The people who like our current membership of the EU or want more involvement in EU matters rely on just two arguments. The first is that we have to stay in on the current basis because so much of our trade is with the EU. The second is we need to be in to have a seat at the table to influence all the rules and regulations.

             I have dealt recently with the misleading figures they use, looking at just the trade in goods and ignoring the big interest the rest of the EU has in exporting to us.  Today I wish to look at the strange EU idea that you need to have lots of common laws and regulations in order to trade with each other.

              This was the  Foreign Office and EU argument I first encountered when acting as The Prime Minister’s Chief Policy Adviser in the 1980s. The EU wanted UK consent to the Single European Act. This proposed the aboltion of our right to veto proposals, substituting qualified majority voting for a range of measures to do with trade, industry and commerce.

               I argued that there was no need to give away our veto over new laws in order to create a genuinely free market in the EU. All you needed was the simple rule, that if a product was of merchandisable quality in country A, meeting the rules in that country, it should be allowed for sale in the other countries of the EU. It does not mean people had to buy it, but why not trust each country to winnow out the dangerous or the false product, and let the market do the rest.

                  The EU insisted that it needed 272 new laws to make a single market. This was to be the “Single market programme”. Having lost the argument to keep our veto, I tried the compromise position with the UK government, that they should say they would only remove the veto for the 272 measures deemed to be necessary. Even that was thought too tough by the Foreign office. The government decided to back the Single European Act and the loss of veto on a permanent basis.

                       The problem with this approach is the EU can use the excuse of the Single market to push through all sorts of legislation that is not strictly necessary in order to trade. Subsquently Labour gave away many more rights to veto in Nice, Amsterdam and Lisbon, leaving the UK vulnerable to an avalanche of laws we did not seek or want.

                     Having the seat at the table has not succeeded in preventing too much law, or in getting poor or needless regulations removed. All UK governments have said they are pushing for deregulation in the EU, and for leaving more matters to national and local determination. Despite this, the body of EU law has risen at a very rapid rate.

                   Meanwhile China, the USA, Switzerland and many other non EU countries trade quite happily with the EU. They have no seat at the table. They do not find their goods excluded because they are not members of the club. The Single market concept has been made into a Trojan horse for more EU government and law making.  The City is about to fall almost completely under massive EU regulation.  There is little evidence that it will be drafted or deployed in a way that is helpful to protecting and enlarging London’s success in financial services.

          Yesterday there was a short debate on the Common Fisheries Policy. The short time for the debate prevented  me from making  a speech. Had I been called, I would have said something like this:

       “Today is groundhog day. For 38 years this House has held regular debates on the Common Fisheries Policy. MPs often have cast aside their party differences. They have forgotten their varying prejudices and viewpoints. We have frequently united to condemn the Common Fishery Policy.

         We have condemned the chronic waste of fish with the demand to discard dead fish in the sea in the name of conservation. We have condemend the collapse of the UK trawler fleet as the policy has degraded our fishing grounds. We have complained that the policy has left us short of fish, with dear offerings in the supermarket.

          Ministers of various parties have usually sympathised. They have told us their aim is to reform the policy. They tell us they will go to Brussels to negotiate a better deal. We are often told about the EU in general that we need a place around the table in order to have influence.

              38 years of having a position of influence around the table has not yielded a Fishing Policy we are proud of, nor even one we can accept. Many of us have concluded that the only answer is to regain control over our own fishing policy. Some of us would like the UK to say it will enact the return of our fishing grounds if we do not get a reform we can accept.

              The Common Fishing Policy has made the UK Parliament powerless in this field, and left successive governments impotent to create rules for a successful UK fishing industry. It should be a warning not to allow the EU similar control over other matters. When they run a policy, it causes decline  and unemployment.

Don’t expect the euphoria over a new Italian government to last long. There is no need to share it. The markets  enjoyed a relief rally on news of a new government forming in Italy. The European establishment is behind Mr Monti, so we should expect the ECB and the spin machine to try to engineer some better results in the bond markets this week to get him off to a good start.

The tasks ahead for him are not easy. He first faces the challenge of putting together a coalition of support within the Italian Parliament when he has never stood for election or been an active party member. He needs the support of Mr Berlusconi’s party. This grouping wants an early election, and is so far only prepared to back the new Prime Minister to implement the measures which Mr Berlusconi rushed through last week. They are likely to quibble about any new measures. The Northern League do not wish to back him, leaving him dependent on the forces of the left, with their strong links to the Trade Unions. They will be suspicious of public sector cuts. Over the weeks ahead we will learn that the first rush of enthusiaism for a PM above politics and for a government of national unity may not miraculously bury all old differences, rivalries and legitimate political ambitions of the parties and people who did get elected.

