Month: September 2011

I reproduce the latest government view set out by Damien Green  of how they intend to bring immigration under control, in view of the great interest in this subject:

I am writing with a further update on the Government’s radical changes to immigration policy and on the action we are taking to bring down levels of net migration back to the sustainable rates we saw in the 1980s and 1990s. Under the previous Government, immigration rates broke all previous records and net migration reached 2.2 million – twice the population of Birmingham. A recent survey found that nearly three quarters of those polled supported bringing net migration down to the tens of thousands a year or less.

To control immigration all the main routes of entry – work, family and education – must be addressed, and the automatic link between temporary routes and permanent settlement broken. And that’s just what we are working to do. But the previous Government did not just leave the visa system in a mess. As recent reports have revealed, they spent a fortune on an asylum system that simply failed to deliver. They also failed to address illegal immigration. We are taking action to clear up their legacy in these areas too.                                  

Immediately after coming to power this Government started work to control immigration.  The first route we dealt with was work visas. Within weeks we had a temporary cap in place on non-EU economic migrants, and by April of this year the permanent cap came into effect. This is the first ever annual limit on work visas. The cap is working effectively and the limit has not been reached in any month since the permanent cap came into effect. We expect economic migration to fall by a fifth compared with 2009.

Then we introduced reforms to the student visa system – the single largest route of entry. We found many examples of unacceptable abuses of this route, as well as examples of substandard and even bogus colleges. To tackle these abuses we introduced a proper system of accreditation for colleges and tough new rules on the level of English required for students. We also brought in new restrictions to limit students bringing dependants and ended the post-study work option for all but the very brightest. Our measures will be fully in place by next year and we estimate that this will cut net migration by more than 60,000.

The spotlight has now been turned on the family route. Consultations are currently running to examine a range of measures: we are looking at language tests and considering extending the length of time before settlement – and access to benefits – can be granted. Our conclusions will be announced this autumn, but we have already taken action to address sham marriages – and produced new guidance to help those officiating spot people trying to cheat the system.

In addition, we are taking steps to cut the link between temporary and permanent migration. Under the current system, too many workers were allowed to apply to stay here permanently. In 2010, 84,000 people who entered the UK for employment were granted settlement compared to less than 10,000 who qualified for employment related settlement in 1997. That is why another consultation paper has been published to set out reforms in this area, which include putting an end to the assumption that settlement will be available to those who enter the UK on the skilled worker route.

Meanwhile, we are clamping down on those who have no right to be here. Already in the first half of this year, we removed more than 25,000 people and we are very close to clearing up the previous Government’s asylum backlog. We are taking action to control illegal immigration by creating a Border Police Command, as part of our new National Crime Agency. By April next year, every passenger on non-EU flights will be checked in advance of travel using the e-borders system.  And to give us better control over those who overstay, we will reintroduce exit checks by 2015 – to count people in and out of the country.

Recent immigration figures have shown the importance of taking action to unwind the previous Government’s disastrous legacy on immigration. The figures cover the period before our measures came into effect, underscoring the importance of our new programme of change. After almost two years of increasing net migration, the figures stabilised in the last quarter. The recent figures also showed how the vast majority of net migration is made up of non-EU movements. This confirms that the action we are taking to tackle non-EU routes is key to controlling net migration.

 

               Mr Darling’s book is an important contribution to the UK debate. It confirms what was so strongly denied at the time – many in the Labour party thought Mr Brown was a disastrous Prime Minister. He argues that Mr Brown did operate through a small cabal, was extremely political in everything he did, and did try to sack Mr Darling at a crucial point in the Credit Crunch crisis.

               More importantly, it argues that Mr Brown did not understand the depth and magnitude of the economic crisis which engulfed the government he led. In 2007 and 2008 this site continuously pointed out that the UK authorities were making a banking crash inevitable. I urged them to  allow more liquidity in banking markets, to prevent runs on banks and to provide a substitute for the inter banking cash which had dried up. Instead we watched in horror as Northern Rock, Bradford and Bingley, HBOS and RBS got into severe difficulties and had to be rescued at much greater cost than if the authorities had lent more  short term money against security earlier.

            The government sought to ignore this view. When challenged over it, they claimed with the Bank of England  that the errors were all the banks, and they deserved what was coming to them. It was  a case of moral hazard. The regulators and the Bank had done no wrong. Later when I proposed cheaper ways of saving what needed saving from the ruined banks, I was told I wanted to take the whole system down by letting them go to the wall, by the very people who had presided over the wrecking of the system by their refusal to listen to good advice.

