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.

 

        Mutuals have been muc h in vogue with all 3 main parties in the Uk in recent years. It is true that John Lewis has been trading very well. There is something satisfying about their model of staff participation in the success of the business which attracts both Labour and Conservative to them.

           However, when it comes to the financial sector both the Co-op and Equitable Life have shown a darker side to mutuals. Politicians need to learn from these bitter experiences that the mutual model can be both risky and  unfriendly to customers and employees alike.

           The mutual model has largely disappeared from the Building Society movement. There were too many small societies with insufficient capital. Some got into trading difficutlies and needed to look for larger partners. Others decided that becoming a for profit bank was a better way to expand their service and finance themselves in the future, so they converted willingly. We need to ask why this was so?

            One of the main weaknesses of a mutual is the absence of enough retained profit to give the business balance sheet streength. Mutuals often pay out too much to satisfy their demands of their mutual owners, leaving them weak should profits slump or assets fall in value. Well based banks and insurance companies need a good reserve to fall back on, and sometimes need the support of shareholders able and willing to put in new capital. Mutuals have neither of these safeguards.

               Mutuals can also lack the competitive edge and the close scrutiny of management that occurs in quoted PLCs. Equitable Life was so keen to pay out more to its policyholders that it made them promises it could not possibly fulfill. Its Board and management did not recognise this problem, and allowed promises to be made and liabilities built up over many years before the truth came out about its plight.

                    So too with the Co-op bank. Far from proving to have a superior moral model to that of the profit making PLC banks, the  Co-op Bank managed to build up a large portfolio of assets which were full of  problems. It has now had to make enormous write offs. To cap it all, it hired a CEO who wanted a huge salary, which was unpopular with many of the true believers in the Co-op approach.

                   We should beware of the idea that there is a moral superiority in mutuals when we look at two of the largest, Equitable and the Co-op. We should also recognise that their enthusiaism to pay out too much to co owners made them far more vulnerable to a downturn and to adverse conditions.

 

Mr Miliband sat firmly on the fence yesterday in his speech on a referendum. The bottom line, we were told, was a referendum would be unlikely between 2015 and 2020 if Labour win the election. The Mirror can say that means a vote is possible, and the FT can reassure business (just the Europhile kind of course) that there will be no referendum.

The problem with the policy is that it is based on a lie. It assumes no powers are currently passing to the EU, and that no powers will pass to the EU in the next Parliament. Why doesn’t Mr Miliband admit this is untrue? Is he ignorant, or deliberately misleading people?

Early this year our power to control the numbers of people coming to our country from Romania and Bulgaria passed to the EU. There was no referendum on that and Labour did not seek one. The EU has in recent years passed substantial legislation to control and regulate banking and financial services. Most of this work is now controlled by the EU. Mr Miliband did not seek a referendum on that. The EU is currently planning strengthened banking and market abuse legislation. He is not offering  us a vote on that.

The EU has just set out targets and policies for energy between 2020 and 2030, limiting the right of the UK to have its own energy policy. Mr Miliband did not ask for a referendum on that.

The Coalition has rightly opted the UK out of all the Criminal Justice measures of the EU. Mr Miliband has stated his intention to opt us back in to some of the most important ones, taking power away from the UK. He is not offering us a vote on that.

New countries may enter the EU in the next few years. Their entry will reduce the UK’s power of self government, as their citizens will gain many rights enforced by the EU. I doubt we will be offered a vote on that either by Mr Miliband.

The cynicism of the contradictory headlines in the Mirror and FT were well brought out by the Today programme yesterday morning. Underneath that deliberately spun set of contradictions is a fundamental lie. Power is being transferred all the time to the EU. Every new Directive and regulation gives the EU more power and the UK government less.  Mr Miliband has no intention of holding a referendum on it despite his promise.

 

Last  Saturday  I agreed  to debate tax cuts later in the evening with Danny Alexander on Five Live for about half an hour. As the evening wore on before the interview I was told it would be David Laws. He pulled out with a couple of minutes to spare. The BBC gave me a shorter interview as a result with no Lib Dem present to argue the case.

