The departure of Steve Hilton as the PM’s Blue skies adviser will co-incide with the end of the first two years of the Coaltion government. The Sunday newspapers were speculating on whether this marks the end of the radical reform phase of the administration.

The government always designed its period in office in two stages. In the first stage, they planned to put through substantial legislation to reform education, health and welfare. They conducted a wide ranging Strategic defence review. They set out a five year trajectory for public spending and taxes. They put their main tax increases into the first period, increasing VAT, living with most of the Labour increases in fuel duty, NI and Income Tax, and imposing higher CGT. They enacted their localism measures, changed planning offering more elected Mayors and police commissioners. They put in place the Green Deal, and started to rebuild the UK’s diplomatic links with the emerging world.

In the second stage they planned to manage the results of all these changes, tweaking the main welfare, local government, health and educational reforms, and adjusting the economic strategy at the margins. They probably hoped that one of the windfalls like the sale of RBS might come in and permit some modest tax cuts later.

It was never going to work out quite like that. The spending squeeze was always scheduled to get tougher in the second half. The first two years see £55.8 billion a year of increases. The last three years see just £37.9 billion a year of further cash increases by 2015 compared to 2012. That was always going to make the politics of the second half more difficult. The welfare reforms will come to a crescendo near the next election, as it takes most of the current Parliament to prepare the computer prgrammes and proceed with a working new system for benefit delivery. They will need to be well tested and well based for them to be well received in a more febrile pre election atmosphere. The Health reforms will take some time to bed down. The deficit reduction programme has so far fallen prey to slower growth leading to higher borrowing. This in turn leads people to demand a better series of measures to promote economic growth.

More importantly, a government has to manage what comes along. It cannot always set out a strategy and stick to it. The Coalition hoped that it could place Europe on the back burner. The two main parties have very different viewpoints on the topic. The Conservatives at the very least want powers back and do not wish to travel with the other EU members in the direction of EU integration and political union, whilst the Lib dems have always been a federalist party. Throughout the last two years the EU issues have kept bouncing onto TV and onto the political agenda, thanks to the Euro crisis and the continental EU wish to integrate more. Many Ministers are discovering that they cannot do what they wish to do in the UK, owing to the stranglehold EU law, the ECJ and the ECHR now has in so many areas. The frustrations the EU are causing are tipping more Conservatives into considering pulling out altogether.

The departure of Steve Hilton should not be taken by the government as a watershed, allowing them the luxury of no more serious reform. The economy is crying out for less regulation, for lower taxes on enterprise, for more working banks, for more realistic energy bills, for more competition in several areas. Ultimately the government will be judged by whether it has turned the economy round or not. It is requires more reform to bring about that task.

I have received around 20 emails from people wishing me to know they disagree strongly with the Health Bill. Apparently there was a campaign as I stated on the BBC that I had received very few emails on this topic from constituents. None of the latest have written from a Wokingham constituency address, so I am assuming they are all non constituents. If any constituent does wish me to consider objections to the Bill or wants me to take matters up with Mr Lansley, I remain as always very happy to do so and will reply personally to you as I always do. I would be grateful for you to include your address so I can see you are a constituent.

The remaining non constituency emails mainly confirm that there are opponents of the Bill, as we know from polls, media interviews and other communications. I have never denied that there are opponents to the legislation. I have always encouraged discussion and negotiations between Ministers and NHS executives and medical staff to seek to get this right and to work harmoniously together.

Let me begin by assuring any hostile readers that I, like Labour and the Lib Dems, dislike health inequalities. It does worry me that a man in Glasgow has an average life expectancy to 71, and a man in Chelsea can look forward to reaching 85.

My objection to that is similar to my objection to gross income inequalities. I do not defend gross differences of income between the highest and the lowest paid. My wish is to boost the spending power of the lower paid, but usually not to cut the pay of the higher paid. Similarly, with health inequalities, I would like to help give the Glaswegian a longer life, but have no wish to cut the life of the Chelsea resident. Both these things need to be done in ways which will work. In both cases government has to accept that there are limits to what government can achieve. A lot of it is down to individuals.

