Month: May 2010

The latest polls reveal a muddle. By a large margin now people do not want a hung Parliament. They seem to accept that the UK needs a government which can get to work on sorting out the many problems which are obvious to most observers. Yet those same polls suggest a hung Parliament is a likely outcome. That just adds to the difficulty of the individual voter’s decision. Ignore tactical voting and you may end up with a hung Parliament. Indulge in tactical voting and you still end up with a hung Parliament, as for each of us it is nowhere near in our power to decide as it all depends on how the others vote. In any Parliament where the Conservatives do not have a working majority there is the possibility that the “progressives” – Labour, the Lib Dems, and the various Naitonalists,could come together to form a coaliton government, even though Labour had lost the election.

The biggest argument against a hung Parliament is it delivers too much power to certain politicians and parties. Many voters have felt that the politicians have not taken enough heed of their wishes in recent Parliaments. They could find a hung Parliament even less to their taste.

I would also say to some voters, beware lest in the short term you do get what you ask for. If voters in sufficient numbers think the UK can muddle through at current levels of public spending and borrowing, avoiding difficult decisions, then think again. Even Labour in its more honest moments says they need to halve the deficit, without telling us much of the detail of how they would do that.

Can you imagine the partners in a “progressive coalition” – Mr Hain’s latest dream – wanting to sit down after an election to settle all the detail of spending cuts? Much more likely would be endless haggling over the Cabinet and other Ministerial jobs, the wish to expand the number of such jobs to accommodate more egos, and then the insistence by each party to such a coalition that certain crucial budgets be protected on their public say so. As I understand it, “progressive coalition” means a grouping of politicians who all believe a larger state is the answer, who all think spending more public money than we currently do can build the perfect society. As they would all be looking forwards to an early election to improve their respective positions, I cannot see such a group wanting to tackle the finances.

The only issue would be, would the markets force them to take action as they are forcing Greece before the second election, or would such a coalition call a second election in time? All this would merely delay the inevitable.

There are a large number of people still saying they have not made up their minds. So we could see a late swing to a majority government, or just more people voting for a hung Parliament.

Promoted by Christine Hill on behalf of John Redwood, both of 30 Rose Street Wokingham RG40 1XU

Roughly Labour has aded a million extra employees to the public payroll since taking power. Overall it employs around 6 million state employees. To be able to pay all the wages without ending up in a Greek type mess, we need to reduce these numbers in a sensible way.

Let us assume 1 million of them are uniformed personnel and front line medics, teachers and other essential workers. Let us assume that overall 5% or around 300,000 leave public employment each year, to retire or do something else. Let us assume we would need to replace all of the front line staff leaving, and need to replace some of the others leaving. That would still enable us to save substantial numbers of posts each year as natural wastage continued. It means no -one faces compulsory redundancy and taxpayers do not have to make redundancy payments to departing staff.

This would be good news for all working within the public sector, as it would increase the opportunities for promotion. There should also be programmes to encourage retraining and accelerated promotion for those already on the payroll. A Conservative government is going to have to weight the reductions more heavily on the overhead, as it has promised a 30% reduction in overhead cost over the next Parliament.

Some will say this could cause more unemployment as the public sector sharply reduces the amount of recruitment it undertakes. However, if it is allied to good policies to promote a private sector revival, it will assist that, building confidence in the public finances, allowing more talented people to join the private sector,and avoiding crisis interest rates. By the end of a five year Parliament the public sector would have a more affordable level of employment, with a better balance between front line employees and back office and regulatory overhead.

Prmoted by Christine Hill on behalf of John Redwood, both of 30 Rose Street Wokingham RG40 1XU

As I have often mentioned on this website, the biggest single current budget in Whitehall is the welfare budget. (£200 billion). It’s the one Labour rarely talks about, and does little to manage downwards.

I am all in favour of generous treatment of the very ill, the disabled and the disadvantaged. I also wish to see many more people currently on benefits helped and incentivised into work.

The Conservatives have come up with a raft of proposals that combine help for the willing and a tougher regime for the unwilling. They have made it clear that if people refuse a job they could do, they will lose their entitlement to benefit. They have said that people on long term benefit will be given work to do for the benefit, which will help them gain experience and the discipline of work to reassure a future employer. Combined with much stricter control of numbers of new economic migrants and illegal immigrants, this policy should start to make inroads into the unacceptably high levels of unemployment.

Positive measures to stimulate small enterprise, to get the banks lending again, and to start to bring the regulatory and tax burdens on small and medium sized enterprise down should create more job opportunities for the out of work.

The UK cannot afford to have well over 5 million people of working age on benefits without a job.

It was good news yesterday to see a Great Repeal Bill announced as a first measure for a new Conservative led Parliament, in the Sunday Times. As one of those who has urged this on the leadership, it was great to see it has survived the drafting of the first Queen’s Speech. The Economic Policy Review contained many ideas for the items that could be included in it. ID cards and Home Information Packs are prominent in the early lists, but there are many other measures from the last thirteen years that have raised our costs, complicated our lives but not brought worthwhile benefits which should also be cast on the bonfire.

