious problems of Brexit and that, by the time the transition period ended polls showed that a clear majority of the public thought the country had made a mistake in 2016 in voting to leave, one might expect that, over time, we would begin to move to a more collaborative relationship. The likelihood, however, is that we will go the other way.

There are a number of political reasons for this. Perhaps most importantly of all, the political imperative for the Conservative Party is to maintain the support of those Leave-voting Red Wallers who delivered the Prime Minister his majority.

This week saw the Conservative Group for Europe relaunched as the Conservative European Forum. The CEF’s Chairman, David Lidington, delivered a characteristically thoughtful, well-informed and pragmatic speech setting the case for building a constructive relationship with the EU.

I hope the Government follows his advice, but I fear it won’t. If the Government’s approach to the EU is thoughtful, pragmatic and constructive, this is not going to get the patriotic juices of Workington Man flowing. There needs to be rows, conflicts and Brussels-bashing from Boris Johnson whilst portraying Labour as the party of ‘rejoiners’. ‘Keep Brexit Done’ will be something we could hear a lot in 2024.

To nullify this risk, there is every sign that Keir Starmer will want the next general election to be about almost anything other than the EU. The most straightforward way for Labour to win more seats is to win back the Brexit-voting Red Wall.

The absence of much opposition from Labour to a hard Brexit position might create an opportunity for the Liberal Democrats to articulate a pro-European one that will cut through to the public. But betting on a Lib Dem revival has not proved to be a profitable pursuit in recent years. In any event, pro-European votes have tended to be split amongst many parties and heavily concentrated in safe seats whilst Brexit votes are most efficiently distributed and, as long as Nigel Farage can be kept at bay, will vote Conservative.

The upshot of all this is that even, if the public continues to become more pro-European in the way that it has in the last five years (largely because of demography), the chances of an explicitly pro-European Government being elected in 2024 remain slim.

Nor should we discount the possibility that UK opinion becomes more hostile towards the EU in future. Even the day-to-day negotiations with the EU which we are now condemned to – endlessly having to make judgements as to how we balance ‘sovereignty’ with access to our most important market – can have a deleterious impact on how the EU is seen.

A bigger trading partner willing to leverage its strong negotiating position to protect its interests can be an unlovely sight, as the Swiss discovered after narrowly rejecting EU membership in 1992, since when support for joining the EU has fallen sharply.

Within weeks of the transition period coming to an end, we have faced more than the day-to-day challenges. The row between the European Commission and AstraZeneca is turning into a crisis that could have very serious implications for UK/EU relations.

Even before the recent difficulties with the AZ supplies, plenty of Brexit supporters were claiming that the UK’s success in rolling out the vaccine is a vindication of our departure from the EU. The reality is that at the relevant time, we were still required to comply with EU rules and everything we did on vaccines we could have done as EU members. Nonetheless, it is true to say that in these particular circumstances, going it alone has served us well. It is not surprising some are describing this as a benefit of Brexit.

The case, however, needs to be made that what worked in the very specific circumstances of finding vaccines in a pandemic applies elsewhere. It is not obvious that there is a read across from our approach to vaccines to other challenges we will face, not least because we are not yet capable of cloning Kate Bingham.

Not every decision that this country has taken during the pandemic has been quite so world-beating, and there is also a risk that we learn the wrong lessons from the vaccine issue and, in the pursuit of self-sufficiency in a whole host of areas, become increasingly protectionist.

But the immediate danger of protectionism comes from the EU in its export controls on vaccines. Understandably, EU citizens are concerned about the slow rollout of the vaccine and the response of the European Commission has been to panic, lash out and distract.

The news that AstraZeneca is unable to deliver the number of doses hoped for has resulted in demands that it diverts the product committed to the UK. Notwithstanding the statements made by EU Commissioners, the publication of the agreement between the EU and AZ reveals that the contractual basis of such demands is, at the very least, questionable.

