On Tuesday I was invited onto the Today programme to talk about the Dilnot Report. I explained to them it was not an issue I had been campaigning about, not even an issue where I had come to a strong or different conclusion to current policy. They were still keen to question me about the subject.

The news peg was a letter in the Daily Telegraph from numerous leading charities and other interested parties. They said there is a crisis in care for the elderly. They urged the main political parties to continue talks to reach a cross party consensus on reform of the system. It is difficult to disagree with that. Cross party agreement to change could guarantee less future change or disruption, if the parties hit on a good answer.

I suggested that we should start from the question of how do elderly people get access to the care and support they need? If there is a crisis, it is because too many elderly people are not being looked after well enough or do not have a good choice of future care home provision. I have been worried by some reports of the poor treatment some elderly people have experienced in care homes. I am concerned that some elderly people living in their own homes do not get the help they need with shopping, cooking and other basic daily chores, making their lives uncomfortable and even dangerous. Reading the Dilnot releases again, they seemed more preoccupied with the issue of who should pay for the care and accommodation, and spent considerable time discussing how to preserve more of the childrens’ inheritance from parents who need expensive care and accommodation in their old age.

The Dilnot proposals suggest that allocating £1.7 billion more a year to this area would ease the problems. This money seems to go primarily to lessen the amount that individuals would pay from their own resources when they needed to live in a nursing home. The Dilnot suggestions include raising the means test threshold from £23,000 of assets to £100,000 of assets before you need to make full payment, and capping the total that anyone had to pay for nursing or care home fees to £35,000 however long they lived in such a home.

The current cross party consensus is based on three main principles. The first is that medical care should always be free, under the NHS. Elderly people tend to need much more medical attention than younger people, and should not face financial penalties for this need. The second is that if an individual has little or no money and property of their own their nursing or residential home would be provided free to them, so they could have a dignified and warm old age at no cost to themselves. The third is that if an individual who has financial and property assets needs to live permanently in a care home, they should pay for their food and accommodation all the time they have the means to do so.

Some object strongly to the fact that the old family home has to be sold to pay for the nursing home, if just one parent is still alive, needs to move into a nursing home, and has no other money. There is no question of using the asset of the family home if the other parent still wishes to live there. I would be interested in your thoughts on whether you think the current system is based on the wrong principles, and if so what changes you would like to see in the provision of care and payment for it.

Since 2005 I have been ever ready to criticise the Bank for helping the roller coaster ride we have experienced. I disliked their super lax monetary policy up to 2007 which helped pump up the bubble and brought on inflation, warned against their super tight bust the banks policy in 2007-8, and expressed concerns about their bring inflation on policy of 2009-10.

Today I find myself in agreement with them, that inflation this year will fall. This month the VAT rises drop out of the figures. We have had a relatively stable year for the value of the pound, which will help. The pressures from commodity prices have subsided for a bit. There is cut throat competition on the High Street, with poor footfall figures so far this year. We should expect more price discounting to attract customers back. The advancing internet captures more sales by offering better value and clearer price comparisons. It’s another force for lower inflation.

The tight squeeze on living standards brought on by rapid inflation, low wage increases, and substantial tax increases, has driven more people to shop for the cheaper brands and the better value goods. The discount stores are thriving whilst many of the higher priced stores are struggling.

I do not expect the government to add to inflation again by further VAT or sales tax rises. They may continue the long term trend of faster inflation for public services than for private sector offerings. The large rail fare rises this January may well be repeated next year, as there is little sign of the railways getting more efficient or learning how to fill all those little used early and off peak trains that I seem to encounter when using the network. Many a quango or government department likes to put up licence fees and charges rather than controlling costs, and will doubtless do more of that this year. Councils reckon taking more money off us in parking charges and other fees is now the easiest way to bring down their deficits. So we cannot say the public sector will now be angelic when it comes to inflation, but no more VAT rises will help, after two years in a row of Labour and Coalition VAT increases.

We do need to recognise that China is now allowing its currency to rise a bit, and still has some inflation in its system. We must factor in some price increases affecting some of those very good value goods we see in so many shops with “Made in China” on the packaging. There is always the danger that the pound could fall again, as there is going to be no shortage of pounds given the policy of quantitative easing. However, there is now a race to the bottom, with many other countries trying to engineer devaluations which limits the scope for a large fall in sterling. Recent weeks have seen the pound go up against the ill fated Euro, though not against the dollar.

