Since Mr Carney arrived as Governor, the economy in the UK has taken off. Unemployment has come down. Inflation has come down. Output and jobs are up. There are even signs that real incomes are stabilising after a large fall in the recession and further downwards movement since.

Is this just good luck and good timing? After all, many of the policies which are now yielding and assisting recovery were in place before he arrived. I think it’s a bit more than that. You do have some influence over your own  luck. If you do the right things you can get luckier. The Governor has helped.

Mr Carney clearly decided from the outset that what the UK needs is a decent recovery. If you wish to solve the continuing weakness of some banks, what better way than to assist more profitable businesses, and rising asset prices? Those assist a bank by reducing the number of bad assets, and improving loan cover.  If you wish to help bring down welfare spending and cut the government’s deficit, what better way than to have an economy generating a lot of new jobs in the private sector that people can take instead of being on benefits. If you want to bring down inflation, why  not encourage more output to ensure competitive prices, and obviate the need for so many tax and government inspired prices rises.

As Governor there were some things he could do to encourage that recovery. He told markets he was going to keep interest rates low, so businesses borrowing to expand would not face large bills. He presided  over the Funding for lending scheme which helped banks find the cash to lend more to business.

The markets have been fighting him, by putting up longer term interest rates despite the Governor’s reassurances, and arguing for an earlier increase in Base rate than the Governor seems to want. Events have also surprised the Bank’s forecasters, with unemployment falling much more quickly. The Governor has moved to reassure those who want low interest rates. The fall in unemployment to 7% does  not mean an early short term rate rise.

Most things are looking a lot better for the UK economy. However, the government does need to respond to the beginnings of a shift on energy policy in the EU. Dear energy remains a foe of a UK industrial revival, and an enemy of the consumer, delaying rises in real incomes to power more growth. I will return to this soon.

The excellent news on job creation in the UK has taken the unemployment rate down to 7.1%. It now hovers above the magic 7% level. That’s  the level the Bank of England said it would need to reach before they would even consider a rise in interest rates.

Clearly the economy has excelled compared to the Bank’s forecast. The Bank thought it would take longer for unemployment to fall that far. They would have taken into account the new job creation rate, the rate of public sector job loss and the likely flows of migrants. So why has it fallen more quickly?

The main reasons are good ones. The economy is growing faster than they thought. More of the new jobs are going to people already settled here and out of work.  Some are now saying they were wrong about unemployment because productivity has disappointed. Is that true? Does it matter?

I have not been expecting productivity to do that well, given the continuing decline of North Sea oil and the loss of high end jobs in banking and financial services. I have commented before on how we have by accident and design been cutting our highly productive well paid activites. The former  50% tax rate, a high CGT rate and a mature oil province were all going to cut incomes and productivity.

I wonder if something else is also happening. Could it be that output is understated, because more is being done in the informal or cash economy? By definition the authorities cannot estimate reliably the amount of economic activity that some people do not put through the official books.

Now we are fast approaching 7% unemployment, that Bank will review interest rates. I expect they will conclude they need to keep short rates low for longer, as they will argue that at last inflation is coming down and is under better control. They will not want to do anything to curb the recovery. Meanwhile, the markets have put up other interest rates. Government bond yields and some savings rates are edging upwards, away from the crisis levels that left savers with a rotten deal.

Savings does need to be more worthwhile. We are gradually getting there. Good jobs news is another step in that right direction.

The wide ranging review of how much power the EU has is still continuing throughout government. Yesterday I had the opportunity to explain to the Treasury offical in charge of their review how I think powers should be brought back in their area.

Those of you who simply wish to leave the EU will argue this reveiw is a waste of time. As there is no prospect of this Parliament voting for the UK’s exit from the EU, nor even approving a referendum to allow the people to vote for Out if they wish,  there is something to be said for the review. It will firstly inform more people of just how wide ranging the powers now taken by the EU are. Secondly it could provide a substantial platform of powers we need back under any renegotiation  before UK voters would consider voting to stay in. It will inform the negotiation.

