Month: August 2010

The planning system in the Uk doesn’t work well.

Many people dislike it because they still end up with too much development on their doorsteps. They do not like the density, location and style of much of the building near them.

Many developers dislike it, because it entails them spending a lot of money on planning advisers and lawyers. The system is prone to delay and cost before they get the permissions they seek.

In recent years the planning system and the general economic circumstances have conspired to produce very high house prices and a very low build rate by historical standards. The last government forced large numbers of prospective new houses on parts of the country that did not want them through their regional plans, but still the build rate remained way below what they said they wanted. People seeking a home do not like the system as a result.

Because house prices are high and planning permissions for new homes limited, land values with planning permission are also very high. Many people feel the system is unfair. They feel that only the rich and powerful developers at one end and those who are prepared to break or bend the law at the other get the valuable permissions. Success in the planning lottery can turn cheap land into a very valuable commodity, making a six figure or even a seven figure sum of profit from just one acre with permission to build houses.

The big developers just spend and spend on planning advice and lawyers, pushing until the system in enough places gives them the permssions they need to carry on their business. Some people build on land without permssion, or push and push from a barn or commercial premises or a single property until they have dwellings on the plot they have acquired at agricultural or derelict land or other lower prices. This is why so many law abiding people who stick to the rules feel it is unfair. They might have their application for a conservatory or garden wall turned down for dubious reasons and have to live with the decision.

I will not restate the long arguments we had on this site under the last government which set out why high house prices were largely the result of the crazy money policy pursued up to 2007. It was the authorities approach to money, credit and bank regulation which led to the mortgage bonanza, lending more money at ever higher multiples of income driving house prices up.

This week I want to look at the issue of how the planning system should be changed to try to make more people happy with it.

The government has proposed two main changes. The first is a democratic override to deal with the sense that many have that the system allows too many homes to be built in the wrong places. Local communities will be able to have a referendum to approve or veto new development in a village. It will require 80% to vote in favour. The second is an incentive to Council planning authorities to allow more homes to be built by offering them extra money to spend based on how many extra homes they build.

What do you think of these ideas? I will set out some other possibilities later this week.

Most progress is being made by the government with demolishing the architecture of top down control and centralisation that the last government imposed on Councils. This week the Audit Commission was added to the RDAs, the regional housing targets and plans, the Comprehensive Area Assessments and many of the requirements and monitors placed on local government.

The Audit Commission was revealed to spend liberally on itself. It was also urging Councils to go over to fortnightly bin collections, when most of us want to keep the weekly collection – or more frequent – that is common in most of the country.

I am delighted to see the back of this apparatus. It now poses the challenge to Councils to shape better policies for themselves and to be properly answerable to their local electors. The UK has become so overgoverned, with far too many layers of government. The complexity made it difficult to know who was responsible for what, and the presence of so much power in the hands of unelected reigons and quangos could thwart effective accountability if you did find out these intermediate layers were to blame.

It will be cheaper, and easier to understand. Some Councils will thrive with the new freedoms and others will find them difficult to grasp. It will be more worthwhile and more interesting to be a Councillor, as there will be more opportunity to do well- or not so well – for your local community. The system of black marks and gold stars, of constant outside interference, ticking of boxes and comprehensive advice, guidance, audit and regulation stifled innovation and often killed commonsense. Can they be born again in Town Hall and County Hall?

In the USA the latest move from the Fed to say it will buy up some more Treasury bonds to try to stave off another slowdown or worse has been dubbed by some wags as QE2. Some here in the UK want the Bank of England to also run up another phase of quantitative easing so they too can have QE2 headlines.

The reaction of the markets to it was at first sight perverse. The dollar strengthened, when you might have thought it would weaken on news of more money printing. The Stock market weakened, when the authorities hoped that more QE would send a message of hope for a stronger recovery. The share market first of all took it as sign of weakness that it was needed. Poeple bought the dollar, perhaps because they have been borrowing too much in low interest rate dollars to invest elsewhere and want to cut their bets.

