The downgrade of Euroland bonds has been like the green bottles song. Now there is just Germany with a stable AAA rating from S and P. The Netherlands, Finland and  Luxembourg are on AAA with negative watch. (apologies for leaving out the two small ones earlier, based on a radio report which I have now properly checked out)  I pointed out a long time ago on this site that the famous big bazooka EFSF, the fund they said would rescue Euro countries in trouble, always rested on their ability to borrow on the strength of their collective credit rating. So far they have borrowed very little for this fund. That has just got more difficult, as the EFSF’s own credit rating must be weakened by the downgrades of Euro country bonds.

          As S and P say,  they do not just have a problem of spending and borrowing too much. They also have a problem of earning and growing too little. They need to tackle both those problems . The Euro makes solving the second one far more difficult.

          Outside the Euro in Europe Switzerland, Norway, Sweden and the UK are on a stable AAA rating. The Agency has taken into account the problems of governance and the inflexibility of the single currency in  its latest downgrades.

 

          I was glad to hear leading members of the government say today they plan to think again about how they will implement their policy of cutting Child Benefit for the better off.

          In the original proposal there were two big problems that gave rise to a sense of injustice. The first was the differing treatment of the one earner and two earner couple. A single earner couple on £45,000 a year loses all child assistance, whilst a two earner couple on £80,000 still receives it. That needs changing.

           The second was the fact that as soon as your pay goes over the 40% Tax threshold you lose all child benefits. This could be a perverse incentive to avoid promotion or extra pay. That too needs examining.

             The Chancellor could still make his savings, whilst working out a fairer and gradual withdrawal system that tackles both these problems.  I have discussed these matters in the past with colleagues, and never thought they would implement the original proposal as reported.

 

           Many bloggers to this site are delightfully cynical  about politics, and sceptical about many politicians. That is healthy in a democracy. Nor is it my job to act as shop steward for MPs. I am not a Shop Steward, and my colleagues would not welcome having one. If an MP reaches the point where he thinks it is about him rather than about the people he serves, it is time for him to be moving on to a different job.

          Occasionally, however, I feel I need to tell you more of the mood of the House and the things that do play on MPs’ minds. After all, many of you interested in politics and government want to influence the people who govern you, whilst reserving the right to condemn, criticise and complain. Some of you seem to think that there are lots of safe seats, “seats for life”. These are somehow given out by party High Commands to those whose faces fit. This makes these people immune to commonsense or persuasive lobbying from electors. After all, you argue, these lucky lifers just need to keep the whips or leaders reasonably happy and so they keep their jobs for life.

            That is not generally true in my experience. In the Conservative party candidates are selected by local Committees. It is true they select from a  very long list of approved candidates that Central Office has passed. This list contains a very wide range of characters and viewpoints, as examination of the statements and voting records of current Conservative MPs displays.  It may occasionally be true that the Centre has a view on what type of candidate or even which candidate is to be preferred. They have no power, however, to place such a person in the job in normal circumstances. In many cases any attempt  by Central Office to influence could backfire. Doughty independent minded Selection Committees might see it as a negative that Candidiate X was CCHQ approved.

 

              Most successful Conservative candidiates who make it to the Commons have served a long apprenticeship. They have usually fought a seat they could not win. They have often been Councillors. They may well have done national policy work, and usually now have been active in community programmes of one sort or another. They may well have nursed the constituency that finally elects them for two or three years before the General Election, acting as an unpaid community worker and campaigner.

              20 years ago there were 7 Conservative MPs in the place I know best, my home county of Berkshire. Most pundits then would have said that six of those seven seats were safe seats, “seats for life” for their incumbents. The seventh, Slough, would have been put down as a swing marginal between the Conservatives and Labour. The caricature of Berkshire then, the royal county, was a pure blue home counties area. People would joke that you could put a sheep up and as long as it had a blue rosette it would be elected. So what happened next?

            Conservatives held all seven seats in the 1992 General Election. One elected a new MP to replace someone who willingly retired. Tragically that new MP died prematurely during the Parliament. The Lib Dems took the seat in the by-election which followed. They held the seat in the 1997 and 2001 elections, only to lose it in 2005 to the Conservatives.

            The MPs for Reading East and Reading West had majorities of 16217 and 16753 at the 1987 election. They won easily in 1992. Both decided to retire in 1997. The MP for Reading East would I think have liked to carry on, but was concerned about  his  ability to win the seat. Both seats were lost to Labour. The Conservatives recaptured Reading East in 2005, two elections later, and recaptured Reading West only in 2010, three elections later.

