Some people tell me UK state debt is too high and we need to take tougher and more urgent action to bring it down. I disagree.

According to the ONS at the end of the last financial year UK state borrowing was £1821bn or 84% of GDP. This is well below Japan, Italy, Belgium and some other advanced countries and not very different from the USA and France.

It is not, however, a very meaningful figure. The Bank of England has bought up £435bn of the debt. As the UK state owns the Bank of England and receives dividends from its interest receipts we should deduct this part of the state debt from the total. That brings it down to £1387bn or 64% of GDP actually owed to people and institutions outside the state. This is a perfectly manageable figure.

Today the UK government can borrow at 0.5% for 10 year money and at below 1% for 30 year money. These are very low rates, showing markets think there is little risk in lending to the UK state. In the 1970s when the Labour government was spending and borrowing too much they had to pay more than 15% to borrow. They ignored these warnings and ended up at the IMF begging for a loan. The IMF demanded spending cuts and a lower deficit.

Today’s problem worldwide in advanced countries is fighting deflation and economic slowdown. Markets are telling governments, companies and individuals they can borrow more for decent projects. There is too much saving and not enough investment going on.

It would be quite wrong as the rest of the world fights recession and the economic impact of the virus for the UK to tighten fiscal policy hastening a bigger downturn. Yesterday we learned that Hong Kong is offering helicopter money. Every adult citizen will be given HK$10,000 to spend, to try to fight recession. That is how bad it is in Asia.

Much of the world is in recession fighting mode. They need to be so, because the advent of the corona virus and the severe responses to it by governments makes recession more likely without action.

The virus has hit international travel and tourism hard, has disrupted Chinese output, slashed the demand for oil and other raw materials, brought freight rates well down and is now disrupting supply chains around the world. It has damaged confidence, and led to investments and orders being put off. Japan had a sharp fall in GDP last quarter thanks to a tax rise, whilst Germany is struggling to grow at all thanks to the anti car policies being followed.

This week the Stock markets of the world have suddenly woken up to the threat that comes from these events. For the first month of serious virus news gold, oil and bonds signalled trouble ahead, and share markets decided it would be short lived and they could look through it. Now they are not so sure.

What can governments and Central Banks do? They can take offsetting action to promote more economic activity, and provide more money to offset cash shortfalls by businesses hit by interruptions to their production and sales.

Taiwan has announced a stimulatory package. China has produced some tax cuts and bank lending at low rates. The Fed, the Peoples Bank of China, the ECB and the Bank of Japan have all put money into markets in various ways to increase liquidity and available funds. China has started to cut interest rates. So far the UK has taken no action to help.

These moves will ease some of the worst features of a slowdown brought on by the virus, but do not deal with the root cause. The best way out is to turn the tide in the battle against the virus by a combination of treatments, vaccinations which are being speeded in research and reducing the spread. That is not easy and we all wish them well in doing so.

As China is discovering, if you go in for lock down and isolation of whole cities after cases have been found you do not stop the spread as some people will already have carried it out of the area, but you do considerable damage to output and activity. It is being debated how feasible and effective lock down is in limiting spread.

In the 1980s and 1990s Ministers and officials in the Home Office administered a relatively successful Immigration Policy. It typically ran at 50,000 net migrants joining the UK population each year. It was never above 100,000, and was at 48,000 in 1997 when the Conservatives were replaced by Labour in government. This level enabled us to be generous over refugees, and to meet the business requirements for special skills or seasonal workers.

The new Labour government wanted policy change to boost numbers. The civil service and the EU were very helpful. It soon rose substantially. Between 2004 and 2007 it ran above 250,000 in each of the four years, some five times higher than the previous government’s preferred level.

The newly elected Coalition government in 2010 appointed a Conservative Home Secretary who made clear her wish to bring numbers down from over 250,000 to below 100,000. Home Office officials were asked to work on various ways to help achieve this. After an early fall to 176,000 in 2012 it accelerated away again to well over 250,000 in each of the years 2015 to 2017.

In the 2017 election the former Home Secretary had her chance to review this policy and targets as Prime Minister. She reconfirmed them, stating in  the Manifesto that “our objective  (is) to reduce immigration to sustainable levels, by which we mean annual net migration in the tens of thousands rather than the hundreds of thousands we have seen over the last two decades”. She also made clear she wished to control EU as well as non EU migration, thus ending freedom  of movement.

