I tend to favour more freedom and less government. My critics favour more government, because they think that people, if left to their own devices, will behave badly and create misery and injustice.

Those of us who believe in freedom do need to answer questions about what should happen when people perform evil deeds, when society is marred by evil features. I am not a freedom lover as a result of having a starry eyed view of the moral good of all men and women left to their own devices. I have read enough history to know that evil stalks the planet and has often disfigured the past. I have had enough encounters with unpleasant people to know that we cannot rely all the time on the assumption that left to themselves people will always do the decent and correct thing.

That same combination of reading history and reflecting on personal experience has also taught me that we cannot rely on government, on the exercise of state power, to correct and prevent all the wrongs that people may wish to do. Sometimes government is well intentioned, but ineffective. Large extra quantities of banking regulation did not prevent or lessen the crisis of 2007-8. Gun controls in Norway and the UK have not prevented some mass murders by people using weapons. Sometimes government itself attracts people who wish to use its power for bad ends. Governments can be corrupted by power and by evil officials and politicians. The Nazi state and the Stalinist Soviet state were just the most public dreadful examples of how much harm a rotten state can do if it puts its mind to it. Better intentioned democratic states can make errors of judgement or employ evil people who commit crimes under cover of the state whilst breaking its rules.

It sounds as if the USA in the wake of the recent tragedy will embark on a new debate around gun control. I am not going to intrude in their argument. It is for US democracy to settle the issue. The natural reaction after such an event is to recoil in horror, and to demand that the state does something to stop it happening again. The US will decide what, if anything, that something should be. I can understand those who say they must try gun control, because it might remove some evil people from access to guns. I can understand others saying mass murderers may get a gun permit before they murder, or they might buy illicit guns.

The problem most of us have is we cannot understand why someone would want to shoot so many people. We do not know how to identify people likely to carry out such a deed. We respond either by condemning them as pure evil, or by saying they are mentally ill and in need of restraint and treatment. Usually the authorities are spared the question of what to do with them, as they kill themselves at the scene of their crimes. In Norway a mass murderer was imprisoned. In jurisdictions with the death penalty if one survived he or she would probably be executed.

The truth is a free society is open to abuse and worse by the bad and the mad. All agree we need a rule of law. The bad break those laws. We actively debate how much law we need, and how free we can leave people to do as they will. Deterrence is the better part of enforcement. Some people by their evil or their madness put themselves beyond the power of the state to deter or to punish. That is what makes it so hard to understand, so hard for the grieving families to bear, and so hard for the rest of us to respond.

I have been asked to write about homelessness in the run up to Christmas. It goes to the heart of the all consuming and worrying issue of poverty. It is not just a property problem.

Some think the issue is that homes are too dear in the UK.  In parts of the country, especially London, they are very dear, but there is plenty of demand for these expensive homes. Many of  the dearest ones now are there for rich foreign migrants into London, but much of the rest of the housing stock in the prosperous areas  stays at high price levels because there are tax paying locals  who can afford it.

In other parts of the country home prices  are much lower, and have fallen further since the Credit Crunch. Here there are often more empty properties, and more propeties on agents books awaiting buyers. Lower prices would eventually clear this market. Current prices can be sustained if more jobs and higher incomes can be generated in these locations to underwrite and sustain the property market. Policies for economic recovery and for growth outside London are part of the answer.

The government is trying to address the issue of expensive land prices that are part of the pricing in the dear areas. They are issuing a large number of new planning permissions which they hope will drive the land prices down, and lead to more development. So far this has been offset by broken banks and regulatory pressures against more lending. The authorities have also come up with Funding for lending and Quantitative Easing to try to tackle the mortgage famine.

One way to cut homelessness is to reduce inward migration. Migration has been one of the big pressures on housing, and some of the worst housed people are recent arrivals on low wages, and especially illegals on no regular and legal  wages.

Some homeless come from former members of our armed forces who find adjustment to civilian life difficult. I have proposed a scheme to encourage housebuying for people in the forces so they are not homeless on exit. When I checked last week the government told me they were  still working on this important issue and recognise the need to do more.

Some homeless have serious drug or alcohol problems. The government is intensifying its response to these difficulties, seeking to get people onto rehabilitation programmes.

