Category: Blog

The UK growth rate was disappointing again in the first quarter. Part of that results from the bad January weather. There might be some upwards revision when they get the final figures in, but it is not going to be a great performance. The UK went into recession early, came out late, and is still limping along.

Why are so many people surprised by this? We have a very lopsided economy, thanks to the strategy to print money for the public sector and squeeze the private sector. Allowing the pound to slide has left us exposed to imported inflation. As predicted here, the squeeze on living standards in now intensifying. Wages in the private sector are only going up by around 1% a year, whereas prices are rising by more than 4% a year. From this month, whoever wins the General Election, the squeeze begins on public sector pay as well. This year could see the biggest drop in living standards I can remember, thanks to the policies this government and its monetary and banking authorities are following.

We see the impact on many a High Street, with closed shops and empty properties. We see it in the order books for many private sector companies. We see it in many small and medium sized comapnies, struggling to boost turnover and short of bank finance.

Technically the recession is over, but in practise many are suffering more now than a year ago in the depth of it. Unemployment is too high, growth is feeble and real wages are falling. We need a change of approach to the banks, to monetary policy and to the deficit. This model gives us inflation and poor output at the same time. That used to be called the misery index. Only Labour could call it a recovery, and try to worry people that trying some other approach might “threaten the recovery”.

Promoted by Christine Hill on behalf of John Redwood, both of 30 Rose Street Wokingham RG40 1XU

I was reminded by a contributor to celebrate St George’s day. I do indeed, and wish you a happy one. Never let it be said that this site is intimidated by political correctness into ignoring England’s day. We should be proud of our flag and history. I was too taken up with the aftermath of the debate and with the need to get out on the campaign trail this morning to do the honours then.

Promoted by Christine Hill on behalf of John Redwood, both of 30 Rose Street Wokingham RG40 1XU

30-30-30 we were told was the scoring at last night’s political X factor show. The Lib Dems and their sympathisers in the media are working hard to say people want a hung Parliament. We are told that floating voters in the audience expressed approval when Mr Clegg appealed to politicians to work together for the public good.

There are several different reasons why some people want a hung Parliament. The most common, that we would be better governed if politicians brokered compromises instead of arguing it out, is perhaps the most dangerous. In my experience this country’s biggest mistakes in the last 20 years have come from policies backed by more than one political party. There is nothing as dangerous as the whole political establishment agreeing about something. They impose a suffocating blanket on anyone who disagrees and who might be right, as they cannot bear to be shown up as wrong.

Good government needs strong opposition. It is the need to face challenge and to listen to criticism which hones policy and improves administration. Agreement creates laziness and sloppy thinking.

Consider three big errors. The first has been the boom and bust presided over by Labour. They should take the main blame, and it was their policy of changing the regulatory and monetary arrangements which caused it . However, the Lib Dems agreed with Labour’s policy of a so called “independent Bank of England”. Conservatives opposed it at the time, but subsequently stopped challenging it. Lib Dems always liked it. The MPC has regularly failed to hit targets, the government has called the big shots over money printing, the Bank was stripped of its powers to regulate the credit creating banks, yet intelligent people sitll talk about the “success of Labour’s independent Bank”.

The second was the war on terror and the invasion of Iraq to stop weapons of mass destruction-weapons which turned out to be illusory. Conservatives did the “decent thing” They supported the Prime Minister over a matter he said was one of national security on the grounds that the Opposition should co-operate at a time of war, showing national solidarity. They took the PM’s claims and intelligence on trust, instead of opposing.

The third was the Exchange Rate Mechanism. All three main parties pursued this damaging policy which gave us inflation followed by a needless recession. Nick Ridley and I from within the government followed a lonely course trying to stop the folly. We watched in horror as the whole UK political establishment became gripped by this absurd idea that the UK currency could be kept stable agaist the DM, and that this would create a stable economy!

Please spare us more of these establishment disasters. I have had to fight too many battles against the establishment tribal view – it always takes too long, and if you do eventually win it is usually because the damage done by the consensus has been so great.

The second reason some people want a hung Parliament is that they are fed up with the whole system and want to change it. They think change would come from the deadlock a hung Parliament could create. They too might be disappointed. A hung Parliament might simply end up delaying any difficult decisions, thinking they could carry on spending and borrowing too much and pretending there is no deficit problem to be tackled. Ask politicians to compromise and they usually do so at the expense of the electors – compromise will probably mean spending more, regulating more and passing more power to Brussels and quangos, given the views of the Lib Dems.

