I will spare you a party political response to the Reeves Mais lecture. Various journalists have described its vacuity, verbosity and timidity. I want to set out the big issues that directly affect UK growth, productivity, jobs and incomes that she ignored or knows nothing about.

1 The big role of the Bank of England in creating the instability in inflation  and output she condemns. A Bank which buys up £845 bn of bonds to keep money too loose is bound to cause inflation. When it then goes on to hike rates and to sell £130 bn of bonds at big losses it is likely to sabotage growth. She supports this wayward conduct.

2. She rightly criticises poor UK productivity. She fails to reveal the collapse of public sector productivity since 2019 or to show UK private sector factories have competitive productivity. Not a single proposal for turning round public sector productivity.

3. The labour market is talked about with no mention of large scale migration. Will she join me in wanting to ban work permits for migrants to fill low wage vacancies? Will she back government plans to cut legal migration by 300,000 and demand they go further?

4. She sees green investment and jobs as central. How much would her accelerated net zero policies cost? How would she avoid creating many new jobs in China that has cornered the market in big batteries, turbines and solar panels? How would she keep the lights on? Is she going to make us all go electric?

Politicians of all parties have this century been in a hurry to shed responsibilities for anything difficult. There has been a rush to create more arms length bodies from government and to transfer more powers and money to the many quangos we already had. The politicians thought that this would remove them from responsibility for outcomes, and  would improve outcomes. Neither of these ideas came true.

The Bank of England is responsible for monetary policy and inflation. It has a prime aim of keeping inflation to 2%. It let it go to 11% by debauching the currency but most politicians declined to criticise or comment. The government got blamed for the inflation, and the government joined the Bank in  blaming  the Ukraine war.

NHS England with its high paid CEO and large Board and top management team is responsible for running the NHS, for recruiting, grading, rostering  and paying all the many staff. A series of strikes hit the NHS. The executives denied all responsibility for staff relations, pay and grading and said the dispute was a matter between Ministers and the Unions. It is difficult for Ministers to resolve the disputes when they cannot hire, promote, regrade, alter shift patterns or reward anyone in the NHS as all that is controlled by senior executives.Whatever goes wrong in the NHS the senior executives  always blame a lack of money, however much extra  the government provides. The government gives large sums to get the waiting lists down only to see them go up.

The arms length Post Office is regulated and monitored by UK Government Investments. They approved senior management, paid them large salaries and bonuses and just watched as they lost a stunning £1400 million as well as sending many innocent staff to prison for fraud and wrong accounting  they did not carry out. Ministers intervened to try to get criminal charges quashed and compensation paid, only to find the Post Office was still holding back in many cases.

The Rail Regulator, HS 2  and the nationalised Network Rail run by well paid senior executives have presided over a big loss of passenger numbers and revenue, and  have racked up huge losses for taxpayers .Parts of HS 2 have had to be cancelled owing to the absurdly large overruns on cost and timetable. Ministers are blamed for the results.

This could be a very long list. Many cases would reinforce the obvious points of these first three. High pay is a  reward for poor outcomes. No-one makes the senior managers responsible. Opposition parties have no interest in criticising the managers or holding them to account before they go so wrong, but delight in blaming the government when they do. Government is too cautious about intervening, fearing the Opposition would complain if they did. Both sides mouth the doctrine of independence, with the Opposition contradicting it often in the same interview by blaming Ministers for failures.  So overpaid managers get away with disaster after disaster and the taxpayer ends up with a huge bill.

Parliament and Ministers need to go back to accepting responsibility. They need to monitor, influence and if necessary change these top managers before disaster strikes. If someone wants private sector levels of CEO pay to run  the railways or the Post office they should expect private sector levels of surveillance and should expect no bonus or the sack if they make big errors. Ministers need to institute regular review meetings and proper reporting to them as shareholders or leading stakeholders in these bodies, so they see problems as they develop and require fixes before they get out of hand. Those few of us who warned of the likely inflation or sided with the sub post masters were ignored.

Conservative briefers are saying the party needs to be united to win the election. I have good news for them. Parties with plenty of internal rows  and disagreements always win, as the two main parties who usually win always  have MPs who disagree with the leadership. Today’s Labour party is badly split over Israel and the Middle East , over a faster move to net zero and over Rachel Reeves OBR austerity  economics but that has not stopped them doing well in opinion polls.

