Category: Blog

There’s nothing like a Coalition to get the Conservatives writing about what they really want for Christmas. I have introduced you to two MPs writing about banks, and to five MPs writing gently about most things. Now I can tell you about 16 Conservative MPs, one Conservative peer and 9 Conservative experts serving up “The future of Conservatism”.

Have I left the best to last? Only you  the audience can judge. More of you will like what these authors have to say. A few of you UKIPers will no doubt say that none of it means anything unless they all resign their seats. The UKIP plan  would be to fight them in UKIP colours so they could be lost to   Labour or Lib Dem federalists.  I expect no less of you.

The aim is to restate Conservative values, and call for a return to them. We believe there is “a limit beneath which no man shall fall, but no limit to which any man might rise”, as Churchill claimed.  We stand against collectivism and in favour of greater liberty and justice. We do not believe utopian dreams can be enacted successfully by all powerful states, we do not like unaccountable power and too much government.  We think in recent years too many modern rights have crowded out our ancient liberties. We think the EU has done much damage to our democracy.

To us Conservatism is idealistic, believing in  freedom, peace and justice,  but practical and pragmatic in how we bring about what we seek. We want the greater welfare of all. We do not wish to take sides in a class struggle, nor do we believe that anarchy, the ultimate minimalist government, is the best way forward. We want affordable and effective government, doing those things which only government can do. We prefer our government to be more enabler than provider. We like government to remember that the best answer for most people most of the time is that they be left free enough to take responsibility for their own lives.

The book will give you Graham Brady’s view of selection and grammar schools, Bill Cash’s view of the need for an EU referendum, Geoffrey Cox’s view of how we tame the unhelpful side of Human Rights, Edward Leigh’s view of flat taxes, Steve Baker on why we should cancel HS2, Colin Moynihan on how to spread and develop competitive sport, John Baron on making more use of the Commonwealth, James Clappison on how to control immigration more effectively, David Davis on Conservative philosophy, some of my views on familiar economic subjects, and much else.

The book is to be launched at an event at this year’s Conservative Party Conference and speakers will include Rt Hon  David Davis MP, former Shadow Home Secretary and Party Leadership contender in 2005, and myself as  Chairman of the Conservative Economic Affairs Committee,  followed by a panel discussion chaired by Graham Brady MP, Chairman of the 1922 Committee.

The launch will take place at 2pm in the Main Hall, Friends Meeting House, 6 Mount Street, Manchester, M2 5NS on Monday 3^rd October 2011.

The book published by Conservative Home will be available on general sale at Party Conference for £9.99 plus postage and packaging. Copies can also be ordered from Biteback Publishing, Westminster Tower, 3 Albert Embankment, London SE1 7SP, Phone: 020 7091 1260 e-mail: info@bitebackpublishing.com .

I have allowed this advert. I will not myself be taking any financial reward from it.

 

                 The Uk has long had a majority against the Euro madness, and against further UK integration into the EU, as measured by issue polls.  Last night Peter Oborne on Newsnight hit out against Mr Lambert, a typical representative of the UK establishment who told us we were all wrong to be against the Euro in the 1990s, and against a provocative performance by a representative of the EU who wanted to assure us that the Euro was doing just fine, ignoring the crisis swirling through Euroland economies and banks.  Peter spoke out for the silenced majority who for years had their  views marginalised or ignored by the fashionable establishment.

                 Mr Lambert used to edit the FT. I remember taking the idea to Penguin, owned by the same company as the FT, that I should be allowed to write the Penguin against the Euro, as they had rushed out a book praising it to the skies.  They were reluctant, as their view was clearly my approach was wrong. I eventually persuaded them that they did need to show some balance and allow readers to see both sides of the argument. The FT was never so understanding, and did not receive my press releases and commentaries on the likely failings of the Euro with any enthusiaism or wish to report.