One of the problems the authorities on both sides of the Atlantic have trouble grasping is the move to make the banks hold more cash and capital is preventing much of the money they are printing from circulating in the private sector and adding to credit. If the banks were working as normal the amounts printed would already be offering a huge kick to activity and would be on course to trigger another bout of inflation. As the commercial banks are constrained,a Central bank buying in more bonds will not necessarily fix it in the way intended.

In the Uk the money printing was on an extreme scale. Most of the money simply fed excess public spending. It was inflationary only because it helped lower the value of the pound, and inflationary in the public sector where it was used to finance another round of pay increases and sloppy buying. We then imported some inflation. Local wages have not taken off in an inflationary spiral because the banks cannot lend the money on recklessly to the corporate sector, who cannot therefore pay much higher wages.

If the authorities really want to ensure higher growth rates next year they need to relax the controls on the banks, so more of the high powered money that is out there can be lent on.They need to do so at a sensible pace, to avoid an inflationary blow out again. the good news is that the leading commercial banks now have levels of cash and capital last seen in the prudent 1990s, before the extraordinary relaxation of money and bank capital controls seen in the period 2000-2007.

For some the £150 milllion fine on the Uk for not displaying the EU flag on projects which received “EU” money is the last straw. It is certainly more proof of Labour incompetence. I remember investigating the use of the EU logo on Welsh projects when I was in office there. The legal advice was clear – the symbol had to appear where money had been received. I was even advised against putting the Union flag on the project as well to show that British taxpayers had also contributed directly as well as indirectly through the EU. The rules on these schemes just demonstrate the lop sided deal we have with the EU, and their attempt to buy our love with our own money.

It is time Mr Hague went to Brussels and tackled some of the issues which feed our sense of unfairness. Many people in the UK are fed up with power seeping away. We did not like Mr Hague’s acceptance of an enlarged EU diplomatic service. That is more cost for the member states, seeking to undermine our own Foreign office and diplomatic service. We did not like Mr Hague’s opting in to more of the EU’s movement into criminal justice affairs. We do not wish to see the UK have to pay out £150 million for a technical infringement, at a time of public spending restraint. We would like the EU to cut its budget to help with our spending review, and would like to see EU spending cut back rather than important domestic programmes.

Throughout the Thatcher era Labour claimed public spending was being cut. Each year it rose. In 1978-9, the last Labour year, total public spending was £75 billion. By 1989-90, the last Thatcher year, public spending was £200 billion. This was up every year and up after allowing for general inflation.

According to this year’s budget plans, public current spending will rise from £600.6 billion in 2009-10, the last Labour year, to £692.7 billion in 2014-15, the last planned year of the Coalition government in this Parliament. That’s a rise of £92.7 billion, or more than 15%: a rise of £1500 for every man,woman and child in the UK.

Total spending including capital will rise from £669.3 billion in 2009-10 to £737.5 billion, a rise of £68.2 billion. This shows that capital spending will be cut, according to the plans inherited from the last Labour government which the Coalition government has accepted.

So why then do we hear so much about cuts?

There are three main reasons.

1. Some departments and Councils had wildly optimistic plans for increased public spending over the next five years. They are now having to cut the increases in the plans. This is very different from having to cut important things they are already spending on.

2. Many public sector managers believe in the “parade of the bleeding stumps” to try to frighten or shock the Treasury and the Cabinet into making more money available. They deliberately claim they have to cut important things to force the hand of the paymasters. It was always thus. When it comes it to it, if they do not get more money, they often then manage things more sensibly and avoid the bad cut. Sometimes they go ahead regardless, cutting clumsily to make a point.

3. The Treasury has asked to see what larger cuts in spending would look like, as they presumably wish to establish new priorities and need to see what could be achieved by cutting in one place to spend more in another. The Treasury’s requests have given departments more scope to play the “inappropriate cuts” game under item 2.