           In Mr Darling’s book we now learn that he came round to my view, that more liquidity had to be supplied. The account of the meeting with the head of RBS in the business pages of the Sunday Times makes interesting reading. Mr Darling blames the Governor of the Bank of England for refusing to accept that there was a liquidity crisis which the Bank could do something about and had a duty to do something about. Mr Darling was told he could not override or intervene.

            So far so good. I am pleased to learn that someone at the top did come to see the obvious truth, which a few of us were shouting from the sidelines. The other truth is, however, that the senior elected officials, the Chancellor and the Prime Minister, can always take aciton in such extreme circumstances if they need to. Mr Darling could have instructed the Bank to supply cash to the markets. If the Governor disagreed the Chancellor could have made the instruction public and I am sure the Bank would have done it.  If it needed legal changes, they could have been put through the Commons in a day. I do not think legal changes would have been needed. Later in the crisis the MPC was effectively told to lower interest rates – rightly so- as part of concerted international action to tackle the problem. They convened a special meeting and made the change, claiming it was something they wanted to do. Their independence, we were told, had not been damaged! Under politicial pressure, the Bank could prove flexible.

 

 

               Mr Darling’s book is an important contribution to the UK debate. It confirms what was so strongly denied at the time – many in the Labour party thought Mr Brown was a disastrous Prime Minister. He argues that Mr Brown did operate through a small cabal, was extremely political in everything he did, and did try to sack Mr Darling at a crucial point in the Credit Crunch crisis.

               More importantly, it argues that Mr Brown did not understand the depth and magnitude of the economic crisis which engulfed the government he led. In 2007 and 2008 this site continuously pointed out that the UK authorities were making a banking crash inevitable. I urged them to  allow more liquidity in banking markets, to prevent runs on banks and to provide a substitute for the inter banking cash which had dried up. Instead we watched in horror as Northern Rock, Bradford and Bingley, HBOS and RBS got into severe difficulties and had to be rescued at much greater cost than if the authorities had lent more  short term money against security earlier.

            The government sought to ignore this view. When challenged over it, they claimed with the Bank of England  that the errors were all the banks, and they deserved what was coming to them. It was  a case of moral hazard. The regulators and the Bank had done no wrong. Later when I proposed cheaper ways of saving what needed saving from the ruined banks, I was told I wanted to take the whole system down by letting them go to the wall, by the very people who had presided over the wrecking of the system by their refusal to listen to good advice.

           In Mr Darling’s book we now learn that he came round to my view, that more liquidity had to be supplied. The account of the meeting with the head of RBS in the business pages of the Sunday Times makes interesting reading. Mr Darling blames the Governor of the Bank of England for refusing to accept that there was a liquidity crisis which the Bank could do something about and had a duty to do something about. Mr Darling was told he could not override or intervene.

            So far so good. I am pleased to learn that someone at the top did come to see the obvious truth, which a few of us were shouting from the sidelines. The other truth is, however, that the senior elected officials, the Chancellor and the Prime Minister, can always take aciton in such extreme circumstances if they need to. Mr Darling could have instructed the Bank to supply cash to the markets. If the Governor disagreed the Chancellor could have made the instruction public and I am sure the Bank would have done it.  If it needed legal changes, they could have been put through the Commons in a day. I do not think legal changes would have been needed. Later in the crisis the MPC was effectively told to lower interest rates – rightly so- as part of concerted international action to tackle the problem. They convened a special meeting and made the change, claiming it was something they wanted to do. Their independence, we were told, had not been damaged! Under politicial pressure, the Bank could prove flexible.

 

 

             We are having a lot of weather these days. We have just had another cool summer with lots of rain in August. Where have all those predictions of long hot dry summers gone?

             We did have a dry spring with warm middles to the day, but even then mornings and evenings were cold with late frosts.

             No wonder people are so upset with dear energy. We need more of it to keep ourselves warm.

            The government needs to look again at our energy policy. It needs to work for when we have cold weather as well as for periods of warm climate. It’s not just industry that seeks a plentiful supply of reasonably priced power. So when are the new power stations and new energy resources going to come on stream Mr Huhne? How can this island of coal set in a sea of oil and gas, these  reservoirs of shale gas and this pioneer of civil nuclear power become energy sufficient soon?

When can we save the balance of payments cost of massive energy imports?