The third group who say they want a hung Parliament are UKIP. They should grasp that we can only have a hung Parliament if the federalists have yet again won a majority of the seats. Far from getting us out of the EU a hung Parliaernt will ensure we drift even further into it.

Promoted by Christine Hill on behalf of John Redwood, both of 30 Rose Street Wokinbgham RG40 1XU

Some people who blog on this site seem to think everything here is the official Conservative line and has been approved by Central Office. You should know that everything on this site is written by me. There are no ghost writers who get up at 6am to do it. None of it is censored. I do not usually reproduce the official Conservative attitude or response, as there are plenty of other ways you will hear, see and read that. The aim here is to get beneath the spin of all sides, and set out ways of tackling the manifold and serious problems that confront our country. To Wokingham voters, let me also assure you that all the newsletters, leaflets and press releases I send out are also written by me.

Promoted by Christine Hill on behalf of John Redwood, both of 30 Rose Street Wokingham RG40 1XU

On both sides of the Atlantic politicians are out preaching their favourite syllogism. Regulation stops crises. Existing regulation did not stop the crisis. Therefore we must have more regulation. All round the world they are also looking for politically easy ways of getting their hands on even more cash to spend, and to fill some of the holes in their budgets. The banks are an easy target for both these impulses.

The banks are very unpopular. The retail side of them can give a poor service as customers see it or thwarts the legitimate aims of their customers. The banks do not seem to be shy when it comes to charging. The investment wings of the banks pay large salaries and mega bonuses which makes many people jealous. When the banks through their own poor management or through the clumsy interventions of the regulators need to come to the taxpayer for loans or even subsidy the public blood can understandably boil over.

We should also ask how well based all this belief in certain types of regulation is? There was no shortage of rules and laws when the US and UK banks got into difficulties in 2008. The problem as we have often discussed was the regulatory judgement – the leading regulators of the US, UK and some other leading countries saw nothing wrong with the low levels of cash and capital banks had relative to their huge loan and derivative books. It turned out both the regulators and the bankers were wrong.

The same issues arise over the regulation of European airspace. Why was it unsafe to fly last week and perfectly safe to fly this week? What changed? The wind direction did not change, and the volcano is still smoking. Was the regulatory response proportionate last week, and is it safe enough this week? Why was there such a sharp downward revision in safety margin?

The consequences of regulatory mistakes can be huge. The aviation industry suffered huge losses and their passengers were put through great inconvenience and misery. The gross failure of the monetary and banking authorities in the period 2005-10 has caused large job losses and loss of income throughout the western world. Of course it took two to tango – some bank directors and senior managers made big errors within the regulatory framework and rules set for them.

The question to ask now should be what tax and regulatory regime will help the recovery. Tempting though many may find it to seek revenge on the bankers, we should instead have two preoccupations – a strong economic recovery and getting the taxpayers money back form the banks that did take subsidy or where the taxpayer owns shares. These two aims require the same response.

Any tax increase on banks reduces the amount of cash and capital they have, and therefore cuts the amount of lending they can do to fuel the recovery. Higher taxes may also lead to higher fees and charges as banks seek to rebuild their profit and cashflow against the fiscal headwinds. In the end it is we the public that pay these taxes.

Regulation and monetary policy today is contradictory. The banks are told they must lend more, and the monetary authorities keep their indicative interest rates very low. Meanwhile the Regulator demands too much extra cash and capital for this stage of the cycle, preventing the banks using the access to cheap money to lend on to the private sector to speed the recovery.

Policies made out of popular anger against a given group are often not wise. The current vogue for more tax and regulation of banks panders to the popular mood but delays the recovery.

Promoted by Christine Hill on behalf of John Redwood, both of 30 Rose Street Wokingham RG40 1XU

It is fashionable to say people want politicians to listen more, to understand their frustrations, to give voice to their anger with the system. Out on the doorsteps it is not always easy to listen, as many people still say “I haven’t made up my mind” as a prelude to making it clear they do not wish to talk about government and the election. Others say they will vote in a given way and also have no wish to discuss it. Some voters are busy when you call and what they are doing matters more to them than your visit. Some feel at a disadvantage, as they are not thinking all the time about the state of the government in the way their visitor is.

However, there are also a lot of people who are prepared to spend some time telling us what is on their mind. Sometimes it is very local: a series of complaints about local planning, rubbish collection, noisy neighbours, poor local roads, high Council taxes or anti social behaviour, matters requiring a local Councillor or policeman to sort out. Sometimes it is a single issue – someone feels passionately about a free vote issue like fox hunting or religious freedom of expression. More often than not it is something that relates directly to that person’s work or family circumstance.

