The main points in  the ECB response yesterday made sense and were similar to the Bank of England’s approach the day before. The ECB announced a major increase to its version of the Funding for lending scheme, the LTRO facilities advanced to Euro area banks. It announced that Euro area banks can borrow from the ECB with the ECB paying them 0.75% a year for the money, so they can lend it on to businesses and individuals.

They also announced an expansion of Quantitative easing, adding another Euro 120bn this year.  They reduced the required capital commercial banks need to hold for any given amount of lending, and allowed a wider range of assets to  be used against the lending. They did not cut their main interest rates, which are at zero or negative already.

The ECB has two problems the Bank of England does not share. The ECB thinks a fiscal stimulus is needed at the same time, as the UK authorities arranged. The ECB cannot be sure this will happen. The Treaty rules make it unlikely, unless they find a way of authorising temporary extraordinary measures.The ECB wants governments to make banks  lending to distressed businesses more likely by offering loan guarantees financed by taxpayers. Again, it cannot guarantee this will happen.

The ECB has gone some way in weakening its prudential regulation of the commercial banks. It will allow them delay in implementing requirements imposed on them by Regulatory Inspection, and it will put off the next set of stress tests they need to meet. It is relaxing the type of capital they need to hold and it will allow them to go under the Pillar 2 Capital requirements anyway in order to keep lending going. It needs to be careful this does not build more future problems into the commercial banking sector.

The ECB has done a better job at keeping money growth at a sensible level than the Bank of England over the last couple of years, offering more support for the Euro economy. It now needs to be careful it does not dilute its regulatory standards too far and allow banks to build loan problems for themselves on a scale out of proportion with their capacity to absorb the subsequent losses when some of the loans go bad.

Mme Lagarde’s comments about spreads were damaging anD her reported private comments about the seriousness of the situation also destabilising.

I will post my speech in Parliament yesterday on the budget this morning.

It is good to see the Bank and the Treasury working together to provide a package to tackle the problems that will flow should the epidemic spread widely in the UK. They also need to work together on the growth strategy for post the epidemic, and on measures to improve productivity and therefore real wages.

The budget judgement produced £18bn of fiscal easing, or under 1% of GDP. The measures for a single year to tackle the virus are additional and would not be repeated.

We will need more tax cuts to promote growth and enterprise in the Autumn budget. The Chancellor had very little time to produce his budget, so it is not surprising he did not open up the issue of cutting tax rates to increase revenues and growth. Levelling up around the country is an important task. It needs more enterprise and private sector investment and company formation around the UK.

The Bank of England needlessly slowed the economy misjudging the economic outlook last year. So far this year it has resolutely refused to ease as the virus has damaged prospects. I have consistently advised a different approach to reserve asset ratios, liquidity and guidance on lending to banks.

A cut in interest rates out of a normal meeting is not a good idea. What we need is practical measures to help banks and markets see businesses through temporary cash flow problems, and to allow growth in the economy suffering the virus shock. I welcome the Bank’s belated cancellation of the counter cyclical buffers. I argued against this wrong move when they made it at the end of last year.

Bernard Jenkin spoke to the Conference about the need to distance ourselves from the European army  which lies behind the Common defence and Security policy of the EU.

He reminded us that out of NATO’s total annual spend of $£912 billion, the current EU only accounts for around $165bn, with the UK contributing $61bn. The EU is keen to keep us locked into their defence ambitions, given the relative scale of our contribution.

The EU Negotiating mandate has gone beyond the Political declaration of the Withdrawal Agreement, and asks for a EU/UK Security Partnership. The UK Negotiating Mandate includes no such item. Defence is not mentioned separately, but is covered by the general provisions about “standard third country participation in certain Union programmes”.

The UK does not wish to be part of PESCO, permanent structured co-operation. The UK may be willing to join EU led task forces or missions as an ally, or may invite EU forces to join in missions we are planning. The main thrust of UK military activity will continue to be through NATO. We rely on NATO support for our defence against potential major global aggressors, and work closely with our NATO allies and the UN on peace keeping and peace making missions around the world.

There are some in the official government of the UK keen to bind us into European common defence procurement, as a first step to making us more interdependent with the smaller and less versatile forces of the continental countries outside France. The present UK government has set out a mandate to move us more in the direction of independent forces collaborating closely through NATO.

Yesterday saw a further big sell off in world stock markets. The decision of Saudi Arabia to pump more oil and slash oil prices, after a failure to agree production cutbacks with Russia, was the new development demanding a fall. Most share markets fell around 8%. Oil companies accounted for much of the decline. The big lock down in Italy, still chasing the Covid19 virus, led to additional weakness in Italy as people contemplated the economic damage clamp downs on travel and events will do. The Italian share market fell 11% on the day.

Brent crude oil was down 21% on the day and down 40% from the February peak. Whilst this means less inflation and more spending power for other items it also means lean times for the oil, oil service and oil financing sectors if the oil price stays down and the price war continues.

More extraordinary was the new low in interest rates on government borrowing. In the UK the ten year borrowing rate slumped to 0.08% at one point, and the 50 year ended the day at just 0.39%. Germany can borrow for ten years at minus 0.85%.

