As we approach the publication of the Leveson enquiry findings, the spin doctors have already set up a partial debate. We are told that Statutory regulation would be good if we wish to stop malpractice and law breaking by journali

sts trying to get big stories. We are warned that it could get in the way of press freedom and allow some malefactors to get away with it without press disclosure of their ill deeds. I doubt if either part of this proposition about Statutory regulation is true.

I approach this problem as one who thinks press freedom is important to a democracy, but freedom is not the same as licence. There should be – and is – a law of libel to protect reputations from lies and malice. There should be a more limited right of the state to block publication of matters which could harm us collectively, by exposing the plans of our army in the field or revealing security secrets that put at risk our protectors for example. There is always a danger that this right is abused by those in office, hushing up matters which should be exposed. It needs limiting, with safeguards against abuse.

I also have experience of the press publishing lies about my private life, seeking to tackle and misrepresent me rather than reporting criticially the ideas and people I represent, and listening in to my private conversations. None of this has made me want to regulate them because of it, or seek to curb their freedom of enquiry into others who may have guilty secrets to reveal, hurtful though it has been at times.

We have good experience of what happens when a major activity shifts from self regulation to Statutory regulation. This has happened to the financial industry over the last twenty years. Over this period we have shifted from a world where no major bank went bust, to a world where several major banks have been driven into state hands and public subsidy. We have moved from a world of limited financial crime, to a world where many major institutions face enquiries into abuse of markets and queries over their corporate conduct. We have moved from a world of lower cost of doing business to higher cost of doing business. People have to pay more to cover the cost of regulation, or end up with no professional advice at all. In the City we have moved from a world where the mainstream decent companies applied moral and upright standards to their own conduct, to a world where the main players ask lawyers and compliance officers what they can get away with and are often tempted to push the many rules as far as they can. Rules compliance has all too often replaced a sense of decency in conduct.

Spin doctors and sloppy journalists have conspired together to characterise the noughties as the era of “light touch regulation” or even of “deregulation ” in financial markets. Anyone who weighs the Statute book, examines the volumes of rules, guidance and compliance materials will know that the noughties saw a large increase in the volume of regulation. The Financial Services and Markets Act 2000 put in place a comprehensive system of Statutory regulation for the first time in the UK. This was changed and reinforced by the Financial Services Act 2010. It was also complemented by the EU financial services plan, including wide ranging legislation like MIFID. Never had the UK been so regulated, and never before had things gone so badly.

Unfortunately the Statutory system saw major errors of judgement by the regulators over safe levels of cash and capital for credit creating institutions, which then threatened the whole system. The noughties were not an era of light regulation or self regulation. They were an era of bigger Statutory regulation both at home and in the EU. This new regulatory system defined by Mr Brown’s big changes to the architecture and by the comperehensive financial law introduced, failed both to keep our system safe, and failed to prevent crime. It has been a notable failure of the free press to expose the true nature of the last financial crisis, or even to report sensibly the current state of public finance. I can’t see how a Statutory regulator for the press would help tackle this problem. Ironically some in the press will now find it harder to make the case against Statutory regulation, because they have so failed to explain its manifest massive failures in the case of the City.

Why do people think Statutory regulation of the press would be any more successful or better judged than the financial regulation was? How would it actually stop journalists eaves dropping, twisting replies, failing to read the basic materials, making snide comments about people and causes or getting the wrong end of the stick? Wouldn’t it mean more managers , compliance officers and box ticking, which would slow down stories and draw out mistakes, rather than abolishing them?

Nor would it necessarily prevent newspapers exposing folly and mischief in high places. If a government tried to use its leverage over the Statutory regulator to close down a story or an outlet, that in itself would be a fine story which would probably get out and do more damage to the government than if they had not bothered.

I remain a sceptic about the powers and wisdom of Statutory regulation. There is a lot to be said for having a clear and well enforced criminal law to prevent extreme conduct, and leaving the rest to competition, choice, public opinion and the free play of ideas and views. Now we have such a lively and often unruly medium in the web, if you regulate mainstream media too much it simply will not be able to compete with the new ways of voicing criticism of the powerful.

 

   I have been asked to post the lecture I gave at Oxford. I spoke without a text, but will post bullet points on Monday.