It would also be interesting to hear your best examples of false greenery, where proposals designed to cut carbon dioxide emissions probably end up causing more. There is a lack of sensible accounting for the full carbon dioxide “costs” of any proposal, with knee jerk attitudes usually predominating.

Gordon Hughes has recently published an interesting study on the “myth of green jobs” for the Global Warming Policy Foundation. In it he argues that jobs in renewables, for example, may destroy more jobs elsewhere by driving up energy prices and making it more difficult to retain or create jobs in energy using activities.

 

            This old canard is back on the agenda. It is being placed there by  the Leader of the Opposition, seeking to portray the Prime Minister as “same old tory”. Meanwhile many Conservatives, perhaps helpfully from his point of view, say the Prime Minister is not Conservative enough. They define Conservative according to their own beliefs – tough on crime, supporters of traditional families, Eurosceptics, low tax enthusiasts or whatever.

          My heart sinks when we get back into this kind of discussion. It acts as an overlay or even a complete impediment to intelligent debate about the country’s problems and what might fix them. Too many well paid intelligent people spend their lives formulating soundbites or trying to interpret soundbites with these political questions in mind. Too few wrestle with what might work, what could make the economy and society better. They either are not interested in what works, or they fear coming up with something  new which will put them on the wrong side of the row between  little or big enders, on the wrongside of the divide between modernisers or traditionalists.

            It generates a strange passivity amongst the political classes. It engenders the thought that public opinion is as it is, and so the politicians have to poll the public to find the answers then stick to what the polling says. In truth public opinion is mobile, and many views on how to solve a problem are not deep rooted or not based on experience or probability of success. The public on the whole thinks the politicans with their armies of expensive government advisers should come up with the answers. Within reason the public is there to be persuaded about the answers, as long as the politicians have got the point about what are the main problems. Intelligent dialogue is important, but passive acceptance of majority poll findings can be  silly. Most  Opposition parties cannot accept the findings of the polls, as the polls usually say they cannot win. Sensible opposition parties know they have to seek to change opinions.

             I do not know whether I am a traditionalist or a moderniser. What’s more I don’t care. I don’t think it is a meaningful or helpful way of looking at the challenges facing our country. If so called traditional remedies fix the economy and lead to faster growth and more jobs, the public will vote for them when they see they work. If modernising agendas do that, they will vote for that. If it’s a mixture, then have a mixture.

                  It’s not entirely clear what is modern and what is traditional. Traditional Conservatism includes a tradition of generous support for the disabled and unfortunate. It includes strong interventionist tendencies for law and order and the offer of a better life through state education and welfare. Modernising Conservatism can include tax cuts as well as social liberalism. The belief in better civil liberties unites some so called traditionalists and some modernisers. Practically  all modern Conservatives are Eurosceptics, arguing over how and how far rather than whether we should move to less EU interference. I know many of you say they do not do enough, but they will say if challenged they agree with Euroscepticism. Most of them are not trying to get you to believe the EU in its current shape is a good thing.

 

            There are rumours circulating in the USA that the authorities are thinking of a back door way of reviving quantitative easing.

             The aim would be to sell the mortgage portfolio held by the Fed, so they could use the money released to buy yet more US Treasury bonds.

            The plan might include  seeking the early repayment and refinancing of these risky mortgages at lower interest rates. The deal would be that the mortgage holder gets a lower interest rate and a refinanced mortgage in return for promising to meet the reduced payments. Fannie and Freddie might be asked to do the refinancing and hold the new mortgages.

           If the original lenders took  the hit – and could afford to – and if thereafter most of the mortgage holders could meet their payments on time at the lower interest rates, we would see good progess in solving the US mortgage/housing problem.

            However, if taxpayers effectively took the hit, and if state backed mortgage companies ended up with a portfolio of mortgages that still looked risky, all that has happened is another extension of US federal and related debt, with substantial new money creation into the bargain.

             The President would be happy, because a large number of mortgage holders would just have received a windfall reduction in their debts, and might be grateful to him. The Fed might be happy, because they could undertake their QEIII but claim they had the money from the sale of the mortgage assets. The losers would be the savers, facing a longer period of lower rates and higher inflation than otherwise would be the case.

            Meanwhile today’s story is possible legal action against the banks that packaged up mortgages and sold them on, only to pose financial problems to markets later. If this is the plan, it marks the third stage of the crisis.