All that was most curious. It was the Saturday of the Lib Dem conference. Their big spin of the day was their gift of a higher tax threshold to the UK. Their false claim was the Conservatives did not want such a tax cut. Such a pity they would not come on and debate that question.

I do find the lie that we Conservatives did not want a tax cut almost unbelievable. A Conservative Chancellor has raised the tax threshold several times as a way of cutting taxes. Conservative MPs have voted for that tax cut. I do not recall any Conservative MP arguing against it or refusing to vote for it. I do recall many Conservative MPs voting against and speaking against EU matters which the Lib Dems and the system thrust upon us and whipped us to vote for, so it is not because we were whipped to vote for the tax cut that we voted for it.

Some Conservatives think raising the tax threshold is the best way to cut Income tax. Others think there may be better ways but will support raising the threshold if that is the only tax cut the Lib Dems will accept. Most other tax cuts have been blocked or argued against by the Lib Dems, including energy tax cuts.

Conservatives have wanted other tax cuts as well. Many of us think people at all levels of income are paying too much Income Tax, save for the rich who pay less than they might  because the rate is uncompetitive. We also think energy taxes, capital gains and IHT are all too high, but the tax raising Lib Dems do not agree and will not support action. The Lib Dems are always going on about raising taxes, and want a Mansion or London flats tax.

It’s most odd that the Lib Dems argue for higher taxes most of the time, spin they fought through a tax cut against the Conservatives, then will not turn up to hear their assertion questioned.

What would you like to see in the budget?

 

 I was pleased to see that John Humphrys agrees the BBC has shown bias and misunderstanding of the public mood on EU matters and immigration.

I would have been more impressed if today he had given a better and more balanced interview to the Australian Foreign Minister.  Instead he  first  attacked her for trying to stop deaths at sea through people trafficking, a policy many of his audience would support. Then he moved on to try to get her to stop the special relationship with the Queen and the UK  by querying the presence of the Union flag on the Australian one when again many of his listeners support it and are proud of it. I loved her answer when she said that sadly many Australians had been proud to die for what that flag symbolises.

He could make up for this misjudgement by inviting on a senior EU representative and giving them a really hard time about

 

high energy prices

youth unemployment in the EU

Mass unemployment in the Eurozone

their role in the current Ukrainian crisis

and the many other sins of EU policy which we in the UK dislike

 I somehow do not expect to hear that any time soon.  The BBC refuses the hold the EU to account for its many errors, bad laws, wasteful spending  and policy mistakes.

 

 

Yesterday even the BBC ran a piece explaining how the 6 million jobs in the EU chemical industry are at risk from dear gas feedstock for petrochemical production, and from dear energy prices generally. Though the interviewer could not resist trying to attack Ineos over Grangemouth, a plant which has so far been saved by US imported gas, nor resist trying to make it an interview about the Scottish referendum, he  did allow his business  guest to explain how three EU policies are deeply damaging to industry.

The first is the belief in green taxes. The second is the reliance on the dearest forms of electricity, especially wind. The third is the hostility to shale gas and the delays that has imposed in exploiting this new resource. As the representative of Ineos explained, US gas prices are now one third of the prices in the UK. The USA has embraced the shale revolution, whilst the EU has dithered and argued against it. The Middle East which has an abundance of cheap gas is also a large petro chemical centre. Its exports which have gone substantially to China may now divert to the EU as China is busily building her own petrochemical capacity.

If the EU and its so called single market are about retaining and increasing jobs, you would have thought the EU would draw up a plan to give the EU competitive energy and gas prices. Instead the EU spends its time drawing up regulations that ensure high and rising gas and electricity prices, the very opposite of what industry needs. Far from being a single market that can get our young people back to work and can enhance our general prosperity, the single market is becoming a regulatory conspiracy against enterprising Europe, designed to transfer more and more industrial jobs outside the EU altogether.

Germany’s BASF has recently stated they will placing most of their new investment outside the EU, as they no longer find Germany and the wider EU as competitive as non EU locations. When is the Commission, and the European Parliament, going to wake up to this job destroying reality?  When will the BBC follow up an interview with the businessman with an interview putting the Commission on the spot, accusing them of taking away people’s livelihoods?