He next faces the even greater challenge of the poorly performing Italian economy. Italy is in the icy grip of Euro deflation. Italy’s cost base is far too high to compete successfully with Germany within the zone. Money supply is falling, unemployment is high, and living standards have been static for a decade. There is nothing Mr Monti can do to the money supply and exchange rate given Euro membership. Efforts to make Italy more competitive require cutting internal prices and wages, against the combined opposition of business and Trade Union lobbies. The need to make the public sector smaller and more efficient will be resisted by deeply embedded public sector defenders.

Mario is clearly an intelligent man. He has made a good career out of his diplomatic skills as a pro EU official. His time as Competition Commissioner meant he was one of the senior people in the EU responsible for economic policy. To some that makes him a talented administrator who can take on another difficult job. To others it associates him with the failure of the European economic model to generate jobs and prosperity on a sufficient scale. Individual critics complain that his famous case against Microsoft did little to help the EU economy. The team he belonged to heaped regulation on regulation, as they sought to extend the EU’s finger into every pie.

He did recently author a report into developing the Single Market in the EU. This Report provides good analysis of the different political forces within the EU that had led to “integration fatigue” and “market fatigue”. Mr Monti proposed a large programme of further integration, offering to the Anglos Saxons more market opening and competition measures, to the continental social democrats more tax “co-ordination” and common welfare, and to the newer nations more emphasis on investment and European networks. He sought more workers rights and a more competetive market, more public procurement and social service provision. He decided the EU needed a stronger single market to back the single currency. He recognised the big advance made by the Lisbon treaty in favour of more integration, seeing in it full recognition of the need for a”highly competitive social market economy”. He wished to use the powers of the Lisbon Treaty to complete a European level government over most things that matter.

That is Mr Mario’s problem. He is well versed in how to extend EU power and influence through a mixture of right and left facing measures. His Report did not, however, set out how the EU could start to compete more successfully with China, Brazil, India or the USA. Mario may find it is not easy being super when it comes to turning round an ailing economy locked into the Euro at the wrong exchange rate. Markets may enjoy a supporting wind from the EU for a bit for his efforts, but the full Monti is likely to be just more European government rather than a bracing fix for Italy’s problems.

People are rightly alarmed at the easy way two European democracies have been pushed over by EU officialdom. The ever tightening grip of the Euro has given the EU the power of the purse over them. He who has the money has the management in this governing situation. Whether Mr Monti can win support within and outside the Italian Parliament for long enough to have an impact remains to be seen. Going by the policies he and his fellow Commissioners followed for the whole of the EU, he does not have a plan for prosperity and growth which is going to work.

There is a debate about what responsibility Mrs May and Mr Green should take for the borders troubles that have recently come to light. Mrs May herself says that she did not want some of the controls lifted at our borders which it turns out have been lifted. She says one of her senior officials went against Ministerial orders. He was suspended from work by another official who also thought he had acted out of turn.

The doctrine of Ministerial accountability is not straight forward. In 1954 the Crichel Down case led to the resignation of Sir Thomas Dugdale, Agricluture Minister. He did not himself handle the land at Crichel Down in the way which offended, but he took the blame for his officials approach. Since then many think that a Minister has to resign as he did if something goes wrong, even if he knew nothing about it.

This doctrine has been modified by subsequent governments and cases. When there was a bad break out from the Maze Prison in 1983 the Secretary of State for Northern Ireland did not resign. He argued that it was not his policy to allow or encourage prison break-outs, so he had no need to go.

Mr Howard, and subsequent Labour Ministers in the 1997-2010 government, sought to argue for a distinction between policy failure and administrative failure. They said that if the Minister’s policy or instructions had led to the problem,the Minister was to blame and should go. If the failure was at executive level, where civil servants had failed to implement the policy efficiently and effectively, the senior official should go.

This approach has been buttressed by the establishment of Executive Agencies. The officials who lead these agencies have more right to speak in public and to lead their section of government than officials within departments. They are usually paid better and may have a bonus based on executing the policy well. Ministers often feel if the mistakes occur as a result of poor Agency implementation, it should be the Head of the Agency rather than the Minister who resigns.