The socialist case of health inequalities has two flaws which need to be understood. They argue that the health inequalities are the product primarily of income differentials. The areas with more people on low or no incomes have much worse health, they say. They argue that these differentials are best tackled by pouring much more public money into the public services, especially the NHS, in the poorer areas.

As they believe in the connection between health and income, their wish to lower incomes in the successful areas implies they wish to narrow health inequalities by giving people in the richer areas worse health prospects, as well as taking their incomes down. Let us charitably assume this is an unwelcome or overlooked consequence of their thesis and policy. They have just tested their idea that large increases in NHS spending will cut health inequalities, and discovered that it did not work.

Everyone in the UK is guaranteed sufficient income by the state to ensure a basic standard of nutrition, heating and shelter. Some of the rich could be prone to lifestyle diseases from eating too much rich food, from drinking too much, and from taking too little exercise. Those on lower incomes may of necessity or choice have healthier lifestyles. They cannot afford the chauffeured car and the champagne reception that the super rich expect.

This is important, because doctors tell us that the main causes of health inequalities are lifestyle issues. They tell us that smoking is a prime cause of many terminal diseases. They warn that drinking too much alcohol is bad for us. They advise more exercise to keep fit. There are various dietary recommendations, but many of them centre around eating more cheaper foods, by avoiding the expensive highly prepared dishes in the supermarkets, and by cutting down on rich proteins.

For thirteen years the last government had as one of its aims cutting health inequalities. They put very large increases into the budgets of the NHS, and slanted much of their public spending towards the areas where life expectancy and incomes were lowest. None of this worked. Health inequalities got worse, not better.

We need an explanantion of why this did not work. We need to challenge the assumption that spending more on the NHS in disadvantaged areas will make people healthier. Many doctors will tell us that you need a lifestyle revolution to make people healthier. A larger NHS budget in poor areas relative to rich areas does not stop people smoking or drinking too much.

One of my concerns about the Health Bill now before Parliament is the inclusion of a clause that makes it an aim of the NHS to cut health inequalities. I have no problem with the aim, but I am not sure that the NHS, mainly an illness service, is the way to get those on low incomes to live longer.

Yesterday the 25 countries signed up to the fiscal pact Treaty. The Uk did not sign it. That sounds like a veto to me.

The veto had three good consequences. The first is this is now an intergovernmental Treaty, not an EU Treaty. They wanted an EU one and Mr Cameron exercised the veto. Their legal grounds for using the EU institutions are as a result insecure or non existent. The UK intends to push the legal issues further, as it has to do.

The second is it has helped force a referendum on this Treaty in Ireland, where the decision to hold one cited the fact that this is now a different legal arrangement from the EU treaties as one of the factors swaying them in favour of a referendum. This delays this Treaty coming into force. The delay gives time for France or others to demand a renegotiation or scrapping of the Treaty.

The third is it has started what will be a long process of the UK setting out an alternative course for the EU and for the UK’s relationship with it. Twelve countries agreed with the UK that the EU needed to deregulate to help growth and jobs, but were ignored by the Franco-German-Commission axis this time. It starts to build support for a different approach. Mr Cameron was right to explain in public that this latest summit has not done enough to promote growth, and has chosen the wrong policy mix for the situation.

Even Euro friendly commentators agree that the intergovernmental Treaty is unlikely to do much for the Eurozone. It is widely seen as a fig leaf for German public opinion. It is not widely wanted or liked by other weaker members of the Eurozone, and it is difficult to see how it delivers the desired goal of lower budget deficits, more cuts and higher taxes all at the same time.

None of this will cheer people who simply want to pull out tomorrow. As I constantly remind them, some people have wanted that for the last thirty years, but it has never happened. The pace of change is slow, but at least this time we are travelling in a better direction. It would have been wrong to have signed this Treaty. It would have been wrong not to seek a better set of freer market policies to try to stimulate growth and jobs. The UK has sought to explain that this latest Treaty is not the answer to Europe’s economic troubles. She now needs to press on with defining a new relationship with the EU that avoids more damage to us from the greater austerity zone they are creating.

