Category: Blog

It was music to my ears to hear Nissan’s revision today of their position that if the UK did not join the Euro they would invest elsewhere. They made a clear commitment to invest in Sunderland to produce their next new European vehicle there.
When Nissan made that foolish comment it was damaging to those of us who were battling to keep the pound, and welcome ammunition to Blair/Mandelson trying to find a way to move the debate in their favour to abolish our currency. I was surprised that such a good manufacturing company should allow itself to make such a strong comment on such a politically sensitive issue, and had to devote time to explaining why it was unlikely to be true.
As I pointed out at the time, business people make decisions on where to place factories and to make new investments on a range of factors that determine whether the investment is likely to be profitable or not, and whether it is likely to offer more sustained profit on a reliable basis than in some other location. Proximity to market, access to good components and raw materials, the ability to recruit and retain a good workforce, tax rates and the regulatory background are all important issues. It was never likely that a country’s choice of currency was going to be the one decisive factor.
The irony today is that one of the important influences on persuading Nissan to base their next new European car production in Sunderland will be the decline in sterling against the Euro in recent months, making the UK more competitive on price than Euroland. All of Nissan’s future cashflow and profit figures on their new car will look better because sterling costs are lower than inflated Euro costs. It would be a different story today if Nissan had set up in Spain or Italy, where they would now be struggling to control inflationary costs against the background of a rising currency making them uncompetitive.
Nissan has done a great job in recruiting and training people in the North East to become one of the most productive auto workforces in the world. They make good products to a sensible budget and of good quality. The UK should be proud of their achievement, and they should be pleased with what their workforce has done. They should also now welcome the wise decision of the British people to keep the pound, and understand that a future government will be pledged to keeping the pound as a matter of principle.
It is the British government that needs to do more to keep and attract industrial investment to this country, by regulating less and offering a more competitive tax package.

Today two pieces of news are juxtaposed which should make supporters of democracy pause for thought.

In Zimbabwe we are told there is a chance that the dictator who lost the election may be about to sign an agreement with the Leader of the Opposition, offering some kind of sop to him whilst retaining the job of President. In the EU the French President acting as President of the EU Council has proposed that the irish No campaign, who won the referendum, should sit down and talk to the Yes campaign and government, who lost the referendum, about how to implement the Treaty the people rejected.

All kinds of bien savants tell us that the new African approach to democracy in Kenya and Zimbabwe offers hope for the future – a government which loses stays in power but agrees to offer the winning Opposition some enhanced role beneath the losing President who retains office. That is not democracy. Democracy says that the will of the majority prevails. Democracy means that if you lose an election you bow out gracefully, to lick your wounds and work out how to do better next time. Similarly democracy means that if a government tables a referendum and loses, it has to stick to the view of the majority. It is not entitled to carry on as if nothing had happened, or to threaten another referendum because it did not like the answer. Indeed, a decent government that lost a referendum on a substantial matter like the future of the country’s constitution would resign, appreciating it had lost the support of the public.

I am astounded that these Europeans seem to think the popular will as expressed in elections or referenda matters so little, and think that in each case people in power have a right to negotiate, spin and slither around any kind of popular rejection. I want to hear our government condemning the idea that in African countries it is just fine for losers to cling to power if they offer the winners a consolation prize, and I want them to tell the French President he is making the Irish situation worse from the EU point of view by interfering in a way which suggest the EU does not care a damn about the views of the public and is desperate to overturn the popular will as soon as possible.

When the Conservatives lost office in 1997 I understood the feelings of the public. I have never through the long years of Opposition thought we had any right to a share in the government, and never wanted to change or rig the electoral system in a way which would give us more chance of winning.

The role of Opposition is an important one in a democracy. A good opposition understands that, and works away first to be a good opposition then to be a plausible alternative government. A sensible elected government seeks to build a wider coalition of support than its own party, but always remembers it only governs through consent, and has to go once it has lost that consent. Those who seek to rewrite the rules for African countries and for the EU are not democrats. They are undermining the very basis of consent which is crucial to democratic government.