So its next step is to control exports to the UK. Yesterday, this even involved triggering Article 16 of the Northern Ireland Protocol enabling the EU to block exports from the Republic of Ireland to Northern Ireland.  This is supposed to be a “last resort” mechanism, but its use was premature, provocative and sets a precedent that will be cited by those unwilling to accept the consequences of the Protocol.  The Commission has now seen sense and backed off.

There is an argument that, if the EU is throwing its weight around in order to prioritise the interests of the citizens of member states, this suggests that it is a good idea to be a member state. However, it is an unattractive argument that is, at best, ‘right but repulsive’.

Medicine supplies rely on internationalism and interdependence, and vaccine nationalism will mean that we all end up as losers. The UK’s response to the strident language coming out of the EU has been strikingly mature and measured. On this issue, at least, it has wisely sought to de-escalate tensions.

Let us hope that this is what happens, that the behaviour of the EU is performative and that the practical implications of yesterday’s announcement are limited. But it might not be.

The fundamentals of the UK’s need for a constructive relationship with the EU have not changed. It was not in our national interest to leave the EU; it is in our interests to create a new, special relationship. Such an outcome is not inevitable but the Trumpian behaviour of the EU in recent days makes that task all the harder.

David Gauke: The Covid paradox for Johnson: the nearer to normality we get, the more difficulties he’ll have

16 Jan

One consistent characteristic of the Covid-19 outbreak in the UK is that at the bleakest moments in the health situation, Boris Johnson’s position in the Conservative Party has been at its strongest, but when the health news is less unremittingly grim, the internal politics become harder for the Prime Minister.

Overwhelmingly, the country rallied around Johnson last spring. His popularity started to fray once the simple ‘stay at home’ message was replaced by a more complex and nuanced one. This was also the point at which some of Conservative MPs started to argue that restrictions needed to be relaxed more quickly.

By the autumn, the process of relaxing restrictions had to be reversed. A pattern started to emerge. The Government’s scientist advisers, Matt Hancock and Michael Gove would favour tighter restrictions; Keir Starmer would eventually called for these; Conservative MPs would complain that the existing ones were bad enough; the Prime Minister would delays making a decision until the evidence was overwhelming, and would then act. Whether with hindsight or foresight, the evidence suggests that the Prime Minister was right to act but that he should have done so earlier.

This approach – as seen with the autumn lockdown, the Christmas restrictions and the January closure of schools – is far from an ideal way to handle a pandemic, but timely interventions would have made party management all the more difficult.

We are now entering into a new stage of the crisis. Notwithstanding that Covid deaths are at record levels and likely to rise for another week or two, there are now reasons to be optimistic. The most recent lockdown is working and cases are falling. The first stage of the vaccine rollout appears to be accelerating. Focus now appears to be moving to be where the country will be in mid-February when, all being well, the first four priority groups – who have constituted 90 per cent of fatalities – will have received a first dose. What happens then?

Steve Baker fired a warning shot, albeit one aimed at his own foot, in writing to Parliamentary colleagues calling for them to contact the Chief Whip demanding that the Government set out “a clear plan for when our full freedoms are restored and a guarantee that [the lockdown] strategy will not be used again next winter”. If not, “the debate will become about the PM’s leadership”.

Within a couple of hours of this communication leaking, Baker tweeted his undying loyalty to the Prime Minister. All somewhat embarrassing, but maybe this was just an error of timing. Many MPs will be calling for a return to complete normality once the first phase of the vaccination process has been completed, and will react in horror if they do not get their way. The Government will have to lift restrictions or have a good explanation for failing to do so.

It will not be enough to say that the people most enthusiastically calling for an immediate “restoration of our full freedoms” are the same people who have been consistently obtuse in understanding the implications of the pandemic.

Some of them may have argued that the virus would disappear in the summer, that we were close to herd immunity, that rising cases were caused by false positives, that there have not been many excess deaths this winter and that lockdowns do not work (although it is unclear as to whether they question whether the virus is spread through human contact or whether lockdowns reduce human contact).