If a major private sector company needs to cut its costs – or reduce its forecast increases in spending in future years – it usually does so in private, hammering out what is feasible without worrying customers and shareholders. A leading retailer, for example, would not start off by saying in public they would have to open the store for shorter hours, cut out a couple of departments or worsen the quality of the service. They would normally look at how they can they cut stocks without cutting product availability, how they can do all the back office functions with fewer staff, how they can they buy better.

We need a new tone and approach to public sector budgets. It is bizarre to listen to this debate about massive cuts, when we know that overall spending will rise. It will be a sign of very bad public sector management in individual Councils and quangos if we end up with clumsy cuts in services, when the overall spending totals allow us to avoid such an outcome.

Listening to parts of the public sector, it’s as if they want things to go wrong.

Yesterday we had to be treated to a leaked letter from the Department of Justice, enabling the media to have another round of discussions of “deep and damaging cuts”. Few point out that current public spending in cash terms will rise by 15% over the period 2010-15 overall, which should give plenty of scope to protect everything worth protecting.

I often had to “cut” budgets in companies I helped lead. We never cut the quality or reduced customer service, and never treated the customers or the wider public to a running commentary on how we were going to cut budgets to make ourselves more efficient. Cutting waste, inefficiency and overall unit costs is just part of good management. It’s what you have to do if you want to compete with China.

Today the Bank of England will confirm the barrage of gloomy briefing about how it needs to cut its forecast of growth and increase its forecast of inflation. It will be implied that the “cuts” and the VAT increase are to blame. It could just be that once again the Bank has made lousy forecasts and needs to get its act together.

After all, it was the Bank which recommended the ERM which did so much economic damage in the early 1990s. It was the same Bank which fuelled the credit boom in 2005-7 with too much easy money, and the same Bank which helped bring the bloated banks down by starving the markets of money and hiking interest rates in 2007-8.

The “cuts” – a slower rate of increase in cash spending – should have come as no surprise as Labour enacted prospective cuts before they left office, and Conservatives made clear they wanted to speed these up. That should not have been difficult to forecast. The current high inflation has nothing to do with Mr Osborne’s future VAT increase, and everything to do with the Bank’s erratic monetary policy.

Finally, why does the Bank expect its QE and low interest rate strategies to produce faster growth in credit and in output, when the banking regulator is insisting on the banks holding so much more cash and capital? The Bank prints more, then the banks have to sit on it to satisfy the authorities. It also forces the commercial banks to put up prices and write less business.

The Bank seems to be following a growth rather than an inflation target. If it wants to do that more successfully it needs to mend the banks, and change the regulations.

Whilst many of you have written in support of withdrawing our army from Germany, some have expressed the conventional objections that we need to use the housing in Germany, and we need the tank training that the German facilities permit. These responses ignore the most important point that I was arguing – we should give up our commitment to helping police or enforce the borders of European continental states, which has caused us so much grief in the past. Surely it is time to leave this to the continental countries themselves, and the UN and NATO led by the USA? Of our four main military tasks, (European,maritime,expeditionary,home defence) this would seem to be the obvious one to remove.

This would allow us in due course once our forces are out of Afghanistan and current soldiers have completed their full contracts, to have a smaller army suited to our current needs. It should also allow us to improve the forces housing position. I have written before on how we could encourage and support soldiers in buying homes of their own whilst in the army, so we do not make them homeless when they retire at a relatively early age from the service. Soldiers should have a UK home base for their families, just as sailors do.

Coming out of Germany would stop the costs in Euros we are incurring, and put that money into circulation into the Uk economy. We would be spared the costs and be able to release the cash from facilities in Germany which the UK rents and owns. There is land and opportunity to train with tanks in the UK as well.

