Category: Blog

 

                 If you want to manage something, then measure it. We should be hearing monthly on the progress with reducing the growth rate of spending, increasing tax revenues and cutting the deficit, in line with the plans.

                 Just to get the ball rolling, I reproduce beneath the Treasury figures for spending (total current) since the Coalition government started in May, compared to the same period a year earlier under Labour. The figures show that total current spending has run 7% higher than last year, to the end of November.

Total current spending, £ billions

May  2009                   47.4                    May 2010         50.7                            plus 3.3  (7%)

June 2009                    47                       June 2010         49.7                            plus 2.7  (5.7%)

July  2009                   46.9                     July 2010            49                             plus 2.1   (4.5%)

August 2009               44.9                     August 2010     48.5                         plus 3.6    (8%)

September 2009       46.0                     September 2010  50.6                   plus 4.6    (10%)

October 2009             47.6                    October 2010         49.3                   plus 1.7     (3.6%)

November 2009        48.6                    November 2010  53.9                    plus 5.3  (10.9%)

Total                              328.4                                                        351.7                plus 23.3   (7%)

                  The figures remind us that the deficit reduction strategy relies on higher tax revenues, not on spending reductions overall. Whilst some individual areas have been cut in real terms and some even in cash terms, the overall trend of current  spending growth this year has been one of strong growth in cash terms, with a real increase of around 3% depending on your choice of inflation index. Capital spending has been reduced, which takes a little of the pressure off the deficit. With the exception of  October, the growth rate of spending has been accelerating over this financial year.

             The main weapons to tackle the deficit will be the higher VAT rate, higher fuel duties, higher National Insurance, and the estimated increased taxes from growth and inflation. As the higher taxes come due, so the questions about value for money and the choices made over public spending will become more insistent from a public worried about the impact of the taxes on living standards. We have seen  this recently with the criticisms of the rising fuel price.

 

                   I read that some think I have suggsted in my blog and speech on sovereignty that it is divisible or can be shared. That is not what I said.

                    Many purists think sovereignty is like virginity. You either have it or you have lost it. This an unfortunate simile for it, but my view is closer to this positon than to the view that you can divide or share it.

                     If you study  history  you conclude that you can  have only one sovereign  person or body, and that person or body can lose its sovereignty. In that sense it is like virginity. However, it is not always  obvious at the time when sovereignty has been lost. It may only become clear many years later. Where our sovereignty now rests depends on what happens next.

                     I asked the question when and how did the Crown cease to be our sovereign? When the medieval  Crown was wrestled from the thorn bush in battle, or when it changed hands by other means , everyone knew that with its power  sovereignty passed from one wearer to the next. He who wore the Crown might wear the sorrows, but the medieval monarch was the ultimate srouce of command, or the  sovereign. He could make the rules and change the rules, raise the taxes, manufacture the coins, command the armies, order the judges and declare war.

                      The twentieth century monarch had none of these powers in anything but name. They came to  rest with the  Prime Minister answerable to Parliament. Ultimately they rested with the people through their power to influence and to vote out of office any government that formed.

                       It is by no means clear when the Crown ceased to be sovereign and Parliament became sovereign. If you asked me to choose a single moment I would suggest the day Parliament executed the King. This ushered in an era of direct Parliamentary rule, followed by Parliament restoring the Crown to the monarch on Parliament’s terms. From that day on monarchs knew the limts to their power were those imposed by Parliament. Charles had ruled alone without Parliament in the 1630s. No later monarch tried to stifle or close down Parliament.

                     Today Parliament still claims to be sovereign. It can and does still  order the money to be printed. The Bank, the UK courts and judges, the army and navy carry out its bidding or behave under its laws and edicts. However, Parliament has also given to the EU superior law making powers to itself. There are superior courts and judges which the UK Parliament does not choose or direct.