In the  last 50 years there have been two leaders who have won three elections in a row, a remarkable achievement. Margaret Thatcher did so despite facing continuous opposition from a significant group of MPs called the Wets. They regularly briefed disobliging comments about her personally as well as attacking her policies. They rebelled in Parliament on various measures. They put up a stalking horse candidate against her for leadership. They backed Heseltine as a replacement.He resigned from government to promote himself. She kept winning because she set out and enacted a clear vision of UK revival, economic growth and wider ownership.

Tony Blair kept winning despite facing many media stories of  his Chancellor’s disagreements and briefings from pro Brown people that wanted the  Chancellor to take over. He had to deal with a left wing group of MPs who thought he was not nearly  socialist enough. He persevered with the low tax rates the Conservatives left him and avoided recession . Eventually he was persuaded out before his Chancellor’s policies put us into a banking crash and deep recession.

If an election were a contest of who is the more united party Labour would be discovered as very split. The truth is millions of former Conservative voters are  undecided or currently saying they may stay at home or spoil their ballot paper or vote for someone who cannot win. They do not want a Labour government and see that Labour government would double up on those  very policies of this government that they do not like.

To win the Conservative leadership needs to do more things this group likes and voted for. Start with getting migration well down as now promised and cut back the woke state  to free money for more tax cuts. Let people make more of their own choices. Champion the big Conservative success of halving unemployment  and allowing so much job growth.

The Bank of England forecast inflation at 2% when it was going on to hit 11%. So clearly it does not understand inflation and has little ability to forecast it accurately as it is required to do. It tells us the inflation was caused by the Ukraine war and energy prices which it could not predict. So how come inflation was already 3 times target before the invasion? That main part of the inflation was not caused by the war. How come Japan and China kept inflation down to around 2% despite having to import much dearer energy as a result of the war?

N ow we are told they cannot risk lower rates because there could be more trouble in  the Red Sea. Freight rates and insurance rates are already well up and much shipping has been diverted to the long route, so markets know all about that pressure on prices. Meanwhile the money supply has been squeezed, credit is dear and scarcer, mortgage demand has fallen and the Bank ignores all these obvious signs that inflation will come down.

Worst of all is the gross distortion of its balance sheet. They bought far too many bonds at crazy prices in 2021 only now to want to sell them at huge losses and send the taxpayer the bill. Why? The ECB that made the same inflationary mistake is not doubling the error by selling bonds in the market. The Fed is not getting reimbursement from its Treasury. Only the Bank insists on double austerity with squeezed money and less public spending or tax cuts as the taxpayer picks up the bill of the UK’s uniquely bad bond investor, the Bank of England. Never has the Bank lost so much money so quickly for no good purpose.

We need an urgent change of Bank policy, Stop selling the bonds. Cut the base rate by 25 bp. Switzerland, Poland, Hungary, Brazil, China have started cutting their rates.

National Grid recognises that it needs a major expansion of grid capacity to carry  all the extra electrical power that will be needed as people switch heating and transport to electrical methods. They also see they need more capacity to handle more intermittent renewable power on the system, as they seek to make more connections available to the mushrooming solar and windfarms seeking access and long distance transport for the power they hope to generate.

National Grid is talking about an increase in electricity volume of 50% by 2035. This is well short of what would be needed for net zero. We will need increased power to handle a growing population, as well as increased power per head when people switch more of their activities to electrical means. They talk of an investment of a large £54 bn. which may well be an understatement. They need to put in subsea cables to offshore wind to get the power to land, and pylon mounted cables to route the renewable power long distances from generation to use. There will also need to be a complementary investment in local power cables street by street and house by house as more people want supplies beyond the capacity of their current installations.

This poses a  number of planning and environmental issues. Many people object to pylons strutting across the valleys and landscapes of England, and few want to live under powerful electrical lines where they need to cross urban areas. There will be a lot of pressure to put more of this underground which greatly increases the costs. All this extra capital will need rewarding, so electricity prices will need to reflect the need for so much money to  be committed to expanding the grid as well as all the extra cost of additional and different generating systems. More renewables also means more back up generation which is costly to provide, or means the construction of expensive large battery farms, pump storage systems or conversion into hydrogen and synthetic fuels using the renewable power.