True democracy is not the tyranny of the majority so much as the accountability of the government to the majority, and the availability of an alternative to keep a government more honest and responsive.If the system no longer allows the alternative to take over or the popular view in a referendum to prevail, the system is dead.

During this second cold and wet summer in succession it is good to enjoy the occasional day of warm sunshine, and remember wistfully past summers which were so much hotter. At least I can blog more, because week-end games of cricket are being cancelled all too regularly owing to rain and bad light! This week I was in a game where we played on into the dark after 6.30 pm at considerable hazard to fielders.

It was against this background that I found the following comments of Dr David Evans, the author of the Australian carbon accounting model, most interesting:

“ The satellites that measure the world’s temperature all say that the warming trend ended in 2001, and that the temperature has dropped about 0.6 degrees in the past year….The world has spent $50 billion on global warming since 1990, and we have not found any actual evidence that carbon emissions cause global warming” (This first appeared in an article in the Australian)

I was also sent copy correspondence Christopher Monckton has been having with the American Physical Society over an article of his written for their Journal in July 2008. Apparently they commissioned him to write a piece claiming that the extent of the likely impact of human generated carbon dioxide on global temperature change is less than commonly thought. He tells me wrote it and that they asked for other professional opinion on it. He was therefore surprised to learn that they intended to place a disclaimer on the article saying “The following article has not undergone any scientific peer review. Its conclusions are in disagreement with the overwhelming opinion of the world scientific community. The Committee of the American Physical Society disagrees with this article’s conclusions”.

All this is looking very dated, as the world faces recession, credit crunch and downturn. In these circumstances there should be more opportunity to concentrate on practical greenery. Most could surely agree it makes sense to recycle and re-use more, to generate more power from sources other than oil and gas, to waste less fuel and raise the efficiency of everything from home heating to industrial production. All these things will help cut the costs of production, help price firms back into weak markets, and help householders reduce their bills.

There are two ways of going green. The UK government belongs to the tax them and regulate them camp. They have put taxes on petrol and owning cars, taxes on business and taxes on using city centre roads. They have with the EU written endless pages of new regulation. They have made the green cause unpopular, by seeing the opportunity it affords to introduce everything from more taxes to a spy on your rubbish bin. People feel robbed. They are nervous about whether they are conforming with the mass of new regulation bossing them around.

The alternative approach is to rely on incentives and new technology. At the end of the nineteenth century people were worrying about how to handle all the horse manure in London from the build up of horse drawn traffic. They did not foresee the technical revolution that the car and bus represented. It is going to be possible to cut the amount of carbon and of noxious gases emitted by engines to produce much greener motorised transport. It is going to be possible to generate more of our own power and capture more of our own water at home, and to insulate our homes to much higher standards. We know how to generate electricity without needing to burn oil or gas.

The best green policy the UK has enjoyed in recent years was the duty reduction on petrol to encourage people to switch from leaded to unleaded fuel. The modest tax incentive achieved the switch effortlessly and comparatively quickly, as people saw the need to cut lead in the atmosphere and liked the cut in their bills. We need more policies like that, to go with the grain of human nature, to cut our fuel use and to promote better technology.

The Conservative Policy Review warned that the removal of powers from the Bank of England could make it more likely a bank went under. It also pointed out that the fiscal rules were well and truly broken a year ago and suggested ways to remedy them:

2.1. Making the Bank of England Independent

The Chancellor’s early decision to make the Bank of England the independent judge of interest rates, with the creation of the Monetary Policy Committee, was an idea whose time had come. It has been welcomed by all political parties and the business community, and has combined with the effects of globalization to continue the relatively benign interest rate and inflation environment we have enjoyed since 1993. However, it is important to understand the limitations that the Government placed on the Bank’s independence; and we will recommend that, in contrast, a Conservative government takes action to strengthen the MPC still further. It is also important to understand that the first decade of a more independent MPC has coincided with a very favourable business and interest rate climate worldwide, and with easy money globally. It should be remembered that the Chancellor also took substantial powers away from the Bank, transferring banking regulation to the FSA and removing the Bank’s role in managing public debt.

