Category: Blog

As Gordon Brown must be fed up with Alex Salmond and the Scottish National party running rings round him, fomenting English dissent with the Union, I suggest the following advice to the Prime Minister:

To :Prime Minister
From :Senior Political Adviser

I understand your reasons for turning down a referendum on the EU Treaty, even though I still think it would have boosted your ratings and made you appear different to the age of spin under Blair. I have been thinking how you could at one and the same time show you are concerned about what people think, and deal with the Scottish problem created by Alex Salmond’s persistent campaigning against the Labour government from his platform in Edinburgh.

The one good thing in the opinion polls for us in Scotland is the way support for independence has fallen sharply. As Salmond is about creating the conditions for Scottish independence, his biggest failure so far is to see support for such a venture falling rather than rising, the more he does as First Minister. I suggest you take advantage of this by giving Scottish people a referendum on independence.

We could present this favourably. We are listening to the wishes of the Scottish people. We would be giving to the First Minister what he says he most wants, a vote on the Union, at a time when he least wants it. We would call his bluff.

It should be easy to secure a "Yes" vote for the Union in Scotland – it would be far more difficult in England at the moment. All the main parties apart from the SNP would line up with us, and the polls allow plenty of leeway for a poor campaign for the Union. Once we had secured it, it means the issue of Scottish independence is off the agenda for a generation, and Alex Salmond will go from hero to zero in three short weeks. It should create internal dissension within his party, and lead many of them to ask what it is all for if they have already lost the hearts and minds of the Scottish people on the main thing that matters to them. Thereafter we would be free to adjust the financial settlement between England and Scotland to some extent, blaming Salmond for any cuts that had to follow in Scottish spending. He would not get another term as First Minister, and his minority government may even break up before the end of their term.

It still leaves us the problem of England, but it would mean English nationalists could no longer look forward to the early exit of Scotland from the Union which many of them favour. My advice on that remains not to wind the English up more by pressing ahead with strengthened regional government which they hate. Indeed, why not as part of the efficiency reviews look at ways of reducing the cost and intrusiveness of regional government in England to show them you understood the meaning of the North East referendum result? At the time you thought the Blair/Prescott combination had really messed that up, so why not accept the verdict of a very Labour part of England on that issue?

This government often lacks a sense of irony and timing.

This week they proudly announced 20 minutes had been lopped off the train journey time from a London station to Paris, after substantial taxpayer expense.

At the same time they announced that they intended to introduce some security scanning at larger stations, including St Pancras, and make it more difficult to get a car anywhere near the station.

When I asked Jacqui Smith sometime ago to explain why they introduced such time consuming security at Heathrow but not at railway stations, I did so in the hope they would streamline the airport system. Instead the government, as always, has opted for levelling up misery rather than levelling down government encumbrance.

We may discover after further large expenditure on physical barriers and security systems at St Pancras that passengers lose the 20 minutes gained by a faster train in more delays getting to the station and on the station before being allowed to board the train.

It is high time transport experts and Ministers started thinking about total journey time, not just about station to station journey time. For many people in southern London a cross channel train from St Pancras is going to take a lot longer than one from Waterloo, as they will take longer to get to the station, whilst for those to the north of central London they will have a gain. It is important that we do not go from redistributing the pain to inflicting more on anyone trying to reach and use a station.

Improved security should come from improved concourse monitoring, better intelligence and intelligence inspired checks on those who might be terrorists, rather than on blanket checks on everyone.

The government has to be very careful in how it handles the Northern Rock situation. This morning on the Today programme there was a call for them to nationalise Northern Rock, offering no compensation to shareholders. That is not an attractive proposition for either taxpayers or the remaining shareholders. It could fall foul of the government’s general duty to be fair to the shareholders of a company it is lending money to and of EU competition rules if they then give the bank favoured access to funding. The shareholders would think they had been robbed, as the market currently ascribes a value to their shares. Taxpayers would be on the hook for the long haul, with a new owner with no expertise at running a mortgage bank and all the problems of nationalised industry control.

