Some  people as they reach retirement come to see their pension savings as a con. At the top end they saved when they were on low incomes, receiving modest tax reliefs, only to find in later years they will have to pay higher tax rates to get their money out. Some very successful people will find they have saved too much and now get caned by the new tax system above the lifetime limit.  Some on lower incomes will find their pension savings have not bought them much extra pension. At current annuity rates you need around £20,000 of savings to get an extra £1,000 pension a year. All will find that current low interest rates and  past costs of running the pension scheme leave them worse off than they hoped.

I warmly welcome the Chancellor’s proposal to give people more freedom to decide what to do with their pensions savings where they have defined contribution funds. It is far from satisfactory that people are made to buy an annuity  when rates are low and returns poor. The state seems to be saying that it regards people’s savings as in some way the state’s money, to be controlled for people.

In recent days numerous regulators and socialists have emerged from the woodwork to tell us what they really think of us. Apparently they do think left to our own devices we will behave irresponsibly, blowing our money on fast cars and cruises, instead of drawing down our pension savings over the years of retirement in an orderly way. Some even say that as we have received tax relief on pension savings the state has every right to decide how we can spend them. They clearly do not understand that the tax relief on pensions is largely a tax deferral, not a tax break.

I make this prediction. There will be very few people if any  buying a Lamborghini from  their pension pot. Most will have insufficient money, and the overwhelming majority will be far more sensible with their money.

I also say this. By what right does someone rule out any way that a person might end up spending the money they have saved? If someone was told that they had  only a few months to live, and they had saved substantial sums over their lives, who would begrudge them buying the car of their dreams or the holiday of their lifetime before death? People are usually better judges of how to spend their money than is the state.

The ending of the compulsory annuity purchase was one of the best things in a budget for many years. I will be pleased to vote for it, and to defend it. Those who think the state should control our savings belong to that school of thought which thinks that we are all on pocket money from the government. What a ghastly world to live in if we got to that position. Why then would people try harder or work longer hours, if the government decides what you earn and how you spend it? The old communist jibe was “the government pretends to pay us, and we pretend to work”. That’s what kept them in poverty for so long.

 

 

Yesterday I debate the motion

 

“Excessive and unnecessary environmental legislation and regulation is seriously damaging the UK’s economic gr0wth”

before an audience of environmental lawyers and others at Simmons and Simmons. I will put up a video of the exchanges when it arrives with me.

 

Crimea is now part of Russia. The EU and the USA should understand this simple fact.  Russia has acted illegally and in ways which offend the West, but Mr Putin now has the Crimea under his control.

Imposing some sanctions retrospectively in a fit of pique makes the West look weak and is a kind of self harm. It looks like someone trying to play cricket in a glasshouse. The sanctions are not going to get Crimea back in the fold of the Ukraine.

The West should believe in democracy. That means we should have worked with the Ukraine for a new election to find a President of the Ukraine who could speak for all and hold it together. That means we should have helped the Ukraine organise a legal referendum on the future of the Crimea so they can settle their own future. Instead the West allowed or encouraged the overthrow of an elected President without an early election to replace him, and condemned the referendum in the Crimea as illegal without having a positive way of letting the Crimea have its say.

In the UK defenders of the Union in the Union Parliament have given Scotland the right to a voice on their future, showing the EU how these things should be handled. Identity and loyalty are important emotions in politics. Unfortunately elsewhere in the EU there is a determined attempt to stifle popular opinion and distort or change loyalties. The EU and the Spanish state are against Catalonia having a vote on its future. The EU and the Italian state are against Venice and the Veneto  having a vote on its future, though an unofficial one is currently underway. The EU and the Ukraine have been against the Crimea having a vote on its future, and partly as a result they have lost the Crimea thanks to Russian actions which the West  condemns but cannot stop.

If the West thinks Mr Putin might be emboldened to do the same again elsewhere, then the West needs to make clear in advance their disapproval and take the diplomatic and defence actions necessary so next time they have some control over events. The rest is just huffing and puffing. The best defence against the splitting of nations is good democratic government in each state that can command the loyalty and agreement of its peoples. Seeking to suppress or deny the existence of demands for self government cannot be the right way ahead.