             I did succeed with  others in persuading the Conservative party. William Hague  refused to rule out joining the Euro in his leadership campaign of 1997, which was why I could not vote for him. He  was persuaded whilst Leader that the Euro would be ruinous for the UK if we joined. He changed his position and made his speech about the burning building with  no exits. Subsequent leaders were all against UK membership.

              The principal argument I used to put which the pro Euro Labour, Liberal Democrat, CBI and TUC forces found difficult to counter was  the simple proposition that joining the Euro was like taking out a joint bank account with the neighbours. You were likely to ruin a good friendship with them, when you fell to arguing over the size and use of the overdraft. This unfortunately sums up the Euro crisis. Greece, Spain, Italy and Portugal want to use the common overdraft or borrowing ability to excess. The Germans do not want to help pay the interest and sustain the joint credit rating, but they are being drawn more and more into doing just that.

 

           The future of the Euro and the greater EU superstate project  now rests largely on German politics. The German political establishment has been keen on integration by stealth for many years. It ignored German public opinion against losing the DM, and took the country into the Euro. Now it is trying to get Germany into a transfer and money printing union against the wishes of many German electors.

           Many Germans were proud of their DM. It was a symbol of resurgent economic success post war. It became the emblem of the newly democratic and peace loving Germany which emerged in the 1950s and 1960s. The electorate were told that you needed an independent central bank wedded to honest money. It did not print too much, it encouraged the state to live within its means, and ensured inflation stayed low.

              That today is all put at risk by the desperate measures being discussed to save the Euro. We are told there is a possibility of a Euro 2 trillion package. This money would be available to put more capital into banks to withstand the shocks when Euro sovereigns rat on their debts. It would also be available to lend directly to those same sovereigns who might rat on their debts, hardly an inviting prospect for lenders.

                 The German Parliament is being asked to approve a significant slice of the Euro 440 billion fund we know about. This has been announced and will be provided by the states of Euroland. Germany, like all the others, will have to borrow her share, at her credit rating, so it can be lent out to worse risks within the Eurozone where those coutnries cannot raise their own money cheaply. Commentators agree that the Parliament will approve this, the July package. It’s another case of too little too late.

                    This leaves the question I asked the other day, where does the remaining £1560 billion come from to get to Euro 2 trillion?

                          Some hint the EFSF itself would gear up, and borrow more in its own name. This would probably be illegal, as the member states have to ratify the size of the fund.

                           More say it will be lent by the ECB acting alongside the EFSF. This money could in turn be borrowed by the ECB. If the ECB is to issue large quantities of Euro bonds to do this, Germany’s nightmare has come true. Euroland will in effect be using Germany’s good credit standing to raise cheap money to lend on to poor risks. That could lead to a German rating downgrade.  Any other EU body doing the same has the same weakness. The UK needs to make sure it is a Euroland and not a wider EU institution that undertakes it if it happens at all.

                          Some hint that it could be printed. Why shouldn’t the ECB do what the Fed and the Bank of England have done? Create some  money in their books and lend it on t0 governments.

                             None of this will be popular with many Germans. The German Parliament is being reassured that the EFSM will only be Euro 440 billion, that the German Parliament will still have the right to say Yes or No to bail outs, and that the Euro will remain a strong low inflation currency. All this is going to prove difficult to sustain as an argument when you see the options for the bigger fund.

                            Both the German Central Bank and the constitutional court are flexing their muscles. They object strongly to Germany’s credit rating being abused on this scale, to any idea of money printing, and to the loss of power over its own finances that these new departures would represent.

                                  Could at the eleventh hour German democracy and independence come to save us from ill judged and ruinously expensive European integration?   It’s a long shot, but it may be the best chance  we have.  There are Germans who oppose money printing by the ECB, oppose the ECB buying up high risk sovereign bonds to prop their price, oppose bail outs as illegal under the Treaty, and who want Greece and others to be reminded of their obligations. Are there enough of them? Can the German Central Bank and the Constitutional Court together with public opinion stop the politicians taking Germany by stealth into a transfer and money printing union?

