Yesterday’s figures for September 2014 and the first half of the 2014-15 fiscal year show spending and borrowing on the rise.

Social security benefits are up by 5.4% on September a year earlier, despite the good progress in getting more people into work. Other current public spending is up by 3.1%. Capital spending is up by 42%. As a result of this substantial increase in nominal and real public spending, total borrowing so far this fiscal year is £58 billion, £5.4 bn more than for the same period last year.

VAT revenues are up by 4%. Capital Gains Tax revenues remain very depressed, owing to the higher rate this government has introduced. It is running at around half the level of the pre crisis peak in the last decade. PAYE income tax revenues are up, but so are tax credit expenditures. Overall tax on income and wealth shows no gr0wth at all. The combination of a good policy of taking people out of Income tax at the lower end, and the self defeating policy of trying to hit people with higher rates at the upper end has meant no rises in receipts.

Taxes on alcohol and tobacco are also failing to produce extra revenues. Petroleum Revenue Tax effectively disappeared in the last quarter. The government raised just £18 m in three months as oil prices fell and North Sea output dropped.  Our EU contributions so far this year total £5.7 billion, and public sector pensions this September at £3.5bn were 28% higher than August or October  last year.

In the remaining months of the year government needs to get a grip on its spending, and revisit its approach to taxing so it gets more by charging rates people will pay.  A  20% Capital Gains tax should bring in more money, for example.

Labour’s lack of ambition in going for a core vote 35% strategy is matched by the dangers of making the NHS the centrepiece of that approach. So far the more they mention the NHS the more their vote stays in the low 30s.

The first idiocy of it is the General Election in 2015 will not be about the NHS in Scotland or Wales. Health is a devolved issue, so what UK Labour says about the NHS is irrelevant for how the health service is run in Scotland, as Mr Brown’s vow made clear. As Labour needs to win back support from the SNP in Scotland, they need a UK appeal on Union policy to win  in May 2015.

The second danger is that Labour runs the NHS in devolved Wales, so people can compare and contrast the Welsh NHS under Labour with the English NHS under the coalition. The comparison is far from helpful to Labour. In  the border areas Welsh patients come seeking healthcare in English facilities. The financial settlement in Wales from the Assembly has been less helpful than the English settlement from Whitehall. The Welsh NHS has worse problems with the quality of care and waiting times than the English.

The third error is in supposing that most voters will buy the lie that a Conservative government would privatise and damage the NHS. This is the same lie that Labour hurled against Conservatives during the period of their wins from 1979 to 1992. It did not stop Conservatives  winning then. Nor did that government privatise and destroy the  NHS as Labour claimed. The Conservatives just kept putting more money into the NHS, as the Coalition has done. Ironically it was Tony Blair who decided to privatise some treatments, in a bid to speed up patient care and cut waiting lists. All 3 parties have long accepted the use of private sector contractors and suppliers  in the property and hotel sides of the service, and for the purchase of drugs and medical equipment.

It will be interesting to see if Labour continue with this ill judged pathway to the Election. Every time the electorate want to talk about immigration, Labour  does another NHS story. Every time people want to talk about the impact of the EU on our borders or our energy bills or our criminal justice system, Labour says that is just a few Tories or UKIP  banging on about Europe. Labour says and offers nothing on the EU. Everytime people talk about  jobs, taxes and the deficit, Labour just talks about the minimum wage and attacks bankers.

They may discover that seeking to cut yourself off from much of the mainstream conversation by always visiting a hospital or finding some mistake with the English (but not the Welsh) NHS is not a good way to boost your vote. They also need to remember that most adults under  70 years of age are fortunately normally healthy and not therefore personally preoccupied day by day with the NHS. They want to know there is free treatment available should need arise, but no main party in the UK wishes to take away that insurance.

Mr Barroso says more UK politicians should speak out for UK’s  membership of the EU. They do not, because our current membership undermines  our democracy and damages  our economy. The EU burdens us with heavy costs, a high tax bill and dear energy. It is left to an  EU official  to lecture us on why we should stay in. The more they lecture us, the more UK voters will be suspicious of the EU and the large bills and instructions it imposes on us.