The problem has arisen because of the actions of the government so far. The current share price of Northern Rock is based on the continuation of loans from the Bank of England and the deposit protection put in place by the government. Those who think the shares have value must believe either the Bank of England will continue to lend the money for as long as necessary, or that there will be a private sector rescue which will ascribe value to the shares (which also probably requires some continuation of government/Bank of England support). In other words, in the immediate future the value of the shares is heavily influenced by what the government and the Bank do over the financing of Northern Rock. If Northern Rock were capable of refinancing its Bank of England loans in the private sector market it would resumably do so.

If the Bank of England is too generous in its loans and guarantees to Northern Rock, then a private buyer may well emerge who can make money out of the situation, benefitting from the taxpayer support. If the Bank is too severe in removing funding from the mortgage bank before there is a suitable alternative available then it retriggers the problems it has been trying to avert.

So what are the government’s options from here?

The first is the completion of a sale to the private sector that the shareholders accept. The government does have to set out what its position is on how much money will be lent to Northern Rock under new ownership for how long. Presumably the government’s interest in a sale is to reduce both the quantity and duration of the loans it makes to Northern Rock. The Chancellor should make an early statement so we the public and Parliament know, as well as presumably making some statement in the Sale Memorandum drawn up on behalf of Northern Rock shareholders. If a buyer can be found who has the balance sheet strength or the access to funding to repay all the current public loans, that would be ideal.

The second is to agree a schedule of repayments and lending reductions with the new Board of an independent Northern Rock, as they have to believe they can trade themselves out of their problems, and can gradually replace public sector loans with normal market borrowings.

The third is to impose a date for the repayment of some or all of the loans, and leave it to the Board of Northern Rock to decide how they are going to meet this, with or without a takeover or new partners.

It is difficult getting accurate information about this on the media. The BBC this morning told us that the Board of Northern Rock had resigned, and this meant a deal must be imminent otherwise Northern Rock was left without a board. Yet the Times says this morning that two new Non executive Directors joined the Chairman on the Board whilst Mr Applegarth, the outgoing CEO, had agreed to stay on for a further two months to help with the sale process. The Times on this occasion sounds more reliable than the BBC. That news is compatible with the view that there is no immediate deal but that serious negotiations are underway with a view to sell the bank. The deal will still need shareholder approval.

From the taxpayers point of view, we need to to be told why so much of our money has now been committed and how the Chancellor expects to get it back and when.

The immediate questions for him are:

1. Where did the ??25 billion advanced so far by the Bank of England come from?
2. What guarantees/ comfort letter has been issued by the Treasury to the Bank of England to enable it to take on so large a commitment in relation to its own size?
3. How long is the money going to be available to the Northern Rock?
4. How does the government envisage it being repaid?
5. When will there be a loan agreement which we the taxpayers can see, with the security, covenants and repayment schedules that one would expect in a large commercial loan?

It is high time Parliament was told more about this huge taxpayer commitment, now bigger than the annual defence budget.

The papers today ask why 400,000 left the Uk last year to live and work somewhere else. I would have thought the answer was obvious.

They’ve had enough.

We live in a country where anyone who has gained some qualifications, who tries to pay their own way and to live a decent life feels targetted by this government. We have our identity assaulted, our democratic views ignored, our pockets and purses rifled by the state, our opinions criticised or banned and the public services we do wish to use run incompetently or rationed for us.

We, the English, are told our country is the one part of the Union that cannot have devolved power. Instead our country is to split into Euroregions, and we are to be told we must be loyal to the South-east, or go round telling people we are east Midlanders. The North East told the government in a referendum they wanted nothing to do with regional government, so the government told them they would have more of it.

We are told we have to love the EU and accept its constitution, after the promised of a referendum in order to win a General election. Many of us see the EU as a hostile bureaucracy, tying us up in ever more rules and regulations. We are not xenophobes – most of us like our continent and appreciate its range of cultures, languages and cuisines. We just do not want to be governed by a bunch of bureaucrats who think they have to regulate every aspect of our increasingly complex lives and who we cannot sack via an election.