                    Parliament remains sovereign if at a future date it modifies or alters those powers exercised by the EU. If it turns out that  EU powers are now untouchable, if they continue to grow, and if they come to regulate and order many more features of our lives, when will we say that Parliament is no longer sovereign?

                        Sovereignty is not the same as power, but the sovereign has to have the ultimate power. The sovereign is the one who can in a crisis decide to change the way all the other power holders behave. Parliament became sovereign by removing the previous sovereign. The EU can become sovereign from here.

                      Ultimately, in all systems, the popular will is sovereign. The most powerful of medieval monarchs had to exercise power in ways that avoided alienating too many powerful forces at the same time. The most powerful of Prime Ministers has to be ever mindful of popular support and popular opinion. Even the worst tyrannies of the world can eventually be torn down by people power, as we saw in Eastern Europe and elsewhere.

So often we talk on this site about things that could be better managed, or policies which have gone wrong. Yesterday I visited a factory in England which was so well run. So today I want to talk about how well we can make things in Britain, and to ask what was so good about what I saw.

The one word which kept coming into my mind as I watched and listened to my hosts was honesty. They called it transparency. The Plant Manager said his office was a glass box near the production lines. It meant he walked through the production area to get to his office, so all the team could see him and he could talk to them on his way in. They could see him at work, and he was accessible to them if problems arose. He shared the restaurant and other facilities with all other employees. He is accountable hourly for what he does and what the whole team achieves. The output and quality achievements were set out clearly with named responsiblities. That set the standard. Everything that matters is measured. Everything has an agreed minimum standard. Everything that goes wrong is managed. Someone is responsible for everything that matters.

The culture was not defensive about mistakes. Complete honesty requires a can do, will fix approach. They don’t have time for recriminations – they identify the problem, analyse its origins, fix it and then fix it permanently  to ensure they cannot make that mistake in future. You cannot manage unless you measure. You cannot manage unless you have a full flow of information about all the important sources of success.

Each year they expect a 6% improvement in efficiency and build that into their plans. They recycle everything they can, they create a clean and pleasant working environment, treat their employees with respect and pay well for good performance. Their absentee rate is low and staff morale visibly good. They automate many processes and use technology to handle parts and finished product.

In the British establishment  some seem to think honesty is the currency of fools. They are concerned if people are too honest. They think it abrupt,”too direct”, insensitive or downright stupid. Yet wherever I have seen and studied excellence, as I did yesterday, I find honesty and superior performance are usually in  a stable relationship. There were many public sector managers I would like to have heard what I heard yesterday. The gap between the best and the worst managements is getting ever bigger.

As some of you rightly tell me,  there are good managers in the public sector and bad managers in  the private sector, as well as the other way round. The point I am making is the extent of the ambition amongst the best. No-one in this factory thought cutting costs by 6% next year was incompatible with cutting error, raising quality, recycling more or having better staff conditions and relations. They showed that you need all these things to be moving together. If you have fewer errors you waste less. If you solve problems your production line can go faster. If you produce more you can pay more.

If instead you think you need more resource to do anything better, that your performance is good in the circumstances, that errors are unavoidable given your staffing levels, and that systems and processes cannot be improved, then you will underperform. If you refuse to measure your performance, or refuse to discuss the figures you have in an intelligent and objective way, you will not be able to manage well.

 

              I have been making enquiries about the build up of the EU External Action service. In the UK there is a tendency  to play this down, to say that it is limited in scale and will not detract from our own Foreign Office and foreign policy.

              According to the EU’s website 1525 staff transferred to the new External Action Service when it was set up last year. They recruited another 118 staff immediately.

               The EU now has 130 Embassies around the world, covering all the important countries and global institutions, and many smaller countries as well. The European Parliament reports that the aim is ” to set up numerous delegations to third countries and to international organisaitons  … a network with approximately 5000 staff” .

