Category: Blog

It’s wonderful to hear from the forecasters that after the fabulous BBQ summer and the mild winter we are now hurtling towards the early spring. It’s just a pity that could be on our snow sledge in near freezing temperatures! The forecasters seem to specialise in winding us up these days.

However, as readers of this site will know, this is just weather, not climate. The problem is we seem to get a lot of weather these days, with two snowfilled winters in succession and a cold wet summer in between. There’s no sign of any of my daffodils appearing from the soil as they clearly could not hear the message about early spring for all the snow there’s been on top of them.

Alister Heath of City AM has produced some more good topical figures to show that lower tax rates bring more jobs and more wealth and income to tax.

Apparently those states in the US like Texas and Florida which levy no additional state Income Tax on top of federal taxes have seen 89% more jobs created and 32% faster personal income growth than states with high state and local income taxes. As soon as one state introduces higher rate tax on the successful, they hop over the border into a low tax state, reducing the revenues of the high rate state instead of increasing them.

It adds to the case I set out before, based in the UK’s past history of lower and higher income tax rates, and based on international comparisons.

Today the pound opened lower again on the exchanges against the dollar. That means dearer petrol, dearer commodities, dearer imports from dollar related parts of the world including China. We are poorer as a result.

The MPC is like the drunk trying to walk along the pavement. They spend some of their time in the ditch of recession and falling prices because they underdo the money growth, and some of their time in the middle of the fast road, because they overdo the money growth and inflation.

Months ago I started warning they were overdoing the easy policy which was bound to lead to a lower pound and higher prices. That is exactly what is now happening. The Governor has to get ready to write another letter of apology. Why can’t they find people who can get it right?

There are three strong camps in the debate over whether John Terry had to resign as England’s soccer captain.

The footballing pragmatists say it should be settled solely on how well he is doing the job. His private life, they say, is no concern of the team or of England. If the Manager backed him the media would have to back off and he could continue. Many of them detect no sudden loss of form or authority on the pitch that worries them. They want a captain who plays football brilliantly. They do not expect him to be a saint or even a great role model off the field.

The media realists agree that you cannot prevent a man being England’s captain just for errors in his non footballing life. There are , apparently, few top flight footballers without something in their private lives that might cause concern or give opportunity for the media to criticise. They take the view that if a player can get away with it, so be it. If, however, a recent scandal leads to an overwhelming weight of media criticism and attention then they feel reluctantly the man has to go. You might call it Labour’s 3 day test. If something bad is leading the news three days running then action has to be taken to remove the source of the concern. It is a “distraction” from the main job.

The third group take a more traditional moral stance. They say that if someone aspires to lead in various walks of life, including in the high profile area of international team sports, they need to show discipline in their private lives as well. They do want great footballers or golfers or rugby stars to be people the young can look up to. They do not want them on charges for assault, or guilty of alcohol excess, or cheating their wives, or some other anti social conduct.

I invite my bloggers to send in their thoughts on where we should be in modern Britain. Should a clergyman lead by example and always behave honestly and decently? What should we expect of our political leaders? Should they be expected to live up to the moral standards expected of a Bishop? Should a sporting leader be required to behave better or allowed to behave worse than a government Minsiter? Is a business leader allowed to be unfaithful to his wife or to behave badly in a pub or club where a footballer or a politician is not? Is a business leader of a well known public company rightly more at risk for misconduct than one who leads a lower profile business?

Are there any absolute standards that all must meet? Are there graded standards that people with differing degrees of power and responsbility need to adhere to? Or is it now the case that the media is the judge, and all hinges on how long a story runs and how intense it is? Do the press in this case speak for the nation, and have they judged it right that people wanted Mr Terry to resign?

The word on the street is that a new Parliament will purge the old and give the country a new start with its democracy. Parliament can put behind it the mistakes, errors and frustrations of the past five years and suddenly become the Parliament people need and may even want. It will not be that simple.

If the new Parliament is to be better than the old, and if the new people are to make a difference, we need collectively to will and require a change in the way we do politics. Parliament should be there to test, to probe, to challenge the government as well as there to pass government legislation. The present Parliament talks about the need to scrutinise the executive – hardly language to send the pulses racing or to get Parliament back in touch with the people it is meant to represent. What we need is a Parliament which keeps Ministers up to the mark, which asks the right questions and refuses to take “No” for an answer, and a Parliament which is reluctant to legislate, forcing Ministers to work hard and to perfect their plans before they see the legislative light of day.

The Opposition is talking of reforms that could help. Stronger streamlined Select Committees where a few MPs learn their briefs and ask expert points would help. Giving Parliament more of a say in what is debated and what is questioned is important. If the government always controls the timetable and decides the subjects – apart from the odd Opposition day – it gives them power to conceal and power to spin the nation’s story as they wish.