 

We are a few days away from the results of the Crimea referendum. The EU and the USA need to think through what they will say and do if the Crimean people vote to join Russia and leave the Ukraine.

The current EU position seems to be that the referendum will not be legal or binding on the Ukrainian government, because the Ukrainian government did not agree to it. There are several difficulties with taking this stance.

The first is that the government itself in the Ukraine is not elected. It draws its authority, such as it is, from a  vote of the Ukrainian Parliament. Many people in the Crimea do not accept the authority of this interim Crimean administration.

The second is that if the referendum is fairly and sensibly conducted and produces a strong majority for leaving the Ukraine, the lack of support for this referendum in the Ukrainian Parliament could be  offset or compromised by the strength of the result in Crimea. The result would serve to highlight the gap between the wishes of the Ukrainian Parliament on the one hand, and the wishes of the Crimean people on the other.

The third is that the referendum itself does have the support and the organisation of the Crimean government and Parliament behind it. Whilst this is currently a subsidiary body to the Ukrainian Parliament, it does not mean it is without democratic authority. What if the UK Parliament had refused consent to a Scottish referendum, yet Mr Salmond had gone ahead and held one. Many would think his support for it as the elected First Minister made it of more than passing interest. The rest of the UK would have to respond to any strongly expressed wish of the Scottish people to leave the UK.

The fourth big problem for the west is the presence of the Russian army and navy, or their loyal helpers, in all the key places in the Crimea, promising or threatening to support the wishes of the Crimean people. The west argues this is an illegal outrage, but it is also a fait accompli which the west is unlikely to challenge militarily.  If you wish to assert the supremacy of the Ukrainian Parliament views over those of the Crimea, it would be easier to do so if the Ukrainian army still had command of the territory.

I suspect the truth is that if the Crimean people vote strongly to leave the Ukraine they will do so. There will need to be negotiations over important arrangements, and provision made for the military personnel of the Ukraine currently blockaded by Russian sympathising troops and ships to transfer to the Crimea or to leave and continue in employment in the rest of the Ukraine.

The Ukrainian government and their friends in the EU had better start thinking through how they will respond to this fast moving situation, when they have allowed most of the momentum and the power so far to rest with the Crimean government and their Russian allies.

 

 

The following interesting letter has come to my attention:

 

Dear Lucy,

I am concerned to read that there could be an enquiry into the funding of UKIP partly from taxpayers money from the EU. Whilst civil servants should not condone possible misuse of funds and should at all times be impartial politically, we need to be savvy in the run up to important elections. We need to realise that there could be a political motive to these allegations against UKIP, and their timing is most unfortunate.

Our primary concern is the good and orderly conduct of government here in the UK, am important part of the EU. The last thing we want now is the disruption of a referendum on the UK’s membership, which the Coalition government has rightly prevented the Conservatives offering during this Parliament. I am of course entirely neutral when it comes to elections and who we should serve, but it would seem to be worrying if the public are dissuaded from voting for UKIP as opposed to the Conservatives  by the intervention of the authorities in allowing an enquiry into funding at this sensitive time. Our concern with the stability of our governing arrangements, and with ensuring Ministers do always accept and conform with our EU obligations, is made easier by the split in the Eurosceptic votes in recent elections. Is there anything we can do to ensure the forthcoming European election  is not affected unreasonably  by external enquiries and interventions?

I was very pleased to see – and hear – from leading businesses concerning the case for our continued  membership of the EU. It appears that the Liberal Democrat Ministers in the Coalition led by the Business Secretary  as well as the Deputy Prime Minister have been active and successful in flushing out the business case for staying.  However, our research and consultations tell us that business is becoming increasingly concerned to increase non EU trade rather than EU trade, given the temporary slower growth on the continent.  This makes it ever more imperative that we push ahead through the EU with trade agreements at EU level with the other important parts of the world. We need to be able to argue that all our trade, not just our EU trade, rests on our membership of the EU. I understand that the CBI is sympathetic to this approach.

The use of the 3 million unemployed figure  if we quite is coming under some pressure. It would be good to revisit this figure and show how many more jobs depend on our total world trade, as this too comes to depend on EU agreements.

 

Yours ever

 

Roy