We need to ask why was it that the Home Office did not implement policies that met these Manifesto pledges? They had shown how it was possible to run such a policy in the 1980s and 1990s. They could have been in no doubt about the wishes of their Home Secretary, nor of the new Prime Minister in 2017. This failure raises interesting questions about the relative responsibilities of senior officials and elected politicians. Whilst I of course defend the constitutional principle that the Home Secretary has to take the public blame for failing to implement her own policy, we do also need to ask about the wider departmental failure.

Today we read of problems for the current Home Secretary to  get her policies implemented in a timely and helpful way. I would urge officials in the Home Office to see that they had had years to get ready to cut migrant numbers, and soon will have full powers over EU migrants as well as from the rest of the world. Surely they can draw on their experiences in recent years, and on the new powers they can create, to succeed this time round? If not the Prime Minister would be right to allow new senior officials who can.

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The Permanent Secretary  in a department is the most senior civil servant. He or she is responsible for supervising, promoting and disciplining the civil servants and for ensuring  timely advice to the Secretary of State. He or she  is the Accounting Officer responsible for controlling agreed  budgets, for spending regularity, legal conformity  and financial reporting of the department’s affairs.

The Secretary of State is the Head of the Department as policy maker, chief spokesman,  and decision taker. Ideally the Secretary of State after discussion with officials sets out the policy, agrees a budget with Cabinet and Treasury and expects the civil servants in his or her department to get on with implementing any changes and administering the wider corpus of departmental actions and policies.

The Permanent Secretary has no independent voice other than when reporting to the Public Accounts Committee as Accounting Officer or to a Select Committee when it is making an Enquiry into matters of implementation rather than government policy. In return for having no direct voice the Permanent Secretary  expects the Secretary of State to defend the department and the actions of officials when reporting to Parliament or appearing on the media.

There are occasions when relations are strained because officials have made substantial mistakes which the Secretary of State warned them against or knew nothing about. It is  best in such a situation for the politician and the senior officials to agree the  way for the matter to be reported to Parliament. The Minister has to take the main hit, but it may also be agreed that there needs to be  disciplinary action with an honest account made of where the mistakes or wrongdoing occurred and by whom.

It is much more difficult if relations are strained because senior officials do not like the policy being followed. This should not in theory happen. Assuming the policy decided by the Minister is not illegal or dangerous officials should accept and implement with good grace, especially if it was part of the governing party’s Manifesto or it was the result of a referendum. The price of anonymity and protection from too much public scrutiny is to accept properly made Ministerial decisions and implement them in the best way even if you have reservations about them.

If a Minister disagrees strongly with an important government policy they usually have to resign. It is difficult to see why it should be different for a senior civil servant who feels so strongly that a government policy is wrong yet he or she is called upon to implement it. When I was the Prime Minister’s chief Policy Adviser I had to judge on the few big issues where she and I disagreed when she had finally decided and was not going to change, and end my attempts to change her mind. Once she was committed in public to a course of action I would never do or say anything negative about the policy I was worried about. I disagreed with the Community Charge or Poll Tax and with the decision to sacrifice the veto in various single market areas.

I will be looking at issues around the performance of Permanent Secretaries in crucial departments  in  future posts.

People’s lives are changing a lot. Some of us welcome change when it is for the better, as much of it is. There is plenty of change which is driven by us as consumers. We willingly buy the product or service when it is better than the old or when it allows us to enjoy new experiences.

It is consumers who choose to watch downloaded films rather than BBC programmes, or who use a mobile phone to shop or pay a bill. It is people who choose to spend more of their lives on line and to learn and be informed from the web.

There is another kind of change which is more contentious. That is top down change driven by governments. Governments sometimes presume to know better than we do. They seek to stop us buying some goods and service with higher taxes, regulations or outright bans. They want us to buy or use other goods and services so they subsidise them ,give us tax breaks or supply them free at the point of use.

Some people think this is becoming excessive. They see too many attacks on their traditional way of life or their pleasures. The fire in the grate is to be changed. The roast beef meal may have too large a carbon footprint. The tried and tested diesel car is evil. Offering cash for a transaction is old fashioned. Their electricity meter has to be ripped out and replaced by a meter too smart for users to understand what it is really up to.