I do not expect to see much price cutting by manufacturing companies. They are enjoying the lower pound, and wanting to make better margins as a result. There is less spare capacity in the system than some at the Bank think. Manufacturers are reluctant to put in additional capacity, as they are concerned about Eurozone recession and poor demand elsehwere over the next year or so.

I do not expect quantitaive easing to have much impact on inflation this year. Two large banks are still weak and with the others are under a regulatory cosh. The commercial banks are unlikely to be able to gear up their balance sheets on the back of the cheap newly printed money. QE seems to be more a device to try to keep gilt rates down so the government’s large borrowings can be accommodated. The recovery needs more private sector bank lending to worthwhile projects. That still awaits reform of the state owned banks, a task not yet given to the Old Lady of Threadneedle Street.

It is time to end the large squeeze on the private sector. Many in the media seem to be unable to distinguish between the private sector squeeze, and cuts in the public sector. They regard the two as the same thing, and often seem to equate what public sector spending cuts there are with the feeling of the many that we are worse off. This feeling has been brought on not by the spending cuts but by the tax rises and the high inflation eroding the purchasing power of our incomes.

As Table 1.1 of the Treasury’s own Autumn Statement book makes clear, in 2011 private consumption fell sharply. Business and dwellings investment also fell. The public sector, taking both current and capital spending together, showed a real increase. Would commentators please just read Table 1 and understand they are quite wrong to keep on talking about the deep public spending cuts so far? Overall there have been none, so the “cuts” cannot be the reason for poor economic growth.

The growing share of the public sector is astonishing. It has been shielded from all overall real cuts so far since the recession hit in 2008. The Treasury figures show that the public sector spent 41% of our total national output in each of the years 2005-6, 2006-7 and 2007-8 before the recession hit. It shot up during the recession and is now running at 47%. Because the public sector so expanded its share of a falling total, the squeeze on the private sector was intensified. The private sector not only had to absorb the hit from recession, taking away revenues from its businesses and employees, but also had to absorb the hit of a large increase in tax revenues to help pay for the expanding public sector. This year taxes will be £46 billion higher than in 2008-9, despite national income being lower than at the pre recession peak.

Some of this change was of course the so called automatic stabilisers. Public spending does go up in a recession as more people lose their jobs in the private sector and rightly qualify for benefits from the public sector. Some was a planned fiscal or Keynsian boost to demand, which did not succeed in preventing a sharp reduction in private sector demand. It did help intensify the tax squeeze and inflation squeeze on the private sector.

So let us assume that the high levels of public spending achieved under Mr Blair and Brown before the recession struck are the desirable norm, the levels the UK public wishes to vote for. That means getting UK public spending back to 41% of our national output, from the current 46% planned for this year. In order to do this without making any real cuts to public spending the UK private sector needs to grow more quickly.

If the UK economy grows at 2.5%, its old pre crisis growth rate, the UK could reach Labour’s preferred level of public spending by 2016-17 by freezing current real levels of public spending and allowing the private sector to grow. If the rate of growth of the UK economy is now around 1%, as some fear, by 2016-17 UK public spending would still be a very high 45% of national output without real cuts.

All agree we need more growth. The way to achieve it should not be in doubt either. It is back to our old favourites. Cut tax rates on earning and making profits, reward savers better, fix the banks, and get many more of the costly but less desirable regulations out of the way. Public spending has risen, continued to rise under the Coalition, and needs to fall as a proportion of our national income. It is easier to do that if the economy is growing.

For the next few days I am going to explore work and jobs. Today I want to explore the political paradox about work.

Both Labour and the Coalition praise the idea of everyone of working age having a job. Most politicians buy into the proposition that if you can work to support yourself and your family you should do so. Some think this from Cbristian and Protestant roots, some from the Marxist labour theory of value, some because it just seems like common sense.

Both pursue policies they say are designed to make it more worthwhile or more likely people will go to work rather than stay on benefit. Political rows are about who has the best way of doing that.