The so called case to stay in is based on three errors. The first is Germany and France would not sell us their goods any more if we left. Germany has of course confirmed they would want continuing access to our markets so we would keep access  to theirs. The second is western Europe would be fighting itself with no EU. It’s not even worth refuting that nonsense.  The third is the UK would have no influence in the world outside the EU, when we would be able to speak for ourselves again in the main world institutions  instead of having to depend on the EU to do it.

I read Owen’s speech and attended the dinner to discuss how we should carry work forward on new measures to give us cheaper energy in the UK.

He made some important points in his remarks. He did not doubt the science of greenhouse gases, but did ask why climate models have failed to predict recent temperature trends. He did not even propose that governments should ignore the impact of energy production on the environment. Instead he illustrated how EU/UK policy is neither delivering cheap energy nor getting carbon dioxide emissions down in the way the dash for gas in the USA is doing.

I am glad he has now decided to speak out. Some criticise him for not doing so when in government, and for voting for numerous EU measures which this coalition has been required to put through under the current terms of our membership of the EU. I do not share this view. I think we Eurosceptics and climate change sceptics do need representation in the cabinet and have to accept that to stay in a cabinet of a member state of the EU you do have to make compromises whilst arguing against the worse abuses of public policy as you see them.

I know from private conversations with Owen when he was a Minister that it was always difficult for him because he fought battles from within that needed fighting. The story of Owen’s tenure of the Environment office is the story of EU domination of parts of our government and the need for change in that relationship. We cannot now have a European Commissioner who is a long standing public Eurosceptic, and it is difficult to have an Energy or Environment Secretary who disagrees with the fundamentals of EU belief and policy in these important areas. That is why we either need a new relationship or need to leave the EU.

When the history of the EU comes to be written, after it has broken up, I suspect the disastrous energy policy will rank second after the economic and social damage wrought by the ERM/Euro to the jobs and living standards of western Europe. I stressed at the dinner my consistent belief that we need to have a policy based on competition and the drive for cheaper energy. The current policy is stripping much industry out of the EU, as aluminium, steel., ceramics, glass and other heavy energy using industries go elsewhere. It is also a cruel policy for people on low incomes, who have to spend a disproportionate part of their money on keeping warm and fuelling domestic appliances.
When the UK joined the EEC against the wishes of some of us we were told that it was about creating greater prosperity for all. It turns out to be a wealth and income destruction machine for many, especially for  those who have signed up to the Euro, and bad news for the many who now have to face such high energy bills.

Readers have asked me to update them on the debates about QE. The UK is not adding to its stock of £375 bn of created money and bond purchase. The US is just about to end its latest programme of money creation. Japan is well advanced with another very large programme and is likely to continue for the foreseeable future, as inflation (ex tax increases) is still low. The Euro area is not undertaking formal QE, but is seeking to increase liquidity by the ECB buying loan packages and bonds from commercial banks.

Before the UK crisis hit in 2007 (Northern Rock) and 2008 (RBS and HBOS) I urged a different policy towards the banks. I wanted the Bank of England to lend as lender of last resort . I urged them to supply more liquidity to a very damaged inter bank market. They chose not to, citing moral hazard. As a result they allowed major banks to collapse. The FSA banking regulator switched from being too lax in its standards of cash and capital to being too tough for the circumstances,  increasing the damage done.  This was a predictable tragedy which this site chronicled at the time and warned against in advance.

I also opposed the pumping of large sums of taxpayers money into commercial banks to provide new capital. I recommended controlled administration once they had helped bring the banks down. The shareholders and bondholders rather than taxpayers should have taken the hit. The authorities should have lent money to the parts of the commercial banks they needed to support and preserve whilst they found their own new arrangements for owners and capital. This approach has now been adopted for future crises through the so called living wills, a type of controlled administration.  I wanted to see radical changes to the numbers of banks and the shape and performance of the banking industry by a market led reorganisation and recapitalisation of the commercial banks that were in trouble.

If this had all be done in a timely way the Bank of England would have financed the system by shorter term loans for a period and we would have seen a competitive sensible banking  industry emerge much more rapidly. We would not have needed QE.

QE was required because the Bank did not keep the banking markets liquid and because the badly damaged commercial banks in the system meant they could no longer finance a normal level of economic activity and modest growth. QE did provide some relief to a very troubled market by releasing cash into the hands of people and institutions who previously owned government bonds. This money then found its way into the commercial banking system and averted an even larger decline in the money supply with worse recessionary consequences. Much of this injection in the US, Japan and in the UK did not prove inflationary for the simple reason the commercial banks needed the extra deposits and additional cash and did not lend this money on or gear it, which would have proved inflationary. The only caveat to that comment is in the UK QE may have been a reason sterling devalued, which did give a one off boost to inflation. In Japan a large devaluation of the yen did not have similar consequences as it is an economy less dependent on imports.