There is a general shift to buying your first home at an older age. Most young people are not homeless, but they form their own household at an older age than previous generations. This is partially owing to high house prices compared to their starter incomes.  Here improving the supply of new properties, and reducing the demand from others  in sensbile ways may bring about a price adjustment to price more young people into this market. I am a strong supporter of home ownership. I also think young people should have the option of forming their own household in their twenties and buying a property where they have a normal job. More needs to be done to get back to this position.

           I have been asked to comment on the rapprochement across the Atlantic between the US and the Uk authorities over how to handle future bank crises.

           They are proposing a new regime where banks in trouble are put into controlled adminsitration effectively. Shareholders and bondholders would be at risk. Bondholders of various kinds would be converted into shareholders if the bank can no longer meet all its obligations, so the bank automatically has to pay less interest on its capital  and has more equity capital at risk to absorb the lossses. The taxpayer would be less at risk, the capital providers more at risk.

           The new regime would allow orderly disposal of the peripheral activities with value. It would allow continuation of the core functions of money transmission and settlement , and allow deposit protection schemes to support depositors to stave off a run.

             I do think it is a big advance on conduct in 2007-8. I then wanted them to place highly stressed banks into controlled administration, to protect depositors, but to make shareholders and bondholders take the pain, and sell off the assets that had some value to help pay the bills and slim down the mega banks in trouble.  It will still need intelligent bank regulation and Central banking to avoid such accidents in the first place, which is a better answer still than this approach to trouble once trouble has hit.

       The Governor elect of the Bank of England has caused a stir through his latest speech as Governor of the Bank of Canada. Whilst the speech comes from the CFA Society of Toronto and is researched and put out by the Bank of Canada, inevitably British audiences are applying its message immediately to UK conditions.

         Mr Carney argues that when a Central Bank is running a very low interest rate policy to stimulate a weak economy, it may also need to manage expectations to encourage faster growth. He endorses Canadian and US past  actions where the Central Banks have announced the maintenance of low interest rates for a lengthy period, to reassure markets and foster an expansion of money and credit. In Canada the promise of low interest rates was conditional, with a statement that if inflation rose too much they would increase rates anyway. For more severe cases  of income and output loss Mr Carney favours an outright promise of low interest rates regardless of the inflation rate.

         He went further. He said that when an economy has lost a lot of output (like the UK, which he did not mention) the Central Bank and the government may need to shift from an inflation target to a  nominal GDP target. This would allow the Bank to run very low interest rates even after inflation had picked up, if output was still below where the authorities wished it to be.

          This is an interesting and challenging new path. As it does not seem to apply to current conditions in Canada, naturally people ask if that is what he is hinting the UK needs. Will he ask the Chancellor to change the target? Will he be willing to turn a blind eye to higher UK inflation in the hope that this could allow more output growth?

          The problem with this approach is obvious. Last year the Bank’s inability or unwillingness to control inflation led to a sharp spike in price rises. This meant a cut in people’s living standards, which further depressed real demand. The danger with Mr Carney’s suggestion, if  it is aimed at the UK,  is twofold. Would higher inflation do too much damage to demand again if  allowed? Would shifting targets as fundamentally as this help to undermine confidence in longer bonds, leading to higher longer term interest rates? It is easy to lose confidence, more difficult to restore it. There would be dangers in signalling that the Bank under  new management no longer wished to even  pretend to curb inflation, in an economy which can be inflation prone.

          Meanwhile, on cue, the Fed has stated it intends to create a lot more money, and does not intend to put interest rates up for a long time, until unemployment has fallen substantially, whatever happens to inflation.

        One figure stared out of Mr Davey’s Statement about the Doha Climate Change Conference. He reported that the “countries taking part in the second Kyoto period (2013 to 2020) account only for around 14% of world emissions (of CO2) – by 2020 this could be less than 10% of global emissions”.

          Mr Davey sagely concluded that “This underscores the need for the future climate regime from 2020 to involve action by all”. In effect just the EU and Australia agreed Kyoto II. China, India, the USA and even Japan are not in or no longer part of the Kyoto targets.

          The EU has signed up to cutting emissions by 20% compared to 1990 by 2020, with an option to make that a 30% cut. It has confirmed its promise of Euro 7.2bn of aid for climate change payments to developing countries  in the period 2010-12, followed by maintaining the average level of support from that period in future years.