Yet both Labour and the Coalition in office tax work. They tax jobs through National Insurance, and tax pay through Income Tax.The Coalition has  cut Income Tax on the lower paid and removed some Labour increases in NI which helps, but has had to stay with heavy taxes on jobs and work. Both governments have used strong rhetoric against those who choose to work long hours in order to earn high salaries and dividends from their businesses. Overall the rhetoric is anti financial success, with all the attention on how hard working people can be made to pay more of their income in tax.

It would be better if more of the tax burden were shifted away from taxing jobs and earning. That way here would be more jobs and the would be less need for top up benefits. We ended to create a virtuous circle where people keep more of the profits of their labours so they need less financial support from the state so the state needs to raise less in taxes. One of the main reasons we have such a high benefits bill is hat we tax earning and creating jobs too much.

Mary Portas has recently published her report into the decline of some town centres as shopping centres.I attach to the bottom of this blog her 28 policy recommendations, which are now the subject of a consultation. I would like to hear readers’ views before putting in my own thoughts to the BIS Department. They are consutling on the Report and will in due course decide what if anything to do.

Last week-end I visited a couple of shopping centres, one in a southern market town and another in a larger city when I was away from Wokingham. They illustrated the problems and the opportunities.

In each case the rise of the internet, the growth of out of town shopping, and the fierce competition from a wide range of shopping centres and outlets was having a visible impact. There was an oversupply of space, with various units unoccupied, or let to temporary tenants probably on much cheaper terms than the established traders. Discount retailing seemed more successful than the higher priced shops. Most stores were having to cut prices substantially to generate traffic. Many were reporting anecdotally poor turnover figures and squeezed margins. Some areas of the centres were run down, with too much empty or poor quality frontage. There have been well publicised problems since 2008 for Woolworths, Senza, HMV, Comet and a number of other well known names.

No-one is seriously suggesting that the rise of internet shopping can or should be halted. It is likely the retail industry has to plan for an increasing amount of trade to take place on line. Indeed, many leading High Street retailers compete with themselves by having strong internet shops alongside their traditional stores.

Some argue that the rise and rise of the out of town large food retailer, increasingly seeking more space to sell chemist shop, textile and other ranges as well as food, should be halted by declining planning permissions for such stores. Mary Portas argues for some tilt in the planning system towards High Street locations, but falls short of wanting rationing or banning more out of town space which remains popular with many customers. Some wish to go further, and demand anti trust action against leading retailers. So far they have not produced evidence to convince the Competition Authorities that there is a case to answer. There seems to be plenty of competition between the major food retailers, and they remain very popular when judged by use.

The out of town food and general purpose retailer, and the specialist shed retailer, have three great advantages over many in town shops. They usually offer plenty of free parking right outside the door, making it much more convenient to shop there. They often have keen prices owing to the weight of their bulk buying. They can offer a wide range of choice owing to the large floorplates they trade from.

The in town retailer also has a variety of advantages, which explain why in town centre retailing is still the biggest single element of the retail market. Taken together the in town shops provide a very wide range of styles and ranges for most tastes and income levels. There is not the same single house view dominating the buying that you see in the main superstores. The general environment may be better for shoppers wishing to enjoy a morning or afternoon for the experience, with a wide range of cafes, restaurants and other facilites in the town near the shops. Town centres can have their own beauty or magic that may be missing on the trading estate. Some in town stores benefit from the same strong buying that out of town stores can deploy to offer keen prices.

The problems for the town centres to me boil down to four:

1. Overtaxation and regulation. Rates are often very high, and rules and controls can be stifling. Change of use may be difficult, and both Councils and landlords can be restrictive in what they will let shop managers do. This is the area where national and local government should concentrate its efforts, to ease burdens and cut costs.
2. Too much provision. As out of town and internet expands,we should expect some retreat of the High Street in some places. Landlords need to be able to convert fringe properties to different uses, and planners with town centre managers where they exist need to work with landlord groups at defining and sustaining a realistic amount of good shopping space within towns.
3. High rents. The market is likely eventually to resolve this problem by putting rents down. Rents are sticky downwards in the UK thanks to upwards only review clauses which are common. The market would clear more quickly and shops have more chance of trading profitably if the rent levels adjusted. This is not something governemnt can or should force. It is currently happening by forcing administration or bankruptcy on the weaker groups. The shops are then taken over at lower rents by new owners or operators.
4. Access and parking. Local government could do so much more to make free and cheap parking available for shoppers. Sensible time limits can stop this parking being used by long stay and all day users. Road networks should be reviewed so that junction capacity and safety is enhanced into and out of our main town centres. If you are going to shop and are expecting to make a number of larger purchases, you cannot take them home on the bus.
Summary of recommendations in the Mary Portas review:
1.
Put in place a “Town Team”: a visionary, strategic and strong operational management team for high streets
2.
Empower successful Business Improvement Districts to take on more responsibilities and powers and become “Super-BIDs”
3.
Legislate to allow landlords to become high street investors by contributing to their Business Improvement District
4.
Establish a new “National Market Day” where budding shopkeepers can try their hand at operating a low-cost retail business
5.
Make it easier for people to become market traders by removing unnecessary regulations so that anyone can trade on the high street unless there is a valid reason why not
6.
Government should consider whether business rates can better support small businesses and independent retailers
7.
Local authorities should use their new discretionary powers to give business rate concessions to new local businesses
8.
Make business rates work for business by reviewing the use of the RPI with a view to changing the calculation to CPI
9.
Local areas should implement free controlled parking schemes that work for their town centres and we should have a new parking league table
10.
Town Teams should focus on making high streets accessible, attractive and safe
11.
Government should include high street deregulation as part of their ongoing work on freeing up red tape
12.
Address the restrictive aspects of the ‘Use Class’ system to make it easier to change the uses of key properties on the high street
13.
Put betting shops into a separate ‘Use Class’ of their own
14. Make explicit a presumption in favour of town centre development in the wording of the National Planning Policy Framework 15. Introduce Secretary of State “exceptional sign off” for all new out-of-town developments and require all large new developments to have an “affordable shops” quota 16. Large retailers should support and mentor local businesses and independent retailers 17. Retailers should report on their support of local high streets in their annual report 18. Encourage a contract of care between landlords and their commercial tenants by promoting the leasing code and supporting the use of lease structures other than upward only rent reviews, especially for small businesses 19. Explore further disincentives to prevent landlords from leaving units vacant 20. Banks who own empty property on the high street should either administer these assets well or be required to sell them 21. Local authorities should make more proactive use of Compulsory Purchase Order powers to encourage the redevelopment of key high street retail space 22. Empower local authorities to step in when landlords are negligent with new “Empty Shop Management Orders” 23. Introduce a public register of high street landlords 24. Run a high profile campaign to get people involved in Neighbourhood Plans 25. Promote the inclusion of the High Street in Neighbourhood Plans
26.
Developers should make a financial contribution to ensure that the local community has a strong voice in the planning system
27.
Support imaginative community use of empty properties through Community Right to Buy, Meanwhile Use and a new “Community Right to Try”
28.
Run a number of High Street Pilots to test proof of concept

It was a pleasure on my return home from a New Year week-end celebration to read on my website that people had kindly voted for me to be nominated as backbencher of the Year by Conservative Home.

I was also pleased to see Douglas Carswell, Philip Davies, Jacob Rees Mogg and David Nutall had done well in the poll. Parliamentary campaigns on the EU and the economy have been team efforts where a number of MPs have made important contributions.

Worry not. I did see the New Year in at a party, and wrote this a couple of days ago so the show goes on.

There is one question I feel we need to ask again which is crucial to western success in the New Year. It is why does the west’s public sector find it so difficult to spend wisely, and to keep within sensible spending bounds? Why is the public sector so good at lobbying for more money, and so bad at delivering more with less?

In the great recession of 2007-8 many industrial companies experienced large falls in their income. Some saw their turnovers halve, as their customers decided to destock. With falling demand from their customers, it meant a period when they ordered nothing, as they worked their way through what they had already bought. Many companies adjusted rapidly to the new reality. They did not take it out on their customers, as they needed to win them back.

If the public sector in the west cut its spending by a little over 10% the current problems would be largely solved. Public borrowing would subside to affordable levels. It should be possible to do this without damaging the main services states feel they should provide. If that was all that private sector companies had had to do in 2007-8 most would have taken it in their stride,and would not have cut anything that mattered.