We are told by the governement that our lifestyles are wrong. As the Health Service grapples with its inability to keep hospitals clean and infection free the government blames us for being ill in the first place. People are told they are too fat, they eat the wrong foods,and they drink too much. The government encourages a debate criticising "middle class" lifestyles. Maybe it’s a prelude to a crisps tax or a further increase in alcohol duty.

If we dare to drive our cars we are treated like criminals. The government has put through so many new laws and rules that most drivers I see on the roads daily are breaking one or other law. Motorists do not accept the government’s demonisation of speed in all circumstances and want to see instead proper policing operating against the minority who are driving stolen vehicles and uninsured cars, and those who are driving dangerously for the conditions. Motorists feel picked on when they are just trying to get to work or to the shops to buy the family food.

If we are foolish enough to make some honest money then the tax collectors descend. The government only wants to know us when they are out to take our cash. The Revenue and Customs have become much more aggressive and in some cases unfair, as this greedy government raids us time and again to pay for their army of helpers and advisers, to swell their drinks cabinets and pay their first class airline tickets as they fly round the world lecturing the rest of us on the need to travel less.

We are not allowed to make comments on immigration for fear of a false accusation of racism. We are discouraged from criticisng the EU for fear of being called xenophobes. We are told if we want fairer and lower taxes it means we are nasty people wishing to worsen the few health and social services we all do want to be better financed and conducted. Our government snarls about success and privilege, disliking good grammar and independent schools and the best universities. It tells us the two big issues of the day are obesity and climate change. That’s not whay they are saying in the Dog and Duck.

They use the "war on terror" as an excuse to whittle away our civil lliberties. I can scarcely believe that under a Labour government people can now be arrested and held without charge for a month, and the government wishes to be able to do this for two months.

The threaten us with useless and expensive ID cards, when they cannot control our borders or run a National Insurance numbering scheme which works. We are made to go through all sorts of difficult security checks at public buildings and airports, but not at tube stations and most train stations. Once again it is the law abiding who are made to suffer.

Should we want something back for the huge taxes we pay, we are often out of luck. There is insufficient road capacity for the needs of a mdoern economy, in a country with a third less good roadspace than our contiental rivals(relative to size and population). There are still queues to get access to healthcare despite all the extra money spent. Many people do not live near to a first class state school, so their children are out of luck.

If Ministers cannot understand why people are leaving, I have this advice for them. Leave the Ministerial car at home next week, and try getting yourself to the office for 9 am each day. Work out what it is like paying the mortage, buying the petrol, paying the Council Tax and the family food on average earnings in this country, and ask yourself if people really are paying too little tax when you’ve done those sums. Try and imagine what it is like to be English, when the government is directed from a Scottish perspective on so many things. Ask yourself if you think it’s fair that Scotland has a totally different deal in the Union to the majority.

If you still can’t figure out why so many people are leaving, then you are not cut out to be a politician. You are simply, hopelessly and comprehensively out of touch. If you can, then DO SOMETHING ABOUT IT.

The BBC now assert daily the climate change orthodoxy, using many of their news and documentary style programmes to press home their view of climate change. I find the more they do this, the more many members of the public take a different view. There is a danger of climate change fatigue setting in, given the endless repitition of the litany.

There are 3 central precepts in the orthodoxy:

1. The world is warming up
2. This is caused by the human element in CO2 production, which is increasing.
3. There has to be a substantial reduction in human CO2 production to save the planet.

As the BBC now tell us, 1 and 2 are facts established by the scientific community. All that remains is for debate and action to ensure 3 happens.

The public tends to take a different view. Many people tell me

1. They accept the world is now warming up.
2. They think governments and political parties go on about climate change because they see it as a good way to raise taxes, in order to spend the money on other things
3. They do not feel they can have any impact on the problem, given the huge increases in CO2 likely from China and India in the years ahead.