The main points I made were:

 

1. There is no positive correlation  between fast growth and large amounts of state debt. China has fast growth and low debt. Japan has high debt and low growth. Greece has high debt and recession, the US and UK have quite high debts and slowish growth.

2. In past UK crises – 1974-5, 1981-2, 1992-4 the formula of cutting the deficit and easing money policy  produced growth and recovery. Indeed, as the cuts came into effect, so the economy grew faster, reinforcing the drop in the deficit through the cyclical effect.

3. After the 2007-8 crisis, the Coalition government proposed the same forumula as in the previous three crises. However, they did not succeed in cutting the deficit as quickly or as far as  in the three previous crises, because they decided to keep on increasing current public spending. They did raise taxes.

4. Whilst they tried to expand money, and printed far more than in responsse to previous crises, the broken state of parts of the banking system and the tough regulatory framework introduced at the wrong stage of the cycle prevented credit growth in the private sector to fuel the recovery

5. So the main difference between previous recoveries and this is the government has neither delivered as low a deficit as before, nor as  much money and credit expansion as before. As  a result growth has been very disappointing.

6. Overseas evidence reinforces the message that tighter fiscal policy and easier money policy produces expansions This has been shown in countries like Canada and Sweden which went through substantial programmes of spending reduciton and deficit cutting which  produced growth from the better balance of the public finances.

It has been a traditional feature of IMF recovery plans that the deficit has to be cut as part of the package to generate private sector led growth and further cyclical falls in the deficit.

 

           Lord Hall has received a wide welcome as the new Director General. I wish him well. I trust he remedies poor journalism and the institutional bias which can disfigure the BBC’s news and current affairs output.

            It was a little worrying to hear so many enthusiasts for more EU government and  for global warming theory extolling his virtues. The rest of us who are sceptical of more EU government or who do not like the EU government we already have, will reserve judgement. The test for many at  the BBC is to understand that there is now a large chasm between their metropolitan views on the EU, carbon dioxide, immigration and the rest and where much of their audience is on these issues.

            I have a plea to Lord Hall. Could he first concentrate on the quality of journalism? Before we get into an argument about whether all sides in the main controversies are fairly represented, can we at least agree that journalists on quality programmes should read some  original sources rather than just relying on spin doctors? They should, if presenting economic arguments about debt, deficit and spending, know the main numbers and present them fairly. They should, when investigating an EU matter, read the underlying budget or document to understand its significance. When wishing to relaunch a very old story like the Welsh child abuse story, they should at least read the full public enquiry which has already reported on it, to understand it better and to see if they have anything new? When wishing to talk about climate change, they should seek independent scientific and economic advice from both sides of the argument, and not decide with forces on one side that it is all settled.

    There is clearly a political controversy about whetehr an economy recovers by borrowing and spending more or by borrowing and spending less in the public sector. It is not, however, possible to have an intelligent debate about this if the participants and the BBC expert do not know the figures or understand how much government spending there is and by how much it is increasing anyway.

             If Lord Hall recognises the need for change over these crucial issues, then I will join his fan club.

 

           I will today be talking to the Thames Valley Chambers of Commerce at lunchtime on growth and the UK economy. This afternoon, at 5pm, I am giving a public lecture on Growth and the UK economy in the Old Library, All Souls College, Oxford.  I will have limited time to moderate.

 

              There are now so many sources of authority and law affecting our country that this fundamental question does need to be asked.  Much of our law is now defined or influenced by EU law. There are laws Parliament cannot pass and stay within the EU legal framework. Our justice system is limited or controlled by membership of the European Convention on Human Rights. The judges of the ECHR, like the judges of the ECJ, can now dictate some of the answers to Parliament. The EU runs our agriculture and fishing policies, has a major say in our environmental policies, runs our trade and competition policies, and how has some influence over almost every  policy area.

                 Nearer to home the “independent” Bank of England decides interest rates, settles the regulatory framework of the commercial banks, and is often the decisive influence on how much money and credit circulate. A host of other quangos from culture to the environment operate with some independence of government in their chosen areas of activity.

                 These large transfer of power away from a sovereign Parliament has led some to welcome a new era of diffused or spread power, whilst for many others it has led to frustration that elected MPs and Ministers can no longer do as they think the electorate wish. A government can look impotent if it cannot extradite who it likes, control its own borders, decide what interest rates should be or how banks should be controlled, or settle the price of energy and how it is to be produced.