I have come across various public sector workers who understandably want to know if their section of the public sector could be in line for cuts. I have come across more private sector workers who want to know just how much more tax they might have to pay to get us out of the deficit. Many want to know the details of the various tax plans of the main parties, as they seek to work out who is offering them the best deal. Some voters are concerned about the bit of the public sector they use – the local school or hospital – and about the amount of tax they are having to pay. There is no necessary contradiction as Labour always says in these two views: it is reasonable to want more money for the local school and less waste elsewhere. People want good local public services, but they do not wish to see a further squeeze on their take home pay, which sustains most of the things that matter in their lifestyles – their home, food and basic services.

If you put it atogether there is no one coherent programme or set of changes which would make everyone happy. The electorate is very divided about what to do, and has a myriad of preoccupations. That is why the main political parties are finding it so difficult. In the rest of their lives people are used to making lots of very specific choices. The market economy has moved on, and many more people have money or access to finance to give them more choice. Making a single choice once every five years and having to accept the whole package comes hard after the subtle distinctions the market allows.

One voter may like the Lib Dems on cancelling Trident but not on more European integration and the asylum amnesty. Another may like the Conservatives lower National Insurance and Euroscepticism but not their overseas aid pledge. One voter may want to pull out of the EU altogether but not see a way to be able to do so. One voter may wish to see more money taken in tax to pay for more public service and be unsure which party will do that without any cuts in things they like. How does a climate change sceptic vote? How should an animal rights voter express their view? It is now complicated and difficult for people to get what they want.

Under the current system most will decide in the end which party offers them most of what they want with fewest downsides. They will see that the main choice is Brown or Cameron as Prime Minsiter. Some will decide to vote for candidates who cannot win to show how storngly they feel about a specific issue – green policy, or Europe or English nationalism. Unfortunately for them if they get the usual poor result it reinforces the message to the main party leaderships that these are not mainstream causes or forces.

We need to strengthen our democracy, by giving Parliament more teeth to hold government to account, and by giving people more chance to express their views and join in the national debate. We need more things to be decided outside government and politics, so people can vote with their feet and make their own choices on services. The world of web is opening up ever broader horizons, allowing consumers more choice and better prices, and allowing people more say on the issues that matter to them. The political establishment has to find a way of adapting to these forces. At the moment the poltiical system as a whole serves up three styles of Table d’hote when people want to dine a la carte. If government did less that would help. If MPs were more independent that might help. If government was more afraid of Parliament and had to take it more seriously that would improve things a bit. Big government doing too much with a weak Parliament and Ministers not in control is a recipe for voter frustration.

Promoted by Christine Hill on behalf of John Redwood, both of 30 Rose Street Wokingham RG40 1XU

Now the polls say the electorate is split three ways the BBC and the fashionable commentators of the media are out and about saying it’s proof we need a new voting system. We should be nervous about such advice, given its provenance.

First past the post has several advantages.

The first is each area has an individual MP who feels very accountable to that group of voters. The reason most MPs work long and anti social hours and at week-ends, unlike most of the public sector, is they wish to respond to the demands of their constituents. They know their constituents can sack them if they do not do a good job. Any system of voting which breaks the link between constituency and individual member will undermine that accountability and the service that comes from it.

The related point is that each town or rural area has an MP voice in Parliament, with a duty to speak up for them, and to act as an adviser and arbitrator in local matters. Any proportional system that relies on a national list to select MPs would lose both these characteristics of the current system.

The third point is First Past the Post gives an MP more independence against the party whips and national party than a list system. When I decided to resign from a Conservative government as part of my campaigns to save the pound and to lower taxes I checked first with my local party bosses who were supportive. They were the people who had the power to back me or sack me. If I had needed the support of the national party to remain as an MP and to become a Conservative candidate again, resignation may well have ended my campaign as it could have ended my time as an MP. The national party need not take a rebel seriously if they can sack him.

The fourth point is that First past the post usually results in a majority party, which allows a government to be formed which has the power to stick to the manifesto it offered the people. PR systems usually prevent any one party having a majority. This means that all parties immediately the election result is known have to dump their promises to the electorate and get down to bargaining with each other, usually behind closed doors, to cobble together a government and a programme which might survive.This tends to exclude the electorate and makes people more cynical about politics and politicians, as people do not get what they voted for from any of them.