            This will be a disappointing outcome for all who believe in Global Warming theory. Surely if the theory is right the emissions of the whole world have to be cut, not just 14% of the emissions coming from the EU? As the EU deindustrialises and Asia and other faster growing economies go through their own industrial revolutions, they will generate an ever higher proportion of the CO2. The EU needs to negotiate multilateral reductions, not just unliateral reductions in its own contribution to the world totals.

          Those who do not believe the theory will wonder why the EU is imposing this expensive burden on itself. They will also question the wisdom of accepting the moral obligation to compensate other countries for past CO2 emissions in the EU, and wonder how well spent is  the current fasttrack climate change aid.

             Mr Monti has decided he can no longer survive as unelected Prime Minister of Italy, without a working majority in the Parliament. It was always an odd idea that an unelected “expert” could parachute into the job of Prime Minister without having taken the precaution of building a majority party and winning a General  Election first. Now it appears that MPs in the Italian Parliament are no longer willing to go along with what he wants to do.

             It will be interesting to see if the Italian General Election will bring to the fore important debates about the future of the Euro scheme and its impact on  the Italian economy. Will Italy vote for more of the same? Will they vote for remaining in the Euro and applying more of the austerity medicine that goes with the current version of the currency?  Will anyone campaign for withdrawal from the Euro? Will anyone say that the current budget and banking policies being followed within the Euro scheme are combining to throttle the Italian economy?

              The issue before the Italian electors is in essence a simple one. Will they continue to do whatever the EU demands, as the price of Euro membership? Are they happy with the current results of these policies, measured in many lost jobs and falling output?  Or do they think the current Euro sceheme is not working? Do they want Germany to contribute more by way of transfer payments? Do they want the ECB to print more money? Do they want cross guarantees to support all Italian banks? Should Germany inflate more to help correct the lack of competitiveness in the south?

              I suspect they will choose another government which signs up to the full Euro scheme for fear of worse. Now is their opportunity to have the debate they need to have over why the current Euro scheme is not working economically for them or the other southern states. Their current levels of youth unemployment are worryingly high. Many forecasters now expect another two years of Italian recession.

I attended a very interesting private meeting  recently on the Scottish Question. A couple of  learned Scots told us that Scottish nationalism was  defined by dislike of the English in general, and the dislike of English Tories in particular. Scottish nationalists do not like London making decisions for them. They like it even less if it is English Tories calling the shots there, instead of Scottish Labour MPs.

None of this is suprising. The success of the Scottish Nationalist party has been brought on by Labour’s anti Tory  campaigns for devolution. Their failure to secure enough votes for devolution in the 1970s, when Scotland was still reluctant to tread this path, led to a long sulk and a revitalised and successful attempt to put it through on return to office in 1997.  Labour consistently claimed that a Conservative “English” government of the UK should not govern Scotland. They saw nothing wrong with a Labour UK governing Northern Ireland with no Labour MPs, or governing England with a majority of Conservative MPs, but they did think a Conservative majority government at Westminster lacked authority to govern Scotland if the Conservatives had few seats for Scottish constituencies.

Labour’s dislike of the Tories, their insistence on using the legitimacy argument against the Conservatives, and their determination to polarise opinion on devolution, helped the SNP establish its position as a credible force in Scottish politics. The SNP had lively internal debates about whether it was a true independence movement, as the purists wanted, or a party of Scottish government seeking more devolved powers within the UK. Mr Salmond has often come across as  a devo max man rather than a true independence fighter. He after all wanted devo max on the ballot paper for the referendum.

The stated position of the current SNP is not to seek Scottish independence, but to seek a new kind of dependence, with some more things being settled by a devolved Scottish government. It is difficult to argue that a country is independent if it does not have its own currency and central Bank, yet Mr Salmond wants to stay with the pound and a monetary policy and interest rates fixed by the Bank of England. Mr Salmon also wants Scotland to be a member of the EU, with all that that implies for loss of sovereignty. The SNP wishes to share a Queen with England, rather than have a new Republic with a Scottish President.  The SNP are just better at devolved politics than Labour, and have used Labour’s anti Tory and anti Union rhetoric of past years to gain themselves devolved office. Now they wish to press for devo max, calling it Independence. In practice what they seek woukld  leave their new  Scotland  controlled financially by a monetary union where they  no longer have a seat at the Cabinet table or in the Central Bank, and leave Scotland under an avalanche of new EU controls without the current UK opt outs.

