Month: July 2009

Prudence was divorced long ago by the government, as we can see from the state of the public finances.

Now Prudence is to be penalised and punished,

If you have saved, you will be offered practically no interest on your savings.

If you have saved through a pension fund, it now has to pay tax on the dividends.

If you are in a final salary pension scheme, you may find tax and regulation are squeezing it to death. You may no longer be able to add additional years service to your pension.

And to cap it all, we learned yesterday that the next plan might be a further tax on the prudent to pay for the costs of those who need residential care later in life.

The message from the government is clear. Spend all you can today, and rely on the state tomorrow. I warn you. Do not be prudent under this government, and do not grow old.

The government today will announce carbon budgets for all, with precise targets for reductions by 2020 and 2050.

All this comes from a government which still has not learned how to run a cash budget for its spending. Never have the public accounts be so out of control as they are currently.

I doubt the public sector will be any better at running carbon budgets than they are at controlling spending. I see no evidence today, at the dawn of the new measured carbon era, that Westminster has got the message. When I arrived in my office some system or person as always had used power to draw the mechanical blinds overnight, so I had to use more power to let in some daylight. The lights were on in the public areas, although there was no-one around needing to use them. (There are no local switches to switch many of them off and no people sensors for automatic mode). The heating and air conditioning are centrally controlled, often producing a room which is too hot in winter and too cool in summer.

People in the many parts of the public sector are not in control of their costs and are not made responsible for their costs. This applies to energy use like everything else. Until that changes, the government is unlikely to adhere to its own green budgets.

Yesterday was another day that captured the mood of a broken Parliament and a government in steep decline.

Jack Straw was the main performer. He is one of the few government Ministers that takes Parliament seriously, and does understand the need to respond to the debate. Yesterday he laboured under two severe handicaps. His bad cough made it difficult for him to speak. The government he serves had decided to do a U turn and accept left wing amendments to the bill on political parties and funding which were partisan. He came across as a respresentative of an administration in collapse, desperately trying to mend its fences with its left wing, realising it did not have much other support.

It was an excellent day for the left. Two independent schools fell foul of Labour’s legislaiton on charitable status, whilst their government was busily trying to stop some rich Conservative donors from continuing to fund their party through new law. Those are the kind of things some Labour MPs love doing. The days of Labour being the party of rich donors seem long gone, a bad nightmare for the left and a golden age for the Ministers who enjoyed spending the money when they had it.

As Jack Straw himself pointed out, we had two parallel debates. One was conducted mainly between lawyers, about how practical it is to define who can and cannot donate. If you move away from the easily understood and relatively easily checked proposition that anyone registered to vote in the UK can also donate in the UK, how fair and how easy to police will it be? The other brought out the tribal partisans. Gordon Prentice rent the atmosphere of civilised debate by saying he wanted to stop people being able to buy elections.

I asked him how they could do that. There was no answer. I pointed out that even if the Conservatives had been allowed millions more from rich donors in 1997 and been allowed to spend it, they would still have lost. If Labour had been able to raise and spend large extra sums this year on the European eleciton, they would still have lost by a country mile.

Some Labour MPs think that if they could just stop the Conservative propsective candidate in their marginal seat from spending anything on leaflets and communications, they will hold on. They after all have their £10,000 taxpayer funded Communicaitons allowance each year which they can spend on leaflets telling people what they are doing.

They want state funded politics, because at the moment they have a majority and can write the rules. They have more incumbents so they want to help incumbents. They might find such a system is not so much fun in opposition. That leaves aside the question of if a rich person can really buy an election, can a Trade Union also buy one? Is that any more acceptable? If you think elections can be bought, you must have a very low opinion of electors.

Click here to read John’s contributions to the Political Parties and Elections Bill debate.

Today we are promised a statement from UKFI on the future of the nationalised banks.

I expect to agree with them that Northern Rock should be an early disposal, but I do not agree that all its tricky liabilities should remain with the state. The point of the sale should be to get rid of as much risk as possible.