                    In stage one, the age of collaboration, governments encouraged banks to lend more and more money to more and more people least likely to afford the loans,  in the interests of growth and wider ownership. In stage two, the age of entanglement, governments subsidised the banks in an effort to shore up the dodgy loans and weakened balance sheets brought on by the previous collaboration. Now we might  enter the third, the age of retribution, when fighting over the blame entails governments demanding banks repay, say sorry and even face legal charges.

                      The truth is, governments and banks are hitched together in all this. It suited governments to see easy money and loads of loans prior to 2008. It suited bad banks to be nationalised or bailed out when the authorities lurched to a super tough monetary policy in 2008-9. Now we are witnessing the fight over blame and over pays the bills, as the borrowing  has run out.

         In the late 1990s when there was huge pressure on the UK to join the single currency, prominent Germans used to meet me to try to persuade me I was wrong in opposing the Euro.

           One of the arguments I used to put to  them was that a single currency needed a single country to back it. I was worried that not even the German people bought into the scheme. Around 70% of German electors wanted to keep the DM, their own successful post war currency.

           The German establishment figures politely but firmly explained to me that the views of the German people as a whole did not matter. 70% of the German elite, the politicians, bankers, senior businessmen and leading academics wanted the Euro, so the Euro they would have.

           They knew their country, and they were right. Germany went ahead with all the other states that wanted to join. They all overrode the very sensible rules over who could join. It was a political project. They would sort out all the economic differences over inflation, borrowing, growth rates and public budgets after they had all committed.

          Today it looks as if my worries about the attitude of the German public could have more force. The German people are still not reconciled to their single currency with the neighbours. There is a strong groundswell of opinion in Germany against common Euro area borrowing, against any bail outs, and against Germany paying more by way of transfers to help the poorer parts of the Union. Most  of  the German elite still think they are right to keep the Euro, but an increasingly reluctant people is going to make it difficult to put in place the transfers  needed to make it work. A successful single currency area requires people in the richer parts like Germany to send money to the poorer parts like Greece.

            In the last fortnight Mrs Merkel has had to rule out German support for any common Euro area borrowing, the favoured solution by France, the UK and others to the Euro’s main problem of sovereign debts. The German President has argued that the bail outs so far agreed are probably illegal. An important court case is pending on this issue. Mrs Merkel is having to move back to a position of not supporting the rest of the Euro area, as the pressure mounts from her own party against  the costs of Euro membership. The elected officials are beginning to reflect German popular  doubts about the wisdom of Euro integration. It is true she is astute at cobbling together too little too late packages to get through the German Parliament. She may well do so again, with promises that the bail out fund at EU level will need Germany Parliamentary approval for new countries and for extra money. That simply gets the last agreement through – it does not tackle its obvious inadequacy.

                Even Finland has added to the difficulty by refusing to put up her share of the Greek loan without full collateral, leading many Germans to say if one gets collateral they all need collateral. That would undermine the Greek loan, as Greece probably cannot find all the collateral that would be needed. If Greece does not get her loan soon state bills go unpaid and Greece ends up reneging on her debts. Work I read is now advanced on a compromise over this tricky issue.

            Mrs Merkel probably hopes she can use strong language against more bail outs and borrowing to steer her through, whilst facilitating back door means of doing it through the European Central Bank.  The show has been kept narrowly on the road in the dog days of August by the European central Bank buying the bonds of Spain and Italy so they can still afford to borrow in the market to pay their bills. This is meant to be a temporary measure, pending sorting out the problems of the big Euro bail out fund. No-one in the markets thinks they can agree a fund big enough to meet the needs of Spain and Italy.

               The truth is a very political project, the Euro, is running into serious political danger. If Mrs Merkel is unable to move her voters and her party to agree to major financial support for other Euroland countries when they need it, the markets will push and push for the removal of weaker countries from  the Euro by undermining  the sovereign debts of the weaker countries.

            I have always argued that because it is a political project the growing economic stresses and costs did not mean it was about the end. It is a different matter, however, if the political stresses for Germany become too great. The German people could at last have their views taken into account, after a couple of decades of being ignored on this central issue. I have no doubt the German government  -and the other political elites around Euroland – will do their best to find ways to repress the public’s   wishes or to find a less provocative way of lending and giving money around the union to keep it going. However, these are dangerous times for EU governments, and the German people now have a chance to be heard.

            Meanwhile, the European Central Bank has added £43 billion to its bond portfolio to prop up Italian and Spanish debt. Given that Italy has only raised E7.74 billion new debt at its last auction, this so far is an expensive way of borrowing on the cheap.

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