(Commentary on benign climate and UK higehr rates) But there are two reasons for our performance still not rivalling the best of our international competitors, which relate to Government actions; and these need to be considered if we are to create an optimal mix of inflation and interest rates in the future.

The decision of the Chancellor in 2003 to change the Bank of England’s target rate of inflation. He replaced a 2.5% annual increase in prices as measured by the RPI with a 2% target as measured by the CPI (which typically rises by 1% per annum less). It is widely agreed that this led to a relaxation of anti-inflation policy at a crucial time. And its result can also be seen as further proof of the destabilization consequent upon attempts to bring fiscal policy in line with Europe’s; which was earlier seen in the deleterious effect of the ERM policy (which had Bank of England and all-party backing).

(ERM passage )
The second reason is the deterioration in the public accounts from 2001 onwards. After two years of following Conservative spending plans, with sensible and tight controls on public spending, repayment of borrowings and fiscal prudence, the Chancellor turned to a large increase in public spending. This resulted in substantial inflationary expenditure in the public sector, and large debt issuance. Money growth was strong, and the public finances worsened rapidly.

This has resulted in the Bank of England struggling to reduce inflation from a high of 4.8% on the RPI (3.1% on the CPI). It is being forced to tighten monetary policy, in an attempt to offset the impact of inflationary public spending, rapid money growth, and increases in public sector charges (in particular, postal prices and student fees).

In relation to this, we are also concerned about the appointment process for the MPC. The majority of its members are chosen by the Chancellor, who has at times failed to fill a vacancy promptly, and whose decision-making is opaque. We recommend that an incoming Conservative government should make this process a far more transparent one.

We are concerned about the division of responsibility between the FSA and the Bank over banking and market regulation. Fortunately, conditions in the last decade have been benign internationally, with no serious threats to banking liquidity. We think it would be safer if the Bank of England had responsibility for solvency regulation of UK-based banks, as well as having an overall duty to keep the system solvent. There could be important delays as information was exchanged between the two regulators if a banking crisis did hit, and there might be gaps in each regulator’s view of the banking sector at a crucial time when early regulatory action might spare a worse problem.

2.2. Recommendations on Economic Management

1. The Government should neither reintroduce exchange rate targeting into its monetary policy, nor enter the Euro: these are likely to prove destabilizing, and to reduce the UK’s competitiveness.

2. An independent MPC should continue to be supported in its role of controlling inflation through the setting of interest rates.

3. There should be further debate about whether the CPI is fully reflecting important inflationary pressures, including the cost of housing, and whether the Bank of England’s target needs reviewing.

4. The independence of the Bank from any external pressures should be buttressed further by introducing an open selection process, and formalizing the role of the Treasury Select Committee in scrutinizing appointments to the MPC.

5. Whenever possible, fiscal policy should support, rather than undermine, keeping both monetary supply and inflation under control.

2.3. The Fiscal Framework – and its Weakening Foundations

2.3.1. The State of the Public Finances

Under the Labour Government, there has been a rapid build up in debt, and official figures show the UK’s public sector net debt at £497.7 billion (April 2007). However, recent work by MPs and the Public Accounts Committee has revealed that the true extent of the UK’s public sector financial obligations is almost three times this stated amount. A report from the Centre of Policy Studies in 2006 itemised the following:

Stated net debt £487 billion
Public unfunded pension liabilities £720 billion
Local government unfunded pension liabilities £90 billion
PFI £25 billion
Network Rail guaranteed borrowing £18 billion
TOTAL public sector obligations £1,340 billion

Even these figures could be increased, however, if allowance were made for the possible failure of some PFI projects, with the consequent need for the Government to spend more on them; the current rapid growth of the public sector pay bill, and hence of pension liabilities; and probable further borrowing by Network Rail. (Estimate raised to £1.5trillion on Northern Rock nationalisation)

PFIs, in particular, are misleadingly valued in the public accounts. In July 2003, the capital value of PFI projects was included as £20 billion on the Government’s balance sheet. And yet payments due under those contracts amount to £138 billion over the next twenty-five years (from 2005/6). It is also worth noting that there are many PFI contracts entered into by local government, which do not appear in these figures at all.