I ask Mr Cameron’s strong critics what should he have done about this Treaty? Surely you agree it was better to refuse to sign it? Surely it was right to table alternative approaches for progress? Mr Cameron told you before the General Election he wanted powers back but did not want to pull out, so he has not cheated you. He voted with the whole Conservative party for a referendum on Lisbon prior to its ratification, as promised. He did not promise an In/Out referendum in the Manifesto as many of you wanted. His coalition partners want a lot more Europe, which stands in the way of the progress moderate Eurosceptics want, let alone what strong Eurosceptics want.

          Mr Brown left the Coalition government a nasty posion pill. He put Income tax (and NI) up to 52% on top rate payers, and he raised National Insurance, the tax on jobs.  The incoming goverment moved a little to take some of the sting out of the NI, but left the high top rate  of Income Tax in place. They then added to the problem by raising Mr Brown’s very competitive 18% rate of Capital Gains Tax to 28%.

           Throughout the Labour years they left the top rate of Income Tax at 40%. They cut the rate of Capital Gains Tax. This made the UK an attractive place for investment and enterprise relative to the continent, and gave people a reasonable chance of competing against the lower tax jurisdictions of Asia and the Americas.

          I agree with the aim of the main political parties to get more tax revenue from the rich to bring down the deficit. The question is how do you best achieve this?  The latest Income Tax receipts show these are now falling. The top one per cent of IncomeTax payers pay 30% of the total Income Tax collected. This is a steeply progressive tax system.  Some of them are relocating elsewhere. Some are taking their new ventures offshore. Some are sitting on their hands, unwilling to work harder and undertake a new venture given the tax levels that would hit any success.  There are still entreprenuers on strike, and entreprenuers who no longer like the UK tax and regulatory regime.

          Both Labour and the Coalition government have followed policies of dearer energy, with green taxes and subsidies pushing up the cost of energy. The current Treasury now seems to see the dangers of dear energy. It squeezes incomes , hitting demand. It raises industrial costs, and sends a strong message to anyone thinking of setting up an energy intensive business to do it elsewhere.

               Mr Osborne’s political antennae tell him cutting tax rates  on enterprising people is against the spirit of the times. His economic antennae should also waggle and tell him the way to tax the rich more is to make it more worthwhile for them to stay here and invest here. The UK is simply no longer competitive on tax. That was Mr Brown’s idea, his farewell present, his poison pill. 40% and 18% were good rates for Labour in power. In irresponsible opposition they will go the way of socialists not in government and send out a message that all we need to do is to soak the rich, even at the expense of less revenue from them . The priority today should be more jobs and more activity.

Falling Income Tax revenues:  January 2011 Total Income Tax receipts £22 billion, of which £10.9 bn was self assessment

January 2012 Total Income Tax receipts £21.8 billion, of which self assessment £10.3 billion.

 

 

 

  Yesterday the European Central Bank grabbed the headlines by lending Euro 529,000,000,000 to 800 European commercial banks for three years.  This was a top up to the Euro 489,000,000,000 they had lent for three years one month last December for 1% per annum to 523 banks. That makes a tidy One Trillion Euros of 3 year lending, all repayable January-February 2015.

      That was not the only money they lent yesterday, They also lent Euro 134 billion overnight at 1%, Euro 29 billion for 7 days at 0.26%,  and Euro 6.5 billion for 3 months.  Commercial banks also borrowed from the ECB  $3.5 billion of 7 day money and $14.5 billion of 84 day money. The European Central Bank’s website also declares a stock of Euro 65 billion of purchased covered bonds at the same date.

          What does this tell us? It confirms that the normal  interbank market in Europe is still well and truly frozen. Banks are unable to borrow the sums they need from each other. It also tells us the banks see profitable opportunities to make some money on the back of very cheap three year loans. Even allowing for low official interest rates, and low returns on German government bonds, there is still a turn to be made barring capital losses.