We need more time to question and debate. If Parliament wants to carry on with half term holidays as if we were a primary school, maybe we could have those weeks for cross examining and discussing matters with Ministers without new laws or votes for those of us who would like to do the job better. We need to have enough time for each new bill. Prior to 1997 the Opposition was allowed as much time as it wanted to debate a bill in committee. Only if the Opposition started to abuse that trust by spending say 50 hours on Clause 1 did a government impose a timetable motion to limit the debate. Automatic timetable motions have crushed sensible resistance to badly thought through legislation, and have flattered uncontentious legislation with more time than it needed.

There is also the unhealthy relationship between spin doctors, leaderships and the media. Power is thought to be the power to control the message. In practice the controlled messages usually frustrate or infuriate as well as inform and make easy the lives of the journalists. The media say they want MPs to be more independently minded. Yet when one is, he is often pilloried for daring to disagree with his leadership, so the press can have great fun with a party row story. If we want more grown up politics, leaderships have to be relaxed enough to accept that not everyone all the time in their party has the same view. The media have to allow parties to have internal disagreements to shape the line or change the approach, without pretending that such a phenomenon is unusual or a crisis

A healthy democracy needs debate between and within parties. It needs a media that allows well intentioned and sensible people to disagree without it always being a challenge to the leadership or a demand for a different job. There are ideas as well as personalities in politics. If Parliament is to rebuild itself it not only has to find a way to claim the bus fare without a problem, but it needs to do its main job better. Its main job is to lead the national debate, to influence and guide government, to frame and develop wise but limited laws and to ensure that if government is spending too much, abusing power, or taking us in the wrong direction we at least know there is an alternative.

The BBC’s fixation with global warming produced a new insight this morning. It opened up a whole new line of questioning for the Green movement, which left their spokesman advocating that people should have a higher carbon footprint, for fear of sounding as if he wanted to kill off all the much loved cats and dogs we keep as pets.

The new topic was the carbon paw print of mogs and dogs. Apparently a large dog requires as much as 1 ton of carbon a year, or around 7% of the average British person’s carbon footprint. As I do not currently keep a pet, that makes me even greener than I realised.

The interviewer made a very good point. Turning to the green spokesman, she asked if people should stop owning pets to cut their carbon footprint. I assume she was kind enough to mean as nature takes its course with all the lovely animals people currently own. He realised the trap, and defended pet ownership as a pleasure we might need, suggesting pet owners should drive less to compensate. The last thing he wanted was the headline “Greens propose mass doggy and moggy murders to save the planet”. The greens always unite against the car, though it represents a modest proportion of the carbon total.

Not to miss the trick, the interviewer countered by saying why couldn’t people without pets buy a gas guzzling vehicle for their pleasure, as this would produce less additional carbon than a large dog? The Green spokesman was bright enough to have to follow the logic, and effectively conceded that non pet owners might well legitimately want to drive more, as long as everyone kept to a sensible average carbon footrpint.

I wonder if this question of the carbon paw print will develop legs? Will someone come forward with the idea that we should start to wean our furry friends off meat, and try and breed vegan pets with special low carbon impacts? Will someone else propose a recommended size limitation on animals we keep at home? It certainly makes a change from the endless discussions of how we should limit personal mobility.

What we need is some commonsense in this debate, an acceptance that we want to become greener and cleaner, to recycle more and waste less, to generate power in a more efficient way and to lift our fuel efficiency at home, on the move and at work as rapidly as possible. We need to cut our dependence on imported fossil fuels as quickly as possible. Cutting down on pets or stopping people driving should not be part of such a commonsense approach.

Last night at a meeting I felt the need to remind people just why we need change, and why that change has to be the Conservatives. Everyone has their ideal view of what the next government should do, say and be like. It will soon be time to live in the real world, and recognise that the choice lies between Labour and Conservatives.

We need to remember:

Conservatives opposed Mr Brown’s changes to the Bank of England which stripped it of important powers and contributed to the banking crash.

Conservatives opposed the switch in inflation target before the 2005 election, a switch which led to a bigger credit bubble than we wanted.

Conservatives opposed the excessive deficit of the last year, voting against the VAT reduction and proposing lower spending.

Conservatives opposed the tax raid on Britain’s pension funds, a raid which led to the closure of most funds to new members and the winding up of many funds.

Conservatives opposed the Nice, Amsterdam and Lisbon Treaties, because they transferred power to Brussels.

Conservatives opposed Labour’s lax approach to our borders, wanting proper border controls and limits on numbers.

Conservatives offered a refererendum on Lisbon and voted for one in the Commons. Lib Dems and Labour ratted on their promise and voted it down.

Conservatives opposed much of the new red tape which now envelops local government and business.

Conservatives opposed attacks on our freedoms and civil liberties.

Sorting out the mess our country, our economy and our society is in is no easy task. It will not be possible to tackle everything all at once. Even mending the economy will take time. The question being debated today is do we want to make a start, or do we intend to carry on living in make believe land, awaiting the market crash which is likely to happen if we do not start to live within our means and begin the task of running our public sector efficiently and well.