2.3.2. The Fiscal Rules – Flexible Friends?

Two fiscal rules were established by the Chancellor, to reassure those who remembered previous Labour Governments’ economic mismanagement that this time things would be different. The Golden Rule required that the current budget should not be in deficit over the cycle as a whole; and the Sustainable Investment Rule required that public sector net debt should not exceed 40% of GDP.

In the early years, this framework worked well, as the Chancellor effectively followed Conservative spending plans. The Government repaid debt and ran surpluses. However, this has all changed in recent years. Public spending has expanded rapidly, which has plunged the country into large annual deficits.

As a result, the Chancellor has been able to remain within the Golden Rule only by changing the years of the cycle; and similarly, he has remained under the Sustainable Investment ceiling only by keeping many public sector borrowings, and unfunded liabilities, off the official balance sheet. This willingness to undermine his own rules, and to exercise such flexibility within apparently sensible and tight controls, has damaged both his credibility, and the Government’s reputation for financial management.

This is a pity, since we agree with the principles that initially formed the basis of the Chancellor’s fiscal framework. We believe that governments should not as a rule borrow to pay for current spending; but instead should run healthy current account surpluses in the good years of an economic cycle, so that some latitude is possible in the weaker years. We also believe that there should be a limit on the total borrowings of the public sector as a percentage of national income, both to reduce any crowding out of private investment, and to preserve a good sovereign risk rating on world credit markets. The common theme here is that borrowing is simply deferred taxation, which ultimately will have to be repaid by taxpayers, with interest.

2.3.3. Public Capital Expenditure – Sustainable Investment Rule Proposals

The distinction between current and capital spending is clear. Daily expenditure on wages and supplies, for example in the education and health services, is recorded as current spending in the public accounts. In contrast, the construction of a school or new hospital ward is recorded as capital spending or investment: items that will be available for a period of years, once the initial sum has been spent.

The contrast between public and private capital spending is, however, an added complication. In the private sector, a company invests to produce a future return; if that return is inadequate, the investment has to be written off. If the investment is sufficiently large and badly judged, it might, in extreme circumstances, even lead to that company’s bankruptcy. As most private investment yields a return higher than the cost of borrowing, it is usually appropriate to borrow some, or even most, of the money to make that investment, increasing both risks and rewards for shareholders. So, for example, a car manufacturer might borrow to invest in a new factory, in the belief that he can then make and sell extra cars; this extra revenue will then bring in sufficient cash flow to pay both the extra cost of his new factory, and the interest on his loan.

Much public sector investment spending, however, does not generate such useful additional revenues, and hence there can be no automatic assumption that an investment can be afforded on these grounds. If a local Education Authority spends capital on a new school, there will be extra costs in future years, but no extra revenues. Staff will have to be paid to maintain, clean and staff the school, but the service that it provides is of course free. The only possibility of extra revenue is if the school is due a government grant under the education funding formula, for example if it is to cater for extra pupils.

All of this requires careful management, as there is no market test for many of the capital projects a government will want to carry out. We believe that a new government will need a revised framework for capital spending, to ensure a sensible balance between the need to control spending, and the need to make enough money available to upgrade and expand public facilities in core areas like health and education.

We therefore propose that an incoming government should consider adjusting the Sustainable Investment Rule to:

1. Include guaranteed borrowings (such as those of Network Rail) in the calculation of public borrowings.

2. Include a more meaningful figure, to be settled by the NAO, for public sector liabilities under PFI and PPP contracts.

3. Adjust the limit on state borrowing to take these changes into account.

4. Continue to exclude public sector unfunded pensions liabilities from calculations of debt for the purposes of the Sustainable Investment Rule. Instead, they should be represented openly on a restated, and more accurate, government balance sheet.