                   The fact that quangos, the EU and the ECHR have these powers does not necessarily  mean that Parliament has lost its sovereignty. We will only be able to answer that when we know what happens next. If the British people get fed up with the results of so much power given away, Parliament could still take it back on their behalf. Parliament is still technically sovereign, because it can repeal or amend the 1972 European Communities Act, the fount of the EU’s power in the UK. It could by agreement or unilaterally renounce the EU Treaties. It could withdraw us from the European Convention on human rights, or negotiate a new approach to the Convention’s powers.

                           If many more years pass when people and Parliament do not do these things, we will reach a point where in practice Parliament has lost its sovereignty. Meanwhile, it would be foolish of Ministers and commentators to underestimate the latent power of Parliament. Ministers can take our armed services into battle, but need Parliament’s support to do so. They can propose a wide range of new laws, but need Parliament’s votes to agree them. Parliament and Ministers can make or break Governors of the Bank of England, Directors General of the BBC, Field Marshalls and Admirals. Parliament can create quangos, change them and abolish them. If the so called independent Bank of England ceases to please Ministers with the backing of Parliament  will instruct it or Parliament will reform it. Parliament still makes and can break governments.

                          We had thirteen years of a poodle Parliament. There were far too few votes against the patronage and spin of the established governemnt to make much impact. Today we have a Parliament with no party in the majority, where every voice and vote can count. Whilst many of us want more MPs to be strong on remodelling our relationship with the EU, this Parliament is prepared to say “No” to the executive, and to probe the overmighty in the world of quangos and the established official government.

                            Parliamentary  sovereignty is not yet dead. It has been asleep. The issues for all of us, is do you wish to stir it to a much more energetic purpose?

This will be the title of tomorrow’s blog. If anyone has received a short and badly typed piece on this topic today, that is because the computer apparently sent out a half finished first draft with poor  typing at high speed. Please ignore. As soon as I saw what it was doing I sought to retrieve.

 

 Seeing the reporting of yesterday’s figures, I am amazed. They know a few of the figures, and give a most misleading view of what happened. They all claim the problem was the 9% fall in Corporation Tax revenues.

The actual figures are  that spending in October was up by £3.6 billion compared to October 2011 (including interest payments – which reduced the increase. Spending excluding interest was up by £4bn).  Corporation Tax fell by £0.8 billion to £8.1billion.

Borrowing rose by £2.7 bn more than in October 2011. That means the rise in spending more than accounts for the rise in borrowing, with tax revenues making some positive contribution. Corporation Tax is relatively small and had a bad month. VAT and NI did better.

 

The latest figures for spending and borrowing reveal more of the same. Current public spending excluding debt interest was up by 9%, this October on a year ago. Including debt interest it was up 7.4%, as debt interest fell by 7.4% thanks to quantitative easing. Spending  was up generally. Benefit spending rose, thanks to the increases in rates last autumn. General expenditure was also up. Over the six months spending was up in cash and real terms,but by a lesser amount.

Meanwhile taxes on income and wealth fell by 0.7% on the month and by 2.5% this year compared to last. VAT receipts were up by a useful 3.6% and National Insurance by 5.1%. Within taxes on income and wealth revenue from Income Tax and Capital Gains was unchanged April to October compared to the same period last year, showing the continuing impact of the higher rates.

Borrowing as a result rose from  £5.9 billion in October 2011 to an extra £8.6bn this October.  It would be good if the media reported that the main reason for the bad October figures  was the sharp increase in current spending, but don’t hold your breath. I expect they will continue to ignore this inconvenient fact. They are buying the spin line that a fall in corporation tax receipts is the culprit. The problem with that explanation is the fall in CT is less than the increased deficit, whereas the rise in spending is more than the increased deficit. Clearly these media commentators don’t do numbers or even read the official figures.

As there have been some cuts in some programmes, and some redundancies, the issue is where is all the extra money going? It would be good to hear a programme exploring how the government can spend so much whilst many think it is all being cut.

 

            Yesterday I attended a fascinating breakfast seminar about the Euro, where we heard the Greek, Spanish and German viewpoints from a panel of experts.  The German speaker  prompted me to think more about the evolution of the German position.