The Treasury has one major area where the case for complete repatriation is overwhelming – banking regulation. As the UK knows to its cost, if a government gets banking regulation wrong and manages to preside over a collapse, it is the UK taxpayers,  not the EU, that pays money to prop up the system. The UK is still a sovereign nation in a crucial respect where the members of the Euro are not. The UK can decide to pump as much money as the Bank of England sees fit into money markets and the inter bank market to keep solvent banks liquid. Euro members have to look to the ECB and European level decisions.

As we pay the bills for any bad banks a UK government wants to help, and as we still have the capacity for our Central Bank to act as lender of last resort and decide how much money to create or allow, we have no need of banking regulation from the continent. There needs to be clarity. The solvency and liquidity of British banks depends on the actions of the Bank of England, supervised by the Treasury. Let us repatriate all banking regulation to the UK, and have a system of co-operation and information sharing with the ECB and EU regulators as we do with the US Fed and regulators for their banks.

PS I am told not many Eurosceptics are writing in to those conducting the Review of competences. It is important they do so, as officials like weighing the balance of submissions before concluding their reports.

This week the EU Commission has reported that the EU’s energy bills are much higher than the US or other major world competitor nations. They say this is causing problems for European industry.

They tell us this as if it were nothing to do with them. Surely they both knew that European energy bills are very high by world standards, and wanted them to be so as part of their green policy?  The EU takes the view that global warming caused by man made CO2 is the world’s worst problem. They want Europe unilaterally to cut its CO2 output to show the rest how to do it. So why the surpise that they have succeeded in making  energy dear in Europe? Why the surprise that that policy will drive business away from Europe to places where energy is cheaper?

The crowning  irony is of course the fact that Germany’s high CO2 emissions are not coming down. In the US cheap shale gas is also cutting CO2 output, whilst Germany is increasing her lignite coal burn to cover for renewable windfarms that only function part time. Its not only CO2 coming out of the chimneys.

German industry is now lobbying strenuously to change policy. There are signs that the EU after 2020 may relax its CO2 controls. They are talking of putting another aim into their energy policy – of helping competitiveness by sensible prices. That would also help the hard pressed domestic consumer.

The trouble is, it is all taking so long to change. In the meantime more energy using industries will quit the EU, whilst the USA industrialises on the back of cheap gas and does better at CO2! We haven’t seen the end of the EU price rises, nor the end of the problems balancing a system with too much wind in the mix.

A rebellion is in effect any attitude or vote of an MP or group of MPs that the leadership of the party does not agree with. Sometimes it only becomes clear to an MP after the event that what he has said or backed is rebellious. On other occasions the MP clearly knows the official position, has no reason to think it is going to change, but wishes to express disagreement so he rebels.

The decision of a group of MPs to write to the Prime Minister backing the Select Committee Report on UK sovereignty did not intend to be  a rebellion. It was well meant advice of the kind MPs are paid to give, urging the government to a future action apparently in line with the policy of greater UK democratic control  they have set out. It only becomes a rebellion if the government condemns it out of hand  and escalates the disagreement  with counter measures tabled for votes.

A party leadership has several ways in which they can minimise the number and size of rebellions:

1. Avoid provocative decisions and requests to their MPs. A party is more likely to breed rebellion if it is trying to do things or change things. Where it wishes to do so it is best if the change is very clearly in line with the last Manifesto, or in line with the principles and values of the party. There is always more likely to be trouble where a governing party decides to do something which is against the party’s instincts and was not argued about in the previous election.

  The big past  rebellions have been over entry into the EEC and  the Maastricht Treaty on the Conservative side. This Parliament has seen large rebellions over the Syrian war, an increase in the EU budget  and Lords reform, three  things Conservatives did not want to see and were not  in the Manifesto. Conservative MPs remember Mr Cameron saying before the election that there was no consensus on Lords reform or desire to do it this Parliament. They also supported the idea of curbing public spending, so naturally wanted the EU  budget cut and an expensive new  war avoided.