5. Value government assets such as schools and hospitals on a ‘replacement cost minus assessed depreciation’ basis, in order to take into account their state of repair and fitness for purpose.

These adjustments should be made to reflect existing liabilities and should not lead to any loosening of fiscal control. In addition, we need to make it easier to decide sensibly the priorities for the limited supply of public capital. We believe that the best way to mitigate this capital scarcity is to allow worthwhile and appropriate infrastructure projects to take place in the private sector, for which there will always be (in normal conditions) readily available capital. This approach, adopted for most capital investment in a free enterprise society, can be applied to the following types of investment, which, in the UK, have typically taken place in the public sector:

There was one really encouraging thing in the Chancellor’s remarks to the Times. He thinks oil prices will remain high. As he’s been wrong on practically everything else, that is very encouraging! It is possible the big falls in the oil price this week will trigger further declines and some unwinding of the substantial “investment” positions that many funds have taken in oil. That would help relieve the immediate inflationary pressures, and might persuade eventually even the slow moving Monetary Policy Committee that it should fight recession rather than inflation. The long term trend in oil and other commodity prices is up, but that does not mean it will happen in straight line with no periods of weakness and decline. World demand growth is reducing, and even China and India are having to cool their economies to combat inflation.

It is also good news that at last the Chancellor recognises that he has been too optimistic about the state of the economy, about the likely pace of economic growth and the state of the public finances. Unfortunately he still seems to think in Labour soundbites and seems incapable of proper analysis of the situation.

He tells his colleagues through the pages of the Times that there will be no more money for “schools, hospitals, defence”. What does that mean, and why put it like that? The budget figures for 2009-10 and 2010-11 show more money for all three, especially the first two. Defence is in great need of additional money for equipment. There is plenty of extra money washing around in the budget estimates for the next two years in programmes without the same priority, which should be switched to the important and sensitive areas. There are huge amounts of over administration, over regulation, over computerisation, and over provision of consultancies which should be flushed out. That would free money for priorities, and allow cuts in overall spending. Non front line staff costs should be brought down through a strict policy of no recruitment.

The Chancellor needs to wake up to the bleak reality of a large budget deficit and borrowing overshoot which will prove difficult to finance and will be damaging to the rest of the economy. If he persists in continuing with so much wasteful spending in the public sector it will squeeze the private sector even more. That will produce more political misery for him amongst the voters he is squeezing, and will induce more job losses in private sector companies who will have to cut costs the painful way because the public sector is unable or unwilling to cut its costs in less painful ways.

The huge surge in borrowing in the last quarter took most commentators by surprise. My forecast of a £10 billion overshoot this year now looks quite low. The public finances are deteriorating more rapidly than I have ever seen, and still the government carries on spending as if there were no problem. The Chancellor talks tough – and foolishly – in the Times interview. Who believes him? The best thing is to watch what he does, not what he says. In the last few weeks he has spent an additional £2.7 billion on the 10 p tax rise compensation, (and promised more to come), £1.5 billion on North West transport, an unspecified amount on Northern Ireland for the 42 day vote, £4 billion over several years for two new aircraft carriers (work for Scotland) and hinted that he will raise less in revenue for fuel duty and car tax than planned. That is hardly evidence of a man with an iron grip on spending, or with a clear sense of direction on taxation. This budget deficit problem is going to get a lot worse and will need additional measures to control it. Borrowing is just deferred tax with interest! The public doesn’t want a bigger collective mortgage.

Meanwhile the commentators write about the breaking of the fiscal rules as if it were sudden and new. Any sensible commentator can tell you the rules were broken years ago by fiddling the figures.

Yesterday the BBC did move from ignoring the idea of cutting public spending, to mentioning it in pejorative terms. At the same time they started pushing out the government propoganda that the UK exceeding the 40% limit on government borrowing should be viewed alongside Italy where government borrowing is 100% of GDP and France where it is 50%. It’s typical of the lazy or biased reporting we get used to from the BBC on the economy and this government.