                   As the official EU site says,  the purpose is the “conduct of the Union’s common foreign and security policy”. The External Action Service a “a functionally autonomous body of the EU”. The High Representative or EU Foreign Secretary is also President of Foreign Affairs Council, acting as Chairman to all the Foreign Ministers of the Member states.

                      The External Action Service states “The policy mix is vast, ranging from bilateral agreements to guidelines and legislation”. The Service controls the substantial EU aid budget. It also works with the army units available for EU missions, subject to Member state approval.

 

                 Today the Monetary Policy Committee of the Bank should seek to answer why and how inflation has taken such a hold over the last year. It’s not just a case a few rogue items, or the result of the hike in VAT. Food, alcohol and tobacco, transport and education within the CPI are all likely to be going up by more than 5% a year. Within those categories there will be much sharper rises in items like fruit, oils and fats, car running costs, fuel, fares and drinks. Even clothing is now increasing rapidly, thanks to cotton and other raw material increases.

                 It’s not as if it was difficult to forsee. This site has been warning about likely inflation for longer than a year. If the Bank allows inflation to stay too high for too long it will squeeze our spending power too much. It also transfers more money from savers to borrowers.

                   The Bank needs to remember that it is RPI inflation which has a bigger influence on contracts, wages and index linked payments throughout our system. The RPI has consistently been running more than 1% faster than the CPI which the Bank targets. People now expect more inflation than the Bank forecast. They have become sceptical of the Bank’s grip on this important matter. Part of this arises from the different methods of calculation, but many think the RPI is closer to their own experience of price rises.

                  The way out of a crisis brought on by the past government’s policy of encouraging all areas of our economy to live life beyond our means is to encourage saving and reward it, and to encourage paying down debt. Instead the Bank’s policy has rewarded the heavy borrowers with low interest rates, rewarded the banks who overlent with low interest rates on the money they need, and penalised the savers and depositors with those same banks. The savers, more numerous than the borrowers have not only taken a hit through low savings rates, but have also faced a series of tax increases as well.

               I argued for  lower interest rates in 2008 to stave off the banking crisis we were put through. Then  they were urgently needed to avoid immediate disaster. The Bank delayed them for too long with  predictably bad results. Once  the banks were stabilised higher rates were needed to restore some balance between savers and borrowers. The structure of interest rates which has emerged is anyway very different from the Bank’s wishes. They have set 0.5%  as their short term rate for the government and the banks, but the private sector faces rates of 5-8% to borrow on mortgage or small business loan.

              There are those on the MPC who point out that wages are not going up very quickly overall, and in some cases not at all. They keep telling us there is no inflation out there. They point out that money growth remains weak. The problem with this view is that it ignores the fact that prices are going up too quickly and have been for some time. They seem to think the UK lives in its own vacuum. There is a very nasty inflation around the world. It is obvious in the uncomfortable surge in food prices, the big rises in most commodity prices, the dearer fuel, food and transport which we can all see. Low interest rates weakened the pound which increased its impact on UK consumers. We are experiencing the results of easy money in the US, China and India, as well as the results of our own domestic Central Bank policy.

How the method of calculation makes the RPI often go up faster

The government provides an example of how the method may produce a higher figure from the same items. The sum assumes a two item CPI or RPI to make the illustration easier. If one item in the CPI goes up 25% and one falls by 20% , inflation is zero. The Index multiplies the figures out and takes the square root (for two items). If the same happens in the RPI inflation is 2.5% as you add the two sub indices and average them arithmetically.

Mr Redwood (Wokingham) (Con): The Crown was sovereign once. It is intriguing that we are more than two hours into this debate but so far we have talked only about parliamentary sovereignty, even though the sovereignty technically still belongs to the Crown in Parliament. We all know about the events that took place over several hundred years, particularly when they were accelerated during the 17th century revolution and crisis. There was a large transfer of power from the Crown to Parliament. When a sufficiently large transfer of power takes place from someone who was sovereign to those who would be sovereign, a point is reached at which that sovereignty passes because enough power has been surrendered and the arrangements have changed sufficiently.