               Presumably Mrs Merkel, after winning her vote by playing down any idea of money on top of the Euro 440 billion will then elide her position to one that allows or does not block the massive gearing up of the money that will be needed to kick the can down the road for a bit longer.

 

             Many commentators write about Greece as if she were some helpless victim of forces beyond her control. I myself have expressed some sympathy for Greek people caught up in a crisis of their government’s making, especially for those who thought the Euro and their government’s policy was ill judged. I have no sympathy for the Greek political classes and for the general Greek approach to the Euro over the last two decades.

            Greece is one of the rich countries of the world. It has many advantages. It has a great climate, a wonderful history, and many talented and well educated people. Greece made her own decision to join the Euro. She signed up to a scheme which very clearly included rules to limit the amount a member country borrowed in any given year to just 3% of national output, and limited the total amount a country borrowed to just 60% of GDP.

            No-one can deny the solid historical achievement of the Greeks of the classical period, leaving aside the embroidered tales of great feats in the legends. Today’s events are enough to make one ask if Agamemnon ever  managed to pay off the loan for his armour, or if Odysseus was forced to take ten years getting home  as he did not want to face the mortgage.

            Those who are ever ready to criuticise the morality of the market when some private sector organisation behaves badly are surprisingly quiet about the  morality of a state cheating its creditors, whether by reneging on debts or inflating them away,

                The Greek government decided the rules did not apply to her. Without a thought for the good reasons why those rules were in place, Greece decided to go on a borrowing binge. The country lived well beyond its means for many years. Instead of cutting the excessive stock of debt, it embarked on a  course of increasing it at every opportunity. Some of the money was borrowed from countries poorer than Greece. Some was borrowed from low income  individuals who depend on the income on the Greek bonds to pay their retirement pensions or meet their daily outgoings. Some was borrowed from banks, who were told by European regulators they could rely on Greek government bonds as part of their capital.

                 Now we read in briefings that the authorities are moving towards the idea that it would be just fine if Greece decided to repay only half of all the money she has borrowed. Poorer countries, weak banks and poorer savers would be told they are only getting half their money back. It is difficult to know what the moral justification for this will be.  Richer countries and richer savers will no doubt  be told it serves them right for being rich, and they too will lose half their invested  money as well.

                If Greece does  default, as the markets expect and as some sources close to the IMF and the G20 are now putting about, this is no victory. It is a moral disgrace.  It is the failure of a rich country to manage its affairs properly and meet its obligations. If a company goes bust owing to misjudgements, changes in the market place, or the economic cycle, that can be an understandable price of having competitive markets. The company has no power to demand money of its customers. A state has the power to demand money of its citizens under pain of imprisonment. That’s why government debt is usually  regarded as much lower risk than company shares. A company can go bust owing to a shortage of revenue. A state can only go bust by deliberately spending too much.

                         It is not just a case that state default  is wrong. It is also the case that it is very destablising. It leads markets to ask is debt refusal catching?  Will other Euro members think it is just fine? Why should people and banks go on lending to these countries if they behave like this? The markets might move on from Greece and try to topple another risky sovereign.

                                     Greece has three simple options that could offer a better choice than ratting on its debts. The first is to spend less. The second is to raise more in taxes. The third is to sell more assets.  Greece can have a perfectly good political argument about the best way forward, the right mix of spending less, raising more in tax and privatising more.

                                  If the sources are right and Greece does default, it would be best done quickly. It also needs a follow up to persuade people it will not happen again. That follow up has to be credible decisions to spend less or tax more. Default and spending restraint are not alternatives.

                                 The west’s economic and financial power rested heavily on providing a clear framework of law, and insisting that my word is my bond. Any western sovereign default would be witness to the declining power and authority of the west in world markets.

