Author: johnredwood

Mr Clegg’s “appeal” is based on the pursuit of power for its own sake. He tells us he can form a coalition after 2015 with either Mr Cameron or Mr Miliband.  That shows how elastic his principles have become.Indeed, he argues that any coalition with Lib dems would be better than any other possible government.

It means, for example,  that he could either support a government renegotiating our relationship with the EU and then undertaking a crucial referendum on that topic, or a government which thinks the current big range of powers held by the EU is just fine, with no need for a referendum.

It means he could either support a government which intends to complete the job of removing the budget deficit by squeezing the growth rate in public spending, or support a government which thinks the UK should spend and borrow more.

It means he could either support a government which thinks current rates of tax on the so called rich are high enough, or join one which wishes to raise wealth taxes, impose a Mansion Tax and raid pension funds further.

It means his party can either support a party which wants cheaper energy and wishes to back shale gas exploitation, or supports a party which signed up to the entire EU dearer energy agenda and wanted to increase fuel duties considerably more than this government has allowed.

It was useful to find out this week  that the Lib Dems think anyone earning more than £50,000 a year is well off and should pay more tax. Surely income levels need to be related to the cost of living and the cost of housing in different areas.

I trust the Conservative Manifesto will not only wish to go further in easing the tax burden on all on lower incomes as part of the continuing reforms to make work pay, but will also wish to ease the tax squeeze on the middle. The 40% tax rate starts at too low an income so  the threshold  needs to be amended.

Yesterday I heard the story of the Monetary Policy Committee at a meeting where we were told we should not quote the source. I am pleased to say it was just the same as the story you can read on their website or hear in the public media. I will draw on the public materials.

Thinking again about  it all, I was struck forcefully   by the question what is the point of it? What can the MPC do that the Chancellor and Governor cannot do, as they used to without an MPC?  Interest rates have stayed at 0.5% for more than 5 years. Quantitative easing is now in the past, and anyway needs Chancellor’s  approval. The Committee has leant over backwards to say they are most unlikely to raise interest rates for the next two years. Nine people solemnly read and think a lot, discuss at some length, and conclude each month to keep rates on hold.

Inflation has averaged around 3.5% compared to the 2% target. The MPC tells us inflation was higher because the devaluation of sterling had a big impact on import costs, because oil and energy prices rose, and because  commodity prices generally did go up a lot in the period, though have since come down. The MPC would only be concerned about higher inflation if it came from “domestic pressures” like wages, where increases  have stayed low.

The MPC recognsies predicting international commodity and oil prices is very difficult. They just use market futures prices, which of course shift around a lot. They have produced a series of forecasts of the UK economic future over the years of their existence that have not excelled compared to the forecasts of many private sector commentators. They duplicate the work of the Office of Budget Responsibility, who also use public money to produce forecasts, often similar to the Bank’s.

During the crisis the old MPC did badly. It kept rates too low for too long to help the boom. It then kept them too high for too long to ensure the bust, as I complained at the time. Now it has created a lot of new money to make up for the weak banks it helped weaken. It has not hit its inflation target for a long time.

I wish today’s MPC well. It seems more balanced than the MPC that cheered the boom on, or the MPC which gloomily assisted in the crash. Maybe we want it to do nothing elegantly for a bit. These are early days for the recovery. Monetary activism in the form of printing  more money could trigger more inflation which we don’t want. A rush to push up interest rates could throttle the recovery.

The markets have their own way of doing these things. They are putting up market interest rates anyay. The MPC does not seem to have a plan to make the markets do what the MPC wants.

So do we need both Bank and OBR economic forecasts?   How much more value does an MPC of nine expensive people provide rather than one of say 5? As most agree we need the good bits of the public sector to do more with less, and other bits of the public sector to do less with less, could we find a few savings here as MPC members reach the end of their terms?

You know there is a recovery underway when the critics of the economic strategy change their tune from saying “austerity cannot work” and “there will not be a recovery in growth or jobs” . Instead the critics now argue the government is complacent for daring to say a recovery has started, complain that living standards are not yet rising after a long period beginning with Labour’s Great Recession when they have been falling, and suggest at the same time there is a housing asset bubble.