               Berkshire East (Bracknell) and Windsor remained in Conservative hands. Their incumbent MPs both, however, resigned when they lost the confidence of their Conservative Associations over how they had handled their expenses. The Associations chose new candidates who were able to win in the Conservative cause. 

              Slough went Labour in 1997 and remained Labour, even in 2010, confounding ideas that it was a swing seat.

               So out of the six “seats for life” three saw two changes in  the MP and party thanks to the wishes of electors  in elections, and two saw changes in MP when the winning party chose a new candidate, worrying that the incumbent MP might have lost the electors’ confidence as well as the local party’s.

             Labour has had similar experiences with its so called “seats for life”. In the 1970s pundits said the arc of seats in south London were rock solid safe Labour seats. Yet Labour lost Bermondsey in a by-election in 1982, and it has stayed Lib Dem ever since.

             Today in Parliament this type of background generates great uncertainties in many MPs. Whilst Lib Dems stay cheerful in public as they have to do, they would not be human without pausing to look at the electoral consequences of their current poll ratings. Lib Dems will be doing private calculations of how far they need to get their vote to rise to save a significant number of their seats.

       The boundary review is abolishing 50 seats in total. It is a preoccupation of many MPs. Many more seats have changed boundaries that make minor or major differences to how winnable those seats are for their current incumbents. As 31 seats are taken away from England, 10 from Wales, 7 from Scotland and 2 from Northern Ireland, there is jostling for position as MPs seek to gain the favourable attention of the selection committees for the new seats.

            All this creates a jittery Parliament. It certainly makes MPs accountable. The average MP does the job for 10 years or two Parliaments. MPs often do not do what you would like them to do, but they are more conscious than most that they each have around 75,000 bosses and they live in the goldfishbowl of public accountability. They cannot please all 75,000, as electors have such differing views and problems.

           Every MP who knows the job well  knows he or she could be  just one foolish statement or action away from losing it. Maybe some of you remember Howard Flight. He had his “seat for life” taken away for saying at the start of  a General Election that if an incoming Conservative government could find more economies it would spend less. He was particularly unlucky and unwise with his timing. It does remind you how slender is the line between “safe” seat and political oblivion.

 

I will be happy to support changes to company law to give shareholders the full power they need to fix or approve remuneration of directors and senior personnel in companies. I trust it will also give them the power to say “No” to large pay offs to executives leaving because their performance has disappointed. Executives on high pay should be fully answerable to shareholders. There are bad examples in poorly performing companies where pay and pay offs are too high, compounding the difficutlies of the enterprise concerned. Shareholders are the obvious group to provide some leadership and discipline, as it is their money the executives are using. There is nothing wrong with high rewards where the company is doing very well. Complaining about that is just the same old politics of jealousy that gets in the way of a successful enterprise economy.

I also hope the government will look again at what it is doing where it is the shareholder or owner. The best way of showing the private sector the leadership it expects from them would be to come up with sensible remuneration packages and plans for RBS where the government is the shareholder on behalf of taxpayers. I will not begrudge senior people at RBS high bonuses if and when their businesses are back in the private sector, trading profitably, and the taxpayer has got a sensible amount of their money back. In the meantime, making losses or little profit and still dependent on the huge sums the taxpayer has put in, it is difficult to explain why people running this business are paid so much. Sorting out RBS is essential for the greater wellbeing of the economy. It is also the main test of the goverment’s new approach to remuneration.

Yesterday’s announcement about High Speed 2 was given more significance by the media than perhaps it deserved. The route of the track from Birmingham to Leeds and Manchester, and the sites for the stations on the northern lines, remains to be finalised. If all goes according to plan the first passangers could travel on the new trains to Birmingham in 2026, and to the more northerly destinations in 2032-3.

I asked how much money will be spent this Parliament on this project. I was told just £200 million. This presumably covers the further work on consulting the public, confirming the works on the Birmingham section and choosing from the options for the northern legs. I was told that no construction contracts will be let this Parliament.

This means that a new government elected in 2015 at the scheduled General Election will in practice be able to make up its own mind about this project then, before letting the contracts. It will need to fit into the budgets being drawn up by the new government. It will need to demonstrate value for money and a good ratio of benefits to costs to the then Secretary of State for Transport and Chief Secretary to the Treasury. It would be wise to look again then at the forecasts of passenger demand, likely fare revenue, and the ratio of costs to benefits. It is also likely that voters in the affected constituencies will make this a continuing issue in the 2015 election.