Mr Dancona, arguing in yeaterday’s Sunday Telegraph, suggests the hard and pure doctine of Crichel Down should be modified at least to ensure one thing. Surely he says, if an official deliberately flouts a Ministerial instruction or policy in the anticipation that this will force the Minister to resign, there should be a relaxation to prevent that happening. It would seem tough indeed if a Minister has to go when a critic within the department seeks to undermine them whilst observing secrecy whilst undertaking the violation.

In practice each case is different and is judged on its merits against the mood of the time. Mrs May has on her side the fact that she was trying to tighten controls on illegal entrants whilst easing the queues for the law abiding at the borders, and the clear support of the Prime Minister.

The case has served to highlight the dilemma of the Coaltion government. How can it implement its stated aims, when there are habits of working and assumptions amongst some officials based on the previous 13 years which point in the opposite direction to the Minister’s policy? Will Ministers now devote more time and enegry to supervising and following up once they have set out their general policy aims? As a rule of thumb, there needs to be three times as much follow up, analysis and chasing after the policy launch and press realease, than before when constructing it. If there is insufficient interest in the execution of policy more Ministers are going to be wasting time defending their actions and claiming that the policy was fine, it was just a pity about the implementation.

The public wants the right press release or policy, but it then wants it to be enacted, administered and enforced.

Today we mourn the many dead in two world wars, and other conflicts. We admire their bravery. We thank them for their sacrifice. We remember they died to keep us free.

Today we mourn without members who fought in the 1st World War to tell us of its horrors. We have memorable poetry from the trenches, many moving memoirs and accounts, and blood stained histories of a war that turned into a mass slaughter. It was the war of the machine age, the war when defensive weaponry was usually too powerful for attacking forces. It was a war of years of stalemate in grim trenches.

From my boyhood onwards I have read and watched accounts of those murderous WW1 battles. Each time I have come to share the common conclusion that it was lions led by donkeys. I have tried hard to understand how it could have been allowed to happen. I realise that some intelligence was applied, as senior officers and strategists wrestled with how to overcome the mighty power of the machine gun, artillery and shells, mines and barbed wire. I see they tried heavy bombardments to make a dash across No man’s land safer. The tried undermining and blowing up opposing lines. They developed tanks, which helped. They resorted to gas and flame weapons to try to break the deadlock of the western front. I still cannot accept the way the politicians and generals accepted death on such a huge scale. They often asked their juniors to run into the guns as if their lives did not matter, or as if the result would be different from when the last waves of young men had tried it. It was not how Wellington would have handled it, always keen to keep his force together and to minimise causualties.

I developed more of a dislike of the politicians who thought this was a necessary and worthwhile war. The first war lacked the cause that a hated ideology and the fanatical treatment of non Germans by Hitler gave to the second. It lacked the sense that the UK had to stand alone and fight to preserve her independence from tyranny that the nation shared in 1940. In 1914 the Uk went to war over the Balkans and ended up fighting shoulder to shoulder with France in what was yet another Franco-German dispute. The Uk could have stayed out of it, safe in the knowledge that her mighty navy shielded the homeland from threat and her Empire offered her trade and commercial interests.

If there was a strand of common policy that provided some justification in the twentieth century it was the wish to avoid any single power dominating the continent. How ironic that today the UK’s foreign policy seems based on encouraging France and Germany to unite, when the twentieth century saw us fight two huge wars to prevent just such an outcome. We can be proud of and grateful to our armed forces. We should pause to ask if the politicians spent too many lives and too much treasure in European interventions.

We are going to hear two constant refrains in what passes for economic debate in the UK. We will be told that our exports to the EU are crucial to our economy, and will be at risk in some unspecified way if we dare to demand a renegotiation of our position or a referendum. We will be told that the the UK economy is not growing quickly, owing to the cuts.

The EU lies are the easiest to rebut. There is not the slightest shred of evidence that if the UK seeks to better deal or a referendum on membership of the EU it will damage our trade with the EU. The trade is guaranteed by WTO rules. As the rest of the EU sells us a lot more than we sell them, they will not want to disrupt it in any way. They have more to lose than we do.

EU goods trade probably accounts for around £120 billion of our output. (EU exports adjusted for the entrepot factor) That’s around 8% of our total National Income. It’s important, but not nearly as important as the 92% that is not dependent on selling things on the continent. Since 2008 the government figures show that our exports to the rest of the EU have anyway fallen by 6%, whilst our exports to the rest of the world have risen by 4%. So the trend has been going against the EU before the crisis. Slowdown in the EU and collapse in the weaker EU economies will accelerate this process.