Of course the BBC should report the government’s spin line, but it should not be presented as fact. They could, for example, have said the following:

“The government today sought to reassure that raising the ceiling for public borrowing above 40% was reasonable at a time of slow down, especially as France has already reached 50% of National Income and Italy 100%. The Conservative’s Economic Policy Review pointed out that in their view the government has exceeded the stated target for public borrowing if you include all the off balance sheet loans and the unfunded pension liabilities, and put the total already at around the Italian level of 100%. City expert Mr X said he would not himself chose to compare the UK with Italy, a slow growth economy in considerable trouble, and said that the faster growing economies tend to be ones with lower levels of public spending and borrowing as a proportion of National Income than the UK”

That would be a better balanced piece, and leaves the listener free to decide the government is right or the Oppositon is right or business is right, or some combination of them.
It is a disgrace that they just assert the government’s spin line as true and sufficient.

It is all part of the systematic misrepresentaiton of economic matters. This includes:

1. Telling people that the only option for Northern Rock was nationalisation, without setting out other options that were available prior to that dreadful decision. Nor did they expalin that nationalisation was the option that made the mortgage position worse and would lead to more redundancies at the Rock.
2. Telling people the Bank of England is independent, when it was badly damaged and its powers reduced by the Brown reforms.
3. Equating cutting public spending with cutting schools and hospitals or teachers and nurses – ignoring all the wasteful and less desirable spending the government carries out.
4. Concentrating on so called “new money” in arguments about public spending, which implies that the only money that matters is additional spending over and above the additonal spending that has already been announced!
5. Believing that spending less means doing things less well – no understanding of productivity and the favourable impact of new technology on costs and quality.

I woudl be happy to set all this out on the BBC anytime this week-end but am not expecting to be asked. They usually ask me to go on to talk about topics I know less about and never write about!

Halve interest rates. Cut out waste and undesirable public spending. Sell some public sector assets to raise cash.

The government should do all three if it is serious about preventing recession or recovering from the downturn.

Money is too tight and interest rates too high, just as money was far too loose and interest rates too low for too long in the period 2001-6. The current inflation comes from past mistakes, and will subside as soon as world commodity and energy prices subside, which they may well do.

Even today, if the government imposed a staff freeze (excluding essential front line service employees like teachers, nurses, police, doctors and service personnel) the costs would run off quite quickly given the huge size of administrative payrolls. It should also place a ban on most new consultancy contracts, cut down numbers of political and press advisers, and slow down or cancel expensive computer schemes, especially the ID one. It would not be difficult to save billions over the next year or so.

Asset sales would also help the public accounts at a time when they are strapped for cash. Let’s see the sale of the Student Loan book accelerated. Bring on the sale of Northern Rock. Insist on more private capital for the railways.

There are many things the government could do to get a grip on its finances. Being a government of spinners, all it will do is change the basis for setting out the borrowing figures and the fiscal rules, and carry on borrowing as if there were not repayment day. That will prevent the Bank cutting interest rates as much as possible, and will intensify the squeeze on the rest of us. The UK is the worst placed of the major economies to ride out the Credit Crunch, because its own economic policy is so appallingly badly run.

Of only we could have some action to fight recession, instead of wonky words and fiddled figures.

After the fiddled figures comes the changed rules. For years we have been served up a diet of changed statistics, altered bases for setting out public spending, a riot of off balance sheet disguises for extra borrowing, and changes in the dates of the famous cycle that is meant to anchor the government’s spending controls. Despite all that we learn today that even the government think their so called fiscal rules lack credibility, so we are to have new ones that allow the government to carry on borrowing as if there were no day of repayment.

“Fiscal rules lacking credibility” is a smart way of saying no-one believes them any more. No wonder. I have set out how I think the true balance sheet indebtedness of the UK government including unfunded pension liabilities is around £1500 billion, or more than 100% of our National Income. To be told we are still just below 40% of National Income on the government’s measure, staying within this control, is absurd. If the government wants to have a control over total debt it should include the borrowings of Northern Rock, Network rail, all the PFIs and PPPs, even if still refuses to include the pensions deficits that any private sector company now has to put on its balance sheet. That alone would mean they would need a debt ceiling above 50% of National Income unless they are going to start cutting their debt burden..