The UK authorities need to respond with a good package of measures to see business and individuals through the difficult times created by the virus. Companies need tax holidays to ease cashflow pressures, and access to credit to enable them to pay wages and other bills whilst turnover is impaired.

Cutting interest rates is not a lot of use from here, as the 50 basis point Fed cut showed. The Bank of England needs to cancel its increase in capital buffers for a bit, make more money available through a Funding for lending scheme, and work with commercial banks to get businesses with a decent business model for the future through temporary interruptions to revenues. It needs to change its restrictive guidance to commercial banks. I was critical of the way the Bank of England slowed the U.K. economy too much by these tightening policies. The further impact of the virus on output makes cancelling these measures essential.

Individuals need a tax cut to boost their spending power.

When Owen Paterson set out how we can use our new freedoms out of the EU to have a better environment and a stronger farming industry, he majored  his remarks on the need for innovation.

He characterised the Common Agricultural Policy as one based on protectionism to keep us in a museum of out of date  farming practices.  He drew attention to how the ban on neo nics had led to a fall in rape seed production in the EU, making us more dependent on imports from the Ukraine which uses neo nics. He made the case for selective gene editing , and argued that gm progress is necessary. It is after all a version of selective breeding which has characterised past agricultural progress inside the EU, done with more precision, understanding  and speed.

He reminded us of the damage done to our landscape by EU inspired policies of abandoning pumps and refusing to dredge ditches and water courses, leading to extensive flooding. Owen himself made an effective case when in government to revert to proven water management techniques with modern high capacity pumps and dredgers to free the Somerset levels of excessive water. He studied how the Fens were still well drained and usually kept out of flooding despite being very low lying, and how the EU/Environmental Agency system   abandoned this approach elsewhere to the detriment of residents and farmers.

Agriculture offers great scope for improvement as we leave the EU. We have a huge food deficit running at more than £20bn a year. We are made to put high tariffs on important food items from outside the EU. Setting our own policy should produce more home grown food and lower overall prices for consumers. we will impose lower tariffs than the EU but will impose them on the whole world once we have left.

Sir Iain Duncan Smith gave a good paper to the Seminar on Friday about controlling our borders and doing more to promote better paid work for people already legally settled in the UK.

He told us that when he was Work and Pensions Secretary he drew attention to the large numbers of people in the UK in entry level jobs who do not go on to receive training and promotion as we would like. He highlighted the way for example we have been importing people to be lorry drivers. It is a short course to convert a car licence into a truck permit. This qualification opens up better paid jobs for those who try it from having no formal qualifications.  He asked his department to  buy up training places and making  them available to UK residents. They told him no-one would want to do it. He bought 100 places for a pilot and there was plenty of demand. His officials told him it would be wasted money as they would not stay the course. 85% successfully completed it. He proved that we can train our own lorry drivers at home.

He then turned his mind to the shortage of nurses, where the UK has been raiding the health services of other, often poorer nations, to find us the nurses we need. It of course takes a lot longer to train a nurse. The same experience repeated. There were plenty of UK volunteers to train as a nurse. We need a system where the state pays if the person undergoing the training pledges to work for the NHS for a stated period after training. If they wish to avoid working for the NHS then they should have to repay the training cost.

Some UK companies are great at training and growing their own talent. The public sector and the other private companies need to get better at it. It is high time we ended the cheap labour from abroad model, and spent more time and money on nurturing talent and encouraging qualifications at home. I understand why big business think free movement of labour to scoop people from low pay countries is a good idea, but it is more difficult to grasp why the Lib Dems are so keen on it.

Iain recommended requiring everyone advertising a job here  to advertise in the UK first. He backed the  principles of the government’s points based system for migration, saying we would need to  monitor levels.  He supported  ending right to benefits until someone has worked here for a number of years or become a citizen. He used Migration Watch figures to demonstrate the net cost to the UK of inviting in people to do poorly paid jobs.

I held a conference in Westminster yesterday on the EU talks.

I was able to praise the government for its opening approach. They are right to insist on talking about all issues in a series of simultaneous working groups. They are right to say we want a Free Trade Agreement, not a comprehensive Partnership Agreement or Association Agreement designed for countries seeking to converge and join the EU. They are right to stress there is no read across from say fishing to free trade. Each has to be settled on its own merits.

The EU still seems to think the UK is the weak party to the talks and needs to make more concessions. It also seems to think the UK will be so desperate for a deal it will crack and concede on fishing, convergence of laws, powers of the ECJ and all the rest of their federal agenda.

The Conference provided unified advice. We do not need to pay to trade. An FTA is very much in the EU’s interest. We need to take control of our fish and land many more of them at home. We want to free ourselves of the controls of the ECJ, and will establish the right to shape our own laws as we see fit. Canada and Japan have FTAs with the EU but do not accept EU laws and the ultimate power of the ECJ. Our defence arrangements should be under our control, and our main collaboration through NATO. We should not impose any border between Northern Ireland and GB and not accept any continuing EU jurisdiction over any part of the UK from January 1. 2021.