Another leaked letter from Dame Lucy

 

I have received a copy of a letter from Dame Lucy Doolittle  to Dr Roy Spendlove:

 

Dear Roy,

I am writing to reassure you. I know how worried you were that the government might cut spending too fast, and might take a combative approach to the EU. I think we can now be reassured that our strategy of cautious  accommodation of Ministers is working.

On the spending front it is encouraging to see realism in the latest revision to the pensions proposals. Allowing  people within ten years of retirement to keep their original deal is progress. You and I must not of course get involved in the Union response, but this may not be the last tweak to the system.

The useful contribution made by overall public services to growth in the last quarter has passed off with little remark in the press. We must make sure Ministers understand that this is still a case of cuts, with highly visible ones in areas like Defence and welfare. Ministers seem to come to sensible moderate conclusions when we suggest taking  the raw edges away from   policies like the forest sales and the capital spending cuts. I was pleased to see this issue of cuts has come out into the open over border controls, as we need to make sure the background to all this is understood, whilst being attentive to Ministers’ wishes. The problem comes if Ministers wish contradictory policies, where we need to sort it out in advance by securing the funding needed.

The March budget relaxed the envelope by £34 billion over the four years of the Plan. I would expect sensible proposals to relax it further this autumn will be received positively. Ministers are likely to want further jobs related announcements, and a stream of “shovel ready”projects to announce, so we must be ready. They are also keen in the Treasury on Credit Easing, which may be a useful vehicle for us to use for a variety of good purposes. I would like you to take a close cross cutting interest in this matter, and to be  innovative so we can get the full benefits from any extra money it may bring in.

I do think Ministers have shown statesmanship over the difficult EU issues that now confront them. We need to keep up the pressure to be in the room, and to keep Ministers committed to involvement in the stresses and strains of the Euro area as well as the wider EU.  I think the Euro area choice to go for  more IMF involvement is inspired, and I am pleased Ministers are taking this up. The UK can now pay to play, whilst paying through a more trusted intermediary. Germany too likes this route for her own reasons, so it makes a UK-German rapprochement over certain key features that much easier. I do hope you and your team can offer good positive  back up to any Ministerial wish to stay engaged, as this is a crucial time for the relationship. We have a special duty now to nurture it.

The UK’s official position is to be in favour of a substantial move to stronger political and economic union by the Euro zone. We must help Ministers ensure that we have seamless working arrangements with the zone for the UK. I think in due course this means the UK accepting more of the common positions, but I would suggest this is not the moment to make that case. Today we must concentrate on keeping the UK there as an important EU 27 player, and accepting the need for much more integration in the zone.

It is good to see how well  Lagarde has made the   transition to a serious working official. She has handled the need to use the IMF to assist the  Eurozone well, with no sign of a backlash from poorer countries. I am also hopeful that the new Head of the European Central Bank will steer it towards a more activist policy. His interest rate cut is a useful first step, but of course much more bond buying and quantitative easing will be needed.

Yours in EU solidarity

Lucy

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31 Comments

  1. lifelogic
    Posted November 5, 2011 at 6:59 am | Permalink

    These leaked letter and very depressing.

    The problem is that Cameron/Clegg and the EU clearly likes this suffocating and absurd approach to government they “think” like the state sector. Government by the state sector, in the interests of the state sector, with the Tories. Government by the unions and Unison if you vote Labour.

    Nor much difference – what democratic choice is that?

    • Bazman
      Posted November 5, 2011 at 9:46 am | Permalink

      Or you could vote Tory and be governed by the City bankers and their rich chums who have cost this country more than any over zealous trade unions ever did. The labour government did very little for the trade union cause over the years, who’s members who helped to create this massive wealth, got little share and even saw their income fall in real terms. Whilst the rich found ever more devious ways to avoid sharing this wealth either by spending or personal tax.
      You need to bear mind how much damage the banks have done to this country even when you take in to account the taxes they paid which could be seen as a form of protection money or at least operational costs, to allow then to continue there operations without interference from the state governments of this country and the world.
      What democratic choice was that?

      • lifelogic
        Posted November 6, 2011 at 8:37 am | Permalink

        Bazman – The problem is not so much “unions” as “state sector unions” with their direct input to the Labour party and the EU and government in general enabling them to rip of the taxpayers and deliver very little of quality.

        The City bankers have made the country countless times more money than they have lost it. They do need proper regulation and taxation systems though (in their own interests the bad boys need keeping out by government). The industry need confidence above all and needs to be able to compete on a world stage – good regulation and sensible tax systems levels and monetary systems will deliver this – after Brown’s absurd disaster.

