Author: johnredwood

European car sales continue to fall. There was a 10.7% decline in March, led by a 17.1% annual fall in Germany. France was down 16.2% and Spain 13.9%. UK sales were up 5.9%.

We have witnessed 18 months of falling European car sales (excluding the UK), with the latest figures showing an acceleration of the decline. The IMF has warned that Eurozone GDP will fall by 0.3% this year, which may prove optimistic. The Euro is forcing austerity policies onto the south and west of the zone. It is also impeding monetary growth in the weak countries. The Cyprus bank bankruptcy has n ot helped confidence, and has revealed the dangers of depositing money in weak banks in weak countries in the zone.

Meanwhile, after a period of good growth in employment in the UK, last month saw an unwelcome rise in unemployment, though the claimant count fell in March. Private sector pay is scarcely growing, at just 0.5%. Total pay is just 0.8% higher than a year earlier, with public sector pay continuing to rise faster than private sector. Public sector pay is up by 1.7%.

It looks as if the considerable attempts to ease money in the UK are still being held back by tough regulatory requirements on banks, and by delays to sorting out the balance sheets and loanbooks of the troubled banks with state involvement. Some money is now getting into the residential property sector, but some banks remain unwilling to lend new money for commercial property. The UK has scope to do more to ease the position, as it still has its own currency and monetary policy. It needs to sort out the troubled banks more quickly and thoroughly.

The IMF is going through a very bad period for economic forecasting, constantly forecasting second half recoveries in advanced countries that do not materialise. It is also at war with it self over whether spending cuts help or hinder economic progress. The IMF used to believe that high deficit countries had to cut. Now some of its people are querying this. They are finding it very difficult to understand and forecast the Eurozone, regularly being too optimistic on output and incomes.

As some of you wish to move on from the thoughts prompted by the funeral of Margaret Thatcher, let me give you this opportunity to do so.

In recent days gold has plunged in value. Some see this as the predictable decline of a barbarous relic. Why should it be so highly priced, they ask, when it only has value for adornment? Others see this as an unwelcome interruption to the steady climb of true money’s value, serving to highlight the way many Central Banks around the world actively debase their currencies in the now famous race to the bottom, the attempt to get trade advantage from competitive devaluation.

Gold’s critics say its high volatility show it is unsuited to return to a monetary role. Gold’s advocates claim its long rise in recent years has shown that the world would be a less inflationary place if gold returned to a role in our monetary system.

What are your thoughts now on the future role of gold? How do you explain the extreme price actions both on the way up and now on the way down?

         If there is one gift that Margaret Thatcher could give to her successors, it would for me be the gift of her honesty.

          Margaret was that rare and brave politician who told people how she thought things were, regardless of how that polled. She spent most of her long waking hours wrestling with the problems of the public. She mainly asked herself how she could right wrongs and make things work better.

          Of course she understood the need to present well. She spent endless hours trying to perfect each main speech. She cared about how the photos would look, and chose a good ad agency. All that came at the end of a project. It came after much work on how to solve the problem. If the answer to a trouble was politically difficult you did not drop the answer. You just had to argue an even better case.

           She was conscious of the polls but not ruled by them. She was told daily what the press and her  opponents were saying about her. We did not hold back the criticisms. She did not usually read it herself. She would think about whether a line of criticism was fair or worrying, whether she needed to do something about it or change the policy. She normally spared herself the unpleasant personal bitterness of much of the criticism in the form of the original article or cartoon. When Ministers suffered from sharp and unpleasant attacks, she always advsied them not to read them.

          She was well aware of the dangers of her forthright approach. She once told me that she was prepared for it by an old friend who had warned her that she would suffer  a barrage of personal abuse and criticism for what she was trying to do. Somehow knowing in advance allowed her to handle it when it came.

       She was also very brave. When she returned from one trip abroad she was asked why she was wearing sunglasses, as the critic thought they spoiled the pictures. Without affectation or flinching she said she had been warned to expect an attack during the walkabout. She simply said she  feared they would throw acid in her eyes, and she needed her   eyes to do her job.