Such positions may have been understandable at earlier stages in this crisis but should have been long abandoned. The best anti-lockdown argument – ‘we cannot do this forever’ – is no longer applicable now we have a vaccine.

Nonetheless, if the Infection Fatality Rate is going to be reduced to a very low percentage, there is clearly a case for easing restrictions given the enormous economic costs of the lockdown. Why might this not be the approach the Government takes?

First, deaths may well start to fall substantially in March, but pressure on the NHS – especially Intensive Care Units – will remain high. Many of the people in ICUs are under the age of 60.

Second, the new variant is very transmissible. A rapid return to normal is likely to result in very high infection levels. The IFR might be very low, but if the numbers infected are very high, deaths – and deaths of relatively young people – will still be significant whilst Long Covid will be a major problem. Meanwhile, those vulnerable people who are not vaccinated or for whom the vaccine might not work will be very exposed.

Third, in the circumstances of widespread infections, consumer and employee behaviour will not return to normal. A lesson of the last year is that there is not a straightforward trade-off between health and the economy – scared people change their behaviour.

Fourth, where there is an opportunity for widespread transmission of the virus, there is a greater opportunity for the virus to mutate and escape the vaccine.

I make these points not to argue that all restrictions should remain in place for months on end (I happen to think that there is a very persuasive case to reopen primary schools before long, but that the speed at which restrictions are lifted is going to require some finely-balanced decisions on which reasonable people will disagree. Or to put it another way, there is going to be an almighty row in the Conservative Party in late February and early March.

There are two things the Government could do to contain this.

The Government would be wise to start explaining the considerations sooner rather than later, even if that means dashing some unrealistic expectations. They have to retain flexibility to react to new circumstances (which is why calls for ‘guarantees’ are ill-judged), and detailed programme of how restrictions will be removed would be unwise, but the public deserve to be treated as grown-ups.

Assuming that the removal of restrictions will be gradual and cautious, the Government should make that argument now, even if it antagonises some MPs earlier than otherwise. Prepare the ground.

It also needs to be ambitious in completing the rollout of the vaccine. At present, the process appears to be going very well, and there are reasons to think that the Government is, uncharacteristically, under-promising and over-delivering. The February target for the top four priority groups looks attainable, and the rest of phase one looks set to be done by early April at the latest.

It is vital, however, that momentum on the rollout is not lost once the priority groups have been done. If at all possible, completing the vaccination programme in the early summer, rather than the autumn, will help the country – and the Government – avoid a whole heap of pain.

The main constraint appears to be supply but if this can be addressed, there is a case for being more imaginative in the delivery of injections (I have argued for using the local government infrastructure that sets up polling stations to deliver vaccinations). However it is done, the Government must keep its foot on the pedal in terms of vaccinating the whole population as quickly as possible.

It is sadly inevitable that many thousands of Covid deaths will occur in the next few weeks, but this does appear to be a case when the darkest hour will be just before the dawn. The new dawn, however, may bring new challenges for the Prime Minister.

David Gauke: Whether there’s a deal or not, Brexit will still not be done

19 Dec

David Gauke is a former Justice Secretary, and was an independent candidate in South-West Hertfordshire at the 2019 general election.

The conclusion of the negotiations over a free trade agreement between the UK and the EU has never been inevitable. The economic logic of the situation has always suggested that the parties would compromise and reach a deal but, a handful of days from the end of the year, we still cannot be certain that, for once, economic logic will prevail.

I have been in the minority in arguing that the political risks for Boris Johnson in accepting the only type of deal on offer – one which satisfied the EU that its fundamental interests were protected – were high and that the risk of no deal was, therefore, under-priced. In the end, the Prime Minister would have to make a choice – does he make a number of substantial concessions but declare victory, or does he leave without a deal and blame the EU for the ensuing chaos?