As other Members have suggested, we need briefly to look at how that very big transfer of power occurred in the 17th century from the Crown to Crown in Parliament and, in due course, effectively to Parliament standing on its own. One important factor was that Parliament was very good at aggregating power to itself. In those days, it decided to be very nice to bankers, which worked very well for it, because it got the City of London and the men of finance on its side. In those days, the English Navy did not have French ships in it, and Parliament made sure that it responded to the English Parliament. Parliament also took the precaution of hiring and training and paying-something quite unusual in those days-the best army in the country. It got over the problem of competing armies and, in due course, established that it had military power and could command the Army.

Parliament also needed to deal with the judges. It was established during the revolutionary period that judges were necessary and that, according to our current tradition, they had to be independent and should not interfere in parliamentary matters by trying to make the law. They simply had to deal with the law as Parliament provided it. We therefore eventually ended up with a very powerful Parliament.

In the 19th and 20th centuries, Parliament did something that everyone in the House is now united in admiring: it made the exercise of power by Parliament a democratic matter by extending the franchise until practically every adult in this country was able to participate in elections. That gave Parliament the authority of having a democratic voice and mandate. The question that we are debating today is whether that great democratic settlement, in which most Members believe, is now under threat from judge-made law, from European-made law and from other centres of power. Could parliamentary sovereignty come under pressure in the not-too-distant future? Is it being damaged because too much power is being transferred? These questions account for the nervousness, certainly on the Conservative Benches, about the degree of power that has already been surrendered by successive Parliaments over the years, particularly under the most recent Government following the treaties of Nice, Amsterdam and Lisbon. Under those treaties, a large number of areas were transferred either to joint decision taking or to sole European decision taking.

That means that the exercise of power in many important areas of activity, including regulation, the expenditure of money and the provision of public services now emanates from the continent. Those powers are trying to establish their own democratic credibility through the European Parliament. They are also trying to establish their own judicial credibility through the European Court of Justice, and their own administrative credibility by strengthening the powers that are exercised around the various collective corporate tables that constitute the ever-evolving, and ever more powerful, European Union settlement.

The nub of our debate today is whether there is something that this Parliament could and should do, no matter how much power has passed, how many decisions are taken through the European Union and how much money it now takes to itself and spends on our behalf, to make it clear that, should we want those powers back, we can have them back. If we wish to change or moderate what the European Union is doing, do we have every right to do so because we are still the sovereign?

Some of us fought long and hard to keep the currency under British sovereign control. These arrangements involve a British sovereign and preserve the settlement of the Queen in Parliament, and the Queen’s face appears on the banknotes of the realm, but we all know that they are Parliament’s notes and that they represent an expression of parliamentary sovereignty. Indeed, it was this very Parliament that, by a majority, approved the previous Government’s decision to print a lot more of those notes-or electronic notes-as an expression of what that sovereignty can do for the people of Britain. We can argue about whether that was a good thing or a bad thing, but it was an undoubted expression of sovereignty.

Kelvin Hopkins (Luton North) (Lab): Wisely, Britain already has a number of opt-outs from the European Union. I am thinking specifically of the single currency; it was to the great credit of our former leader that he kept us out of the euro. Would not a test arise, however, if Britain decided to opt out of something that we currently opt into? For example, if we chose to withdraw from the common fisheries policy and to place our own historic fishing grounds under democratic British control, would not that represent a test of our sovereignty?

Mr Redwood: Indeed; the hon. Gentleman makes a powerful point. I, too, would like us to opt out of the common fisheries policy. I would like us to elect a Government in this country who had the necessary majority to go off to Brussels and say, “It is now the settled will of this Parliament that we want different arrangements for fishing, and if you will not grant them through the European Union arrangements, we would like to negotiate our exit from the common fisheries policy.” That is exactly the kind of renegotiation that many of my hon. Friends were elected to achieve, and, had we had a majority, we would have wanted our Government to do something like that. There are a number of other policy areas, some of which are more politically contentious across the Floor of the House, where we think we can make better decisions here than are being made in our name by the European Union.