Ministers also seem to take a different view in practise from the view they express. The government would say it agreed with the BBC orthodoxy, yet they show by their own actions they do not really believe it is a serious problem. If they did they would stop jetting around the world so much themselves. They would get out of the Ministerial car more often. They would change the heating, lighting and control systems on public buildings and get on with the task of making large cuts in the huge energy bill the government itself pays. Daily I see evidence of enormous energy waste throughout Whitehall, and am one of the few people who ever bothers to highlight it, or to turn a light off where there is a switch that allows me to do so when leaving a room.

In practise there are several more possible view points than the 3 set out for us by the BBC and the political elite.

1. The world is warming up. Yes, but it was cooling down between 1940 and 1975 – so much so that many of the climate change experts then were predicting a new mini ice age from continued global cooling. There needs to be more explanation of what was going on in this earlier period.

2. This is caused by human CO2. Some people think it may be caused by the much more voluminous natural CO2 and other greenhouse gases, some by changing patterns in the sun’s output.

3. We must curb our carbon output to save the planet. Some think it would be easier and cheaper to adapt the planet to the possible harmful consequences. It would be possible to build flood barriers to protect main settlements, and to install proper water supplies in areas subject to drought or shortage.

There are also a number of other important disagreements about how to green the world.

1. Multilateralism or unilateralism. Should the UK anyway raise green taxes and impose green regulations, even if others are not? Unilateralists say we should, as a rich country we should give a lead. Multilateralists say that one country action will simply export energy intensive actions elsewhere, losing us jobs but not curbing total carbon output worldwide.

2. Curbing the car and plane, or taking action against the whole range or carbon generators? Some left wing politicians are just the old haters of flexible private transport and international travel who have repackaged their dislikes. They think carbon (and dirty diesel fumes) coming out of a train is fine, but out of a car is evil. They wish to target around 15% of carbon output, ignoring the bulk of it which comes from residential central heating, domestic appliances, commercial space heating, power generation and industrial process. They do not look at the full carbon account. With a train journey they ignore the carbon component of the journey getting to and from the station, and when recommending cleaner vehicles they ignore the carbon production from making the new vehicle.

3. Doing it by incentives or by taxes and controls? Many seem to think it is best to try to change human behaviour by taxing and regulating people more. Others think it better to offer incentives.

So come on BBC – there are some good debates to be had here. Not everyone who fails to agree with your 3 "facts" is foolish or immoral.

I myself do believe we need to curb our energy use, by adopting new technologies to save fuel and to generate electricity in greener ways. The biggest impact the UK could have would be to build a new generation of power stations urgently that produced less carbon and wastee less fossil fuel, and to export these technologies to the developing world. I also favour incentives to people and busiensses to curb energy use and be more fuel efficient. I do want the government to take a lead, and make significant reductions in the energy use of the public sector. I also want urgent action to strengthen our flood defences and to improve our water supply.

The Chancellor is ever keen to claim a Tory “black hole” in the Opposition figures for any odd billion needed for a tax cut or a spending improvement. Yesterday when I asked him about the ??23 billion “hole” in his own figures he was unable to answer.When I asked Peter Hain at the end of the debate the government still did not know. Ministers had failed to use the hours of the debate to get properly briefed on this important subject – yet they raised Northern Rock themselves in the Chancellor’s opening remarks.

The Chancellor authorised the Bank of England to make ??23 billion (so far) available to Northern Rock. The Bank of England is a company wholly owned by the Treasury on behalf of taxpayers. It is a relatively small bank, with total equity of just ??1.8 billion, and a total balance sheet of around ??40 billion before the Northern Rock crisis.

I asked the simple question, where did the ??23 billion come from? Which account? How will it be accounted for in the government’s reports to Parliament and the nation?