I expect to disagree over the conglomerate banks. If UKFI say they will wait and then sell shares in RBS and LLoyds at prcies they think more acceptable, I say “No”. These mega banks should be split up and sold in bits, to increase taxpayer value, to cut risks and to create a better structure to Uk banking.

In future the competition authorities should block mega mergers that damage markets and weaken financial underpinnings for banks. ABN Amro and HBOS were mergers that should have been banned. The government was wrong to ignore competition advice and wrong to allow or encourage these mergers. It can now be put right because the government owns the lot on behalf of taxpayers. Its the price of their mistakes that they do so. If they had blocked mega banks earlier we would not be in the pickle we are now in.

There are fewer marriages and more divorces. Iain Duncan Smith is about to produce some more work on what could be done to keep more marriages alive, fending off divorce, and how people could be helped before entering a marriage to give people more chance of long term happiness. These are good intentions. People with good marriages draw great pleasure, companionship and security from them. The greater permanence which marriage can bring to relationships can help a couple bring up children.

We also need to recognise that marriage law and the nature of the contract was designed for a different social order. Society has changed far more than marriage. Marriage was a contract created in ages when there was men’s work and women’s work, when it was assumed the man would go out to earn the money and the woman would run the home. The law needed to offer security to both sides – the woman needed reassurance the husband would continue to provide the cash for their home, and the man the reassurance that the home would be run. The society accepted these roles, and people knew they had to carry on even with unhappy or bad marriages, because the two in the marriage were literally each other’s other half. It was rare for there to be divorces, and if one was agreed it was important to offer a generous financial settlement to the wife who could not earn her own living in a world hostile to paid female employment.

Today we live in a mutli tasking world. Women go out to work and earn money. Men cook and clean, and there is pressure on them if they don’t. When a marriage breaks up there is need to ensure fair contributions to looking after any children. The way divorce law still sees the end of a marriage as an oppportunity to long and expensive law cases to haggle over the winnings from the combined estate puts energetic and financially prudent people off marriage. The lack of clarity over pre nuptial agreements and their enforcability is one of the issues that needs resolving. In a multitasking world based on equality between the sexes the marriage contract needs to be designed so it ensures proper care and provision for children without allowing adventurers of either sex to demand large portions from people they have married and then fallen out with.

This morning I heard that Michael Crick for the BBC is going to produce a programme on the growing taxpayer cost of politics. I am glad they are going to draw attention to this trend, which has gathered huge momentum in the last decade.

Labour is happier with politics as a great nationalised industry. There are new armies of advisers on the payroll, to add to the Councillors. MPs, and regional governments. Like most nationalised indistries, the politics corporation is overmanned, costly and not very efficient. Labour has introduced more elected officials in London, Scotland and Wales, more unelected or indirectly elected officials in England’s bogus regions, and a huge increase in the number of political advisers, spin doctors and researchers across all levels of government.

Labour have consistently tried to prevent private money coming into politics, as they fear other parties will be better at attracting voluntary donations than they are. It is now much more difficult to accept money from outside without falling foul of some sleaze test. Money from overseas is banned altogether, at a time when business is much more global and when Labour wants us to be more European.

Meanwhile the Labour model is for much greater spending. Instead of MPs and Councillors doing their own research and handling their own statements and press conferences, people assume now that politicians need researchers and press people to do all that for them.These people need salaries which need paying for. There are difficult issues about the dividing line between politics and government, between what a Council or government spokesman can say and what a political party wants them to say, but not sufficiently difficult to put the politicians off having the paid officials at their side.

Nationalisation cocnentrates power in the hands of the party machines. People who want a “career” in politics instead of wanting to serve the public and contribute to public debate have to conform more and go along with the “professional” political advice from the army of advisers. It leads to a jejune soundbite culture which stifles proper debate. It leads to a bigger burden on taxpayers. It leads to worse government.

What should be done? We need fewer payers of government, fewer elected officials, and fewer advisers. We need a better spread in sources of funding for what political parties do need to do. We need a lower ceiling on how much a political party can spend for an election. Let the elected officials who remain do more and say more, to earn their salaries.