           It is often easier to get into office than to be in power. The kind of politicians who are good at easing and charming their way into an official position, sometimes cannot remember why they wanted to be there by the time they make it. Some may never have had anything particular in mind to do. Some are happy to adopt whatever agenda the civil service, the EU or a past Minister left lying around for them. Some are soon hit by an unexpected crisis. Free of ideology in such circumstances can mean bereft of an  anchor or set of principles by  which to steer and judge.

         This was not true of Margaret Thatcher. She always knew there was a country to save and dragons to slay. She did not rest content with being the first woman Prime MInister, or feel that the state of the UK in 1979 was broadly acceptable, requiring just a little tinkering and bit of management. She wanted to create industrial peace in place of the endless strife. She wanted many more people to enjoy what had been the privileges of the few. She wanted to end inflation and make saving and investing worthwhile.  She wanted to tackle the communist threat from without. She was not radical when it came to the NHS or comprehensive schools or even welfare.

         My predecessor(but one)  at the Policy Unit, John Hoskyns, ran a small unit of three people. He specialised in the Union issue and helped her with the first important  steps towards Trade Union reform. He was often at variance with the official civil service and found getting into other matters than the central economic reform difficult. Taking over from Ferdy Mount, I inherited and recruited  a unit of ten people, with a remit to engage  with all policy areas with the exception of foreign affairs, and intelligence. The Prime Minister for her second Parliament in office, wanted better back up and analysis from a home team. I was careful to position and run  the unit as a civil service unit, with two official civil servants, two former Political Advisers, one former journalist,   three seconded business people, one person directly recruited from  from business,  and one recently retired senior accountant. We did not attend political meetings, nor brief the media (save for an occasional  background brief on big issues which I did for the lobby at Bernard Ingham’s request)

         I set about studying what the Prime Minister needed. Often she was called upon as a judge, to adjudicate between departments in dispute over an issue. In such a role she needed help in assessing the strength of the various cases put in, in establishing lines of questioning to probe the differences, and suggested criteria or principles for coming to a judgement.  Quite simply at times she needed a translation and precis service, to turn hundreds of pages of leaden civil service prose into something clear and focused for a busy woman.

         More importantly, I wanted to help her  to be strategic. She did not need to  intervene in dozens of issues where a Secrerary of State should be free to make his own decisions. I wanted to help her  influence or decide the big calls that would shape the government. I wanted her to ensure progress and success where the governing politicians had promised to take action as a Cabinet or political group. I also wanted her to be able  intervene to stop some legislation and administration that lobby groups or the civil service favoured which had no great cause behind it. All too often the so called apolitical ” necessary” or “tidying up”  bill sparked a bigger row than a very political measure, without delivering any great national gain.

        She agreed  that we would have a weekly bilateral meeting. I would send her a list of the main policies and actions being taken in each department and where they had got to. I would highlight major issues where the Manifesto had promised action or she had expressed a wish to do something. I would also list any bigger items planned by departments where I thought there could be political and financial cost for no obviously good reason.

           She liked this system. I always sought to arrange regular bilaterals for her with the  leading Secretaries of State, so they could be sure in private of any important view she held, and could tell her what they intended or explain why they were doing what they were doing. There had to be plenty of  private talking to ensure common aims and success.

           One of the nicest things she ever said after this system had been working for sometime was she welcomed the service the Policy Unit gave, because she could get so much more done.

       Let those who are never divisive cast the first stone.

       In some senses all democratic party politics are divisive, as parties seek to differentiate their policies and achievements from the others. The Church of England can also be divisive, when it decides to intervene in party political debates.

       The 1970s were no haven from divisions. I seem to remember the punitive tax and spend policies which forced us to borrow money from the IMF, and forced large public spending cuts on us as a result, were very divisive. So too was the winter of discontent, when the Trade Union movements turned against the wider public and against the Labour government.

      The noughties were also divisive. The Iraq war was bitterly opposed by many. The boom and bust policies were oopposed by a few of us in the boom phase, but by many when so many suffered from them in the bust phase. Bankers were then made the scapegoats for a wider failure of the government, Central Bank and regulators as well as of the bankers.