The answer has to be that the public sector has borrowed the money to lend to Northern Rock. I appreciate they believe they will be repaid it as some point – maybe some of it not for several years according to latest leaks – but in the meantime it is money spent. As the public sector overall has been spending more than it raises in taxes, and as it is heavily in debt, the most likely source of the cash is borrowing. Buying a mortgage portfolio should have the same effect on public spending and borrowing as buying property or vehicles or any other public asset.

It appears from the Banking returns of the Bank of England that there has been some reduction of the other assets on the Bank’s balance sheet to make some room for the Northern Rock loan which helps. But it also appears that the Bank has increased its overall borrowings to help finance this loan, which means public borrowing as a whole has increased. We should be told how we are paying for this special finance. We should be told what guarantees the Treasury has offered the Bank of England to enable it to take such a large loan onto its books, distorting prudent management of risk at the Bank of England.We should expect the Chancellor to know how it was done, as he authorised it. We should expect him to tell us, as he is always urging the commercial banks to be more open about their assets and liabilities. As this is our money at risk we have a right to know. I will go on asking these questions until we get an answer.

Today in the Commons it was the Chancellor’s turn to show he has gained his diploma in Tory bashing from the Ed Balls academy.

Apparently the failure to build Crossrail during the last fifteen years is all down to the Conservatives who were in power for five of the fifteen years. Meanwhile we are told that every policy difference between Conservative and Labour is the cause of a “black hole” in the figures.

Can you create a black hole by saving all that money from abolishing ID cards, or slimming down regional government and quangoes, or cutting the regulatory bureaucracy? And how does that mythical black hole compare with the gaping black hole in this government’s figures, filled by borrowing through the government debt market, borrowing through PFI and PPP, and by offering guarantees to others that are not recorded on the government’s own balance sheet? Ever since Gordon divorced Prudence, this government has run up collosal debts, whilst criticising others for being masters of black holes. This Chancellor has added massively to contingent liabilities by offering ??23 billion of loans to Northern Rock and offering to guarantee the deposits of any bank in trouble.

When in a black hole of his own, the Chancellor should stop digging.

The Chancellor’s contribution to understanding the credit crunch has been lamentable. So far he has told us it is an American problem based on bad mortgage lending in a far away country; that Northern Rock is a one off problem in a mortgage bank which has a good mortgage book; that he wants more transparency about off balance sheet financing; that he thinks banks should not be bailed out for the mistakes they have made with poor loans, and believes there should be a re-pricing of risk.

Let’s look at this in relation to his own actions:

1. Whilst lecturing banks on the need to tighten up lending because there would be no bail outs, he has offered a gurantee on all the deposits in any bank subject to financial problems in the market. Such an offer is without precedent.
2. He has through the Bank of England lent ??23 billion to Northern Rock. Recent sale documents for Northern Rock suggest taxpayers will still be lending ??6 billion to them in 2010.
3. Despite his wish for more transparency and less off balance sheet lending and borrowing, he does not put the full details of the government’s PFI/PPP borrowings onto the government balance sheet, and continues to encourage off balance sheet borrowings by government.
4. He has failed to sort out the muddled responsibilities between Treasury, the Bank and the FSA over banking regulation and money market operations.

What is wrong with his analysis?

1. This is not just a US problem. The Credit crunch in the UK will raise the mortgage failure rate here. The world banking system has bought and sold loans between banks from different countries, so it is a global problem.
2. This is not just a mortgage problem. In the UK there will be the need to write down some loans in the private equity, property and business areas as well as some mortgages. People today in the city are finding it difficult to value a range of differing debt instruments, and the property that is often the security for loans.
3. The US banks have started reporting to the market how much they think they have lost in the credit crunch so far. The UK banks do not report for a while, and are probably pondering how to value some of their assets in this volatile and constrained market. There is no sign that Darling’s call for greater transparency has resulted in any changes to reporting or reporting requirements, so why did he call for it?