So what is happening?  There is a decent recovery led by new private sector jobs. There are 1.4 million  extra jobs in the private sector since 2010. Unemployment has fallen, though by much less than the number of new jobs owing to continued net inward migration, which has itself come down. Output is now expanding, probably at the fastest rate of the major economies. The government has been careful in how it has described this, and is far from complacent about the state of the UK economy. They stress the need to do more to raise living standards, to curb the debt and spread the growth more widely.

The best news for living standards recently has been the rise of the pound against the dollar and some other leading currencies. As we import so much, a stronger pound cuts import costs and helps control inflation. The recent rises still leaves the pound much more competitive for our exports than prior to the Great Recession and credit crunch. The move to a negotiated settlement in Syria rather than a military escalation has also helped by lowering the oil price. More needs to be done to make energy cheaper, to control public sector costs and charges, to lower  tax on working families and to stimulate more competition and cheaper prices in other areas.

The government’s freezing of Council Tax, raising of Tax Threasholds for Income Tax, removing  Labour’s planned Fuel Duty increases and creating a climate for more jobs are all helping with living standards. Higher VAT and the continuation of the  Miliband/EU dear energy policies have been less helpful.

It is difficult to accept the claim that we already have a housing bubble in the UK. The housing market in many parts of the country  still shows prices well below the 2007 peak. Transaction volume has been much lower than during the 2005-7 bubble.

It is true the Uk has a new good export business, building very expensive luxury flats in a few parts of central London and selling them to foreigners. This does not signify that the rest of the country or the UK mortgage financed market is in the same state of rapid turnover and rising prices – far from it in most cases. Higher house prices from modest rises elsewhere will stimulate more turnover and activity, make it more worthwhile for developers and builders to build some new homes, and create more jobs and better incomes for a wide variety of people in housing related activity. The market generally is far from overheated and does not yet need a dose of cold water all over it.

          A contributor accused me of unfairness in my attempted independent analysis of what contributions the Lib Dems have made to coalition. I have reviewed it in the light of the news and views coming from their conference.

          Mr Davey obligingly reinforced my view of the main difference – the Lib Dems want more windfarms and dearer “green” energy, the Conservatives want cheaper energy with more gas. Mr Davey went out of his way to criticise Conservatives in general and Mr Paterson in particular for being anti wind farm.

         The Conference voted in favour of the tuition fees policy Dr Cable created in government, confirming my view that Lib Dems have radically changed their position on this issue after campaigning in 2010 against tuition fees.

         Today the conference is likely to back the Coalition budget strategy and general economic policy, despite noises off from Dr Cable, Lord Oakeshott and a few of his friends. There has been no great split with Conservatives on the so called “austerity” policy, of reducing the growth rate in public spending.

       The Lib Dems duly announced their Bag tax, with some Conservatives worried that it will be dubbed a tax on shopping.

               The one pleasant  surprise was to hear this morning that Lib Dems are considering adopting an EU referendum as policy again, as they did prior to 2010. It was a pity they dropped this policy once in government.

           Last week the media criticised MPs for spending more in 2012-13 than in 2008-9 on running their offices and on their general expenses. After all, the critics pointed out, IPSA the independent body brought in to curb excesses this Parliament had changed the rules over what can be claimed, and cut the items and amounts in many cases.

         Despite this total MP claims have risen from £95.4m in 2008-9 to £98.1m in 2012. That means the average is now £150,000 per MP. So why so much and why has it gone up?

          The main item in the spending is staff. Most people working as executives do not have the  salaries of staff reporting to them recorded as part of “their” expenses and remuneration.  Some MPs employ staff to do research, to write speeches, to talk to the media, as well as employing staff to help with casework, office organisation and organising the diary.MPs themselves of course run the surgeries, supervise the casework, undertake the constituency visits and consultations,  do all the work in the Commons, and undertake the political activities which Parliamentary staff must not handle.   Staff wages and salaries have gone up since 2008-9, though more recently there have been tight controls on pay increases as for the rest of the public sector.

           The other big item is living accommodation in central London for the majority of MPs who cannot get back to their constituency homes, given the working hours through to 10.20pm on Mondays and 7.20pm  on Tuesdays and Wednesdays, and the need to be back by 9am the following morning. IPSA decided to disallow mortgage interest on a flat an MP had bought, but IPSA does pay rent bills. Many MPs have switched to renting, and all new MPs have to rent, so there has been a big increase in rental costs and an overall increase in cost as this is a dearer way of providing housing.