The advent of the public spending crisis has encouraged the Lib Dems and some left wing Labour MPs to return to the idea that the UK should not renew its nuclear deterrent. It is touching that even they now understand that the UK public sector is spending too much and needs to rein in its appetite to flash the plastic. They are right that this is the time to challenge old assumptions concerning spending.

Cancelling Trident is not where I would start, however. The defence budget is one of the smaller departmental budgets, and it is the only one which this government has kept under some control. That should not make it immune from cuts, but spending reductions should concentrate on doing more for less, not on doing less for less. I have never understood why we need more admirals than warships, nor accepted it should cost so much more to buy military equipement when the MOD draws up the specifications and tenders. The most popular defence cut today would be phased withdrawal from Afghanistan , and a decision not to fight a major war for a bit whilst we sort ourselves out.

The governemnt’s defence of the war in Afghanistan is that it is making our streets in Britain safe. How do they work that out? Our streets in the UK will be safe if all living in the UK today are united in opposing terrorism and if we have well controlled borders to sotp potential terrorists from visiting. There are no signs that fighting the Taliban in Afghanistan is about to stop terrorist training or Taliban activities in Pakistan.

Over the next few years it looks as if more rogue states and potentially hostile countries will obtain or strengthen their nuclear arsenals That does not seem like a good time to announce that the UK is stoppping its nuclear defence, and is open to nuclear blackmail.

I do wish to see more progress with multilateral nuclear disarmament. That is one thing Mr Obama may be good at, and it is to be encouraged. That may offer us savings in due course on our nuclear programme. In the meantime, for all those of us who do seriously want to cut the deficit by spending less and spending better, the big budgets are welfare, local government, nationalised banks and quangoland. They offer considerable scope for reductions. Are the Lib dems and Labour up for that?

Alastair Darling used a strange phrase when describing what he needs to do on public spending. Maybe he has a sharp sense of humour. He promises to tell us more about the lie of the land: more than the PM wishes to tell us, less than a full scale public spending review which would need the PM’s permission.

Perhaps he did have in mind that the “lie” of the land is the false choice between Labour investment and Tory spending cuts. Apparently the Chancellor does not use the crude language on this topic which emanates from next door, perhaps because he realises that it does not resonate with the public any more than it represents reality. The Chancellor seems to know they are running out of money fast, that they have to rein in public spending, and turn their attention to doing more with less.

We learn that £170 billion of public spending is beign examined around the proposition that it cannot increase so they had better find better ways to spend it. That’s a sensible start, but we are going to have to do that with most spending. We agree across the Parliament that we do not want cuts in schools and hospitals, certainly not in their front line services and professional staff, but no budget can be immune to the question can we do this better and for less? If we can save money on what we buy to run a school by better purchasing , or can adminster it more cheaply to a good standard, we should do so.

I invite readers to blog in with their view on what are the great lies in the land. For my part the great lies revolve around the refusal of some in the government to accept that some of the increased spending has been wasted, the stubborn wish to interpret anyone who wants better value for money as a health cutter, and the denial that we do have to take action now to control the massive deficit. Borrowing is just deferred taxation. Poeple will pay tax for worthwhile services, but they are fed up with paying tax to finance Labour’s bloated and inefficient public sector. Any public sector which can offer £9.7 m to a CEO of a loss making bank, and can press on with “voluntary” ID cards has not begun to understand the need to control spending.

Eight young soldiers dead in a single day in Afghanistan is a heavy price. It has woken the media up to the dangers of Afghanistan, and led to the start of a debate about what we are doing there, for how long we might be doing it, and what winning might look like. We all send our condolences to the families, and salute the bravery and selflessness of our troops.

Readers of this site are strongly of the view that we should not be in Afghanistan. They are worried that the terrorists can operate from Pakistan as well as from remote and difficult areas within Afghanistan. History should warn the great and lesser powers of the problems of interfering in the complex and dangerous civil wars that have shaken this country.

The government must engage in both the issue of our force and its protection, and the bigger issue of how long we will remain committed and when we might be able to hand over to the civil power. The Afghan war needs the government’s urgent attention. We need a change of policy, not just more spin reinforcing old soundbites about terrorism.