Then there is the sustainable investment rule, which says they should not borrow more than they need to pay for capital items across the cycle. This allows them to borrow for current spending – to live on overdraft – for years on end, as the cycle may last 12 years and is their flexible friend. They only tell you when the cycle ends when they feel like it and after it has happened! A better rule would be to limit borrowing to capital and a specified percentage for current spending if economic growth falls below a stated level, and to require proportionately less borrowing than capital spend when economic growth exceeds the same level, which should be set at the trend or average rate of growth.

What matters today is not efforts to change the rules, but efforts to control spending and borrowing more effectively. This week I was sent a note telling me that work is advancing on having more honest, understandable and consistent figures for public spending after all these years of fiddled figures. I emailed back with the ironic enquiry that I assumed this work would not be ready until the 2010-11 financial year, just in time for a new government if one is elected. Quick as a flash I was emailed back to tell me that was exactly the expected date of introduction! I just trust the sender shared my sense of irony. Clearly some are preparing for a new government, and think it should not have access to the flexible presentation of the current regime.

This morning I awoke to the BBC telling us there are just two choices for the government – relax the rules on borrowing (i.e. borrow more) or put up taxes.
What is with these so called independent journalists?
Why is cutting public sector waste and undesirable spending never an option for them?
How much more waste and needless spending do we have to have before it might just be?

Yesterday was an Opposition day in the Commons, when the Conservative party was able to chose the topics of debate. We used the second half of the day to highlight the robbery at the petrol pumps, and to demand a reduction in fuel duty. The government responded by announcing it would not be going ahead with the 2p a litre increase scheduled for the autumn, though this was more likely to be response to the Glasgow by election than to our Parliamentary pressure.

During the course of the debate the Chief Secretary to the Treasury, Mrs Yvette Balls (nee Cooper) showed a marked reluctance to share any figures with us. The Government’s number cruncher in chief was apparently unable – or unwilling – to answer the following questions:

1. How much revenue will be lost by cancelling the forecast 2p tax rise this autumn?
2. What has been the increase in total revenue from oil and oil products since the budget over and above budget forecasts, resulting from higher oil prices?
3. By how much has the pump price of fuel risen since the Budget as a result of tax?

Mrs Balls is an intelligent woman. She would have expected us to ask these basic questions in a debate which majored on the issue of tax revenue from fuel duty, VAT on fuel and North Sea taxes. As the government’s chief number cruncher these should be a pretty elementary part of her brief. We must assume that when she announced the cancellation of the 2p tax rise she not only knew how much this would “cost” the Treasury, but would also know how much extra revenue they are gaining anyway. It is pathetic that she was unwilling to tell us these basic figures despite frequent probing, showing just how “political” these Ministers are. Don’t they realise that it merely makes them look shifty that they refuse to answer such basic questions or supply the rudimentary information Parliament needs for a proper debate on these topics? Far from protecting them from unhelpful comment or criticism, it intensifies the criticisms and the anger of the public. They have come to end of the Spin show, yet pretend it is still going down well with the taxpayers.

Our guesses of the answers did not get challenged in the debate. We ventured that the government had enjoyed a windfall of more than £500 million in the first six weeks of the new financial year from oil taxes, and suggested the revenue loss this year from taking away the extra 2p would be around £550 million. The government is clearly better off on oil tax account with the price rises and their impact on VAT and North Sea taxes, even after the 2p cancellation.

The Opposition was right to ask for a cut in Fuel Duty now. It would cut the inflation rate, show the government was getting the message of how people are suffering, and would help the lower paid especially. This government seems to take the Marie Antoinette approach to travellers. To all those who are finding it is now too dear to run a car thanks to higher VED and higher fuel duty, they say “Let them go by taxi”. It is their own erstwhile supporters they are hitting most by high petrol prices and ever higher VED. It is going to take another revolt or two by Labour backbenchers to get the message through to Mrs Balls.