The quest to change public services does not always lead to improvements in them. The GP no longer does home visits. A telephone or on line surgery booking service does not always allow a same day appointment.Many public libraries are only open when working people are at work in the week and not open on Sundays. Governments want people to leave the car at home so they  make it more and more difficult to use it, whilst many people regard it as the only way to get to work and to get the children to school.

Government needs reforming to get closer to how people lead their lives, and be more understanding of people’s aspirations.

Car sales in China fell 92% in the latest figures reflecting the closures and stay at home advice in that epidemic torn country. Meanwhile EU plans to accelerate the shift to electric cars is hitting diesel and petrol sales in Europe.

Countries are falling over each other to cut demand for petrol and diesel vehicles with steep car purchase taxes geared to output of CO2. French sales fell sharply in January by 13% on the back of new higher taxes. UK diesel car sales are well down over the last year thanks to higher VED and threats of more taxes and regulations to come. Germany is imposing bans on older diesels from entering various cities. The new EU Commission intends to make a frontal assault on CO2 the centrepiece of its economic and industrial strategy.

Even in the USA where the government does not share EU fervour against CO2 car sales fell last year. The industry is wrestling with the shift to electric, the more draconian environmental regulations, higher taxes and a strike by many buyers not persuaded by the new ideas.

On top of this a new generation of urban dwellers doubts they need to own a car, whilst some look forward to a future when many more will hire a car when they need it, slashing the number of cars required to sit in the garage or in on street parking for most of their lives.

It is unusual for governments to set out to damage a big industry like this in quite such a concerted way. It is even more unusual for the industry to accept it and to collaborate as freely with the demise of its existing products and method of working. I find it odd the industry in the UK lobbied so hard against Brexit which was not designed to damage it, yet does not lobby against the many EU policies determined to close all factories making diesel and petrol cars as quickly as possible. It means writing off huge amounts of sunk capital and firing many workers. It is also possible the winners in the electric car wars will be new companies.

The small spike upwards in inflation last month is likely to be temporary. Inflation remains below the 2% target. The recent 20% fall in the oil price, and the fall in a range of other raw materials is likely to push the CPI figure back down again.

In the Euro area and in Japan the authorities are desperate to get inflation up a bit. The general disinflationary and deflationary forces worldwide remain a worry. The virus has struck China and made a temporary hole in her output. It has also hit international travel and tourism. Japan reported a fall in GDP in the last quarter of 2019 owing to her tax rise and is still weak owing to the effects of the epidemic. The car industry everywhere is reeling from the tax and regulatory attacks on diesel and petrol vehicles. US GDP is losing important output from Boeing with the current cessation of manufacture of what was the firm’s best selling plane, the 737 Max.

Meanwhile the media that spent three years boring us rigid with silly false scare stories about supply chains after Brexit say very little about the genuine threat to our supply chains from the big decrease in Chinese production this month. We are currently living on product made before the Chinese New Year, as it takes a month for product to reach us by ship. What happens next month?

The Bank of England will doubtless use the uptick in inflation and the stirrings in the housing market as an excuse to do nothing. The rest of the world is busy fighting the downturn with monetary as well as fiscal action. The Bank should join in. The government may face pessimistic OBR forecasts of the kind they specialise in. To the extent that they are sensible, based on the big world slowdown, the problems in  the car industry and the effects of the virus, they need to be offset by positive action.

One of the follies of the UK system is it is usually pro cyclical. When a downturn or slowdown hits, forecasts show revenues falling and spending rising, so the demand goes up for  spending cuts and tax rises. Instead policy needs to seek to offset any slide to low growth or no growth.

Yesterday the government released more details of the new Immigration system it plans to come into effect on 1 January 2021 when we are finally out of the EU Implementation period.

The aim is to reduce numbers coming to the UK by preventing people coming to the UK to look for a low paid job, or coming to the UK to take up a pre arranged UK job at a low salary. This should make quite a difference to numbers which in turn will take some of the pressure off social housing and public service provision.

The points system will require an individual to have 70 points. 50 points are awarded for someone who can speak English, has a job offer and some skills. The additional 20 points come from appraisal of skills, qualifications, salaries and professional training. Speaking English will be a requirement for all to meet.