I understand the strong feelings of some in the north that they would like to see this project go ahead to provide better travel links between north and south, in the expectation that it will stimulate northern economic activity. Such a view needs to grasp that we are talking about contributions to the economy from construction jobs towards the end of this decade, and stimulus to the wider economy from the transport links after 2026, 14 years away.

It makes it even more important that the present government, spared significant cost for this new railway, spends what money it does have in its transport budgets to boost other rail and road capacity for maximum economic advantage for the whole country as soon as possible. This one day railway will neither help the UK out of the recent recession by construction jobs soon, nor provide the stimulus to northern economic development this decade. This very fast train is on a very slow planning and building timetable.

The original London to Birimingahm railway took just five years to build, despite the opposition of local landowners who forced diversions of the route in places. It was also built with private sector finance. Not everything has got better and slicker.

Meanwhile, the best possible investment for the greater early success of northern – and southern – UK business might be better and faster broadband. Like the railways in the Victorian era, this is the latest technology, with much more private finance around to go into it.

I am with the Prime Minister when he says the UK Parliament should decide on when the referendum on Scottish independence is held, and what the question should be. Scottish nationalist concerns will be recognised by the UK Parliament holding a referendum on the topic, and by agreeing to their view that only Scottish voters should have a vote on this Union matter.

The referendum electorate raises issues which Westminster has to solve. Do people born in Scotland, temporarily resident in England, get a vote? Do people born in England, now resident in Scotland, get a vote? Should the referendum take the already established Scottish electoral roll, or should we allow a possible surge in new registrations as interested people register themselves at a Scottish address for it? What are the correct qualifications by residence, property ownership and employment? There are difficult issues in creating Scottish nationalist purity in the electorate when the two countries have become so intermingled by blood, marriage and residence.

The Prime Minister hopes that by offering a simple question soon to the Scots on whether they wish to remain in the union with the rest of the UK or not, he will secure a Yes vote. This makes him a very traditional Conservative and Unionist. The latest modernisers in the Conservative party now include some who are more English nationalist. Whilst for Scots arguing over their identity and external relationships the prime issue is England, for the English arguing over the same things the main issue is the EU.

The Prime Minister will discover when moving into this territory for public debate that English nationalism is on the rise. In a way that is what Mr Salmond hoped for and has helped promote. Scottish nationalism is becoming more popular in England, as more English think they could be better off without the UK. The dream ticket for a modern English nationalist is a decision by Scotland to leave the UK, followed by the ending of membership of the EU because the member, the UK, no longer exists. Paradoxically, making the traditional case for the maintenance of the UK, the government may find itself drawn into the territory it is less keen to explore, the continuation of the UK’s membership of the EU.The EU itself apparently does not welcome the idea of Scotland breaking away from the UK. This may help win Yes votes in Scotland, but will antagonise more English voters the other way. Were Scotland to leave the UK the EU would have to renegotiate its relationship with what remained, as the new country that emerged after Scotland left would need a new name and would be smaller, affecting all the numbers for votes, contributions and the rest. It would also be a more Eurosceptic country.

Whilst the Prime Minister can take comfort from the fact that he can deny the English a vote on the Scottish question, and concentrate on the debate north of the border, he may find there is more debate about Englishness and English nationalism as a result of events in Scotland. He will need to build on his “No” to France and Germany over Treaty change, and demonstrate that he understands the EU frustrations of many English nationalists and of those who are thinking of joining them. He will need to offer more to avoid the divorce of this movement from the Conservative party.

It is a bold move to challenge Mr Salmond’s apparant leadership on this issue of identity. Saying bring it on, and providing focus to the debate is fine. Some in Scotland will counter that this is a Scottish matter, not a Union one. Mr Cameron needs to win this argument rapidly with a few well chosen soundbites. It has to be understood, however, that the politics of identity and belonging is about the most explosive type of politics there is. The English have been quiet for a long time, but the English lions are awakening. This may just be the alarm call they were wanting. The English too have an independence agenda. It mainly relates to the EU. The problem for the Prime Minister is the EU is now strongly linked to the union of the UK, both legally, and in people’s minds.

The government wishes to get the UK out of extreme debt. So far on its watch the private sector has done its bit. It has reined in credit card excesses, and gone soft on mortgage borrowing. The banks won’t lend 100% of a property any more, and many people are circumspect about taking on high debts to support high home prices. Many people have saved from their incomes so they have something to fall back on if things get worse.