 

There is a big gap between what the experts say and what is going on. The experts say we are cutting the deficit primarily by cutting public spending. When people hear that 80% of the task of deficit reduction comes from spending cuts, they think that means public spending is actually declining in cash terms.

Starting with an inherited deficit of £160bn people would think that meant cutting £128bn off public spending to remove the deficit, with the remaining £32 bn coming from tax rises. Of course nothing like that is happening, as all elected politicians agreee you cannot cut that sort of money out of the budgets given the importance of many public services.

Instead public spending will go up every year in cash terms during the period of deficit reduction. They used to say that it would be cut in real terms, though the figures for the first three years of the programme of deficit reduction show there has in practice been small real increases in current spending each year.  Far from causing low growth or no growth as the opponents of austerity have argued,  public spending has made a positive impact to total output and incomes since 2010. Within the spending totals welfare, debt interest, overseas aid and health take a rising proportion, so some other programmes are experiencing cash cuts.

So how is the deficit being brought down? It is coming down for one simple reason – tax revenues are rising. The idea of the gradual programme is to make the task  easier, by allowing more tax revenue to arise naturally through the growth of the economy. Where the government has tried higher tax rates on income and capital gains it has actually damaged the revenues, not increased them. If any government tried to reduce the deficit quickly through a series of tax rate rises, considerable damage would be done to the economy and tax revenues might fall.

Growth has always been the main requirement to help correct the large imbalances in the economy without pushing it into a deep recession. Growth results from change to the economy, with more successful and more helpful activities increasing. We need more exports, more homes, more domestically produced goods to replace imports. The budget seeks to help bring that about.

 

               There is some good news in the budget. The increase in the ISA allowance for savers to £15,000 and the ending of the disticntion between cash Isas and the rest is a welcome simplification with more generous tax relief. The forthcoming Pensioner bonds from National Savings may well offer a reasonable and secure income.  The offer of much greater flexibility of what to do with your pension saving is also welcome, though the details still need to be worked out in some cases.

              Total public spending at 42.5% of our national output  next year  is still too high a proportion of the total economy, but is down from the excessive 47.5% of 2009-10. The aim is to get it down to 38% by 2018-19.  Total spending  rose this year in real terms.  As expected, the Tax threshold was raised to £10,500 for next year.  There was also a small increase in the 40% tax threshold.

               The Chancellor recognised the need to do something to cut energy prices. He himself highlighted the dangers of UK energy prices twice the US level, and has extended and improved a scheme to subsidise high energy using industries for their energy costs. The better answer must be to find and produce much larger quantities of cheap gas for ourselves. The Chancellor is offering tax assistance to North Sea oil and gas developments, and states that he supports shale gas extraction. The Uk still remains way behind the US in finding and using this new hydrocarbon source.

             The Red Book warns that “Energy intensive Industries pay almost  50% more for their electricity than they do in France, and the cost to business of policies to deliver low carbon energy infrastructure  is set to increase by about 300% by 2020.” This is a massive threat ahead, and should persuade the government to demand changes to EU energy policies so that the UK can opt for cheaper energy which could help power an industrial revival. The goverbnment is offering £500 m in subsidies a year to energy intensive industries from 2015-16 to compensate them for dear green energy, subject to EU approval.

               The long term reforms to achieve a low rate of Corporation Tax now give the UK a competitive advantage with a 21% tax rate. The Chancellor added to that a £500,000 investment tax allowance for business.

                 The main figures in the Budget are little changed from the December Statement. Growth is forecast to be a little higher, unused capacity a bit lower. The Budget concentrates on trying to assist industry to invest, savers to save, and individuals to enjoy some real growth in income.

 

We know most of the main numbers of the Budget. These days they are given to us in the late Autumn (December) Statement, with full forecasts from the OBR. The revisions to these this March are not likely to be large.