Promoted by Chrisitne Hill on behalf of John Redwood, both of 30 Rose Street Wokingham RG40 1XU

So far the UK appears to have come off lightly compared to Greece. This is owing to the huge devaluation in the UK currency, which means a lot of the hit on living standards which Greece is now taking from wage cuts is happening in the UK from surging import prices and a rate of inflation well above wage increases. It has also owed a lot so far to £200 billion of money printing, something Greece cannot do for itself as a Euro memebr. This has kept UK official interest rates and government borrowing rates artificially low. It gets a lot tougher when rates rise further: then the taxpayer gets sandbagged by the increased costs of servicing the rising debts. The state borrows more to pay the interest!

I always thought it a nonsense that we could solve the bank bad debt problems by transferring them to the state. The state can no more afford them than the banks. We needed to manage the bad debts as well as possible at as little cost to both banks and taxpayers as possible – instead this government bailed them out too readily after condemning them and their weaknesses in public to worsen the trouble.

Meanwhile the UK went into the recession with too much borrowing, and increased the borrowing as a “fiscal stimulus” when that very stimulus has helped choke the private sector with the public sector pre-empting all the credit. There is a great deal to sort out rapidly if we want a happy ending to Mr Brown’s ruinously expensive experiment in expanding the state. Otherwise, just like Greece, the markets will force bigger cuts in our public spending, and threaten us through higher interest rates with little or no recovery to help us pay the bills.

Promoted by Christine Hill on behalf of John Redwood, both of 30 Rose Street Wokingham RG 40 1XU

Yesterday I wrote about the scope to save billions on the capital budget. A few wrote in to say it was not enough. Of course it isn’t enough. I am writing another series of pieces on the actions a new government could take to get us out of huge deficit. Just read it day by day to build up the full picture of the billions needed to plug the gap.

Today we need to think about what assets we could sell – things the state owns that would be better owned by private individuals and companies. Selling assets off brings three benefits. Firstly, the state gets a receipt. In the next couple of years, whilst we are waiting for the benefits of efficiency gains, changed policies, staff freezes and pay freezes to come through, we need some help from asset sales. Secondly, selling the silver back to the family often will lead to it being better looked after and run. Thirdly, the state will start to benefit from more rax revenue once trading enterprises are returned to private hands and more profit is made.

We should start by selling the banks. Substantial sums can be raised from selling Northern Rock, RBS and Lloyds shares. First we need to restructure them, to create more competing banks to improve the flow of finance in the UK economy and the cut the risk of too large to fail. We may not make a profit ovcerall after allowing for the insurance of dodgy loans and the other aid granted, but current conditions are ideal for banks to make profits and this will enable the government to get better proceeds for the sharesales and the better results come through in the market.

We should move on to selling the Student Loan portfolio, whilst protecting the repayment terms. The government could sell Railtrack, offer the Queen Elizabeth Conference Centre, sell more surplus land and buildings from the central estates, and sell the minority shareholdings in companies Labour has already started to privatise.

Promoted by Christine Hill on behalf of John Redwood, both of 30 Rose Street Wokingham RG40 1XU

In the next few days I am going to seek to fill the blackhole in Labour and Lib Dem spending plans by reviewing again what needs to be done to bring public spending more into line with revenue.

There is one area were Labour has proposed large cuts in public spending where I agree – in capital spending.We might be able in the next couple of years to go further and faster than they are suggesting.

In recent years Labour has undetaken five different kinds of capital spending. There has been spending on new accommodation and equipment to expand their growing bureaucratic army. There has been spending on IT and other centralised equipment and replacement accommodation for their existing central services. They have spent on additional facilities in the main service areas like railways, schools and hospitals. They have spent on replaement facilities in the main service areas. They have spent on defence hardware, which I have partly discussed in previous blogs and will not discuss again in this one.

Any company facing a financial crisis brought on by borrowing too much and earning too little stops all but essential capital spending at an early stage in trying to control costs and cash outflow. So should any government.

All projects to expand the bureaucracy should be cancelled straight away. We need to live with what we have got- we need no more government or local government offices, no more quango computer systems to control new parts of our lives, no more new Ministerial and official cars for additional posts.

Many of the projects designed to raise efficiency and to replace existing bureaucratic back up should also be deferred or cancelled. If a project has a pay back of two years of less – if it can save more than its own cost in less than two years – then let it go ahead. If something needs replacing because it is about to cease to function or about to incur very high repair bills, then let it be replaced. Otherwise nice to have or usual cycle replacements need to be put off for better times.

All projects to increase service provision outside hospitals, surgeries and schools also need to be cancelled or deferred. There should be a Mnisterial review mechanism to allow through special cases.

We do need more road and rail space as part of our programme to make the UK a more competitive economy. This is going to have to be financed privately, and paid for by user charges, as this government did with the M6 toll road in the Midlands. There also needs to be a maintenance programme for major public assets to avoid the build up of even dearer and mor fundamental repair.

Promoted by Christine Hill on behalf of John Redwood, both at 30 Rose Street Wokingham RG40 1XU