Readers of this site will not be surprised that world markets are starting to tell individual governments that they are borrowing too much. If there has been a surprise, it has been the delay before markets wake up and force changes on reluctant administrations. The sloth of markets to say “No” to excess will just ensure that as each country crisis comes it will be bigger and the reckoning heavier, because each country will have borrowed even more.

Iceland, Ireland and the Baltic Republics had their medicine administered sometime ago. They have each been forced into spending cuts, and have to pay more for their loans. Last week the storm surrounded Greece. Yesterday the pressures began to envelop Spain and Portugal.

This is the period of maximum pressure on the Euro. Markets are saying to countries in the Euro who have wandered miles away from the discipline of keeping public borrowing down to an annual 3% of their national incomes, they need to cut spending. If they refuse, they need to seek loans and subsidies from the better run members of the Euro area, as the markets are no longer willing to lend to them at German rates. It turns out they are not part of an integrated money union where all are for one and each is for all. Each Euro member has its own deficit problems, and each has its own credit rating. So it will remain unless and until they each guarantee each other’s borrowings and freely transfer cash from the richest to the poorest, from the best run to the worst run, as needed. Germany is understandably reluctant to do that at the best of times. When she is wrestling with her own recession and deficit problems she is unlikely to bail them all out to the extent needed.

Some in the UK look on with a sense of relief or even amused superiority because we stayed out of the currency union. As a keen advocate of UK currency independence myself it is tempting to write of the advantages for us of not being caught up in this particular Euro crisis. I have always said there are just two decisions made by Gordon Brown as Chancellor that I fully support – the decision to keep us out of the Euro, and the decision to set sensible CGT and standard income tax rates.

I will not do so , for one very good reason. It would be foolish of us to say we welcome being out of the Euro to give us the flexibility to borrow to excess, to borrow more than the prisoner members of the Euro, Greece, Portugal, Spain and Ireland. There is one very simple observation. It does not matter whether you are in or out of the Euro when it comes to world market reactions to how much money you can borrow. The UK will not escape the government debt crisis. It has been living on borrowed time for too long. What can happen to Greece, Portugal and Spain today, can easily happen to the UK tomorrow.

Far from enjoying the collapse of the Euro against the dollar and the good questions now being raised over the whole shaky edifice of the single currency, we should look to our own problems. The UK has borrowed too much already, and is borrowing far too much going forward.

The Bank “paused” quantitative easing yesterday, to start to let the bubble in government debt down gently. From here it gets tougher to borrow all the money the government needs. If the UK government does not take the right budgetary action soon, it will be the UK’s turn to be tossed around in the world’s bond markets. The end of that process is for all of us to have to pay more tax to pay the rising government interest bills as the rates go up. At a certain point, just as happened in Ireland and now in Greece, the government has to cut spending.

Last night I gave a lecture to 300 professional and business people in the Sainsbury Wing of the National gallery. I presented my views on the true origins of the Credit Crunch and the continuing errors of monetary and fiscal management. No one in the discussion which followed queried my thesis that the Monetary and regulatory authorities were a central cause of the crisis – a view familiar to readers of this website.

Today people are at last waking up to the real threat that we will run out of power ere long, if cold winters coincide with modest economic recovery and if no more power stations are built quickly. This is something I have been warning about for years in the Commons, asking the government to make decisions about replacements for the ageing nuclear stations and the coal stations that the EU rules are closing. They have dithered instead of getting on with issuing the permits and licences required to replace them with more nuclear or something else. Our only option now to keep the lights on is to build some gas powered stations rapidly.

In the Economic Policy Review I repeated the urgency of sorting out this problem. We said “We also believe that government needs to provide leadership in tackling the large number of capacity problems and bottlenecks which have emerged in the UK’s ageing infrastructure. The UK may be an island of coal set in a sea of oil and gas, but it came close to running out of energy in 2006” “We examine ways in which private capital and competition can be harnessed to ensure more plentiful supplies of transport network capacity, of energy and water”. Two years later, and we are still awaiting some decisions which will allow the construction of new power stations.

I also see others are now revising their view of the UK’s long term rate of growth. I have long been saying that it is likely to be 1.5% rather than the 2.75% the Treasury claims. The higher taxes go and the more debt that builds up, the lower the long term rate of growth is going to be. At least if they do succeed in putting the lights out we wont see how bad its got.

Will the MPC make honest people of us at last? With inflation well over 3% and rising it is high time they said “No” to more easy money for a government awash with too much debt and wasting far too much money. They should grasp that recovery requires a private sector, export and savings led recovery. That in turn requires a government spending sensibly and gaining us some better value for money. Someone today on the radio said he could not see how QE led to inflation. He should try looking at how the government overpays for all too many things and how it also slaps extra taxes on which drives prices up further.

The MPC’s boom and bust and attempted boom roller coaster ride has done us great harm. They have encouraged or allowed a government to debauch the national accounts and run up horrendous debts. Today they could start to do the right thing, start to get the UK back onto a prudent and well managed path. They also need to have words with the FSA and Bank over why credit is now so lop sided in our economy, and why the UK’s state banks cannot and will not help small business.