I see no need for either the USA or the UK to undertake any further QE. Both have reasonable recoveries. Even with the poor performance of the Eurozone and slower worldwide growth, most forecasters think the UK and US will continue to grow at a  reasonable pace this year and next. Japan needs to fix its commercial banks more successfully. Its massive QE programmes achieve very little by way of extra output or inflation.  I will study the Eurozone in more detail in a later post.

QE has adverse side effects. It damages the returns to savers and grossly distorts the price of financial assets.

This week one of my Parliamentary colleagues in a private meeting (not the NTB lunch!) summarised the problems with Mr Obama’s coalition in such scathing terms that quite a few MPs present just laughed in nervous agreement and changed the topic with the Minister present. Many of the MPs who would normally agree with the USA and be willing supporters have grave doubts about the current war.

The first concern many have is where are the boots on the ground to win this war in a timely way? Are the armies of Iraq and the Kurds able to defeat ISIS with just some air support by the west?  How long will it take the west to train and arm the Iraqi forces to ensure victory? What guarantee is there that  rearming the Iraq forces will not lead to more loss of good US equipment to the forces of ISIL?

The second concern is what is the future for the Kurds. If their army is successful in the north will it then hand over to the Iraqi forces, go home, and accept Iraqi rule? How hard will the Kurds push their claim for an independent state?

The third is the role of Turkey. Turkey should be one of the USA’s prime allies in the region, as a member of NATO with substantial ground forces, planes  and airbases. Turkey’s recent  intervention has been against the Kurdistan Workers party. Turkey remains very nervous about helping the Kurds, and ambiguous about the whole coalition strategy.

The fourth is how do you define the ISIL enemy? It may be clear in the areas ISIL has seized in Iraq, though even here identifying and killing or capturing every ISIL soldier is an extremely complex and difficult task as they are embedded in the local community and have taken over many flats and homes. In Syria it is even more complex, with the need to distinguish ISIL fighters  against Assad from so called moderate opposition fighters against Assad. The coalition is not seeking to defeat a field army in uniform willing to come out and fight conventional battles which the west could win.

The fifth is where will the political leadership come from in Iraq to unite the country, offering fair and peaceful government to Sunni, Shia and Kurd that each community accepts? How do more deaths and more destruction of property assist the task of reuniting the country? What does victory look like, and when does politics take over again from war? In Syria where is the political leader or coalition of parties that can take over power and unite that country behind peaceful democratic government?

The sixth is how do you prevent any military success against ISIL merely displacing the centre of their activities? What relationship does ISIL have with some of the armed bands that now roam in Libya? Where else could ISIL forces go for cover and assistance?

The seventh is to learn the lessons from western intervention in Libya. The democratic government there is now cowering in Tobruk, unable to venture into much of the rest of the country and unable to enter the capital city. Successful  military intervention by the west got rid of the dictator, but local politicians were unable to establish their authority and construct a government that works. Do we now know how to get a better outcome in Iraq and Syria?

In an April survey on the “Future of England”  (You Gov, sampled English voters)  62% wanted English votes for English issues, with only 12% against. ( 5 to 1)

42% of voters also favoured giving control of the majority of taxes raised in Scotland to the Scottish Parliament, with 25% against.

Many people in England like the idea of more fiscal devolution to Scotland, on the basis that Scotland would then be responsible for raising much more of the money itself which it wishes to spend.

I chair the NTB group of about 100 Conservative MPs. Formed in the 1980s to support  Margaret Thatcher and her  famous statement “The Lady’s not for turning”, the Group has evolved over the decades to offer frank advice to Ministers and Shadow Ministers in private, and to work together from time to time in public with campaigns that matter to us. The Group today as with Margaret Thatcher is there to support Conservative Ministers trying to do difficult but sensible things that can improve our country and its government, and to be candid friends in private where things are not working as we would wish.