No one, in my view, could have predicted with certainty which way the Prime Minister would jump because, for a very long time, it was apparent that Johnson did not know the answer to this himself.

Even at this very late stage, the outcome is not inevitable. A desire to protect the interests of about half of a very small industry – fish – might still cause the talks to collapse.

But it does now appear that the Prime Minister has reached the conclusion that he wants a deal and is willing to do what it takes to get a deal. He has left it late – excruciatingly so for many businesses – and by leaving it late the risks of an accidental are material. But the likelihood is that there will be a thin deal before the end of the year.

The key concession has been on the level playing field provisions. It was not that long ago that the UK position was that it would be intolerable to us to leave ourselves open to the economic risk of retaliatory tariffs if we diverged from EU standards or, in the words of Lord Frost “chose to make laws suiting our interests”.  Very sensibly, the Government has abandoned this position in the negotiations.

There are two very good reasons for it to do so.

The first is that the original position implicitly assumes an incoherent and unworkable interpretation of sovereignty. There is an argument to be made that it is a matter of sovereignty that important decisions are made by people who are directly accountable to the British public. But the principle of sovereignty does not mean that such decisions will not have consequences. It is an act of sovereignty, not an abnegation of it, to sign up to a set of rules which involves sanctions if those rules are broken. If such a position is unacceptable in principle, then one would have to object to rollover trade deals with third countries signed by Liz Truss, or even membership of the World Trade Organisation.

The second objection to the Government’s original position is that it is obviously absurd to claim that the threat of tariffs and quotas in future is an appalling economic risk, but embracing tariffs and quotas on 1st January – which is what happens without a deal – whilst the country is ravaged by a pandemic and there is little time to prepare, would be ‘wonderful’ and that we would ‘prosper mightily’.

Contrary to the position earlier in the year, non-regression clauses are now acceptable. ‘Dynamic alignment’ is out, but ‘managed divergence’ is in. Either way, if the EU changes its standards, we either follow or face consequences. The EU, meanwhile, has moved on the process – no ‘automaticity’, no European Court of Justice, limits on the cross-sectoral retaliatory measures. There will probably something else, perhaps a ‘freedom clause’, which will give the Prime Minister some cosmetic cover.

Assuming the deal is reached, the Prime Minister must have concluded that he can sell the deal to the country and his backbenchers. There are three reasons why his optimism may have increased.

First, Covid. Both the good news – progress on the vaccine – and the bad news – the rise in infections – has taken the wind out of the sails of lockdown sceptics. To criticise the Prime Minister for imposing restrictions at this point looks eccentric and irresponsible. The pressure from the backbenchers has abated.

Second, timing. Any deal will be rushed through. There will be no time to pick over concessions to the EU (cynics think this is why we do not already have a deal) and the public will be more focused on disinviting granny for Christmas. The country is not in the mood for a row about whether the level playing field provisions are too stringent.

Third, the US. A mini-deal with America would lift the hearts of Brexiteers who want to see progress towards the UK disengaging from the EU. Many already seem very excited by rollover deals with small countries that replicate existing deals with the EU (it turns out the EU was not quite so insular, after all). A new deal – however small – with a major economy will be a cause of great rejoicing. An announcement next week would be very convenient.

So the Prime Minister has the space to get a deal, even if that means he rows back on much of what he has previously said. Many of his Parliamentary colleagues will live with it, but see this as a staging post, not the final destination.

For some, Brexit has simply been about leaving the EU institutions but for others it has always been about the country setting off in a different direction, away from what they see as a bloated, bureaucratic, dirigiste, social democratic behemoth. In their eyes, Brexit is about re-orientating the country towards the rest of the world and a different economic model. Divergence is the whole point.

The free trade agreement will not have delivered all that they want, at least, not all at once. But Johnson can argue that it will give them the opportunity to go further in future.