   My colleagues Kwasi Kwarteng, Priti Patel, Dominic Raab, Chris Skidmore and Elizabeth Truss have sent me a copy of their  publication:  After the Coalition: A Conservative agenda for Britain.  We need to take note of what five intelligent newly elected MPs are saying about how they see the future and wish to shape it.

    The good news is in the title. They may be recently elected Tories who have been through  modernising as candidates, but they are no Lib Dems in drag or Coalition mongers who fancy another five years of political marriage to another party. They want to help mould the agenda, and want to be part of a majority Consevative government one day.

So how do they measure up to this big challenge? They combine something old and something new, something borrowed and something blue.

Michael Howard would be proud of them. The word “Responsibility” which he placed at the heart of his 2005 election campaign is central to their values, as it is to David Cameron. They wish to see the idea of responsibility infuse  welfare, housing and social policies.

They borrow a lot from the current government’s programme, liking the health and education reforms and  many of the welfare proposals. They wish to go further in some cases. They like free schools, but favour allowing for profit ones as well as charities. They think the private sector could have a bigger role in delivering good quality health care free at the point of need.

They do have some bold and  blue ideas in critical areas. They would cut the 50p tax back to 40p as they see 50p as a revenue loser. They would deport more foreign national criminals convicted here. They would legislate to require a majority of union members, and not just a majoirty of those voting, to be in favour of a strike before taking action.  They would build three new south-east runways to help UK competitiveness and the aviation industry, and build new road capacity after years of neglect.

They oppose the intrusion of the European Court of Human Rights into UK law, and wish to legislate a UK solution. They do not like female quotas for Boards, and attack  some equality measures which they see as outdated or unlikely to work.

They wish to negotiate a different deal with the EU. They seek a two speed EU, where the UK opts out of much more of the common government. They want to get fishing, social policy and justice back for starters, and wish the UK to be able to make its own case in  international trade talks.

My main quibble with them is their belief that we need a carbon tax to tackle “climate change”. It seems to me we have more pressing priorities to put food on the table and a roof over everyone’s head. It will be difficult to compete with China if we have a carbon tax and they do not.

 

             The Coalition spinners have done a great job, presumably with some help from within the Labour party. They have made the issue of the Labour conference the question of Ed’s leadership and his own personal poll ratings.

                 They would be wise in the privacy of their own politcal meetings to recognise an inconvenient truth for them in the polls. Labour is around 4-6 points ahead of the Conservatives, and the Lib Dems are way down. The latest average polls show Labour on 40%, Conservatives on 36% and Lib Dems on 11%. The Coalition parties combined have come down from 59% at the General Election to 47% today. Even today’s poll showing the Conservatives one point ahead, show the Coalition down 10% from 2010.

  Incidentally, to all those bloggers forecasting a UKIP breakthrough, their poll rating remains at 4% which would guarantee no seats next time round, just like 2010. The strongest UKIP support is amongst southern males post retirement. The party seems to have  little attraction for other voters.

The main change since 2010 is not a UKIP surge, but a big switch from Lib Dem to Labour, probably  influenced heavily by their change of stance on tuition fees. The Conservative poll rating has remained unchanged from May 2010.

              The Labour poll ratings are remarkable, given the state of the economy and the debts Labour passed on to its successors. The issue polls show  the Coalition has  won the arguments on the need to curb spending to control the deficit, boosting the Coalition’s rating for  economic competence . However, what matters is how people vote. Voters often hold apparently contradictory views when you read a wide ranging poll. There are still plenty of interest groups out there wanting to defend every last penny of public spending, whatever the consequences for the national economy, and however ineffectual or ill judged. Labour’s strength has increased probably because it opposed the tuition fees and  is saying cut less quickly than the Tories, and that attracts Lib dem left wing voters. It will put off Tory floaters, and get in the way of Labour driving to the “centre ground”.