Instead of getting on with doing this, the public sector often enters a barrage of complaints, special pleading, and funny numbers. Rarely does anyone running a public service speak in terms of pounds or dollars spent. Budget numbers are put into so called real terms, and cuts are expressed as reductions in previously agreed growth plans, not as cuts in actual amounts of money being spent. Bonuses, pay awards, salary increments and pension improvements are often taken as unavoidable commitments, not something to manage in hard times. Public sector managers appear on the media to say they cannot do a good job because they are short of money. Private sector managers appear on the media to say they are doing a good job despite the shortage of cash.

I hope 2012 brings more commonsense to the public sectors of Europe and the USA. If more action is not taken voluntarily, the markets will press on and force worse medicine on the unwilling patient.

2012 is a year crying out for leadership.

2011 saw dreadful drift in the West. The EU politicians proved incapable of deciding whether to press on to create a single country called Euroland or not. Would they take the necessary powers to tax, spend, send money to troubled regions and print money on the scale needed to shepherd through their chaotic union? Would the voters let them? Could they do so by stealth, without referenda?

As a result they fell between the two schools of thought. Some wanted to avoid spending and borrowing collectively, thinking they could have a currency union without the usual systems for using budgets to ease the problems in the less successful parts of the zone. Others wanted more transfers and common borrowing, but were unable to convince Germany fully, as she feared she would be paying a lot of the bills.

The US politicians ended up in stalemate. US politics is polarised between those who want to spend and tax less, and those who want to tax more. It is split between proponents of Obama’s health care reforms, and those who want them reversed as soon as possible. Major deficit reduction has been delayed. The US wants to pull out of its Middle Eastern wars, but has sounded an uncertain note over how and when.

In the UK there is clear leadership from two parties in favour of deficit reduction, but the latest figures shows the early plans have been overtaken by slow growth and a slowing world economy. They needed to revise them substantially last autumn, allowing much more borrowing. They have decided to take two more years to get there, as the strategy relies heavily on rising tax revenue.

Politics has been living through a long period of followership. In the US and the UK it has been the fashion to spend large sums on focus groups and polls, allowing the senior politicians to craft messages they know will play well. The aim is to tell people what they already know, what they want to hear, or what they half believe. Whilst in a democracy the people are often more savvy than the politicians and capable of good commonsense, public opinion can be both volatile and contradictory, depending on how it is polled. Trying to make policy and govern by the guiding lights of polls is not a good model.

The worst kind of such approaches could best be called followership. It is unlikely to generate policy that will tackle difficult problems strongly and in a way likely to solve them. All too often politicians duck the issue because the solution polls so badly. Many of the successful Thatcher reforms polled badly when undertaken, but have not been reversed as the country and the Opposition came to see the sense of them.
Today we need leadership. The west needs leaders who will explain that we have to change our ways. The west is too debt soaked. The public sector needs to be transformed, to do what it needs to do for less, and to confine its actions to the those most needed. The Euro area needs to settle its intentions quickly – do they want to pay the massive bills needed to complete their union? Wouldn’t it be cheaper and wiser to cut the membership down now, before more economic damage is done? The US needs to accept that borrowing one dollar in every five that the Federal government spends is not a sustainable model. The UK needs to redouble its efforts to carry through a working plan to eliminate the structural deficit. Getting more people back to work through welfare reform and a growth strategy are crucial to success. It needs to develop a looser relationship with the EU to avoid the collateral damage the Euro’s tribulations will bring.

Enjoy seeing in the New Year – the west needs a new approach.

I do wish the media and journalists would sharpen their questions for 2012. I am getting fed up with the old spin that seems to have been hanging in the air for so many years.

Wouldn’t it be good, for example, to put behind us the old lie that we have to accept everything the EU dishes up because 3 million jobs are at risk. Why don’t the interviewers who are given that tired old line ask:

Do you think Germany would stop selling us BMWs and France stop selling us wine if we demanded a change of relationship with the EU?
Wouldn’t WTO rules protect our export jobs to the EU?
How come China and the USA can export to the EU successfully when they are not members?
If more than half our goods exports and a bigger proportion of our service trade is with non EU countries, isn’t that a plus as the rest of the world is growing?

In response to the line that the UK only has influence in the EU and the wider world if it is a full and keen member, they could ask:

Does that mean that the UK by opting out of the Euro has ceased to have any influence in the world?
Has the US stopped asking the UK to help it out in its wars and diplomacy, now that we have opted out of the Euro?
What influence within the EU have we wielded? Why is the CAP still unreformed? Why is there no deregulation at EU level? Why does the EU budget still keep going up? I thought the UK wanted less regulation, a lower budget and a market friendly CAP from the EU.