On the radio yesterday Lord Skidelsky was kicking off the ridiculous argument that the Uk economy has slowed down owing to large cuts in public spending. The interviewer and the other participant failed to point that that public spending is up in real terms according to the govenment’s own figures since 2010. No-one mentioned the planned borrowing of at least £122 billion this year, or the additional borrowing and spending announced in the March 2011 budget.

Why on earth do they want to debate something around a completely wrong version of the facts? The question they should have asked Lord S is “Why has the UK economy slowed when real public spending is up, and public borrowing remains at near record levels?”. Why can’t any of these commentators bother to read the numbers? Why does the BBC insist on suppressing the true numbers, so there can be no debate about what is going on as opposed to what is being spun?

Neo Keynsians love high levels of public spending and borrowing, and say they stimulate the economy. They need to be asked why public spending at nearly 50% of GDP, and borrowing of more than £10 billion a month, is not stimulus enough. They should be asked how much more borrowing would it take to get faster growth, and would anyone lend us the money? Could it be that spending more in a wasteful or less productive way, and borrowing more than the country can afford, could be a road to ruin rather than a welcome shot in the arm?

Sometimes it is a good idea to see the big picture. For many years now the west apart from Germany has decided to live beyond its means. It has imported its lifestyle from China and other emerging markets, and borrowed money to sustain the spending. More recently a collapse of private sector bank credit and a squeeze on real incomes has started to adjust the way individuals borrow too much. Instead governments have taken up the task of spending and borrowing way beyond the tax capacity of the country concerned. In the case of the more extreme countries, they have been borrowing 10% of national income for extra state spending. This entails borrowing at least one pound in every five spent in the public sector.

Certain European countries decided to bind themselves into a currency union with Germany. Germany kept her costs down, and exported large quantities of manufactured goods to the weaker states in the zone. They ran up large borrowings to buy the goods, inflated their house prices, and spent too much in their public sectors. These countries cannot devalue to get into a more competitive position. They now want Germany to grant and lend them the money to carry on spending. Germany is reluctant to do so.

The US and the UK printed money to keep interest rates down, and allowed their currencies to devalue, to help price themselves back into world markets.

The Euro area is running out of opportunity to sustain the high levels of spending and borrowing. Money lenders are saying to several countries in the zone they are no longer willing to lend at an affordable rate, or at all. The EU and the IMF impose substantial cuts on public spending. The banks are weakened by the losses on the government bonds. They find it difficult to finance a private sector recovery. The more the economies decline, the less tax revenue there is, and the bigger the deficit.

What passes for political debate is usually about tackling symptoms, or seeking to delay the inevitable. Continental politicians hope that China and Brazil will come to their aid and bail out problem countries, or anticipate the IMF arriving with cash infusions for Italy on top of the three countries it is already supporting. If markets fall they seek to prevent shorting, only to discover the market still falls as owners sell. They shuffle governments around, hoping that markets will be impressed if a new team comes in to supervise the old policy.

The truth is markets will only calm down and refinance states at affordable rates again if governments not only say they intend to live within their means for a bit, but manage to do so. The public sectors of the overborrowed states need to do less, and do it better. A lot could be achieved by applying good management techniques to tasks in hand. I know of few public sector activities where it would be impossible to reduce the cost by 10% without damaging the service. The public sector does have to raise pension ages and change future pension entitlements. It does have to cut out less desirable activities and delay some desirable projects.

Savers and investors in markets do not believe the European states are going to transform themselves quickly enough and cut their demands for cash. Until they do so, the crisis remains. There is no choice between cutting public spending and getting growth going. Controlling public spending is a necessary but not a sufficient condition for growth. China does not have to lend us the money to buy her goods and live beyond our means. She can turn to making more goods for her own population. The West has to do better at paying its way in the world, and has to learn to live more within its means.

Yesterday’s casual approach to the Italian debt markets by the Euro area does not breed confidence in the currency. It is true the European Central Bank intervened to buy some Italian bonds. It did not do so on a scale sufficient to get the yields down to acceptable levels.

Leaking rumours that France and Germany are now ready to slim the Eurozone down, and press ahead to fiscal union with a smaller group of countries will merely fuel the bears and help exacerbate the crisis. As one who has consistently preferred splitting up the Euro zone and doing it quickly as the best solution, I just wish they would get on with it. How many more jobs and busiesses do they wish to see destroyed first, before they bow to the inevitable? It is interesting to see the President of the Commission battling to hold the Euro and ever closer integration together under the EU, whilst France and Germany are musing about creating a new club for a few.