           As some of you strongly think MPs claim too much, I am inviting you to contribute.  How many staff you think would be appropriate, and for what tasks? Do you think IPSA have got the housing right? 

          I am also interested in your thoughts on employing a relative. This has  attracted considerable attention, with some saying relatives work longer  hours and will work outside normal office hours, whilst others think it is more difficult to ensure  a relative does provide value for money.

(PS I will not publish  personal assaults on individual MPs, as I cannot check it all out. I do not myself employ a relative, and last year claimed £65,807 for my office and other costs so you do not need to ask. ).

          We have learnt today what the Liberal Democrats want for their party conference. They want a plastic bag tax. We hear that the Coalition government may be about to grant them their wishes. The Lib Dems will be at home proposing a new tax with “green” associations. It’s not something Conservatives have been asking for at  their party conference.

          In government the Liberal Democrats have made a distinctive contribution in  two crucial departments of state where they have the principal Minister. At Energy they have driven forward the dear energy policies of the green movement, keenly advancing windfarms against reluctant Conservatives. They have stayed true to their anti global warming instincts, presiding over closures of cheaper carbon based energy generation and substituting dearer intermittent systems.

            At Business surprisingly their man designed and pushed through a scheme for higher student charges and loans. In the 2010 election Conservatives said they would keep Labour’s student loan scheme, and would consider higher charges. Lib Dems campaigned stridently in favour of abolishing student loans, and condemned any suggestion of increases. Dr Cable’s scheme and the Lib Dem 3 line whip to support it came as a surprise.

           The Lib Dems main claim for themselves is that they have pushed through the big increase in Income Tax thresholds, taking more lower paid people out of Income Tax altogether. It is true they backed this scheme at the election and in government, but also true that Conservatives have been equally enthusiastic about this policy, pushed through by a Conservative Chancellor with the keen support of both parties. Had there been a  majority Conservative government there would also have been Income Tax cuts for the lower paid.

                  Both parties have signed up to cutting the deficit and both agree that it should be made more worthwhile working. The best welfare policy for the many of working age  is a job.

                 Conservatives helped the Lib Dems secure a referendum on the Alternative vote, which has settled that issue.

                  Lib Dems do not want to help cut the costs of politics by reducing the number of MPs, and no longer want to vote for a referendum on our EU membership, though they advocated one in opposition. They have succeeded in stopping the Coalition government doing either, even when the referendum is delayed until 2016/17. Conservative MPs  have blocked the Lib Dem’s scheme for Lords reform, which did not establish sufficient support in the Lords either.

                 Conservatives have felt constrained by the Lib Dems most importantly over the matter of the EU. Most Conservatives want to get on with negotiating a new relationship with the EU now, and want to stop and curb the powers of Brussels in many areas. The Lib Dems in government as out of it have remained true to their belief that EU membership is good for us, and more EU government would be welcome.

                   Come the European election and the General Election there will be plenty for Conservatives and Lib Dems to disagree about, so the public can have a choice on big issues like the EU, the constitution and energy policy.

 It was inevitable that the privatisation of the Royal Mail would come up on Any Questions, with the head of the CWU on the panel.  It is strange that it has become such a divisive issue, as Labour tried to do this towards the end of their period in government. They believed then that the Royal Mail needed to be able to borrow and raise money like normal companies, freed from the tighter controls that operate on public sector businesses.

             The fear of private business in the Royal Mail is particularly odd, as the Post Office itself has thousands of offices or branches which are of course private sector businesses operating under a common public franchise. No-one seems to worry about this arrangement, or demand that they be nationalised. No-one suggests this means they cannot provide a good service.  I have never had an email or letter complaining that the local sub Post Office has failed because it is private, and demanding the state  takes it over.

      Two main worries are voiced about privatisation of the Mail. The first is the private company might put up prices more. That would be difficult, given the huge increases  put through from time to time by the nationalised industry. It would also be impossible without the approval of the regulator, as these prices will be controlled in future.

       In 1997 when Labour took over government the second class stamp cost 20p. It costs a stunning 50p today, an increase of 150%. If it had risen in line with prices generally it would be just 31p. Not much sign of nationalisation helping the customer.