We hold either a  working sandwich lunch, or a  working  buffet dinner once a month. We usually invite a Minister as guest, and raise matters about  their departmental policies and activities with them. Sometimes we invite an interesting non Ministerial speaker. Nigel Lawson came, for example, to tell us of the work of his Global Warming Policy Foundation,which most of us support. Occasionally one of us leads a discussion of what needs to  be done next.

We do not inform the media of these events, as we wish to have good private conversations with Ministers. They need to know they will not read about it next day in the papers so we can have more wide ranging and honest discussions. I was therefore surprised to learn that on Wednesday the NTB had been invited to lunch at Downing Street for immediate topical reasons. This is simply untrue. I had invited the Prime Minister some time ago to be our guest in the Commons for a working sandwich lunch and he had agreed. The invitation was before recent by elections were in the air and was not about them.

I am grateful to the Prime Minister for the time he gave us  and for his attention to a number of issues where we wish to see changes and improvements in policy as we move from Coalition government to Conservative manifesto. I intend to keep silent over what was said and how the meeting went, as I remain strongly of the view that it is better if these exchanges between colleagues are done in private.In this hectic media world any critical comment or disagreement is blown up out of all proportion, as there is the absurd idea that members of a party always have to agree with one another.

I note that the UKIP supporters who write into this site who have in the past picked up on a very misleading account of a private meeting I attended with the Chairman of the Conservative party, have not come forward with comments on the selective reports of the NTB lunch with the Prime Minister as they clearly see no party advantage in quoting what it is alleged some of my colleagues said at this latest meeting.

Gordon Brown has changed his mind on English votes.

In the  1980 book ‘The Politics of Nationalism and Devolution’,  (which he co authored with H Drucker)Gordon Brown accepted that on one of his two possible models for  future  devolution (and the one he favoured for Labour) Scottish MPs would be prevented from voting on English or Welsh domestic matters as the quid pro quo for devolution to Scotland of  tax-raising powers.

These are the words from page 127 on the future:

“Some form of taxation power could be devolved if the price were paid. It is scandalous for the British Treasury to deny that it is capable of devolving any powers to levy tax when so many other countries do it. Most of all, a revised Scotland Act could embody some form of the ‘in-and-out’ principle. Under such a principle the remaining Scottish MPs at Westminster would not be allowed to take part in the proceedings of the House when it was debating England or Welsh domestic matters. The ‘in-and-out’ principle ought to be attractive to Conservatives since it would ensure them a semi-permanent majority on most social issues at Westminster – no small prize. Labour remains formally committed to devolution and may be expected to consider a plan along these lines in the future.”

So now we know that he and his co author once saw as a possible solution to the problem of devolution in Scotland offering some fiscal devolution. The authors  saw the justice of England’s case, and saw no impediments to devolving  tax raising powers to Scotland as long as there were also English votes for English issues

In my participation in debate  with him on Tuesday   I challenged his statement that Conservatives  had not alerted the people of Scotland to the English votes issue before the referendum, and so raising it now was unreasonable. I pointed out that I deliberately  raised it in Prime Minister’s Questions shortly before the Scottish vote, which got a lot of media pick up at the time. I also reminded him that English votes for English issues has been Conservative party policy since the 2001 Manifesto. We have given 15 years warning of the need to do this!

It is fascinating to discover he too had been thinking about the merits of this case in the context of fiscal devolution when he was a Politics lecturer at the Glasgow College of Technology.

Yesterday was an acrimonious day in the Commons. The debate on devolution and new settlement for the UK after the Scottish referendum brought out some strong disagreements.

The SNP accused the 3 main Union parties of bad faith. They said the promises were not being delivered, though all 3 parties confirmed they intended to do so. The SNP said we should only be debating Scotland, yet the debate was a general one on devolution with many wishing to discuss the consequences for England.

The Liberal Democrats and Labour mainly argued against any immediate justice for England. They disliked English votes for English issues, oppose an English Parliament, and want to take many months of consultation and discussion before coming up with any proposals of their own.

The more realistic ones accepted that the North East referendum on regional government had been decisive , and agreed elected regional government is dead. So now they wish to pursue selective devolution to selective cities or larger councils. They had no answer to the question of who would fix England’s tax rate, or replied that the whole Union Parliament should still do that.

The SNP supported English votes for English issues, and were keen on maximum fiscal devolution to Scotland. Wales and Northern Ireland were unclear about how they would like to proceed.

I made the case for fairness for England. I will post my speech later today.