If such renegotiations could be achieved, we would clearly have reasserted, or asserted, the sovereignty of our Parliament. If, however, they can never be achieved, it is difficult to see how Parliament could still be sovereign. If we are saying that nothing can ever be changed once it has been agreed under the various procedures in Brussels-including the many measures that the British Government did not want or on which they were outvoted-we cannot say that we are sovereign any longer. We would then be in a relationship with the European Union that would fall short of our preserving parliamentary sovereignty.

Tonight we are discussing a narrower, but crucial, legal issue that has been well highlighted by my hon. Friend the Member for Stone (Mr Cash) and the European Scrutiny Committee, whose perception is first class in informing the debate. I do not need to repeat all those arguments. Suffice it to say that I support the important amendments proposed by my hon. Friend. As I understand it, we have a Government who say that they wish to do all they can to reassure people in this country that we are and intend to remain sovereign. They do not wish to pick a fight with Brussels, and we are not asking them to do so tonight. They say, however, that should a disagreement arise in future that cannot be resolved through the usual channels, it will be settled here. I am very much in favour of that; it seems to me to be a wholly admirable and sensible place to take the debate. If that is the intention, it proves that Parliament is still sovereign.

We are arguing only about the words used to carry out that intention. It is one of those rare magic moments when the Conservative party is completely united on its intentions. The Government’s intention to reassert parliamentary sovereignty warms the cockles of Conservative Members’ hearts. It is wonderful to know that in another debate we can have a referendum when anything important happens. There may be some arguments about what is important, but we welcome the spirit. Again, we are at one with our Government.

When eminent lawyers and colleagues who have studied this matter at much greater length than I have say to the House that they have studied it carefully, that they have what sound like moderate and sensible words that basically repeat the Government’s policy and that it would be helpful if those words were written into the legislation, my feeling is-unless the Minister has a very powerful speech coming up-what is wrong with that? If the Minister wants to reassert parliamentary sovereignty, why cannot we just say that in the Bill? It is exactly what my hon. Friend says -it does not seem difficult, so will the Minister please humour us on this occasion?

The fact remains that if we succeeded in amending the Bill in this way, we would not be truly sovereign in future unless we had the will and determination to shape our own destinies, should the need arise. I hope we can do it by agreement. Any sensible person wishes to do it by agreement, given how far we are in this thing with our European partners and what a mess they are in.

Martin Horwood (Cheltenham) (LD): The right hon. Gentleman makes an eloquent case. He and I might disagree on whether we want to withdraw from the common fisheries policy, but would he have seen any constitutional bar to that taking place had a Conservative majority Government taken office? Surely, if this was in the manifesto, he must have believed that it was possible to achieve it under the present constitutional arrangements.

Mr Redwood: Withdrawal from the common fisheries policy was not in the manifesto, although it might have been in the personal manifestos of some of my right hon. and hon. Friends. I gave it as an example because I believe it has a great deal of cross-party support. Most people think the common fisheries policy is extremely badly run and is not in the interests of the fish or the fishermen. Casting all those dead fish back into the sea is not my idea of conservation and it does not bring cheap fish to the fish market either, so it does not seem to be good news.

Successive Governments have always said that they quite agree with those of us who make such points, but they have never managed to negotiate a better deal. Would it not be wonderful if the Government said, “If we cannot negotiate a better deal next year, we will use British parliamentary sovereignty to pull out of the CFP”? I would like to do that and I do not think it would be tantamount to leaving the European Union. It would be pretty cross, but it would probably do a deal with us because it would be more embarrassing to have a sovereign Parliament taking unilateral legislative action than to do a deal. I hope the EU would do a deal; it would be sensible for it to do so.