Meanwhile the public sector has carried on with near record borrowing, whilst talking about cuts. It has made some, but overall it has raised its spending more. It has kept official interest rates at record lows, as it suits the government to be able to borrow at very cheap rates. The government has continued policies of taxing those who might save more at high levels, reducing their saving rate.

It has continued the past government policies of taxing pension savings more, confirming the death of many a private sector pension fund. The very low rates of interest on offficial debt have also been a death blow to pensions, as the pension funds rely on government bond income to purchase annuities to pay the pensions. The large deficits today are in no small measure the direct result of low government bond interest rates, as funds need to buy so many more government bonds to get the income they need to pay the pensions.

The way out of excessive debt is to save more. The way out of excessive dependence on state welfare is for more people to have savings and future pensions they can rely on, so they do not need so much money from the state. In order to encourage more self reliance and less state and individual debt, saings need to be more rewarding. We are at the point where the very low interest rate policies are doing damage to this wider social and moral issue. We need to make savings worthwhile. If it cannot be done by realistic interest rates, it needs to be done by sensible tax breaks. A balanced economy needs plenty of private savings, and wortwhile ways of investing them. A healthy society needs more families providing for themselves, where savings have a role to play.

Some of you have written in to say you do n ot agree with encouragement to people to buy their own home. The big advantage of home ownership coems before you retire, on the day your mortgage is paid off. Surely it is good to look forward to an old age where you do not have to pay rent? It is cheaper over the typical adult lifetime to buy your home than to rent it, even if renting from the subsidised public sector.

Many of the emails and blog replies I receive effectively ask just this question. I am bombarded with many examples of how our welfare state rewards people who do not get a job, do not buy their own home, do not save hard for a rainy day, and fail to provide a decent pension for their old age. Those who have worked hard to make provision for themselves and their families ask why do I have pay twice, once for myself and once for those who did not bother to be prudent?

The answer is in one sense very easy. I want to live in a society where we all contribute to provide an income to those who are disabled, who have fallen on hard times through no fault of their own, who cannot find a job despite looking hard for one. Few of the toughest critics of welfare would make the case for letting people sleep rough on the streets for lack of a roof over their heads, or would wish to see children go without food or basic amenities for lack of money.

The problem is in the tests we apply to see who should be eligible. All three main parties and most voters agree that much of our welfare provision should be means tested. No-one wants to offer unemployment benefit to the billionaire who does not need to work, or to pay for the children of the banker or footballer on the seven figure salary. Most agree we need to target the aid and assistance on those in need.

So far so good. It is the next step of the argument that causes the practical problems, and some of the moral argument. It is the need to offer the money to those who not only need it but deserve it. Most people and the three main political parties do not think benefits should be given to the individual who simply will not work, despite work being available. Difficult judgements have to be made case by case. Was this individual unlucky in not having a job in an area of relatively high employment? Was this individual trying to put employers off by his approach to job interviews so he could stay on benefit?

I always want us to be more generous to people who are blind or deaf or unable to use their limbs. These are visible and debilitating medical problems. It is more difficult if someone claims they are depressed or have a bad back. The condition could be life sapping and make it impossible for them to work, or it might be something many put up with without stopping them earning their own living. These tricky decisions are having to be made by adjudicators and medical advisers, to offer justice over claims.

The welfare system largely provides help to individuals and families with insufficient independent income, but some of the money is also based on spending patterns. Instead of giving people a fixed amount to take care of housing needs, housing benefits are based on the actual cost of the person’s accommodation. There does seem to be widespread support for the reform that says there needs to be some upper limit on how much a family without income can spend on housing to receive state support.

The issue I would be interested in comment on is how tough should the state be when assessing eligibility for benefits? How do we answer the question Why should I be prudent? At the very least it must always be worthwhile working. It also needs to be worthwhile saving, a topic I shall return to later this week.

I was pleased to see the Shadow defence Secretary acknowledge Labour needs to show what it would cut. They have always found cutting national security easy – they did some of that in office whilst presiding over the huge overall surge in public spending elsewhere. I await with interest how they would cut this far bigger area of social security, where cross party agreement could add to the authority of the decisions. This year national security or defence is scheduled to cost £40 billion and social protection or social security to cost £200 billion.

I was pleased the Prime Minister tackled the difficult issue of nursing and nurse leadership yesterday in his speech. Many of the problems I see in the public sector stem from poor management, just as companies which go bust are often badly led.