               Mr Balls was wise to apologise for several items in Labour’s record. I presume Mr Miliband will do the same. Labour is also wise to see that they need to shift from saying all spending is a good idea, to saying that what matters is effective spending in the areas where  people value a public sector presence. Whilst the message of cutting less and not liking high tuition fees has made some easy gains from disaffecetd Lib Dems, there is an undercurrent of understanding amongst the public that several countries around the world are in a huge mess because they borrowed too much. Many people see that there are limits to how much the UK can spend and borrow to avoid a worse tragedy. Labour understand this, and are saying they will mnot pledge to reverse any of the Coalition specific cuts.

           I have been impressed by the tough questioning of some BBC  journalists to Labour spokes people, pressing them hard on why they spent and borrowed so much in government and whether this made the crisis worse. I have yet to hear, however, a BBC journalist ask a Labour representative why their policy throughout the last thirteen years was to join the Euro in principle, and why they still cannot come out and accept that was a mistake. The UK would be a safer place for the future if the two main parties could at last agree that the Euro would be a very bad idea for Britain. That would leave the Lib Dems free to represent the small unrepetant minority who still want to abolish the pound.

 

 

 

             The Coalition spinners have done a great job, presumably with some help from within the Labour party. They have made the issue of the Labour conference the question of Ed’s leadership and his own personal poll ratings.

                 They would be wise in the privacy of their own politcal meetings to recognise an inconvenient truth for them in the polls. Labour is around 4-6 points ahead of the Conservatives, and the Lib Dems are way down. The latest average polls show Labour on 40%, Conservatives on 36% and Lib Dems on 11%. The Coalition parties combined have come down from 59% at the General Election to 47% today. Even today’s poll showing the Conservatives one point ahead, show the Coalition down 10% from 2010.

  Incidentally, to all those bloggers forecasting a UKIP breakthrough, their poll rating remains at 4% which would guarantee no seats next time round, just like 2010. The strongest UKIP support is amongst southern males post retirement. The party seems to have  little attraction for other voters.

The main change since 2010 is not a UKIP surge, but a big switch from Lib Dem to Labour, probably  influenced heavily by their change of stance on tuition fees. The Conservative poll rating has remained unchanged from May 2010.

              The Labour poll ratings are remarkable, given the state of the economy and the debts Labour passed on to its successors. The issue polls show  the Coalition has  won the arguments on the need to curb spending to control the deficit, boosting the Coalition’s rating for  economic competence . However, what matters is how people vote. Voters often hold apparently contradictory views when you read a wide ranging poll. There are still plenty of interest groups out there wanting to defend every last penny of public spending, whatever the consequences for the national economy, and however ineffectual or ill judged. Labour’s strength has increased probably because it opposed the tuition fees and  is saying cut less quickly than the Tories, and that attracts Lib dem left wing voters. It will put off Tory floaters, and get in the way of Labour driving to the “centre ground”.

               Mr Balls was wise to apologise for several items in Labour’s record. I presume Mr Miliband will do the same. Labour is also wise to see that they need to shift from saying all spending is a good idea, to saying that what matters is effective spending in the areas where  people value a public sector presence. Whilst the message of cutting less and not liking high tuition fees has made some easy gains from disaffecetd Lib Dems, there is an undercurrent of understanding amongst the public that several countries around the world are in a huge mess because they borrowed too much. Many people see that there are limits to how much the UK can spend and borrow to avoid a worse tragedy. Labour understand this, and are saying they will mnot pledge to reverse any of the Coalition specific cuts.

           I have been impressed by the tough questioning of some BBC  journalists to Labour spokes people, pressing them hard on why they spent and borrowed so much in government and whether this made the crisis worse. I have yet to hear, however, a BBC journalist ask a Labour representative why their policy throughout the last thirteen years was to join the Euro in principle, and why they still cannot come out and accept that was a mistake. The UK would be a safer place for the future if the two main parties could at last agree that the Euro would be a very bad idea for Britain. That would leave the Lib Dems free to represent the small unrepetant minority who still want to abolish the pound.