        • AbolishIncomeTax
          Posted November 6, 2011 at 10:40 pm | Permalink

          Actually Banks in the UK have never made a profit, taxwise, for the treasury/taxpayer. They have always cost more in bail outs than they contributed in tax. The City pays £60b in taxes p.a. and cost £700b to bail out this time and they have been bailed out many times before.
          Fiat paper money always fails as all Empires do. If we cut Govt spending by half and halved taxes across the board and cross cancelled our deficit we would be out of this mess in a year as they did in the recession of 1921 and after WW2. What is happening is banks and politicians deciding how much tax they can confiscate until the EU collapses under market pressure.

          Reply: it is right to net off losses on bank bail outs. I do not think the cost of them last ill advised bail outs will be anything like as high as you suggest.

    • lifelogic
      Posted November 5, 2011 at 10:05 am | Permalink

      Sorry I mean ” These leaked letters are depressing” I must remember to wake up fully before typing!

      I also see that a 55-million tonne asteroid will fly past the earth closer than the moon November 9 (it will miss us and the moon we are assured.)

      I trust that the global warming industry, sustainability industry, the University of East Anglia and 100 year temperature predictions industry have take this and all the millions of other asteroid orbits fully into account. Also the other variables the suns activity, volcanoes and millions of others C02 concentrations being but one.

      Rather clever of them as many are not even knowable at this time.

    • Disaffected
      Posted November 5, 2011 at 10:45 am | Permalink

      Ministers have discovered that the EU is currently seeking to negotiate deals with Ukraine and north African countries that could result in millions of people being given the right to claim state pensions and benefits in this country. Is this the type of democracy we want in the UK? The EU negotiating what immigrants the UK will have from around the world! Cameron, Clegg and Osborne telling us to work longer, contribute more so that free loaders from around the world can benefit!! Outrageous.

      The fanatical obsession for a single European state was shown by the unelected dictatorship of the EU this week by making sure the people of Greece were not allowed a vote. There is no other option than an in/out choice. Out of the EU now.

      • uanime5
        Posted November 5, 2011 at 11:56 pm | Permalink

        Given that Turkey has been trying for 60 years to join the EU we don’t need to worry about North Africa joining any time soon.

    • lifelogic
      Posted November 5, 2011 at 11:32 am | Permalink

      I see it is reported that Stephen Hester, chief executive of RBS/Natwest, said that “from Thursday any businesses approaching RBS with a “credit-worthy plan” would receive up to £250,000 in backing at a “historic, low fixed rate”. Also that “More than 40p of every £1 lent to small business comes from RBS”.

      Let is hope this is true with 40% of the small business lending market they have certainly wreaked pointless & damaging havoc with good customers over the past three years with the predictable no growth and job losses we have seen.

      Most plans submitted, I would have thought, would be more “credit worthy” than RBS group but let us hope he is speaking the truth and he knows what has really been going on in his lending departments for a change.

      • Bazman
        Posted November 6, 2011 at 12:23 am | Permalink

        What the…

    • Mike Stallard
      Posted November 5, 2011 at 5:25 pm | Permalink

      One of the charming things about this blog is the typos which put everyone in a relaxed frame of mind, and which point our minds towards the meaning rather than the Grammar.
      lifelogic’s grammar is impeccable. So allow me to explain the apostrophe which causes a lot of embarrassment to otherwise very intelligent and thoughtful people.
      1. “It’s” always means “It is”. Always.
      2. The other apostrophes fall into two parts.
      A> If we leave out a letter, like Tony used to it goes like this: “Under New Labour, life is much be”er than under the Tories.”
      B>If we are talking about ownership, then we just forget the ” ‘s ” and write “of”. So, Labour List – List of Labour – Labour’s List. Or the People Pledge – the Pledge of the People – the People’s Pledge.
      I am writing this to help – not to be a clever clogs.
      Now, back to Josephus……

  2. Mike Stallard
    Posted November 5, 2011 at 7:38 am | Permalink

    Having just been shafted by the DfE over a Free School in exactly this way, I read this with enjoyment. You have even got the tone right!
    The terribly sad part – Mr Papandreou’s face as he had to listen to Fr Merkel telling him off in public, the desperate Greeks outside their parliament, the haggard faces of the politicians on Newsnight yesterday – of course, you have skimmed over.
    Quite right – bureaucrats are totally incapable, in my own experience, of feeling any empathy at all.