If we are not prepared at some point to assert our power, we lose our sovereignty. Just as the Crown lost its sovereignty, became the Crown in Parliament and eventually lost practically all its real powers, so this Parliament is losing its powers. If it goes on losing them, without sensible provision being made of the kind proposed by my hon. Friend the Member for Stone (Mr Cash) and without at some point standing up for a better deal for Britain, this Parliament, too, will no longer be sovereign.

 

          Yesterday in the debate on UK Parliamentary sovereignty I asked How does a sovereign lose their sovereignty?

            Sovereignty is not the same as power. Confusion over this leads to some of the arguments about the EU. Those who favour a federal state say such a state would be more powerful than the British state acting on its own, that “pooling” sovereignty enhances our sovereignty rather than damaging it. Anti federalists point out that if you “pool” sovereignty you cease to be sovereign. The new larger organisation may well be more powerful, but you do not control it in the way you controlled your own country.  California is more powerful than Iceland, but Iceland has its own sovereign democratic government whilst the government of Cailfornia is under the direction of the sovereign US federal authority.

         However, sovereignty and power are closely related.  Why did the British Crown cease to be sovereign? It lost sovereignty through major transfers of power. Parliament wrestled away control of the money, the army and the machinery of government from the Crown. Parliament was then clever enough to vest its own new found power in a cloak of constitutional respectability through democratic enfranchisement, making it the people’s government and Parliament. Voters became sovereign, as they could dismiss Parliaments and governments they did not like when asked at regular intervals. In between elections voters could get government’s attention, as Ministers tried to find ways to please electors sufficiently to stay in office.

             So the issue today is how can the British people and Parliament lose their sovereignty? If it needs by general agreement a new Act of Parliament to buttress it, there must be transfers of power eroding it.

             By keeping control of our own currency we  still have monetary sovereignty. The UK Parliament still commands the UK armed forces. The UK Parliament still has substantial control over taxation and spending if it wishes. Yet in area after area now when it comes to legislation, when it is a question of who makes the rules, the truthful answer is the EU makes the rules.

              It is this which worries many electors and some MPs. It is this which has led to a reassertion that all EU law in the UK is the result of an Act of Parliament. Implied is the proposition that what Parliament has granted to the EU, a future Parliament could remove or amend.

              The question remains how much power can a country give away before it has lost its sovereignty? In the end that comes down to a question of political will. If a country never uses its theoretical powers and keeps giving powers away it may one day wake up to realise it is no longer sovereign. Like  the monarch before it, Parliament might retain ceremony and some privileges, but much of the purpose would have passed elsewhere.

 

           Today we will debate Parliamentary sovereignty. In truth, it should be called popular sovereignty. If Parliament can make and unmake laws, raise taxes and spend them without interference from the EU or judges, then the people are sovereign, because they can dismiss the Parliament in elections and influence it between elections through the pressure of public opinion.

         If the EU and judges can now make law against Parliament’s wishes, or by ignoring Parliament, then the people have lost that control they should exercise through the pressure of public opinion and the votes of elected representatives.

           At the heart of the arguments today in Parliament will be just that. The government says its Bill will reassert or confirm Parliamentary sovereignty, at least with respect to the EU. It will confirm that EU law only applies here because Parliament enacted the 1972 European Communities Act, giving the EU what powers it enjoys.

               Some say it is now more complex than that. If, as some say, judges can now change or overturn laws through common law judgements and cases, then judges too can work with EU law and Treaties regardless of the views of Parliament.

                 The government and the MPs who are tabling amendments say they both want the same thing – a convincing reassertion of Parliamentary sovereignty. I will vote for the strongest formulations on offer, as I do believe we need to strengthen democratic accountability here at home.