2. Where the government and leadership do wish to make changes they need to seek to carry the party with them by explaining and consulting before launching the policy as a fait accompli.

3. Where backbenchers wish to amend legislation or make their own proposals in motions or bills, the government can  seek to find some good in them rather than seeking to dismiss or defeat them. If a backbencher’s proposal merely seeks to take the government further in a direction it says it wishes to travel, there is a lot to be said for accepting the amendment, or proposing a counter amendment that moves some distance in the direction the backbencher seeks. Where the backbencher is against the stated policy and principles of the party then of course it needs to be voted down.

4. Allow more free votes. The Conservative MPs who voted against gay marriage were not rebels. They were exercising their conscience in a free vote in a different way to the leadership. Where an issue does not split on party lines, like gay marriage or abortion there is every reason to allow free votes to decide it.

5 Where MPs seek to put something on the agenda which the government does  not want on the government can quite often keep it off. If  there is considerable public pressure behind the MPs requesting it, and/or if events are going to force the government to come to a view and decision anyway, then the government  cannot cimply avoid it. The EU is such a perpetual issue. Public concern about EU policies on borders or energy is going to be high, and there  are endless action points thanks to the activist approach of the EU. Such matters cannot be delayed or buried. Others can.

There has been some commentary recently on loyalty and rebellions in the Conservative party. I want to explore some of the reasons and consequences. Today I wish to dispel the wrong notion put around by some commentators that the rebellions are by the old and grumpy in the Conservative Parliamentary party, sitting in safe seats with no hope of preferment or recognition by the present leadership. We read that this small group of malcontents rebel and disrupt, causing difficulties for everyone else and making it more difficult for people in marginal seats.  The briefing usually distinguishes between the 2010 intake, the future, and the rest, implying it is some of  the rest who are the problem. This simply is  not the case.

I define a major rebellion as a case where a group of MPs votes against a 3 line whip on a motion or piece of legislation that the Conservative leadership and whips say is important, and where the rebels can change the government’s stance as a result. There have been four such large rebellions in this Parliament, with the amendment to the Immigration Bill to continue last year’s arrangements for Romania and Bulgaria  also a possible major rebellion depending on what happens next.

These five rebellions have all been led by MPs who first entered Parliament in 2010, not by old timers with no prospects of preferment. 3 of the five MPs sit for marginal seats, and decided their cause was just and would be attractive to their constituents.  One has a majority of 536, and another 2243. They are listed below:

24 October 2011    David Nuttall proposed a referendum  at a time when it was not official Conservative policy. The 81 Conservatives who voted for his proposal helped make it Conservative policy later to hold a referendum.

10 July 2012  Jesse Norman led the opposition to a certain type of Lords reform which the Coalition government wanted. 91 Conservatives voted for his rejection of the government changes, and the proposals were dropped by the government.

31 October 2012  Mark Reckless proposed a cut in the EU budget and helped defeat the government, with 53 Conservative MPs voting for his proposal. The government has now arranged a lower EU budget than planned.

Andrew Bridgen led the opposition to military engagement in Syria by organising a letter to the PM requesting a vote, signed by 81 Conservatives.  A vote was granted  leading to the defeat of the government’s policy  and a new government policy opposing military intervention. He did not himself vote against on the eventual  Commons vote which was held, as the government had by then changed the motion to exclude authorising the use of force so the case was already won.

Currently Nigel Mills with 74 Conservatives has proposed an amendment to the Immigration Bill.