    • forthurst
      Posted November 5, 2011 at 12:47 pm | Permalink

      Clearly you didn’t read the small print before starting. This scheme is being prioritied to areas of high ‘vibrancy’ where the demand for school places is outstripping the capacity of the building industry to deliver.

      What would be the benefit of building a school enabling English children to be educated for free without being groomed with the official Cultural Marxist doublethink on history and society? Setting and selection by the back door? Internationally recognised exams? No thankyou. Do you want to obliterate the educational progress of the last 50 years?

      Perhaps you should settle for a website offering materials to enable teachers better to groom their pupils with preferred interpretations such as this founded by Lord Fink:

      http://911londonproject.com/the-programme/

      • Mike Stallard
        Posted November 5, 2011 at 5:29 pm | Permalink

        Now you tell me!

  3. Martin Cole
    Posted November 5, 2011 at 8:10 am | Permalink

    I am surprised Dame Lucy did not pick up on the Lagarde stole, which like the earlier hooped earrings, gave the game away that she was merely attending the G20 for visual affect!

  4. Martin
    Posted November 5, 2011 at 8:56 am | Permalink

    Credit should also be given to our glorious banker at the BofE for the latest round of QE which has achieved ???

  5. Kevin Ronald Lohse
    Posted November 5, 2011 at 10:29 am | Permalink

    Dear John.
    When you publish these letters in book form, as you most certainly should, I hope you will acknowledge your debt to C.S. Lewis.

  6. Bernard Otway
    Posted November 5, 2011 at 11:17 am | Permalink

    I would FIRE the lot of them and replace them with people with at least 20 years private sector experience,even if they are paid severance pay ,it would in the long run save much much more
    from their idiocy of thought and lack of implementation of proper [Business] work ethics and methods,it would be like cutting off a gangrenous limb to save the body.

  7. Denis Cooper
    Posted November 5, 2011 at 11:21 am | Permalink

    This leaked letter is undated, but clearly it must have been written before the G20 when the German government effectively knocked on the head the idea of expanding the IMF to fund eurozone bailouts, which must now be a disappointment to Dame Lucy.

    The CDU Chief Whip, one Peter Altmaier, was on Newsnight last night, starting just before 10 minutes in here:

    http://www.bbc.co.uk/programmes/b006mk25

    Starting just before 13 minutes Baroness Vadera complains that not a single additional cent had been committed to the EFSF at the eurozone summit last week, and now at the G20 summit Germany had blocked the idea of the IMF lending SDR’s to the EFSF.

    Altmaier replied that there is a strong commitment to the German parliament limiting the total Germany will lend to the EFSF to 211 billion euros, the clear implication being that any additional money lent to the IMF would count towards to that total.

    And of course it should, because whatever the British government may say we all know that the IMF is just being used to launder money for illegal eurozone bail-outs.

  8. Denis Cooper
    Posted November 5, 2011 at 11:25 am | Permalink

    The Newsnight presenter kept banging on about gettting the ECB to print whatever money was needed for the distressed eurozone states, apparently unaware that she was urging another major breach of the EU treaties which she would normally worship as gospel.

    It was of course stupid for the EU member states to order the ECB to put price stability above all else without reserving powers to over-ride that standing order under abnormal circumstances, and in fact explicitly ruling out that possibility in Article 130 TFEU:

    “When exercising the powers and carrying out the tasks and duties conferred upon them by the Treaties and the Statute of the ESCB and of the ECB, neither the European Central Bank, nor a national central bank, nor any member of their decision-making bodies shall seek or take instructions from Union institutions, bodies, offices or agencies, from any government of a Member State or from any other body. The Union institutions, bodies, offices or agencies and the governments of the Member States undertake to respect this principle and not to seek to influence the members of the decision-making bodies of the European Central Bank or of the national central banks in the performance of their tasks.”

    At least the UK’s Bank of England Act 1998 does have its Section 19 on the Treasury’s reserve powers to issue instructions to the Bank, should a Chancellor ever decide to openly invoke them rather than doing it through back channels and then letting the Governor take the blame for the excess inflation.

    Reply: You need to remember that parts of the Treaty can be interpreted flexibly if it suits the main countries to do so. The Rome Treaty had provisions to tackle balance of payments imbalances, but no-one bothered to do anything.

  9. TimC
    Posted November 5, 2011 at 1:39 pm | Permalink

    Good to see Dame Lucy highlighting the border controls issue so early. She is of course right that ‘we’ must keep making Ministers aware of the impacts of their decisions. I am hopeful that a few power cuts this autumn will clear the way for more windturbines in my minister’s constituency.