There will be clear routes for new NHS staff to be recruited and granted an NHS Visa, for students to come to Universities on a Student Visa and for top talent in science and maths to get easy access.

Anyone under the general scheme must have a job paying more than £25,600 a year unless they have a job offer in a field identified as a shortage area where special temporary factors may apply.

This looks like a good improvement on open borders under the EU scheme. Employers will have to pay a bit more to attract local talent. They need to spend more on raising productivity to justify better pay. This can be done through better training and or through investment in computer and machine power to raise output per employee.

Like some other media driven campaigns, the anti global warming movement is being damaged by its share of  hypocrites. Some   grandstand on the issue yet live their own lives ignoring the imperatives they set for others.

It is most important that those who lecture the rest of us to change our lifestyles  to lower our carbon footprint show us by example how to do it. It is true that Miss Thunberg’s supporters and funders have been very keen to show she will use trains and sail boats , though it has led to questions about how realistic it is to sail across the Atlantic and how green it is to need so many people to support one traveller’s journey.

Others in government and the business world seem to think the rules should not apply to them. Attending important environmental or business conferences apparently justifies international jet travel and chauffered cars whilst telling others they should not take a plane for a holiday and should leave the car at home. Nor should we regard diesel trains or even electric trains fed by the general grid with fossil fuel power as necessarily the answer. Trains with few passengers may be a high carbon way of travelling. The idea that carbon dioxide emissions should be the prerogative of those able and willing to pay premium prices for their comforts is not a good way to promote the cause. Many of the green answers are higher taxes on normal behaviours for personal transport and domestic heating, which the rich can afford.

There is also the position of some countries that talk the talk on cutting carbon dioxide but do not cut their output in the way the UK has done. China for example buys into the problem yet keeps on increasing its own carbon dioxide output. It has been able to use the argument that as an emerging economy it needs leeway to increase its use of fossil fuels. Now it is better off and more successful surely it should ask itself if its conduct conforms with its concerns. It opens new coal mines and is very reliant on fossil fuels for its industrial activity. It is the largest source of manmade CO2 in the world. Germany closer to home and much richer than China also is a heavy user of coal and gas to generate electricity, and a big user of fossil fuels in homes and factories for heating and power.

There is also a question of whether it works well enough to sell pardons in the form of offsets . There is now a market in various assets and activities thought to provide some offset to more carbon dioxide released into the atmosphere, which again allows those with the money to continue with fossil fuel comforts whilst paying for an offset.

I do not wish to publish personalised attacks on named individuals in reply.

Since 2008 the Maastricht EU Treaty rule that state debt should not exceed 60% of GDP has governed our economic policy. It did not do so before Labour’s big build up of debt because we were below the ceiling.

Three Chancellors of very different views and ambitions, Messrs Darling, Osborne and Hammond all accepted Treasury and legal advice that state debt as a percentage of GDP had to drive policy. They battled first to get the annual deficit down to the Treaty ceiling of 3%, and then took it down more to get debt as proportion of GDP down.

Pro EU people often argue the UK did not have to do this because we were not Euro members. This is untrue. It is true we did not face fines for non compliance, but we were bound by Treaty rules and the UK state always accepted the discipline. Every year Parliament held a debate on our compliance. Every Red Book and OBR report included a report on progress with hitting the debt targets as a central part of economic policy.

It was bizarre to hear Opposition MPs condemn the budget stance as austere whilst insisting we stayed in the EU and obeyed its Treaties, as the Maastricht rules were at the centre of the policy.

Now we are out the new PM and Chancellor are right to expunge the state debt rule from our economic policy. Current levels of UK state debt are not too high. The UK can borrow at 0.6% for ten years, showing markets have no worries about debt levels. They supply affordable debt.

The Maastricht rules did not allow us to use the true figures of state indebtedness which should be net of the one quarter of outstanding state debt which the state has bought in and owes to itself. Adjusted for this our debt to GDP ratio is around 67%. This is low by international standards, well below Japan, Italy, Germany, France etc. The Maastricht rules are right to make Euro area states include State debt the ECB has bought in, because of course a Euro state does still owe that debt to an outside party, the ECB. The UK owes money to the Bank of England which it wholly owns.

UK Economic policy should be geared to growth and low inflation, not to state debt levels as the main target.