The Chancellor may be able to anticipate a bit faster growth, and therefore more growth in tax receipts than planned at the end of last year. He will doubtless wish to increase the tax threshold as much as he dare. He might even allow some of the benefit of this  to accrue to 40% taxpayers as well as to 20% taxpayers.

Growth will come from most parts of the economy. Current public spending contributed with a real increase of 1.7% in 2012, and  a further real increase of 0.7%  in 2013, according to the OBR. They anticipate another 0.4% increase in real current public spending in 2014, with a good pick up in government investment as well that year after  cuts in previous years.  Public borrowing was forecast at £111bn in 2013-14, and at £96bn next year. There may be some improvement in those numbers thanks to faster growth.

There will be various schemes to promote extra growth. We have already been told of the planned new town at Ebbsfleet. This was the subject of my publication “Thames Reach a new city” which made proposals for the brownfields near Ebbsfleet. We are told that Help to Buy money for newly built homes will continue until 2020 if there is a Conservative government elected in 2015. I would expect more tax relief and assistance for companies taking on extra labour, especially of younger people.

The Office of Budget Responsibility may well have to revise its forecasts again to catch up with the reality of faster growth now coming through very visibly. There may also be rises in real wages before the end of the year, after the slump  in people’s spending power in 2008-10 and the continuing stresses on real incomes since.

 

THOSE SPENDING “CUTS” IN FULL

Total Managed expenditure

2012-13       £701.9bn

2013-14      £717.8bn

2014-15       £730.5bn

2015-16       £744bn     (OBR figures Autumn 2013)

 

            During the Labour years I responded to their Barker Review into housing supply. That government identified four major areas for housing growth – Ashford, Cambridge, Milton Keynes and the East Thames corridor.

            I agreed with them about the fourth on their list. Fresh from the success at encouraging major development in London Docklands, extending the renewal eastwards seemed a natural idea.  I proposed a new city called Thames Reach to rise between the M25 and the Crossways Park in the west, and Gravesend in the east.

            Piecemeal developments have proceeded in this area, reclaiming land and  filling in old quarries. Now we learn that the Coalition government wishes to turn the Ebbsfleet area into a garden city. That implies lower density developments with good public spaces and a mixture of sizes and prices of homes.

            There is a substantial shift going on in our country from north to south. In parts of the north we have a surplus of accommodation and weak house prices. In   most of the south we have a scarcity of housing and  high and rising prices.  All parties would like to find ways of stimulating more development in the north, and relieving some of the pressure on the south. The problem is the economy of a Cambridge or a Milton Keynes is taking off, creating many more jobs and offering a good market for anyone wanting to set up in business. Just as Liverpool grew and grew  a hundred years ago thanks to the dynamism of its dock based activities, so today Cambridge grows and grows owing to the success of its knowledge based activities.

      We need both to reinforce success, ensuring lack of transport, homes and other infrastructure does not stifle the fast growing parts of the country, and to find ways of harnessing that success to more parts of the country. We will need a new garden city at Ebbsfleet and more besides in the south. We also need more triggers for private sector led growth in  the big northern cities. Meanwhile Wokingham is offering builders scope to construct 12,500 extra homes just in the one relatively small district.

 

Some of the foundations of modern UK political arguments are absurd spin that does not stand up to any intelligent analysis, yet passes for political debate.

Take the often repeated phrase that divided parties do not get elected to government! The Thatcher Conservative party had a long running battle between Wets and Dries, with endless briefing against the Prime Minister,  yet it won three elections in a row. The Blairite Labour party was scarred by a permanent public feud between the Chancellor and the PM, with the party split three ways between the left, the Blairites and the Brown followers. They found plenty to disagree about but also won three times.

Or take the ridiculous statement that if we try to negotiate a new relationship with the EU or simply vote to leave, we will lose 3 million jobs. This is based on the crazy notion that overnight we would lose all our exports to the EU because they would want to stop all trade with us, yet they export far more to us than we export to them. The German Finance Minister has already said that if the UK leaves Germany would want and need trade arrangements so we could carry on trading as at present.