            Germany is being told that a fiscal union and a banking union are being constructed to protect German financial interests. Worried by the prospect that too  much German tax revenue and earnings will be needed to bail out dangerous banks and to pay the bills for excessive debts and deficits in other member states, Germany argues that the Euro area will not become a transfer union. They claim they can have a single currency where each member state has to be responsible for controlling its own debts and deficits without common funding. They are assured that the new banking union will prevent future excesses by banks within the Euro system, so a scheme for mutual deposit protection and financial support will be fair and affordable. They want to believe that you can have a fairly integrated economic government to reassure German taxpayers, without having to send large sums from rich areas to poor areas to make it work.

               West Germany has long experience of the true cost of establishing a premature currency union. The East German union of the 1990s proved to be very expensive for West German taxpayers, as East Germany struggled to catch up with West German living standards. Many East Germans migrated to get better jobs in West Germany, frustrated by the lack of economic progress near to home. This experience is leading many German voters to worry about the extent to which Germany is now going to be committed to financing the large areas of Euroland that are deep in recession and deficit.

                  Mrs Merkel seeks to assure her voters that Germany will not undertake the same massive transfers of cash and finance to the southern states of Euroland in the way they did to help fellow Germans in East Germany. She talks tough at home. Greece and the others have to tighten their belts and borrow less.  However, Germany is already committed to substantial financing of the rest of the Euro zone. German surpluses deposited at the European Central Bank, allied to Germany’s payments and promises to the various bail out funds, mean Germany already has at risk or has promised far more than E 1 trillion of money for weaker states and banks.

                  Some Germans are now thinking the unthinkable.  They ask whether Germany herself may have to pull out of the Euro to prevent the costs spiralling out of control. The mainstream still thinks it is Germany’s destiny to be the voice for prudence and austerity within the Euro area, and to send more money after the money already spent in trying to make it work.

                    Meanwhile, Mrs Merkel on a visit to London warned the UK that it would not be comfortable outside the EU. I suspect such a warning is counter productive.  Many UK voters hearing that would  be more inclined to become more Eurosceptic as a result, rather than being intimidated by the talk.  It is difficult to know what she really means by it. Countries like Switzerland and Norway are the richest in Europe whilst not being members of the EU. The UK is a far larger country than either of those, with a wider range of global interests. If none of the UK’s legitimate fears and disagreements with the centralising EU are to be dealt with or taken seriously, why would the UK wish to stay locked into a club which clearly does not have sympathy for our views?  On the continent it may be about a union, about the mutualisation of various tasks and liabilities, about solidarity and common tasks.  In the UK it is quite simply about whether we can once again  be self governing or not.

 

 

Yesterday David Davis made the public case for the double referendum which some of us are urging the government to launch.

The idea would be for this government to put through a Bill requiring a Mandate referendum on the EU issue. The question would be:

“Do you want the UK government to negotiate a new relationship with the EU based on trade and political co-operation?”

The aim of such a question would be to unite all shades of Euroscpetic opinion behind a single proposition, to carry it by a large margin. The government would then have a strengthened hand in negotiations in Brussels, and would also have to get on with sorting it out, as the people would have spoken. It should unite come-outers with those who wish to be in a common market, with those who merely wish to repatriate certain important powers.

The second referendum would follow once the negotiations were complete. That would ask

Do you want to accept the new negotiated  relationship with the EU or not? Voting No means withdrawing from the EU.

The knowledge in advance of the second question would send a clear message to other EU members that if they wish to keep the UK in some kind of relationship they need to take seriously the many changes the UK wishes to see in the relationship. If they offer nothing or little, the UK people are very likely to vote for out altogether.

This seems to me to be the best way forward. The negotiations would also allow the government to negotiate the items that would need to be sorted out for exit anyway. There do need to be arrangements on ferry routes, airspace,pipelines, extradition, police intelligence and all the rest between the UK and the rest of the EU.

David Davis dismissed the arguments of the pro Europeans that  we would be damaged by exit. He pointed out how much more trade we now do with non EU nations, and anyway how trade with the EU could continue without full membership. He showed how much damage to our productive potential and our exports the high costs and restrictions of EU regulations now do.

The Lib Dems in the Coalition may not agree to such a Mandate referendum to get this process started. Conservative Ministers should table it anyway. It would be surprising if the Labour Parliamentary party turned out to help the Lib Dems trying to  vote it down, when the public so yearns for a different relationship and a chance to have a say on this most important of issues.