            This liquidity is helping drive down the costs of Spanish and Italian official borrowing, as they hoped it would. It has not had the same benign impact on Greece or Portugal. It does nothing directly to curb the large deficits, grow the economies or solve the tax problem in the most damaged  southern states. It does buy them time, it does keep the interest charges down in the countries where some of the cash is used to drive government bond prices up and interest rates down as a result.  The commercial banks could even consider lending more to the private sector for suitable projects, which could give the economies affected a modest boost.

                 The question is what do they use the time for that they are buying with this large injection of liquidity? They need to be repairing and sorting out the banks, so they can set up a working interbank market again. They need to be developing growth policies which work. The danger of the current system is that it means weak banks are propping up weak countries which are propping up weak banks. The Central Bank has taken various items as collateral for its loans. They need to mend the underlying economies to make sure the Central Bank can get its money back on time, and to ensure the collateral it has taken has full value.

               If they do not restore health to bank and state finances, and growth to economies, this becomes a fanciful money go round which will go wrong.

1.     It shifts power to GPs so they can get the best health care for their patients

The Bill abolishes two layers of administrators (PCTs and SHAs) and the money they now spend on health care will go directly to groups of GPs. GPs will decide how to spend that money working with other health professionals like nurses in what are called Clinical Commissioning Groups.

2.     GPs will be able to get health care from the NHS and other organisations. They must get the best treatments, not the cheapest and the Bill encourages GPs to give patients more choice

So, if you have a stiff shoulder you could go to an NHS hospital for physiotherapy or to your more local group of self employed physiotherapists. Your GPs can give you a choice between the two – or even more choice of where to go to fix your shoulder.

In Eastbourne some nurses left the NHS to set up a specialist wound healing clinic. It has a fantastic record of healing people who have suffered from serious problems like leg ulcers for years. GPs will be able to get treatments like this from other not-for-profit organisations, charities and organisations offering health care.

In Broxtowe people in need of help to control pain used to travel to specialist clinics at hospitals in Nottingham. Now their GPs have set up their own award-winning  local service – so no more trips to hospital as the service is now nearer to home.

3.     It  joins things up at a local level

Based on shire or unitary authorities one body called the “Health and Wellbeing Board” will bring together local health and social care services and public health. This Board will be a mix of doctors, other health workers, councillors and patients – all coming together to make sure there is a joined up way of keeping people healthy and making people better.

4.     It stops the current system that favours the private sector

The last Government discriminated in favour of private health companies doing work like knee operations. The Bill puts the NHS, not-for-profit organisations, charities and health companies on the same footing.

5.     For the first time there is a statutory duty on the NHS to reduce health inequalities

In 2005 the British Medical Journal commented. “The difference between the life expectancy of the richest and poorest in our country is now greater than at any time since Queen Victoria’s reign’ and under Labour the gap grew. The Bill makes it law that the NHS must work together to make sure people everywhere get the same great level of health care.

 

               Yesterday William Cash MP asked the Speaker to grant an urgent debate on the draft inter governmental Treaty which Mr Cameron declined to sign for the UK last December. The Speaker heard his case. Many of us were in the Chamber signifying our suport for an early debate. The Speaker granted Mr Cash’s requests on its merits. The government declined to oppose the suggestion, so tomorrow we will have our three hour debate.

                 I was pleased he did so. Mr Cameron is soon off to another summit of EU leaders. It is important that he presses UK concerns. Whilst it is great news that we will not sign this Treaty, it is important that the 25 signatories do not seek to use EU institutions to enforce their proposed Treaty in any way that inflicts loss or duties on the UK.  The UK is raising legal questions about how such a Treaty of the 25 would work, given that the 27 are the custodians of the EU institutions and of the EU Treaties. Can they use the EU institutions at all, when two members of the EU have declined to accept this draft Treaty?

                   The debate needs to go wider than these important legal and constitutional issues. The truth is the Treaty of the 25 is in trouble. The French socialist candidate for the Presidency has said he wishes to renegotiate the Treaty. The re are rumours that incumbent President will offer a referendum on it. The Irish have now said they would need a referendum. Instead of this Treaty being a quick fix for the Euro, a rapid dash to stronger controls over Euro member budgets, it is in danger of becoming a long running constitutional saga which could help to unmake governments and thrust more antagonism between governments and their electors.