The deal will, in truth, be a very hard Brexit. Many of us will question the cost of our negotiating strategy prioritising ‘sovereignty’ over practical concerns for businesses; tariff free and quota free is all very well but little will have been achieved on rules of origin. Trade with the EU will involve much more friction and with that comes additional costs and inefficiencies. Services get next to nothing. This will not be the comprehensive deal the country needs.

Quite quickly, the outlines of a new debate will begin to emerge. Some will argue for a closer relationship with the EU, pointing to the inadequacies of the Johnson deal. Others will argue that, having come so far, we must go further in disentangling ourselves from the EU.

Even if a deal is reached – as it probably will be – that debate will not yet be settled. Our relationship with the EU will continue to be one of the biggest questions facing the country. And that is why, at one level, Brexit will still not be done.

David Gauke: How the Conservatives are morphing from a party of power to a party of protest

5 Dec

David Gauke is a former Justice Secretary, and was an independent candidate in South-West Hertfordshire at the recent general election.

Harold Wilson sought to make the Labour Party the natural party of Government, but failed. Years later, Tony Blair sought to fulfil the same ambition and – with the three successive general election victories – came closer to success.

Yet just over eight years after he stood down, the Labour Party elected Jeremy Corbyn as its leader. As Blair pointed out about himself, he had been ‘the person in power taking difficult decisions’ whose face was ‘on the placard’ whereas ‘Jeremy is the guy with the placard, he’s the guy holding it. One’s the politics of power and the other’s the politics of protest.’

Labour has never quite escaped the politics of protest. In part, this is a product of its history. The Labour Party was formed to represent the interests of trade unions and their members. It exists to represent one section of society, not to govern all of society.

There is also a question of temperament. As a party of the Left, it has tended to attract dreamers and idealists who value ideological purity and the clean conscience available to those who do not have to take responsibility. It has always been a party for the placard-holders.

The Conservative Party, in contrast, exists for the purpose of being in power. One way or another, it has been in office for 67 of the last 100 years and, as such, can claim to be the natural party of government. It is a party capable of obtaining and retaining power but also a party changed by the experience of power.

Its reputation as the party of government has helped it reassure small ‘c’ conservative voters; the greater Ministerial experience attained by Conservative politicians has given the party greater credibility in contrast to its opponents; a track record in Government also demonstrates a willingness to make tough decisions – such as the economic reforms of the 1980s or 2010s – which helps win the public’s respect, if not its affection.

There are disadvantages, too. The Conservative Party has been seen as not just the party of government ,but the party of the establishment. When social mores change, it can look outdated and the defenders of privilege, as it did in the 1940s, ‘60s and ‘90s. And given that to govern is to choose, some of its choices will displease. Policy decisions involve trade-offs, sometimes very difficult ones. In government, one cannot escape that.

There are certain attributes necessary for a party to acquire and retain a reputation as natural party of government. Of course, it has to obtain power. But it must also demonstrate and value administrative competence; it must be able to live in the world as it is, not as it would like it to be; it must be willing to take tough decisions on the basis of a realistic understanding of the consequences; it must recognise that what brings immediate popularity does not always translate into long term electoral success; it must apply its principles in a manner that appreciates the practical implications in changing circumstances. Fundamentally, it should be a party that feels much more comfortable – in Tony Blair’s phrase – with the politics of power, not the politics of protest.

How comfortable is the Conservative Party now with the politics of power? It is tempting to answer this question by focusing on Boris Johnson. He was elected as leader of the party not on the basis of his record as a successful administrator (most Conservative MPs, including many who voted for him, would have said that his Ministerial record was the least distinguished of all the contenders), but as the candidate who could marginalise Nigel Farage and reunite the Leave coalition.

This proved to be a correct assessment, at least for the moment. But Johnson’s approach to Brexit has long been to ignore the hard questions – the trade-offs between sovereignty and market access or the Northern Ireland border – with a ‘have your cake and eat it’ optimism and mutually contradictory promises.