          The second is the false claim that it will mean the end of the comprehensive six day delivery to anywhere in the UK for the same price. This has been written into the law, so it will remain unless some future Parliament wishes to change it. Clearly this government wants to guarantee the service and has done so. It is the nationalised industry that has removed twice a day delivery and does not always give the early morning delivery that business likes.

             I am glad the employees will become shareholders. I expect motivation, quality and efficiency to improve in the private sector. It is good to know in future taxpayers will not have to pay for any losses. There have been many job losses under nationalisation.

           The Unions have been much in the news this week. There has been debate in the Commons about the government’s proposal that there should be some independent check on the accuracy of their membership lists used when balloting members on industrial action and other matters. There has been discussion of Mr Miliband’s  attempts to negotiate a new settlement with the Unions for the Labour  party.

           I welcome Mr Miliband’s proposal that Trade Union members should have to opt in to the Labour party political levy if they wish to do so. It will give everyone a clearer view of the true level of individual member support for Labour. It is a pity members cannot choose to opt into membership of other parties if they prefer, if the movement stays with a political levy at all. It should be up to the members to decide this matter.

            If a large number of people currently paying the political levy to Labour no longer opt to do so, the Unions will be richer and the Labour  party poorer as a result. The one advantage of the old system of the levy was it gave Labour money direct without the Union leadership deciding on the gift. Under the new system Mr Miliband will have to negotiate with or at least talk to the Union leaderships about sending him larger lump sums from the Unions themselves.

            I would be interested in your views on whether  you prefer the new system to the old, and what you think should happen about large grants from Unions to Labour. In the interests of fairness it is also important to discuss the receipt of money from rich individuals and companies, something which all 3 main parties enjoy.  Money these days mainly comes from entrepreneurial companies where the owner/Director is in effect giving his own money. Large quoted companies tend to be international, avoid making UK political donations, and understand if they wished to they would need wider shareholder support.

               I strongly favour private money from volunteers rather than state money from taxpayers to fund political parties. Clearly there have to be rules, and each party has to ensure it cannot be said to have traded policy for money. If a rich person gives money because they like a policy you have adopted and generally agree with your stance, that is fine. If a rich person says I will give the party money if it changes its policy in a way which clearly benefits the donor that is wrong and probably illegal.

On Tuesday David TC Davies held a debate on global warming and government policy in Westminster Hall.  A DECC Minister replied.

It was well attended for a debate in Westminster Hall, as an increasing number of MPs are concerned about the impact of dear energy on household budgets, industrial development and our economy generally.  Andrew Tyrie, Peter Lilley, Philip Davies and Christopher Chope who had disagreed with the Climate Change Act in 2008 were joined by some newer colleagues who spoke about the damaging impact dear energy can have on industrial jobs. Just two Labour MPs, the Minister and the front bench Labour spokeswoman defended the UK legislation and the EU framework of anti global warming measures.

Graham Stringer, a thoughtful Labour MP with a scientific background was critical of some of the so called science published on the subject of global warming. Several MPs sought to establish that there has been no global warming this century, and asked at what point the government would expect scientists to revise their models in the light of this evidence. Mr Davies pointed out that as the proponents of global warming stress climate change is a long term business, shouldn’t they show graphs going back hundreds of thousands of years and not just concentrate on the last 150 when there are better records?

The global warmists were asked if they accepted that there were plenty of other potential causes of global warming than manmade CO2, which had caused past periods of global warming? If they accepted this obvious truth, how could they be sure any recent warming was down to human CO2 and not one of these other factors. They were asked why they concentrated on CO2 and not on water vapour.

The so called “deniers” roundly rejected any idea that they denied the fact of climate change. All said they accepted the climate has changed a lot in the past and will doubtless change again in the future.  They accepted that CO2 is a greenhouse gas and can have an effect, but that in order to model and predict accurately all sorts of other influences on climate and weather need to be taken into account.  They asked why we did not adapt as and when the climate changed, as a cheaper and more effective option than trying to prevent it.

To me the most powerful part of the sceptics case was the practical one. How can  making energy especially dear in the UK/EU help, when it leads to industry shifting its jobs and processes elsewhere rather than stopping them? If there is to be no global agreement to curb man made CO2 what is the point of a relatively small producer putting itself at a massive competitive disadvantage?  The US, Japan, China and others do not accept the Kyoto process. Australia has just voted down the carbon tax. We want more and better paid jobs in manufacturing in the UK, so we need realistic energy prices.