There has to be a plan on how to fight the battle of Italy, if they are serious about keeping their currency and getting it to work. Are they going to get the IMF to advance the large amounts of money Italy will need to pay for her running deficit and refinance her expiring debts? Are they hoping that Germany will relent, and allow the ECB to buy up so many Italian bonds, that the Italian state can still borrow at affordable rates? Are they about to announce major quantitative easing, overcoming all the German fears of inflation and unorthodox monetary actions? How are they going to prevent the bank market freezing up, on fears of more losses on sovereign bonds?

It is all very well for them to encourage changes of government, and hope that people more enthusiastic about complying with the Euro scheme will arrive in power in each problem country. They are still left with the difficulty that their plan may not work. Just cutting spending and trying to squeeze down deficits that way may not succeed. If the banks are broken and cannot increase their lending, and if the southern member states remain uncompetitive with no ability to devalue, the austerity medicine may not cure the patient.

IMF packages normally entail monetary medicine and devaluation as well as spending cuts. The Euro area is trying to do it without important parts of the cure. Why do they think it is going to work?

Meanwhile, new governments have to follow the old remedies. Their task of gaining and keeping consent for these policies is going to prove difficult.

Today the markets cut up rough on Italian debt. Ten year bonds now yield 7.4% and one year money is priced at 9%. Pundits have told us 7% is the danger level, the point at which borrowing becomes too dear for the Italian state.

We await news from the Euro leaders what they now plan. Does Germany overcome her resistance to the ECB lending to Italy and printing more money? Does Italy now have to petition the IMF for funds?

The markets are moving much more swiftly than the politicians. The problem is jobs, businesses and standards of living are all being chanced on the roulette wheel of the Euro. Is anyone in charge? What is their plan now?

               Left wing critics of  market economics talk about markets as if they were just a small overpaid bunch of bond and currency traders they do not like. Markets are places for us all.  The large financial and banking markets are used by almost everyone. Let him who has no hedge fund to back his pension or no financial product to power his charity throw the first stone.

              The Trade Union which criticises the market often has an investment fund invested in bonds and shares. The Trade Union official who condemns  a market oriented approach will often have an invested pension pot, a mortgage, a credit card and a range of other financial products. The vicar who dislikes global capitalism enjoys money from funds  managed by the Church Commissioners. Unlikely people can have pensions and savings tied up in hedge funds, managed futures and other portfolios using futures, options and geared financial instruments.

              The market serves poor and rich alike. One person’s money is as good as another’s: there is no discrimination. The divergences in choice and lifestyle come from differences in access to funds, not from differences of other treatment.

               A late friend of mine used to host guests from the USSR visiting London in the days of communism. The people allowed to visit were trusted communists. He would take them to Marks and Spencers on Baker Street. They would be bowled over by the range and quality of the products compared to Moscow stores of the time. They would ask if this great shop was reserved for party members or members of various elites. They would be suprised to be told M and S was for everyone.

                My friend would then take them to Harrods. He would say this is where many of the elite shop. They were even more impressed. They were surprised to learn that no regulation  stopped the  unemployed or the former criminal shopping at Harrods, just as nothing  stops the billionaire buying at M and S. The western retail market was much freer and more democratic than their soviet controlled shops.

                  The main argument against capitalism in western democracies is it can leave some people behind, with too little or no income. The great western democracies have moved to tackle this by offering financial help to those who might otherwise get left behind. Anyone with some money can use it to buy whatever they like whenever they like, as long as they can afford it or can  borrow to buy it. Countries that have tried to replace the market by state planning, allocating goods to individuals and families, have usually created lower living standards as well as greatly restricting personal freedoms.

                     The market place is the ultimate democracy. Individuals can express their preferences or offer their services whenever they like. Only in a state planned system do they have to combat rationing, quotas, and  form filling as well as facing  the threat of  criminal penalties if they abuse the system.

                   Democracy understands how outcast people can feel in a wealthy market economy if they have little or no money. That is why all mainstream political parties agree with some redistribution of income and wealth, and all agree with financial assistance to those who cannot provide for themselves. The political debate should not be about the superiority of the enterprise system, or about the desirability of taking care of those who cannot provide for themselves. The debate should be the narrower one of how generous should we be to those who need state support, and how should people qualify for it?