At the time of writing, he is in the uncomfortable position of having to make a choice on a deal that will mean, either way, at least some of his promises are broken. If, after months of hesitation, he goes for a deal – and I hope he does – he will face the fury of sovereignty purists who have never come to terms with the reality that free trade deals necessarily involve some constraints on what a country can do.

The Prime Minister also faces a challenge to his authority on Covid-19. The crisis has been testing for him, and he has looked ill-suited to the challenge. But his relative caution on restrictions reflects the realities in front of him. It suggests that he has looked at the evidence and concluded that if you go too far in loosening restrictions, the virus very quickly spreads. This would not only cause many deaths but also damage the economy because of voluntary changes in behaviour. It is hard to imagine any of his predecessors reaching a different conclusion in the circumstances. In this sense, Johnson is acting like a conventional Prime Minister.

Conservative MPs, however, are not giving him the benefit of the doubt. In some cases, there are legitimate constituency concerns but in other cases, the laudable desire to protect individual liberty has resulted in a willingness to engage in wishful thinking.

Some have fallen for a succession of optimistic but wrong predictions – ‘the virus is burning itself’, ‘the new cases are just false positives’, ‘higher cases won’t necessarily mean higher deaths’, ‘lockdowns do not work’ – that get discredited before moving on to the next argument.

This is partly ideological. It is also partly about the changing nature of being an MP. Members of Parliament are increasingly seen as local champions first and foremost. They are more inclined to organise themselves into ‘Research Groups’ that act as parties within parties, content to define themselves by contrasting themselves against the Government rather than as being part of the Government.

It is less about being part of a team that seeks to govern the country but more about representing particular viewpoint or constituency. It is less about solving problem; more about taking a stand. It is a change in attitude that makes it harder to accept compromise, to recognise trade-offs, to temper principle with practicality. We have seen this for years in the context of our relationship with Europe; we have seen it increasingly in recent months in the context of Covid restrictions. I suspect we may more of this when it comes to tackling the public finances.

The Conservative Party has become less disciplined and more comfortable with the politics of protest. In some respects, Boris Johnson is a natural leader for such a party – a columnist and controversialist; an insurgent rather than an administrator – but it would be wrong to ascribe the change in the party to him. He is a symptom not the cause, reflecting changing attitudes amongst MPs, party members and many of its supporters. It may still have an appetite to be in office, but the Conservative Party no longer has the temperament of a natural party of government.

David Gauke: Next week’s spending review – and why our holiday from spending restraint is coming to an end

21 Nov

David Gauke is a former Justice Secretary, and was an independent candidate in South-West Hertfordshire at the recent general election.

For reasons that some readers will understand, the departure of Dominic Cummings from Downing Street was not a source of great sorrow for me. It appears that I am not alone. Nonetheless, Cummings’ resignation/dismissal makes the Prime Minister’s job much harder in at least one respect.

We are already pushing the limits on when a free trade agreement with the EU can be agreed in order for it to be in place by the end of the year. Boris Johnson continues to appear to be undecided as to whether he is willing to make the necessary concessions in order to get a deal (thus upsetting hardline Brexiteers) or leave without a deal (wreaking further damage to the economy and the integrity of the United Kingdom).

Both options have been apparent for some time, and they are sub-optimal for the Prime Minister and the country. Now he really has to choose.

If he compromises, some people will say that, without Cummings, the Prime Minister lacks a spine. Cummings may well be one of the people making this point.

If he does not get a deal, the Prime Minister’s strategy must be to convince the Leave half of the country that the ensuing mess is the fault of the European Union (it will be a hopeless task to avoid the blame with the other half of the country). To do that, he will need a communications strategy that is ruthless, aggressive and lacking in self-doubt, entirely untroubled by the overwhelming evidence pointing to a different interpretation of the situation. These are exactly the circumstances in which Cummings has a track record of success.

This is a bad time for the Prime Minister to fall out with his most influential adviser.