Mr Darling should take better advice and understand the nature of the coming problems the banking system, the property sector and financial markets face. Property share prices are anticipating a double figure percentage fall in commercial property values in the UK. Housebuilding shares are warning that the housing market is going to be damaged. Some early indications suggest that other forms of debt are going to be marked down by a significant amount.

Mr Darling should start looking forward, and understand his overall responsbility not just for banking regulaiton but for the money and credit markets, as they are heavily influenced by what government and Bank does day to day by way of market operations, and month by month in terms of supplying cash and issuing government bonds. He cannot duck his involvement or responsibility, so he had better start learning how to carry it out. So far his record is poor and full of contradictions. The City’s reputation requires skillful handling by Treaury, Bank and FSA. Over the last 10 years financial and business services in London have been the stellar performers within the UK economy. Mr Darling still needs them to do well.

The danger for him is he allows the crunch to go on for too long, and forces an extreme re-pricing of risk which weakens credit creating institutions too much. If balance sheets are weakened too far by big write downs, then the banking system will be unable to deliver sufficient credit to the market. That will mean fewer jobs, fewer new homes and all that goes with it.

Ed Balls came to the House for a debate on Education and Health with a soundbite in mind. He intended to share it with Parliament, the media and anyone else still listening. It praised the government and ran down the Conservatives in a predictable and foolish way.

The soundbite was that Labour wants educational excellence for all, the Conservatives for the few.

Like so much from this government, the soundbite was too clever by half. It seeks to mislead people about Conservative policy, and confuse them in a favourable way about Labour policy. He did little to explain how his policy would work in practise, and why we should believe standards will make a great leap forward on his watch. There was little detail on how the large number of students who do not do well at GCSE and leave school at 16 would suddenly be transformed by another two years of school or College.

The truth is both the Labour and Conservative parties want to extend educational opportunity to all, and both strive to make public sector education better for the many who will rely on tax financed schooling. The Conservatives do not wish to limit excellence to the few.

The truth is also that under either a Labour or Conservative government there will be students who do not achieve the excellence that Ministers and teachers would like. Labour’s aspiration is not very different from the Conservative one, and Labour’s results are disappointing judged by the grand claim of their Schools Secretary. Conservatives are more honest in admitting that not everyone will be able to achieve academic excellence or vocational excellence, whatever policy is adopted. We are a long way from that happy outcome today, yet the Secretary of State showed no humility before the scale of the task, or even any recognition of how many pupils find school a disappointment that does not work for them.

The debate should have been about the detail. Given that all main parties want the best for all children, the debate should be about whether new diplomas replacing A levels and the current raft of vocational qualifications will make such a difference to real achievement as the goverbment asserts. The debate should be about how courses and curricula can be made more relevant – whilst maintaining or raising standards – to engage more students willingly in learning. The debate should be about whether compulsion to 18 will work where compulsion to 16 does not work for all too many at the moment. I am not proposing a lowering of the school leaving age but a recognition of the reality that some 14-16 years olds do not value school as it is today, and more work to engage the 14-16 year olds before compelling the 16-18 year olds to stay.

The Home Secretary came to the House to explain the failure of the Security Regulator to check whether approved people for the security industry were legally settled here or not, and to explain the emails reproduced in the press from her office saying she did not wish to release the information about the problem when she became aware of it.

Instead of apologising for what had happened and showing rapid movement to put things right, she told us that everything she had done had been fine, and the delays in sorting it out were presumably just one of those things.

During the course of her remarks she mentioned that she had written to other government departments reminding them of the duty which rests on employers to check immigration status before employing someone. I asked how many illegal migrants the government has found it is employing, and what action is going to be taken where such employment is found. Answer came there none.

My colleague, James Clappison, asked why so many more National Insurance Numbers have been issued to new arrivals compared with the number of work permits. Again there was no answer to the main point, even though there are some cases where people are entitled to a NI number without needing a work permit. The failure to answer properly implies there is also a problem with the NI issue.
The Home Secretary protested innocence too much. She still had some Labour supporters, but she must get on top of the administration of her deparment to give a convincing impression of authority.