Then there is the strange notion that more and more matters of public policy, often very contentious, should be given to independent Agencies or panels of experts, as if they could somehow spirit away the genuine divisions of opinion and do a better job than accountable Ministers who have to listen to public opinion or lose their office.

I have dealt with the dangerous idea that a so called independent Central Bank can give us a stable economy with growth and low inflation. What part of the experience of the last eight years did people not understand? I have tried to explain again that you cannot have an independent Central Bank in a democracy.

I will also deal with the difference between leadership and followership, examining  how you can use opinion polls and media lobbying  intelligently to try to improve your understanding of the public debate and needs. Alternatively  you can slavishly follow them and end up with an erratic and often unsuccessful policy  based on the twists and turns of papers and media outlets seeking variety and novelty.

The lecture is being filmed so I will try to post it here afterwards.

 

 

The UK has had kept returning to the idea that there is some independent professional way of managing the economy free of political dispute or Parliamentary disagreement. Like moths to a flame, this has usually proved destructive to the jobs, incomes and businesses of our country.

During my lecture on Monday I will return to this theme. The UK was mesmerised after 1964 with the idea of German economic performance. Many decided that one of the central differences which delivered this better result was an “independent central bank”. The UK first tried to copy this by linking our currency to the German one. This policy led to a spectacular failure on the markets and a nasty recession.

More recently it led to the UK adopting the underlying idea, and seeking to have its own independent Central Bank. This same Bank presided over a huge build up in credit and risky bank balance sheets. It followed this up by starving the markets and banks of money, leading to the largest banking collapses for over a century.

The truth is you cannot have an independent Central Bank in a democracy. Someone has to appoint the Governor and the Board of the Bank. Someone has to establish the powers of the Bank, and someone has to set the Bank its tasks and targets. All that rightly remains the work of Parliament. So Parliament remains sovereign in these matters. You can have Parliament dismissing the Bank officials or changing the Bank’s powers if it ceases to please. You cannot have the Central Bank dismissing the elected government or changing the  government’s powers if they no longer like the government. That remains the electorate’s job.

The German model was  no more independent than the UK Bank has proved. The German Bank gave good advice on the hasty and badly drawn up Ostmark DM merger and was overruled. Even more amazing, the so called Central Bank whose main task was to defend the German currency was then overruled with the abolition of the currency itself! Some independence then!

 

When the main political parties agree about a policy or approach to a problem, taxpayers should start counting their spoons. Far from  representing some new higher level of democracy, it stifles choice, prevents intellectual challenge to the policy and often ends in expensive tears. Consensus can be a conspiracy against the public or a stitch up  by a professional vested interest.

On Monday I have been asked to give a Speaker’s lecture in the  Speaker’s Dining Room  at the Commons.  One of the issues I want to tackle is the enthusiasm for consensus and the wish to find more and more areas of policy and administration that can be given to experts to decide in place of Parliament and elected Ministers.

The public does sometimes say when  polled they wish the main political parties could get on better together, and work in the public interest. The idea of a finding a common wisdom is attractive. Yet the public speaks with forked tongue on this. When wanting to see Parliament in action, people usually want to see the most party and conflict riven part of the week, Prime Minister’s Questions. There is usually little enthusiasm to sit through a debate on a subject where the main parties all agree.

The same polls that say we want more consensus also can say the public want their MPs to stand up more for them against the government, the very opposite of building consensus around what the government is  doing. One of the privileges of being a democratic politician is you can choose which of the many  and sometimes conflicting views the public holds to advance yourself. Your judgement will then in turn be judged. There is rarely a single overwhelmingly held monolithic public view which you cannot gainsay.

I will explore in the lecture a couple of crucial ideas that have been consensus ones that have gone horribly wrong. The first was the Exchange Rate Mechanism. The second is the idea of an independent Central Bank. which helped give us the massive Boom and Bust of the last decade.

So spare us consensus. Give us choice. Spare us a rush to rely uncritically on external experts. Give us forensic analysis and loads of commonsense. That is what Ministers and MPs are meant to do – to use, criticise and judge external advice, not to give in to one strand of it.