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Anyone entering politics will be aware that there may come a moment when there is a conflict between what one perceives as the national interest and the furtherance of one’s career.

We can currently see this playing out in the United States, as Donald Trump continues to refuse to accept the election result. With a few honourable exceptions, most senior Republicans have gone along with this nonsense. Presumably, none of them believe the election was rigged in favour of Joe Biden, but they dare not say so because of the fear of offending the Republic base.

Although not as egregious, there are similarities in the UK. Fear of offending the Conservative grassroots has inhibited too many senior Tories in setting out the realities of our departure from the European Union for far too long.

At this particular time, the talk of Westminster and Whitehall is that the overwhelming majority of the Cabinet favour a compromise with the EU because they are conscious of the consequences of failing to get a deal. But the ambitious amongst them know that to be seen to be associated with compromise on Brexit is a career damaging move.

As a consequence, they keep their heads down, content to let others challenge the prejudices of their party’s more extreme supporters. If things ultimately go as badly as they might, history will not judge kindly.

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The Prime Minister’s announcement of an ambitious green agenda will, we are told, help create thousands of green jobs. The increase in defence spending will, we are told, help create 10,000 new jobs. Such announcements are always treated as being good news – a further justification for a policy.

There are good arguments to be made for reducing carbon emissions and improving our defence capabilities but, while the fact that pursuing these policies requires the employment of more people may be good news for the individuals concerned, for the Government and society as a whole, this is a cost not a benefit. Employing people is expensive. And if they are employed to do one thing, they are no longer available to be employed to do something else which society or the economy might value.

I do not always agree with everything Nigel Lawson says, but he has a point when he states that “a programme to erect statues of Boris in every town and village in the land would also ‘create jobs’ but that doesn’t make it a sensible thing to do”.

To give an equally absurd example, it is not a cause of celebration that, from January, the country is going to require an additional 50,000 customs agents because of increased bureaucracy involved in trading with the EU. I repeat, this is a cost not a benefit.

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Wednesday will see the Spending Review, albeit one that is less comprehensive than first intended. I suspect much of the focus will be on the Office for Budget Responsibility’s assessment of the public finances, which is likely to be ghastly.

Borrowing this year will certainly be a peacetime record and might not be far behind a wartime record, either. To some extent, that does not matter as much as it might do – we can get our debt away easily and cheaply enough in a world where markets are much more forgiving of high levels of Government debt than they were even a few years ago.

But the worry will be that, even a few years down the line when the virus is behind us, we will still be borrowing very large sums of money. Exceptional borrowing in an exceptional year is one thing, but one cannot expect to get away with that forever.

Something will have to be done – but when? One of the many challenges for the Chancellor is that the political and economic cycles are misaligned.

Politically, he would want to get tax rises or spending cuts (and it will be mainly the former) in place early in a Parliament so that the pain is well out the way by the time we get to 2024.

Economically, the consensus view is that early tax increases might choke off a recovery so better wait a while. On that basis, even with the recent good news on vaccines, 2022 would be the earliest point for tax increases (and plenty would argue for later).

The politics of tax increases also appears to be immensely difficult. The Prime Minister seems dug in on the tax lock (preventing increases in the rates of income tax, national insurance contributions and VAT, which between them raise two thirds of Government revenue) whilst the back benchers also appear squeamish about any kind of fiscal consolidation.

As a country, we have given ourselves a bit of a holiday from thinking about the public finances. This coming week might indicate that this holiday will soon be coming to an end.

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Should we relax Covid-19 restrictions to save Christmas? It would be lovely to have a normal Christmas, but I am not sure proponents of seasonal break in restrictions have thought this through.

There is every reason to believe that Christmas would be a super spreader event, resulting in the deaths of thousands just weeks before we will have vaccinated the vulnerable.

For too many families, making the wrong decision about Christmas 2020 could mean that all future Christmases will be tinged with sadness, loss and guilt. Just be patient; we are nearly there.