What some dislike about First past the post is MPs and candidates with strong views have to compromise with others to form an overall party position. Some see this as weak or dishonest. Others see this is the necessary compromises needed to run a civilised democracy, where voters disagree about what they want.The upside is it avoids extremists being elected to Parliament – the UK Parliamentary electorate does not elect BNP or Communist MPs. Sensible people recognise that all the main parties in our system are coalitions with argument within the parties about how far the common position should go in different directions.

At the moment people with very strong views have three choices in the UK. They can join a main party most likely to be sympathetic to their cause and fight for it from within. They can join a fringe party that mainly figths on a single issue to keep that issue alive in public debate, in the knowledge they are unlikely ever to get an MP elected. Or they can join or form a protest group and lobby institution, rasing money to keep the issue alive and to promote it. There is a role for all three.

Under PR the same is true, but the balance of advantage different. There is more point in joining or forming new parties, as they can get someone elected. There is less point influencing a main party, as each of the main parties is less likely to form a majority government able to do things. It may be easier to influence a main party by having MPs in a hung Parliament.

There are pluses and minuses to each system. I am far from happy that the First Past the Post system has stopped the Eurosceptic majority getting what it wants for the last 13 years. I did not enjoy losing the votes against Nice, Amsterdam and Lisbon each time, when I knew my party’s votes were the view of the majority of the Brtish people. There is absolutely no evidence that a PR system would deliver us strong government, or government that wanted to do what the public wants.

Promoted by Christine Hill on behalf of John Redwood, both of 30 Rose Street Wokingham RG40 1XU

Mr Clegg fibs again today. He tells us he would split investment banking from clearing banking to stop another banking crisis.

Was he asleep during the crisis? Lehmans went bust – that was a pure investment bank. Northern Rock went bust – that was a pure mortgage bank. Alliance and Leicester and Bradford and Bingley got into trouble – both specialist mortgage banks. Fanny and Freddie needed taxpayer subsidy – both mortgage banks. What’s his answer to that?

The truth is the banking regulator didn’t ask for enough cash and capital from any sort of bank. That’s why they got into trouble, when the monetary authorities decided to lurch from super loose to super tight money.

Promoted by Christine Hill on behalf of John Redwood, both of 30 Rose Street Wokingham RG40 1XU

As predicted here inflation continued to rise throughout Q1, hitting a new high of 3.4% on the government’s own CPI measure (target rate 2%) and reaching 4.4% on the more used RPI. Excluding housing the RPI rose by 4.8%.

This means as warned there is a ferocious sequeeze on living standards underway. Wages are going up only by around 1% on average, with some people experiencing declines. The price of petrol at the pump, food prices, heating bills and many other items are putting pressure on budgets.

The Monetary Policy Committee has obviously given up the day job of keeping inflation down to 2%. They are just helping the government’s pre election stimulus in a public sector led economy. I wonder what their excuse will be this time? It was all so predictable. They have lurched from too easy to too tight to too easy again! Why do they find it so difficult to see the obvious and read the cycle?

They should be telling the government the banks are not working properly, the economy is lop sided, official interest rates are unrelated to private sector reality and the public sector stimulus has forced the pound down so far, causing imported inflation. The fact that they say none of this shows they are neither independent in thought nor sensible.

Promoted by Christine Hill on behalf of John Redwood, both of 30 Rose Street Wokingham RG40 1XU

So the authorities now think it might be safe to fly from Scotland. There is no sign the volcano has stopped or the dust plume has gone away, so there must be a change in the “science”. Or is it just a change in the government’s view, under pressure from the aviation industry? I repeat my advice – let them fly freight planes if they wish and if they think it safe, and see what happens.

Meanwhile the Met Office has its critics. Their BBQ summer was cold and very wet. Their mild winter turned out to be full of ice and snow. The early Spring I heard about on the BBC did not come to me – the daffodils in my garden were around three weeks later than usual. Now they are being asked why they rely on computer simulations rather than observations to estimate the ash cloud.

The announcements that the Navy are going to pick up people from the continent have all the hallmarks of the triumph of spin over reality. Apparently two of the ships do not have orders, and the third that is going to pick up troops is not advertised as a ferry for civilians at any stated time or place.

Please government, do make up your minds and tell us what you are doing. If there is insufficient commercial ferry capacity, then say how you will supplement it.

Promoted by Christine Hill on behalf of John Redwood, both at 30 Rose Street Wokingham RG40 1XU