    • Steven Whitfield
      Posted November 5, 2011 at 4:43 pm | Permalink

      Regarding the border Issue, it would suit the coalition and Sir Vincent Cable and Saint Nicholas Clegg rather well if immigration was allowed to stay high as it boosts the GDP growth figures.
      I expect lots of hand wringing over the figures to ofset the political flak but no real action.

      Unprincipled and reckless yes.. ..but that is the hallmark of this coalition.
      We deserve better.

  10. Steven Whitfield
    Posted November 5, 2011 at 4:30 pm | Permalink

    “The useful contribution made by overall public services to growth in the last quarter has passed off with little remark in the press. We must make sure Ministers understand that this is still a case of cuts, with highly visible ones in areas like Defence and welfare”

    Mr Redwood you suggest that spending is being increased to boost growth figures across sectors of the economy supported by state spending. What proportion of the 0.5% GDP growth in the last quarter do you think was bought by borrowing ?. I suspect we would be at 0.0% or worse if we didn’t have a buy now pay later Chancellor.

    My suspicion is George Osborne asks the BOE and Treasury officials ” what amount of money do we need to pump into the economy (through QE and borrowing ) to achieve a level of growth that isn’t politically embarrassing ? (0.5%).

    Mervyn King and officials answer “75bn would do it plus borrowing of X billions above plan”

    George Osborne says ” okay that should get us out of trouble for now. What’s another few billion when the total dept is 2 trillion!.

    This is economic madness and no way to run an economy – the treasury is pushing us ever closer to a spiral of unpayable dept to avoid embarassing growth figures in the short term. This is what happens when a once proud party with a long history lets itself be taken over by (modernisers?-ed).

    The electors didn’t forgive the Conservatives for the ERM debacle. Because of John Major’s (approach-ed) we suffered 13 long and damaging years of new Labour. Arguably we could have avoided the Iraq war and the worst of the overspending of the Brown years if this (unwise man-ed) had listened to ‘the rebels’ .
    If David Cameron doesn’t connect with economic reality soon, he will suffer the same fate as Sir John.

    • Steven Whitfield
      Posted November 5, 2011 at 5:19 pm | Permalink

      Mr Redwood – I wish I could share your more measured tone!. The description of ‘ modernisers’ as the clique currently driving the Conservative party into the ground made me chuckle.

      I think (any unnamed politician) who because of their policy (The ERM) ,caused home wrecking 15% interest rates, the loss of billions of pounds and a landslide election defeat has every right to be castigated.

      It’s a perfect example of how politics is far too important to be left to a narrow political elite engaged in the grip of a group-think mentality. Look what this has done to Mr Hague.

      The fact that wiser critics like yourself (who were largely ignored on this issue) pointed out that the ERM was a Federalist dream and doomed to failure makes the critiscm even more justified.

  11. Rebecca Hanson
    Posted November 5, 2011 at 4:37 pm | Permalink

    There is realism in the latest revisions to the pensions proposals????????

    On what planet?

    Has the government now engaged with the reality that the TPS is not broke – that it self funds and that it is underpinned by robust agreements to ensure that it continues to self fund and that all it’s spin about it being in crisis was just lies?

    Has the government come to understand that family budgets of people on long term pay freezes who are coping with serious price rises have no slack in them and so if they are forced to massively increase their pensions contributions they will have no choice but to pull out of the scheme – WHICH WILL FORCE IT TO COLLAPSE because current income funds current payments.

    OR DID THEY ALWAYS UNDERSTAND THIS AND WERE ALWAYS TRYING TO FORCE PUBLIC SECTOR PENSIONS TO COLLAPSE?

    Is realism the new word for ‘another attempt at confusing spin’?

    • Richard
      Posted November 5, 2011 at 5:02 pm | Permalink

      Rebecca, Ive worked in the private sector all my life, in a small manufacturing company and I am now self employed, to my mind the new “them and us” is between my sector of the economy and the public sector.
      The fact is your pensions are not affordable any more.
      We are all living longer, there are more of us and the kind of pensions we all want cannot mathematically be provided without paying in huge sums and or working longer.
      Why should I be forced to pay more and more tax to help those in the public sector get a pension way above mine whilst I have to pay more and more into my pension scheme to end up with a pension well below those in the public sector.
      The days when a good state pension was the reward for a lifetime of poorly paid public service have gone. Wages in the public sector are now on average higher than those in the private sector.
      I don’t wish to sound impolite, but welcome to the real world.