                    The draft Treaty, even with an easy passage, was never going to resolve the Greek crisis, for example. It is all well and good the EU or a group within the EU telling Greece to spend less and tax more, but they have been saying this for years and it has not happened. Saying it under some new powers in a new Treaty, and threatening to fine Greece if she does not comply, is bizarre. As Greece has run out of money and has to borrow so much from other Euro states and the IMF, she would have to borrow the money from them to pay the fine. How would that help?

                     Much of the ground in the draft Treaty is reminiscent of   the old Growth and Stability  Pact all Euro members were meant to follow. It is similar, but Germany claims there are new enforcement procedures and sharper focus to the fiscal union in the draft Treaty than in the existing Treaties for Euro members. It looks as if Germany’s insistence on greater clarification and enforcement of fiscal union rules will create more dislocation in the churning politics of Euroland. Meanwhile Greece has promised to have an economy growing every year from next year to 2020. If it does manage to do so, it will once again fail to hit the deficit reduction targets that it has promised to meet before.

                    The EU awaits nervously as private holders of Greek bonds make up their minds whether to accept the new much reduced terms for their bonds. They wait nervously to see if Greece can at last find policies which simultaneously cut spending, increase taxes and promote growth. They watch to see if the contagion might spread to Portugal. And now with baited breath they contemplate what the voters might make of their latest fiscal union ideas, given that it looks as if somewhere in the union a referendum will be held on it if the Treaty survives to ratification.

Dear John

Thank you for taking the time to send in your comments as well as opening up the debate with your constituents and others through your online diary.  Your thoughts, and those of the respondents to your website, are very welcome as we take forward the government’s response to the Portas Review.  Indeed, many of the recommendations you offer, as well as those submitted by respondents to your website, are covered in Mary Portas’ Review, particularly around regulation, access and parking, and the creation of ‘Town Teams’.

With regards to regulation, we have already carried out a retail themed Red Tape Challenge, and we will work with local authorities to address their own regulatory functions.  We are very keen to identify and remove any unnecessary regulations impacting on the high street.

As far as access and parking is concerned, Mary Portas suggests the lack of free parking puts high streets at a disadvantage to out of town shopping centres, and that more should be done to make shopping in the high street easier.  Although this is an issue for each local authority, we would urge councils to look closely at their parking provision and charges and to consider the different options that are available, and think about new schemes to ensure they are working to do the best for their area and bring vitality and success to their high street.

Last year, we removed a number of barriers to tackle parking rules, including the policy that encouraged councils to set car parking charges to discourage the use of cars.  The draft National Planning Policy Framework follows through on these changes by removing the restrictions which impose maximum numbers of parking spaces in new non-residential developments.  This in turn will relieve pressure on on-street parking and support local high streets.

We have also made a number of proposals to help businesses.  We have listened to concerns about the Retail Price Index (RPI) increase for 2012-13 business rates bills, and are therefore giving businesses the option of spreading the increase over three years.  This will give businesses flexibility to manage their rates bills in the current economic climate, help their cash flow, and give them time to adjust to the impact of inflation.

Additionally, we have also doubled small business rate relief for two and a half years, which will include the whole of the 2012-13 financial year.  Over half a million businesses in England are expected to benefit, with approximately a third of a million businesses paying no rates.  We are ensuring that all eligible ratepayers automatically receive the small business multiplier, and we are removing the legal red tape requiring ratepayers to fill in paperwork to claim the relief.

In addition, government is giving local councils new powers to levy local business rate discounts, for example, to support local shops, community pubs, new business parks or vital local facilities, via the Localism Act.  The new power will be available from April this year.