Given planning  delays and the long enquiries used by those against all this is going to take many years to accomplish. What are your thoughts on the feasibility and practicality of this approach?

On 21 st  September 2022 on the eve of Kwarteng/Truss budget the Bank  announced a 0.5% hike in bank rate. This was designed to push up interest rates. Just to make sure it would mean higher mortgage rates on the same day they announced they would over the ensuing year sell £80 billion of bonds at a loss  which they had bought at very elevated prices in the previous year. Selling bonds pushes their price down which automatically pushes up interest rates.

The bond market fell in the days before the mini budget because US bonds were falling and interest rates rising , and then because the Bank so clearly signalled it wanted rates higher. This was a bad background for the Kwarteng announcements.

On the following Monday it became clear in the market that a number of  pension funds had bought too many government bonds through levered funds. As bond prices fell they had to put up more money for bonds they owned but had not fully paid for. They did not have cash to pay for their losses so they had to sell bonds to raise money, on top of the planned massive sales by the Bank. No wonder the bond market tanked.

The Bank of England responsible for the overall solvency of the system at last realised their dreadful error of selling so many bonds when pension funds were so weak. They suspended the  sales and agreed to buy some. The market surged upwards, Pension funds had space to reduce their heavily overcommitted positions and the crisis past.Between 28 September and 14 October the Bank bought £19.3 bn of bonds to correct its errors.

These were the special UK factors of autumn 2022 that temporarily increased volatility. The UK trend was the same as the US and EU. The higher mortgage rates that resulted were  caused by Bank of England policy.Todays higher rates have nothing to do with the long cancelled Truss budget.

I write to counter the Labour lies that Liz Truss’s mini budget of September 2022 caused higher mortgage rates, owing to unfunded tax cuts.

I wish to make it clear Liz Truss did not take my advice on either the mini  budget or the policy on the  conduct of bond buying and selling. As set out on my website I recommended tax cuts matched by some spending reductions , with support for energy bills limited to  lower income households, not for everyone. I strongly argued against starting a large programme of bond sales from the joint Treasury /Bank portfolio amassed under Quantitative easing.

So first the facts.

UK ten year bond yields rose to a peak of 4.4% on 9 th October 2022, more than two weeks after the budget. They fell back to 3.1% on 20 th November following temporary reversal of the Bank’s aggressive bond sale programme. They hit a new higher high on 13 th August 2023 at 4.67%. They are currently at 4.2%.

They largely mirrored US ( and EU) bond rate rises. The US ten year yield rose to 4.2% on 21 October 2022. The US bond rate rose to a higher high of 4.9% on 20 October 2023.

These changes were not reflected in Japan or China as their Central banks did not make the same errors as the Bank of England, Fed and ECB who needed to rein in excess money they had created by forcing up interest rates.

This pattern shows there was no big special effect from the Kwarteng budget. It also shows rates went higher a year after the Kwarteng  budget had been reversed, as happened in similarly placed EU and US,

Tomorrow I will explain two special factors hitting the UK in the autumn of 2022 from Bank policy which did temporarily cause sell offs in the bond market.

I was talking last evening to a US specialist in AI who had come to the UK. asking about what it would  take for the UK to catch up with US AI and digital success she made two interesting responses.  Lay on more electricity and water.

If the UK is serious about building on its relative success over the rest of Europe in now being the third tec hub a long way after the US and China tge UK needs to  expand its web capacity. This needs large increases in electricity supply to power the Cloud servers and storage centres, and plenty oof water to cool. It is also going to take more broadband capacity.

I would add that it would help to take corporation tax down to 15%. The Republic of Ireland has proved this generates a lot more revenue than 25%. If the golden triangle of Cambridge, Oxford, London is to be the new hub it takes more homes, trains and road capacity too.

The UK is far behind the US in tec and so in GDP per head, growth and numbers of large companies. Much of the necessary extra capacity can be financed in the private sector, but it will take more energy by government to get it going.