These are all talented MPs who might have become Ministers had they chosen a different approach to this Parliament, and may well be Ministers in future. They are by no means old. They are recently elected MPs, with ages from 39 to 52. They are not grumpy or pessimistic. They just believe in things and are seeking to represent their constituents and the values of their party. Those who write in general terms about rebellion should remember the names and backgrounds of the leading rebels. They should also take into account that most Conservatives prefer the policies which these rebellions triggered. Most of us are far happier proposing a referendum on the EU than not, happier seeking a smaller EU budget rather than a bigger one, and pleased that the UK did not go to war in Syria.

There is a clamour to build more homes. All parties agree we are short of homes, and hope that building more will meet demand and reduce house price rises. Today I wish to look at this without reproducing the long debates we have already had about migration which of course also is part of the picture. Whatever the outcome of the stricter controls on migration there is unsatisfied demand for homes.

Some now say we have a problem with builders and speculators sitting on land which has planning permission to build. They think that if we have new laws or rules to make them build we can solve the problem. As part of Labour’s wide ranging attack on the private sector, or attempt to remodel it, they are talking of penalising developers who do not get on with developing.  The truth is more complex than this.

The English planning system is driven by a most important requirement placed on each local planning authority. They need to demonstrate there is a five year supply of land in their area at any given time. The local plan specifies the build rate on which this is based. This in turn is partly a reflection of past experience of demand, and partly a planning judgement made by the Council subject to review by an Inspector.

This means that under planning law at any given time the government requires the private sector to “hoard” or sit on a lot of land with planning permission. There is good reason for this. A housebuilder with a large site may take three years or so to move from putting in the detailed planning application to selling the last completed home. He is not hoarding the site, but proceeding as fast as planning applications, building work and buyers will let him. Time is money for the builder, and turning the land over quickly improves profits.

The same housebuilder will probably want the security of another large site to start work on when he has completed his present projects. He may decide the best way to secure it is to buy it outright, or he may buy an option from the owner who then has to hold it for a further period of years until the builder is ready to work on the development.

If a future government now wants less land holding then it could of course remove the requirement for a five year supply. That might reduce the total amount of land with permission held in the system, but there will still need to be quite a lot given the nature of the housebuilding industry. When trying to intervene like this there is always the possibility that the intervention will work in a perverse way. In this case it could reduce the amount of land where planning permission is sought.

There remains the issue of the gain that occurs when land without permission is granted permission. This is partly a reward for ownership and partly a reward for whoever goes to the trouble of preparing the land for development and applying for permission. However, increasing amounts of the gain are taken by local and national government through requirements on the developer to provide public facilities or a cash sum for such facilities. The arrangements amount to a development tax that is negotiated on a case by case basis in the light of final values of the properties and local infrastructure and service needs.

I am glad the idea of more banking competition is now popular with Labour as well as with the Coalition and the Vickers Report.

Our current problems in banking emerge of course from the previous Labour government which aided and abetted the reduction of competition on a large scale. Before the crisis they allowed or even encouraged the acquisition of many banking assets and businesses by RBS, creating a bank which turned out to be too big and too badly run to succeed. During the crisis they added to the mistake by encouraging and allowing the merger of Lloyds with HBOS. I opposed both the RBS-ABN AMRO merger and the Lloyds-HBOS merger at the time, and thought both warranted a competition investigation.

Today the government is advancing plans to encourage more banking competition and to split up RBS. RBS has already shed its insurance activities, and is planning to sell its US bank. The Investment bank has been slimmed substantially. The new corporate plan is to slim the bank further by disposals and concentrate it on improving and developing a good UK High Street clearing bank business capable of servicing UK individuals and businesses as they need. TSB has been established as an independent bank again to offer more competition to the Big 4, with sales of branches and business by Lloyds. The government assisted the Co-op which also wanted to become a challenger bank, but that miscarried. Perhaps Labour could tell us a bit more about why that bank went wrong and what they have learned from their close association with challenger banking.

I welcome any workable plans to inject more competition more quickly into banking markets. However, I cannot see how a government can insist on divestment by Lloyds when it does not own it. It looks like a lop sided attack on that bank where the majority shareholders may have strong views and legal challenges against any such policy. Nor can a policy which limits a bank’s market share work well. It means that as a large bank approaches the ceiling it has no further wish to compete for custom.