With respect to rent levels, I agree with your opinion that this is a matter which the market should largely resolve and it is an area where government intervention should be measured.  Tenants who are in leases with upward only rent review clauses will indeed find that their rent does not move downwards in accordance with market values;  however, research suggests that the average lease length is now around 5 years and as such the majority of new leases do not feature rent reviews; this makes upward only rent reviews far less common that they once were.  We are working to make sure that progressive, fair and flexible leasing terms continue to form the basis of standard leasing practices across the sector.  As per Mary’s recommendations, we, in conjunction with BIS, are supporting and promoting the 2007 Code for Leasing Business Premises which sets out advice for prospective tenants and landlords aimed at ensuring tenants secure the best leasing terms possible, including considering alternatives to the upward only rent review clause.  We have challenged key industry players (RICS, the British Property Federation and the Law Society) to consider how they too can do more to raise the profile of this valuable tool.

Mary Portas recommends that Town Teams should be considered.  She clearly set out in her report how key to the success of high streets visionary, strategic and strong management can be.  We will look at ways in which the Government can support and encourage town centre management, and we would expect town teams to work with local partners to develop a joint vision for their local high street.

I recently announced a competition to choose twelve towns and cities across England to create Town Teams, with successful bidders benefiting from a share of £1 million to turn around their local high streets.  Those bidding will need to demonstrate a real transformational vision on how they can breathe new life into their high street or shopping parade and should have the strong support of their local community and a range of local partners.  Further information and the prospectus can be found at: www.communities.gov.uk/publications/regeneration/portaspilotsprospectus/ .

The Government intends to respond formally to the Portas Review in the Spring.

Yours ever

Grant Shapps MP

 

Many of us dislike the apartheid in UK education. If you are blessed with parents on good incomes, or with parents willing to make a large financial sacrifice, you have access to some of the best schools in the world, the top public schools. If you do not, you face a postcode lottery for how good your local state school will be. You may end up at a poor performing school, where ambition for pupils is low, and where there is no tradition of pupils successfully striving for excellence.

Of course there are weak or poor fee paying schools, and there are some excellent state comprehensive schools. It is not as simple a division as some class warriors would have us believe. Nor is it fair to suggest that all rich parents are great parents. They may not spare the time or offer the love and suppport children need, in addition to the money for the fees. Meanwhile socialists wrongly assume that all poor backgrounds mean disadvantage, when low income parents often do provide time, support, a framework of encouragement for their children which is so important. Allied to a good local state school, this can work well.

As we saw yesterday, the politicians have lighted on a definite social problem. Pupils from the great public schools do get a very  high a proportion of the places available at top universities, implying there is some problem with the state schools on average  in helping pupils pursue such ambitions.

The grammar schools fare better than the comprehensives. In one sense that is only to be expected, as they choose pupils most likely to qualify for elite universities. Grammars should produce a higher proportion of suitable candidates for top colleges. In another sense it is worrying. Comprehensives do not fare as well as grammars, when adjusted for the impact of selection. The Comprehensives in most parts of the country include the group who would otherwise have gone to grammars. Many comprehensives do not seem to provide the same back up to these able pupils as the grammars once did.

The left say that selection is wrong in principle. I find this difficult to understand. They seem to welcome academic selection at 18, accepting that only some should go on to university. They welcome selection based on ability and tests  for sports academies, for music schools, for elite dance and arts establishments. They do not want to have quotas of disadvantaged footballers placed in every elite Premier league team, nor do they complain if young people have to jump through hoops of fire to compete in the Olympics. Their approach to selection is highly selective. More importantly they lived through 13 years of government with school selection at 11 or 13 based on parental income, as if this were in some way more just or acceptable than selection based on ability and work rate.

The Coalition government rightly says one of its prime tasks is to raise school standards. The Secretary of State is pulling various levers in his part of the government machine to try to get standards higher. Allowing selection by ability and work rate at 11 or 13 in the state sector would create many more opportunities for children without rich parents to get to a top university at 18. The UK’s best policy for social mobility, the grammar school, was largely ripped out.

           The advocates of comprehensive education for all but the rich promised us more social mobility and better results. The truth is it has not happened. Could advocates of comprehensives explain why not? And could they refrain from just saying comprehensives do not get enough money per pupil, when they often get more per pupil than grammars. We have just lived through a generous era for public spending. Labour voted as much as it dared. Why did it not work?