Month: April 2009

The latest figures show that consumer spending has held up reasonably well. As forecast here the savings rate is also on the rise, mainly owing to people borrowing less or repaying some debt. The public is learning to handle the new situation, by getting out of debt and by shopping around for the bargains and discounts.

Those with floating rate mortgages and other loans have the pleasure of deciding how to spend the extra money they can keep as interest rates disappear, as long as they keep their jobs. Those on savings income have to tighten their belts, as their needs are ignored.

The two parts of the economy we need to do better, business and exports, remain weak. The government sector continues to pre-empt resources, increasing the squeeze on companies through its taxes and regulations. We need a recovery based around increased business investment and a higher level of exports. So far we just have the favourable consumer impact from lower interest rates and the extra incomes of the growing army of public sector employees.

We learn today that Mr Darling may admit he needs to borrow a collosal £175 billion this year to pay for all the excess in his public spending figures and to feed the ever hungry nationalised banks. It would be good if he would start by admitting he borrowed more than £150 billion in the year to March 2009, and not the £78 billion he told us about in the Pre Budget Statement. We need an honest presentation of how bad the public finances are before we can start to clean them up.

We also learn he will be setting out some combination of higher taxes and lower spending to start to plug the gap in the Budget. The probem with higher tax rates is they can send business abroad and jobs overseas. In a highly competitive world you need to keep tax rates at a competitive level in order to maximise tax revenue. The UK is no longer very tax competitive and needs to be careful about any proposal for higher tax rates on individual and company income or gains.

What we need are some cuts in pbulic spending. Not from the 25% of public spending that goes on the salaries of nurses, teachers, doctors and other front line service providers, but cuts from the rest. What we need is a government that understands spending too much will cause problems raising the money, will crowd out the private sector, and will make bringing the balance of payments back into order more difficult.

You can’t solve a crisis brought on by borrowing too much by borrowing more. Government spending is not necessarily reflationary, as you need to take the money from the private sector to be able to spend it in the public sector.

The BBC reminded us today that Labour calls Special Advisers (like McBride) Spads.
A few years ago we were told that Spads stood in railway speak for “Signals passed at danger.”
Is this connection intentional?

“Government of the people, by the people and for the people” was Lincoln’s immortal description of democracy, as he gazed on the battlefield of Gettysburg.

This government would do well to rediscover that.

They have picked a fight with too many largely law abiding people.
They have politicised the police.
They have created a nasty surveillance society, eavesdropping and spying on the normally law abiding.
They have picked a fight with too many MPs, on their own side as well as across the Chamber, by their juvenile and unpleasant spin.
They have undermined that mutual respect and support for our society and its traditions and conventions that keeps the social fabric together.
They have badly damaged our freedoms and our democracy.

When people no longer think their system of government is safe in the hands of an incumbent government, it is time for that government to go.

Labour’s policy of featherbedding public sector pensions and clobbering private sector ones is being implemented with great success. We have all admired the new way to riches – lose a lot of money for a public sector bank, get fired and pocket an enormous tax payer backed pension. Today we are reminded of the Labour way to lose your private sector pension. Work hard for a private company, save in a pension scheme, then discover the fund has a huge black hole and has to take action to cut its costs.

The accumulated deficit is now around £240 billion in private sector schemes. The government has made a major contribution to creating that mess by taking the following actions:

1. Imposing a £5 billion a year tax on the funds – that directly relieved them of around £50 billion so far, £50 billion they clearly needed.
2. The £5 billion a year tax also made the shares they own less valuable. As the shares yielded less income after tax, so they were judged to be less valuable by the Stock market. That cut the value fo the capital the funds had invested.The last decade saw no positive return from holding UK equities, which is a commentary on the government’s tax and regulation policies towards business. It didn’t hit the fat cats – they took the money. It hit the small savers and the future pensioners.
3. Driving the interest rates on longer dated government bonds or savings instruments down by their repsonse to the slump and through government purchases of its own bonds. One of the ways of measuring the pension deficit is to ask how much monedy the fund would need if it were all put into bonds so the interest and amortised capital could pay the pensions. Low rates means bigger deficits and the need for more contributions.
4. The introduction of the Pensions Regulator’s tax. All funds now have to pay so the Regulator has money to pay his salaries and to pay for any funds that go under. It’s another charge on employers, another straw which can break the camel’s back.
5. Presiding over the collapse of great banks by failing to control their capital and cash in the good times. The big falls in bank shares and the cuts in dividends that have followed have cost UK pension funds large amounts of money.
6. The slump. This has hit the shares of other companies, again undermining capital values in pension funds.
7. Failing to control inflation as promised. Inflation imposes large extra costs on pension funds, as they need to find the money to pay increases in pensions. Few pension fund actuaries or Trustees are going to value the funds on the basis of zero inflation, whatever the government may say about the danger of deflation at the moment, as they know current inflation is high for pensioners. They also see the government is not worried about triggering a new faster inflation in due course, judging by its monetary actions.