The right way to limit market share is to block all takeovers of more capacity by banks that already have a large market share. This is  something I assume is now policy but was not policy in the previous decade. Stopping banks winning more market share by being cheaper or offering a better service is the opposite of what we need.

I was pleased to hear Mr Balls on Radio 4 yesterday say there was ” a massive regulatory failure in the UK” before and during the crisis. I remember arguing that at the time, when we were told it was simply a case of bad banks.  It was not just bad  banking policy and behaviour at RBS and a few others but a big failure of the more complex rules and laws under Labour  to stop a crisis. More banks and more competition will help. That is exactly what is now happening, with the emergence of several new challenger banks and the sale of assets and businesses from conglomerate banks under orders of the Competition authorities and as a result of a change of corporate policy.

          The Labour government took a couple of good decisions whilst generally making the railway unaccountable, expensive and  not very friendly to passengers.  They allowed First Hull and Grand Central Railways access to Network Rail’s tracks to act as challengers to the established franchise holder.

          The results have been excellent. First Hull has the highest passenger satisfaction ratings out of all 23 rail operators.  Grand Central has pioneered books of ten tickets, more anytime tickets and cheaper fares.  They have offered direct services to London for cities like Sunderland, Halifax  and Bradford. First Hull provides 14 trains a day between Hull and London ,compared to 1 prior to their challenge. Both companies offer free wifi for all travellers. I have had the chance to read the latest case for open access to train lines and to question  the lobby group that backs it.

        If the challengers  did not provide routes people want to travel and service levels people do not like, these companies would fail. Unlike the franchise holders who have access to  subsidies, the challengers have to provide their own capital and need to sell enough seats to pay the bills.

            More importantly, they provide a check on what the monopoly franchise holder and state  monopoly track owner are telling us about what can be done and what the public want. The successful challenger companies proved that there was spare capacity on the East coast mainline, and they could run services using the slots available to find new passenger demand and service other cities along the route. They showed that the pattern of demand was not just as the franchise holder said, and showed they could innovate on service.

           We need more challenger railway companies and offers. Apparently there is scope for a new fast service to Edinburgh using current track, and more spare capacity on both the east and west coast mainlines. One of the interesting things about our railway is how empty the tracks often are. Of course there needs to be proper safety gaps between trains, but the present gaps are considerably longer in many cases than the prudent safety advice. The task should be to improve what we have got, especially as there is a lot of public money lined up in the non HS2 rail budgets for the years ahead.

Last week the Chancellor made an important speech. In it he charted the progress in cutting the deficit so far, and set out why more needs to be done to complete the task .

He proposed that an additional £25 billion a year be taken from  the projected growth in cash public spending in the first two years of the next Parliament, establishing a lower base in 2016-17 for future growth in spending than current plans.

In 2012-13 total spending was £679.3bn. In 2014-15 this will be £730.5bn. Previous plans saw this rising to ££756.3bn in 2016-17. The revised plans will see it effectively frozen for 2 years , at £731.3bn in 2016-17, before going up by £9.3bn the following year.

As tax revenues are forecast to rise from £556bn in 2012-13 to £699.6bn by 2017-18, this will bring the deficit in that year down to £40.9bn.  The Treasury using previous plans scores this as 80% of the work being done by spending measures. The deficit comes down because spending goes up more slowly than revenue.

In his speech on the EU yesterday the Chancellor reminded the rest of the EU that The European economies are falling behind the Asian ones. He drew attention to the high unemployment in many parts of the continent, the lack of competitiveness and the need for more jobs friendly policies. He also made clear that the UK as a non Euro member with no intention  of joining the single currency needs a new relationship so that we do not get dragged into accepting liabilities and instructions appropriate for a single currency zone but not for us.