 

 

 

  I nearly choked over the coffee on Sunday morning. The Appointments pages of a leading newspaper opened with the offer of £130,000 plus benefits for a Managing Director, Business Group, UK Trade and Investment. It also offered £110,000 plus bonus for a Newcastle based CEO of the Marine Management Organisation quango. Careers at MI5 were advertised, but being a secret service we were not told  anything so vulgar as how many people and what salaries. There were then various NED Appointments to Health trusts and Trustees for the publicly funded Institute of Food Research.

               Surely the public sector has enough managerial types. If you ened to fill a slot, reshuffle the pack and eliminate a post somewhere else.

Some of you write in and say what can be done, and assert the government does not listen and does not change its mind.

On March 15th, March 19th, June 13th, July 12th and Agust 8th I drew attention here to a potential  contradiction between the government’s wish to pursue an industrial led recovery, and  the dear energy policy it was following. 

Listen then to Greg Barker, Minister in the energy department. He admitted recently that “just piling on costs” to business could drive firms elsewhere. The Sunday Times reported that civil servants are drawing up options to make energy cheaper for industry, and stated that the PM is “very very supportive of this agenda”

Watch this space. I know it does not amount to the complete  change on global warming theory many of you want,  but it it could be practical progress for UK industry at a time when it needs all the help it can get.

 

             The IMF under Mme Lagarde says it wishes to have more money at its disposal to be able to bail out the bigger states of Euroland if necessary. The lady tells us that their current facilities of $400 billion may seem like a lot of money, but they  could spend it all quite quickly if one of the larger EU countries needed a rescue.

             I thought the IMF was there to lend money to near bankrupt sovereign countries when all else had failed. They normally put in a programme of spending controls, asset sales and devaluation, to give the problem country a chance to work its way out of debt difficulties. They regard it as a sovereign risk, as the state in question can always print some more money to meet the nominal liabilities it faces.

              If Scotland or California got into financial difficulties and needed to borrow more than the markets wanted to lend, the IMF would not go anywhere near the problem. The IMF would  say that  Scotland is part of the sterling currency union and UK federation, so it would expect the rest of the UK to sort it out. It would regard California as part of the US federation and a member of the dollar currency union, so again there would be no loan for that state.

              So we have to ask why are there loans for states who have given away their monetary and currency sovereignty and are now members of the Euro currency union? They can’t print the money they might need, and they can’t devalue, so why should they be regarded as sovereign risks that the IMF might take on and tutor back to economic health? They are clearly riskier bets than sovereign states, because they do not control their own Central Bank and monetary policy.

                  In her new role Mme Lagarde should not be an apologist for a failing Euro model. She should  not seek to distort the IMF portfolio by placing  massive bets on failing Euro states. These loans merely put off making the proper adjustments to the single currency model. Greece and Italy have to become like Scotland and California are within their single currency areas,  within the Euro union. They are the Euro area’s problem, not the IMF’s or the world’s.

                As a leading member and contributor to the IMF I would like the UK to ask some sceptical questions about the wisdom of the IMF bailing more Euro countries. Without proper budget discipline, monetary reform and new political architecture the Euro cannot work properly, so it is a huge mistake to go on pretending and extending more credit as if it was fine.

               Trying to bail out Italy if Italy finds it too difficult to borrow money in the normal way on the market should be too expensive for the IMF to contemplate. If Italy cannot finance herself in the Euro in the markets, there must be something  very wrong with the design of the Euro.

              I do see we have lost E1 trillion overnight in the latest briefings. Sunday’s newspaper stories of E3 trillion have become E2 trillion today. The longer the Euro authorities leave coming up with a plan which has been thought through in detail and looks as if it could work, the more damage the markets will do the exposed positions of Euro sovereign debts.