Wouldn’t it be helpful if instead of always demanding more public spending and spreading stories about cuts, we heard some of the following questions:

Why has current public spending gone up by £29 billion a year in the first year of the Coalition, and by an additional £23 billion a year in the second year? Where did all the extra cash go?

Individual public service providers should be asked where they think the waste and inefficiencies lie in their service, and pressed if they decline to answer. They should be asked how come productivity in making planes or cars keeps on going up, but has not risen overall in many public services.

Senior public sector managers should be asked about numbers and levels of remuneration of managers in their service or area, and put on the spot about it as commercial CEOs are regularly by the media.

Public sector managers should be asked how come Hammersmith and Fulham have been able to cut the Council Tax every year for six years without cutting main services.

How about the lie that the Credit Crunch was simply caused by the Bankers? Wouldn’t it be a good idea to ask:

Why did the Competition regulators allow mega mergers, when some commentators and City experts were warning that these banks would be too large to run well or to control?

Why did the Bank of England allow easy money until the middle of 2007, creating a bubble,and then tight money, causing a crash?

How can people claim that the problem was deregulation, when the 1990s and 2000s saw an explosion of additonal financial regulation, and the creation of new regulators by the Labour government on assuming office in 1997? Why was the regulation unfit for purpose?

Finally, to all those who argue the Coalition government is cutting too hard and too fast, it would be good to hear the following:

How does borrowing more get you out of a crisis brought on by borrowing too much?

How much more would you like the state to borrow, given that the Coalition is planning to borrow an extra £563 billion over five years (Public sector net borrowing)?

Why should we have things today and make our children pay for them tomorrow when they have to pay back the borrowing?

It would make understanding the problems and finding solutions for them so much easier if we call current public spending spending and not investment, if we call extra cash spending an increase and not a cut, and if we remind people that far from cutting the debt the government has only made a small dent in the extra debt or deficit.

John Major’s premiership was dogged by endless rumours of a leadership challenge. The media often told the story of the two Michaels. There was to be a great clash between Michael Heseltine and Michael Portillo for the crown. Whilst they both enjoyed tenure in the cabinet, their followers and supporters must have briefed about the coming contest. Little was done to silence these unhelpful comments. I remember MPs coming to see me to suggest I might run in such a ballot. I told them if they were true friends of mine they would not allow or encourage any such speculation. All the time I remained in the cabinet I felt I had to be loyal to the Prime Minister and seek to stop any unhelpful briefings about his position. As a result the press continued to talk about a contest of the 2 Michaels, ignoring me.

Of course, we now know there was no leadership contest between the two Michaels. Neither ran when John Major resigned and asked for a contest in 1995. Michael Heseltine cast aside his ambition to lead the party on the general defeat in 1997. Michael Portillo lost his seat and so was unable to contest the 1997 leadership election. He subsequently lost the 2005 leadership contest. The pundits had spilt loads of ink over a war which never happened.

When I turned up at party conference this autumn I was astonished to be asked by the BBC to cast a vote for either Boris Johnson or George Osborne to be the next leader of the Conservative party. They had placed large ballot boxes in the entrance area. I explained that there is currently no vacancy, and such speculation cannot be helpful. I did not cast a vote.

My advice to the friends of the two is to stop that kind of distracting media speculation. I doubt very much that there will be a leadership contest one day between Mr Osborne and Mr Johnson. Mr Johnson, after all, is not even an MP and intends to run to be Mayor again. This job does not allow him to be an MP and Leader of the Conservative party as well. By the time Mr Cameron does move on there may be plenty of new talents around who have not yet appeared as leadership material.

Meanwhile Mr Johnson needs to reassure his voters in the suburbs that he understands their wishes. They want lower Council taxes and better transport, including freer flowing less congested roads with good realistically priced parking.

Hammersmith and Fulham have shown what can be done. The Conservatives since taking over cut the Council Tax every year, from £916.97 in 2006 to £811.78 in 2010-11. They kept it the same this year owing to the system of government grants which rewarded a standstill, but aim to cut it again to £783 next year. At the same time they have brought the Council debt down from £169 million to £78 million, and improved services. That should be a model to other Councils and the Mayor.