Mrs Blears has noticed that some of our High Streets are in a bad way. Her answer? Make it easier to set up advice services or other public activities in other people’s property, and if all else fails to get Councils to take over empty shops by compulsion. After the banks, comes the retail sector! First damage it, then take it over.

Over the Easter period I have visited a couple of our Cathedral cities. I was unhappy but not surprised to see just how much decay there now is in middle England. Empty shop properties are gnawing away at the heart of the commercial centres like death watch beetle in the timbers of society.Litter and graffitti were testimony to the lack of pride and discipline. Public space has become no man’s land. Concerned adults are too frigthened to complain if someone litters or abuses it.

Each city had a welter of really ugly buildings close to the centre. Why did they get planning permsision? Because they were all buildings to provide public facilities at the taxpayers expense. These buildings were usually poorly maintained and especially prey to litter and street art.

It’s not just the retail centres of some cities and market towns that are dying. It’s the sense of civic pride, of shared space, of mutual responsibility. Labour is turning our town and city centres into unpleasant areas of public squalor, supervised by the all pervasive surveillance cameras and by an establishment that has no concern for or understanding of the weft and warp of our society.

We are in danger of being left with vast areas of public space controlled by the graffitti artists and gangs in the evenings. The rest of us will venture into this alien environment rarely for short periods. We will not linger long, deterred by the rip off car parking charges and by the need to comply with an ever more terrifying array of traffic and personal conduct rules and laws. We know the yobs will flaunt all this with no consequence for them, and we know if we make a mistake we will be pounced on. Council officials will enjoy their privileged car parks close to the centre whilst making it as difficult as possible for the rest of us to get in and to park.

As the Today progrgamme wisely reminded us this morning, soon everything in Britain will either be banned or will be compulsory. With Mrs Blears adding her pennyworth to Mr Darling and Mr Brown, more will also soon be run down at the taxpayers expense.

We need to mend our broken Parliament to stop these lies and dirty tricks.

One of the more cynical lines that came from the Prime Minister when he took over was his claim that he would banish the culture of spin, and put a strong Parliament back at the centre of our political life.

He was right about the problem. All can now see he was not serious about the answer.

Ministers in the Major government were not saints, but just look at the freedoms we have lost in the last decade compared to the way things ran in the 1990s:

1. Prime Minister’s Questions were held twice a week, giving the Opposition two days a week when they could choose the main topic to lead the news. Now we only have one day a week.
2. Parliament met for longer hours and for more weeks of the year, giving the Opposition more chance to challenge the government and make their points.
3. Most bills were debated for as long as the Opposition wished, both in Committee and on Report on the floor of the House. Today every Bill is rushed through on a short timetable decided by the government, with large amounts of each bill heavily amended by the government usually going through with no debate.
4. Ministers accepted they should tell the Commons before telling the media about any big problem or new policy. Today Parliament usually gets to hear about after the media has had a good run at the story when it is no longer very newsworthy and after it has been presented in the way the government wishes without Opposition criticisms.
5. If Ministers or their officials did misbehave and leak something in advance they were put under pressure for doing so. Often a leak enquiry followed. These gave the Opposition some chance to complain about the discourtesy to Parliament of the premature disclosure. Budgets and market sensitive information never leaked. Today budgets and matters relating to big banks and other large companies regularly leak.
6. Whilst Ministers could be political and were not averse to criticising Opposition mistakes or policies, most Ministers did think they had to answer questions about what they and their departments were doing when asked. Modern Ministers rarely try to answer a question put before going on to bash the Tories.
7. You could table written questions about anything the government was doing or was responsible for. I am often stopped from asking questions on the grounds that Ministers have said they won’t answer them – as at present where I cannot ask about the conduct of the nationalised banks.
8. If a Minister misled the House or made a mistake he or she was under pressure to offer an apology and to put it right. Today Ministers regularly get their “answers” wrong and hardly ever apologise or put the record straight.
9. Press Officers in departments were permanent civil servants who were very careful never to get drawn into politics. Today’s press offices are much bigger, dearer, and much closer to Ministers in what they do.

If Mr Brown wants to put things right, here is the minimum he has to do:

1. Recall Parliament for this week and set out in a Statement how Parliament will be taken more seriously and given more time to do its job.
2. Reinstate twice weekly PM’s Questions.
3. Offer a September session with Question times, Statements and general Adjournement debates on matters of interest to MPs who do want to do their jobs properly. Also offer similar non voting business weeks when no legislation is pushed through in the Commons during school half terms, so those of us without children to mind can hold the government to account.
4. Promise that Bills will only be subject to a timetable Motion from the government if the Opposition starts to delay a measure unreasonably.
5. Promise that in future announcements will be made to Parliament first.
6. Agree cuts to the spin doctor and Special Adviser army as a sign of some disarmament from the nasty spin war this government has launched.
7. Tell Ministers they do have to answer questions as well as bashing the Tories.