                  The seventeenth century constitutional crisis sought to settle our constitution decisively in favour of Parliament making the law and answering for its works to electors. Judges were to interpret the law for individual cases, and MPs rightly  agreed to stay out of those. Some fear that the world of creeping EU jurisdiction is different. It can lead to more decisions being taken by unelected officials, and to a sense of frustration about who is in charge as multiple sopurces of power and law making overlap and collide.

 

               Today representatives of business will meet the Prime Minister to discuss the government’s growth strategy. The government is keen to stress that it understands the need for growth, to generate the jobs to get people back to work, and to generate all the extra tax revenue they have forecast to pay the big bills for the public sector.

              The following are things whcih business could ask for which would help:

1.  The introduction of a fuel tax regulator, to prevent large price increases on fuel that occur when tax and oil price go up at the same time.

2. More  competitive levels of Income Tax and Capital Gains Tax. Lower rates would doubtless bring in more revenue as well as encouraging more business.

3. Better transport systems, through spending what public money there is available on projects that remove capacity bottlenecks on roads and rail. This could be allied to private finance initiatives to increase overall net work capacity.

4. Cheaper power, through a programme of permits and incentives for modern more fuel efficient power stations.

5. Informed purchasing by government, that allows local companies to compete for sensible sized contracts that they might win and be able to fulfill.

6. Weeding out more of the quango state which imposes too many penalties, charges and restrictions on business.

7. Review of employment law, so we can have one which is fair to employees but does not deter the offer of more jobs, especially by smaller businesses.

8. Changes to bank regulation and bank management in the public sector, so there is a better supply of finance for small and medium sized enterprises.

9. A general review of regulation to concentrate on what is really necessary.

 

                A number of bloggers have in recent months referred to the Bank of England’s interesting decision to switch most of its pension fund into Index linked securities at a time when  it was in public worrying about deflation and possible falling prices. By the Annual Pension fund report in February 2010 the reorganisation of the fund was complete. The fund showed:

UK gilts (fixed interest loans to HM government)                £108 million                         4.6%

Index linked gilts (loans to HMG)                                               £1915.9million                     81.8%

Other Index linked securities                                                          £330.4 million                   12.9%

Total assets                      £2357 million

                   Their investment strategy, which looked smart when share markets were falling in 2008-9, looked less rewarding in a year of share market recovery. The fund managed a return of 12% to February 2010, well below returns on funds with substantial investments in real assets. The authors of the Report, aware of possible criticisms of the performance, stated   ” It should be noted that the investment strategy now being followed is not designed to maximise return, but rather to maximise the probability that the Fund will be adequate to meet its liabilities in all future economic and financial conditions”.

                  This concentration on managing risk and cutting the deficit on the fund  also resulted in an agreement to pay into the fund 55% of pensionable earnings of all the full members of the scheme in employment from March 2010, a very high contribution level. The £2.357 billion of assets provides for a total of 13,300 members and their dependents.

                   Some have raised eyebrows that the Bank, agonising about too little inflation and worrying about deflation and double dips, should at the same time be putting in such extensive and expensive inflation proofing to its own pension assets. The Pension trustes and their advisers have had the better of the argument over inflation than the Monetary Policy Committee. The MPC  tasked with curbing inflation have consistently underestimated it or refused to take it seriously. The Trustees in contrast have made it the one risk they wish to cover fully, so they  have been less good at pursuing better returns on this large sum of public money in the better asset market conditons of 2009-11.

                 Meanwhile the Bank’s own balance sheet shows just what quantitative  easing does to the financial shape of an old lady placed on a crash binge. The balance sheet has shot up from £44 billion in Janaury 2007 before the crisis, to £246 billion today. The £246 billion balance sheet is supported on just £4.2 billion of share capital and reserves. This maans the Bank is now more than 58 times geared. It’s a good job Central Banks have full government support and play by different rules from commercial banks. No commercial bank today would be allowed to gear like that.

                We all look forward to the Bank delivering on its inflation target. The trouble is there will be some more rough months ahead before it starts to do so, owing to past decisions.