The UK does need to provide the manpower and the military equipment for its maritime and expeditionary roles. Helping police the world’s sea lanes is important to a maritime power so dependent on overseas trade and investment as we are. The naval and air force resources could also be used in home island defence if ever need arose. The expeditionary capability – which has been used too much in recent years – requires good joint working by all three services. There needs to be a well equippped and trained army to move into trouble spots quickly. There needs to be naval and air support, and good heavy lift capability for a speedy transfer.

Any serious naval power needs aircraft carriers to be part of its fleets to provide air cover. Our current policy of ordering two large ones leaves us limited in what we can do, especially if there has to be a lot of down time for refitting and maintenance. Getting the right balance between naval and air power will be crucial to success in the future. Defence of the home islands should always be the overriding priority. That requires good air cover to prevent or limit aerial attack, and good naval and air cover on the seas around our shores to prevent seaborne invasion. More of the capabiliy can be provided by drones and other remotely controlled devices, to lower the risks to manpower, and to cut the costs of some of the machinery needed. Procurement of weaponry and transport needs to be sharpened up so we buy more with less. The Uk ends up redesigning the wheel at great cost on too many programmes.

The extreme difficulty of having a sensible debate about public spending in the Uk thanks to Labour’s unpleasant, personalised and biased approach to the topic has been revealed by the case of free school milk.

If you listen to the debate you would think that Baroness Thatcher alone abolished free school milk, leaving it just for under 5s. Ann Milton and David Willetts came forward to query the costs and value of the last vestiges of free milk. David Cameron seeing the political danger intervened to stop them becoming heirs to the mantle of “milk snatchers”.

What we need to do is a little detective work. The biggest “milk snatchers” were Labour. In 1968 they took free school milk away from all 11 to 18 year olds. The Conservatives did not dub Harold Wilson a milk thief, but accepted this economy as part of the package to cut the excessive borrowing of that Labour government. No subsequent government, including the Labour governments of 1997 to 2010 thought free school milk worth reintroducing. Most people cannot remember that Edward Short was Education Secretary for most of 1968 (I looked it up) the year when the free milk was withdrawn, because no-one ran a campaign claiming he left us short of free milk.

In 1971 Edward Heath’s government took milk away from 7 to 11 year olds. This was opposed by Labour, who personalised it to the Education Secretary. Labour have always treated Mrs Thatcher in a mean and personal way. They dubbed her “Milk snatcher” rather than coming up with a phrase like “Edward Heath, milk thief”. Doubtless if the Education Secretary in the 1979-1990 governments had cut free school milk they would still have personalised it to Margaret Thatcher, then Prime Minister.

The BBC website tells us free milk for 5, 6 and 7 year olds had gone “by 1980” without telling us which Minister removed it. Nor did they name the Labour Ministers responsible in 1968 for the main cut. There’s bias for you, after the account of how Margaret Thatcher had done her bit to cut it. People were so untroubled by the removal of free milk for 5-7 year olds that few can remember who did it.

Labour in office did not restore milk to primary school children, despite finding money for everything else, and despite still reminding people from time to time of their “Milk snatcher” jibe.

It is high time we moved on from these lurid lies and silly soundbites. The truth is all three parties in power from 1968-2010 went along with the phased removal of free milk in schools. Presumably they did so because they recognised there were better ways of helping children from low income families with dietary needs. I am prepared to say I support the results of both Harold Wilson and Edward Heath’s decision to remove free school milk as an economy measure, though I disagreed with many of the things both these Prime Ministers did in other fields. Any truthful politician should say the same, as no mainstream politician in living memory has campaigned to restore these “brutal cuts” from a long-gone era.

The intervention of the Prime Minister to save the milk also confirms what you have been reading here. The increases in cash spending allowed for in the next four years do not require as much pain and as many difficult cuts as the publlic sector wants you to believe. If we can keep the free milk for the under 5s it cannot be that eye wateringly tough out there. It will still require some good management of course – and there will still be public sector managers who choose to cut things we would rather they didn’t, even allowing for the cash increases in the totals.