      • Rebecca Hanson
        Posted November 5, 2011 at 9:34 pm | Permalink

        Richard I actually work in the private sector But I’ve been curious about this dispute so I’ve been back to basics, have scrutinised the figures and the arguments and am so horrified by the way these have been totally misrepresented by the government and the media that I’m speaking out.

        The TPS currently self funds – the income from currently working teachers pays for the pensions of retired teachers and there are agreements in place to increase contributions if it stops doing so.

        Public sector workers have been on a pay freeze for a long time while prices have gone up a lot. Many simply cannot afford the massive increases in contributions which the government is demanding. They WILL have to drop out of the scheme. What else can they do? So how will the pensions of retired teachers be paid? The government will have to pay them instead and the teachers will have no pensions. It’s completely stupid.

        You clearly believe what you’ve been told through the media so I’ll ask you to publish the figures to back it up Richard. That’s reasonable isn’t it? If this government was actually telling the truth they would have done that wouldn’t they – so they would be easy to find on the internet.
        Could you publish a link to them please?

        I’m in favour of fair pensions for all (including me – yes they are a nightmare in the private sector) but I just don’t feel that shutting down the public sectors one is the right way forward.

        By the way I’m quite happy in the real world. Thank you for your welcome.

      • uanime5
        Posted November 6, 2011 at 12:02 am | Permalink

        So you believe that teachers, doctors, and nurses in the public sector are better paid than those in the private sector? That’s not how it works in the real world.

        • Richard
          Posted November 6, 2011 at 2:43 pm | Permalink

          The subject if you had read my post carefully, was about pensions.
          Whilst it must be a shock for public sector staff to find they suddenly are facing having to work longer, pay in more contributions and then also receive less that they had expected when they retire, that this is something private sector staff had had to come to terms with over the last 20 years.
          I dont see that your comment about teachers doctors and nurses is relevant because even if it is correct that they may earn more in the private sector, most of them do not work in the private sector so we can deduct that they must be happy with their current terms of employment.

          • Rebecca Hanson
            Posted November 6, 2011 at 10:01 pm | Permalink

            Reasons for working in the private sector (yes I know these distinctions are a bit too broad brush).

            – Freedom of self determination
            (as opposed to doing what is decided by central government)
            – Flexibility of working hours
            (especially if you work for yourself – as opposed to long contracted hours when you are totally owned by the state)
            – Not having to take rigidly defined maternity leaves and stop work completely when you retire
            (especially if you work for yourself – you can do a bit more or a bit less as life allows)
            – It’s easier to fix things which don’t work efficiently or well which brings more job satification.
            – The opportunity to build business value.

            This last one is key for many of my friends who are struggling to save for pensions because the are putting their money into their businesses and is, of course, something those in the public sector will never be able to do.

            Lots of my friends who work in the private sector couldn’t cope with the rigid demands of the public sector.

  12. MajorFrustration
    Posted November 5, 2011 at 4:41 pm | Permalink

    PS – the PM does seem to be, as you crickers will know, playing and missing a lot. Perhaps it would be as well to start dusting off those papers which all Departments use to game plan a change of government.

  13. zorro
    Posted November 5, 2011 at 6:42 pm | Permalink

    There is only one option if they want to keep their superstate and that is to print and do it quickly. They are wasting time and making matters ten times worse by extending this agony. Push Greece out now and take the hit and try and contain the mess if at all possible or cover their debts and take the hit. The longer they delay the more likely that contagion will spread.

    Having said that, I don’t really care as long as the UK is not sucked into this anymore. I am afraid that I cannot trust Cameron to control his vanity in hobnobbing with European leaders and Obama, pretending that he has the first clue what to do. All he seems to be saying is that we need the Euro to survive otherwise we will be in economic peril. This is no means the most likely scenario for the UK and could produce some opportunities…

    I really don’t know how much Cameron understands that he could be engaging in a risky strategy by effectively acting as an IMF guarantor. He keeps on saying no-one has ever lost money by supporting the IMF. There is always a first time…….Oh and where does he get this imaginary money which he thinks we won’t need to use as a guarantee?

    USA and UK are engaging in a long term strategy to slowly (ever so slowly) reduce the current account deficit and radically reduce the real value (by inflation) of the debt. Cheap government debt issue, QE and anaemic growth = slow covert default, so I don’t know why the Europeans don’t do the same and join the club rather than engaging in these pathetic theatrics/German masochism when everyone knows when they have to print they will be taking hold of a lot of the PIGIS physical securities.

    Disclaimer: The exposition of these views should in no way be seen as an endorsement.

    zorro

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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