Don’t hold your breath. The Prime Minister’s statement yesterday that Mr McBride’s type of conduct has no place in modern government could just be more spin!

What the departing Speical Adviser did was against the existing Codes. It does not take a new Code to stop this happening again..

What it will take is a complete change of approach and changes of personnel. When Cabinet members like Mr Balls and Miss Cooper spend time seeking to misrepresent Conservatives instead of answering questions and improving the performance of their departments we can see that the approach of bash the Tories rather than fix the country is endemic to this regime at high levels.

Just listen for a few days to the way Labour Ministers handle debates and fail to answer questions in the Commons. It was not just one Special Adviser who thought it was about getting the Tories. If Mr Brown really really wants to stop it he has to call in his senior people and tell them all the clean up the government’s act, and he needs to sack a few more of the worst offenders.

I detect a lot of support for my view that government should offer failing banks tough love, not large subsidies. Government should be the lender of last resort to stop untimely bankruptcy, but not the feather bedder of first choice. Government should not offer so much taxpayer cash as equity and easy terms loans so the banks do not have to wake up, shake up and sort themselves out quickly. Changing this policy could save us tens of billions. To those who say this is not public spending as counted by the government , I say “Oh yes it will be, and the bill is on you”.

The same should apply to the motor industry. We learnt on Saturday that Mr Mandelson is not giving up his battle against a reluctant Treasury to put in place a £2000 bounty on every old car more than 9 years old for someone buying a new vehicle. Mr Mandelson has been impressed by the German experience of such a scheme, and thinks the taxpayer could easily afford to help shift some of the surplus car stock out there in the car parks – and more importantly on the import wharves.

Mr Darling clearly worried about how affordable all this might prove. He may even have pointed out it has a different economic impact from Germany, where the majority of the new cars bought would be home built, to the UK where the overwhelming majority of new cars bought are imports.

A day later we read that Mr Mandelson appears to have won, and the Chancellor has come round to see the wisdom of such a scheme. Was he really working on this very point over the Easter week-end? Did he see the light on Saturday morning? Is it good practise to provide a running commenary like this on what could be in the budget, still more than a week away? All that this item can do is to put people off buying new cars until we know the contents of the budget. What happened to the idea that anyone in the know caught leaking the contents of a budget lost their job?

A scrappage scheme will be dressed up as a green measure, but this one draws the anger of the Greens. Apparently you can buy any kind of new car under it, however big and gas guzzling, and scrap any kind of old car, however small and little used. It should boost the prices of old wrecks to nearer the £2000 subsidy level and create a lively trade in old bangers. I hope if they do this they have the wit to demand that the subsidy attracting old vehicle has to be still in use and can be driven to the scrapheap under its own power with its own road tax.

A scheme like this is presumably for a limited time period only. It will bring forward some sales of new vehicles. How many of those will prove to be extra sales once the subsidy is removed is more difficult to tell.

At a time when the full extent of Labour’s politics of hatred is revealed, let me say something positive about others toiling in the political vineyard.

For some time I have admired the work of the Taxpayers Alliance. They have brought to life the dusty subject of public spending. They are helping us win the argument that there is a lot of waste and unwanted spending in the figures. They have got people interested in the public sector rich list, the tip of the iceberg of excess.

Yesterday it was good to appear alongside their comments in a full page written by the Sunday Times on just how you could start to get to grips with over spending. Cuts do not have to be taxing. Indeed, I could find a lot of cuts that would be popular.

It was also good to see George Osborne, on a day when Labour were out to hurt him, getting on with the job of explaining how he would want to change public service management and delivery, so we could do more for less. It was good to see the Sunday Times helping lead an important debate that the Chancellor should be having with his colleagues, to start to curb the gross deficit which will leave us all with our children in huge debt for years to come.

Positive politics is about creating or joining a coalition for change, and supporting each other. Labour’s politics is based on the politics of dislike. They seek to create or exaggerate divisions between themselves and the rest. They seek to call everyone who disagrees with them a “Tory”, and to paint the “Tories” in the worst possible light, falsely claiming we came into politics to cut essential public services to the poor to give tax cuts to the mega rich. As we can now see they also run dirty tricks departments to try to character assassinate any Conservative who is effective at putting over an alternative view the public might like to hear or vote for.

Conservatives – and other opponents of this government – have to get better at helping each other and supporting each other. We must not allow our discourse to be dragged down into the gutter of Labour’s politics, or to fall for their wish to divide and rule.