English nationalism is not defined by attitudes towards other parts of the United Kingdom. Indeed most English nationalists are relaxed about belonging to the union of the UK. Most accept that it is Scotland’s call whether to stay or go from the union. The defining characteristic of English nationalism is dislike of EU power, a sense of shame or anger that a once great free country is now bossed around by the institutions of Brussels. English nationalists are not allergic to the Scottish saltire, but to the twelve stars.

It is true that English nationalists now think the deal within the UK union is unfair on England. They want as much self government for England as Scotland enjoys for Scotland within the union of the UK. They want a fair financial settlement between the differing parts of the UK union. They either want English votes for English issues, or a new English Parliament.

All of this argument is second order compared to their overriding wish to be rid of EU interference in our law making, budgets and general government. A true Scottish nationalist wants for Christmas to be free of London control. A  true English nationalist wants to be free of Brussels. Eng,lish nationalists also want their country to be allowed to exist, instead of continually wiped from the Brussels version of the map. The aim of balkanising England into unloved regions has been defeated. Now we need to rebuild England.

          Coming to this blog for the festive season:

A modern fairy story,   “Dave, George and the magic lamp”

and the latest leaks from the heart of government, as we discover what Dame Lucy and Dr Roy are up to.

What else do readers want to hear about?

             We saw yesterday that the OBR forecasts a gently rising recovery from here. People’s real incomes will go up modestly, share and property prices will rise  a little, more people will get jobs.  The trouble is the OBR have been too optimstic before about this economy.  It would be wise for the government to take more action to try and ensure a faster recovery, and head off more bad news and downgrades like the ones we have experienced for the last two years.

              I want people to be better off. I extend that wish to people at all income levels.  Lower tax rates could help. So too could a faster rate of economic gr0wth, generating better returns for savers and higher incomes for those in work. Breaking up the state banks, writing off bad debts to speed the day when the banks have good enough balance sheets to lend more against decent projects, is central to making progress. A new generation of would be home buyers and entrepreneurs are being denied access to proper credit facilities thanks to past errors, weak bank balance sheets and now super prudent regulators who cannot resist getting the cycle wrong both ways.

             I do not wish to hit people on low incomes by being mean on benefits for those who need them. The government is right not to hit the pensioners and the disabled with increases in pensions and benefits below the level of price rises. I have no wish to cut important public services. I do, however, think the government is correct in saying it must get the deficit down, and make progress in limiting the build up of debt. The Opposition too agrees with this, though there are still rows over timing and extent.

            So how can you square the circle? The answer surely is to be generous to those in need, but to be firmer over eligibility for state help. Many of us wish to be generous to pensioners, so maybe as longevity rises so we have to make further increases in the age of retirement to help balance the books. A 60 or 65 year old today is on average fitter and likely to live considerably longer than the equivalent twenty years ago.

             We should speed the moves to control our borders better. We should not extend out of work benefits to people who recently arrived in the UK and are not UK citizens. If they come here under the free movement of workers they should not be entitled to out of work benefits for doing so. The availability  to  work test should be applied to ensure that those who can work do work when work is available.

               The introduction of a high cap for housing benefit in understandable, as the government does not wish to destabilise families living in dear to rent homes . There could be a much tighter cap for new claimants.

                The UK could have a couple of years off from meeting the 0.7% target for Overseas Aid whilst we are sorting out our large budget imbalance. There are still items in the Overseas Aid budget that do not represent value for money, or further the noble aims of relieving poverty and disease in the poorest countries. Mr Cameron could dig deeper over the excessive contributions  we currently make to the EU budgets. Why not tell them we do not wish to contribute to the EU regional aid and agricultural programmes? it would be cheaper to do our own.

              There is universal acclaim for more public capital spending. We need to remember that these are often growth projects, which then need revenue finance to keep them running once built. When trying to reduce public spending, you do need to limit new capital works. If we gain better control over our borders then we will cut the need for extra schools, hospitals and social housing, which will represent a substantial saving to the taxpayer.

              Let’s have lower more competitive tax rates, better working banks, and more realistic public spending. Then we could match or probably exceed the OBR’s forecasts for rising incomes and a more successful economy.  Some seasonal cheer is better than more gloom about austerity.