There are big differences between being a senior manager in the public and private sectors. In the private sector the danger is the boss has too much power. You have the power to hire and fire, to reward and to penalise. Your approval is sought by the ambitious, and your disapproval can cause angst and worry for your staff. In a private sector company the problem for the boss is to get honest advice from employees. The boss has to beware. A throw away remark or an ill formed thought can become a mantra or a command which people take too seriously. The danger is rash action based on the boss’s poor understanding or unchecked prejudice.

In the public sector the Minister has no power to hire and fire, to set salaries or award bonuses. There is plenty of honest – and some self serving or badly informed- advice available. A clear Ministerial decision or instruction can be treated as an invitation to a seminar by civil servants. It might become a challenge to them to see how they can rally forces against it. Ministers need to learn how to get the system to do as they wish, as it is not easy. The danger is nothing new or better ever happens. The forces of inertia can be very great. It is especially difficult for a Minister who wishes to do more with less, as the whole culture is in favour of spending more as a signal of success.

Nursing, as the Prime Minsiter observed, should be about caring for patients. Record keeping is important. A good hospital needs to be meticulous in recording drugs needed and treatments administered to avoid errors and to check on results. This need not get in the way of patient contact. Indeed, the records should mainly stem from nurse and doctor contact with the patient, and can be mainly carried out at the same time as the conversation with the patient. The drug taking needs to be recorded at the bedside when it is administered. The patient’s condition needs to be recorded along with their feedback when the nurse or doctor calls.

Good leaders or managers know when to listen, when to seek advice, when to consider, and when to decide. They decide based on good evidence, and carry through their chosen course. They need to explain it to staff and all affected by it. They need to carry as many as possible with them, but at times they may need to make a decision which does not meet with the approval of some involved. In such cases it is even more important to be right, when you need to draw on superior experience and knowledge to make it worthwhile going against the viewpoint of some of the team and those affected.

Nurses above all have to carry the patient with them, and must regard the patient as the most important person and the ultimate decision taker. Many patients will trust their medical advisers to do what is best. Others need explanations and need to be persuaded to consent to the interventions thought helpful. All this requires more time with patients. If the Prime Minsister achieves anything from his speech , it is important he achieves this simple thing. Nurses need to spend more time with their patients. The “paperwork” as it is called in a rather old fashioned way has to stem from the work done at the bedside, and has to to be fitted into the relationship with the patient.

Yesterday Italian unemployment figures came in at 8.6%. That is bad news for many Italians, but by Euro area standards it was a good performance.An astonishing 23% of the Spanish workforce is unemployed, including 45% of young people. 18% of the Greeks of working age, 14% of the Irish and 13% of the Portuguese rely on out of work benefits for their living. Even in France almost 10% of the workforce is without a job.

The Euro area chiefs do not seem to worry unduly about this waste. They seem unconcerned that their currency scheme is one of the main reasons why unemployment is so high in these countries. The Euro has delivered a series of uncompetitive economies in the south. It delivered a credit and property bubble in Ireland and Spain which is proving painful now it has burst. It has created a very weak banking system throughout the Euro area. The currency requires countries in trouble to follow mutually assured deflation as their prime policy.

Yesterday was another bad day for the Euro in other ways. Uni Credit bank shares fell another 14% on the back of their deeply discounted issue of new shares to buttress their capital position. In sympathy Euro area bank shares generally fell by around 5% on average in just one day, after a prolonged period of weakness. Investors worried about the volume of new bank shares the other banks will need to issue, and assume they will be able to buy those at well below current prices, as UniCredit shareholders have now discovered.

Hungary, a candidate to become a member of the Euro saw her bond rates forced up to almost 10% and is now seeking help from the IMF. Italian state 10 year borrowing rates went above the magic 7% again, whilst Spanish 10 year rates also rose to 5.63%.

The ECB’s giant injection of more cash has not injected the confidence in the system that all hoped. Mr Monti, the new technician PM of Italy, has had to travel to Brussels for more talks. Sarkozy and Merkel will be back together attempting another package to save the Euro, probably next week. The truth is the Euro system has unleashed a banking crisis on the back of a sovereign debt crisis. They failed to keep banks’ capital up to sensible levels in the better days, and are now behind the curve in the bad days. Meanwhile the overborrowed governments are struggling to raise the collosal sums they need to keep going.

If they were at all worried about the unacceptably high unemployment, they would be plannning and early and orderly exit from the currency of the weakest economies. They would also be sorting out the banks in need of state support, deciding which bits to back and keep and which to put into orderly administration. Spain announced this week another 50 billion Euro hole in its banks and related property market.