There have been lively exchanges between Mr Fox and the Treasury over paying for the renewal of Trident, according to the newspapers. I do not quite understand all these briefings. The outcome looks clear.

The Coalition government is committed to renewing Trident. Trident is a main programme of the MOD. The final settlement of money for the MOD will have to take Trident and all its other necessary commitments into account. Fortunately no-one plans to spend a penny let alone billions on missile replacement this Parliament. Any preliminary spending on new boats will build up gradually. The main spend will be spread over several years in due course.

A nuclear deterrent is a necssary evil. Mutually assured destruction (MAD) worked as a doctrine throughout the tense cold war. Huge arsenals of weapons remained unused. Now they are being reduced and dismantled by successive rounds of disarmament agreement between the main nuclear powers. The UK has been in the forefront of reductions.

Unfortunately as the main traditional nuclear powers become more enamoured of a sensible and desirable reduction in these weapons, the technology of mass destruction spreads to ever more states, and leaves open the possibility that it could also spread to terrorist organisations or informal armies in search of a state.

As the range of states with nuclear weapons enlarges, the main parties running the UK will conclude they need to keep an up to date deterrent. It will be accomodated somehow within the overall MOD budget and is not the main issue we should be concentrating on when reviewing MOD spending.

Today I wish to start a debate about why we have armed forces, what we expect of them and how they should be shaped, deployed and supported in the future.

The last guidance from the outgoing government came in its vague document “Adaptability and Partnership”, a Green Paper published in February 2010 to hold the line prior to a major defence review. The new government has embarked on that more fundamental review.

The main questions in February were thought to be “What contribution should the armed forces make in ensuring security…within the UK”; “Should we further integrate our forces with those of key allies..?” and “How could we more effectively employ the armed forces in support of wider efforts to …strengthen international stability?”

The whole bias of the doucment was on Iraq/Afghanistan type conflicts, as it gently steered people to the conclusion that more integration of our command and communications structures with the US would make things better and easier.

The new government has rightly warned that the next challenge to our armed forces may be very different from the US led Middle Eastern wars of the last decade. Mr Fox has said that we need to examine our commitment to Europe, maritime defence and the expeditionary capability which has been so important in recent years.

So let’s begin the debate today with a modest proposal that could save money. Why don’t we withdraw the army from Germany?

There is good news. On this issue EUsceptics and EU enthusiasts should be agreed. EU enthusiasts tell us that the EU has and will keep the peace in Europe. There will be no more recourse to arms. Many of us agree that the advent of peace loving democracies in Europe makes war between the main countries over borders unlikely. The UK could say that it no longer sees its own role as in any way responsible for enforcing or helping determine borders between continental European countries as it did in 1914 and 1938-9. If there are disputes then the UN can determine them, and NATO led by the US is available with force should the UN need any backing. Russia remains a major European power, and her views will also be important to and through the UN.

In practise in the run up to 1914 and again in the years before 1939 the UK did not build an army for intervention on the continent. The brave small force sent to France in 1914 was ill equipped for the trench warfare that followed, without machine guns and motorised transport. The much larger army to help win the war had to be recruited, trained and equipped in wartime. In 1939 the UK had no large army to help protect France from invasion. The force which was subsequently sent was too small to contain the might of the German advance, and is best remembered for its heroic and successful retreat from Dunkirk. Most of the equipment and transport was abandoned. Again most of the winning army had to be recruited, trained and equipped in wartime for the invasion of 1944. There was no victory in either war until the US started pouring men and material into the conflict.

This does not in my view argue that we should learn that we need a bigger army to intervene on the continent. Modern more peaceful conditions and the history of 1914-18 all argue in favour of the Uk not becoming embroiled in continental conflicts or keeping an army on the continent. The army in Germany should be the first saving and the first change from a past of European conflicts. We need the people and the cash elsewhere.