Category: Articles

NICE has been in the firing line recently. This body which has the duty to decide which drugs the NHS can buy and which are unsuitable on grounds of efficacy and cost has been caught in the crossfire. On one side the pharmaceutical companies have been running effective campaigns to claim NICE was wrong to reject their latest drug. On the other side patient groups have started to lobby in ever more media friendly ways for spending on the latest drug that they hope will alleviate or cure their symptoms.

It is what you should expect when you have a near monopoly health service provider controlled by this particular group of politicians who live by the media. Because the NHS has such colossal power in its buying decisions drug companies have to throw everything in in England to selling to the single purchaser. They are very disappointed if it does not work.

Similarly, patient groups have come to realise with this government that only media friendly prominent lobbying is likely to get Ministers attention and possibly lead to a change of policy. One of the newer features of an MP’s life is a stream of invitations to attend functions organised by groups whose sole aim is to change the drug purchases and the medical and clinical protocols of the NHS for treating a particular disease. Most diseases now have their action group. They feel forced to behave like this, competing for the attention and money of Ministers in this heavily centralised top down system Labour has devised. Too much rests on the decisions of just a few people at the top, in the Ministry, and in NICE. Sometimes constituents write to me urging a particular treatment that they heard about, so I add my voice to those wanting the drug to be available.

The government has invited people to make the NHS the central concern of modern politics, They have shown them how to lobby and use the media, and they have so centralised the NHS that people conclude the only thing that matters is to get to the Minister. They have ended up fashioning a boomerang that is beginning to hurt the very government that fashioned it as their own political weapon.

Labour believed that if they spent lots more on the NHS most of the problems would go away. If they centralised decisions they could guarantee good standards across the country and claim the credit for all that was going on. Such a strategy means they must also be to blame for things that are not working well, and to blame when people cannot get access to the drugs they think they need or the treatment that would make them better.

I have been meeting GPs during the summer break from Westminster. They complain to me that too many top down targets are making it far more difficult to serve their patients well. They dislike features of the very expensive centralised computer technology being introduced into their lives. They too are unhappy about the endless fiats from the centre and from too many judgements being made by too few people.

Labour had better be careful. Its attempt to play politics with the health issue, showing itself as the beneficent provider of more cash from the centre, is becoming a cause of angst with patient groups, with drug companies and with GPs. That is a very powerful alliance of interests to turn against you. Never has so much money been spent by so few people with such negative effects.

Well done to our Olympians. I recently talked to St Crispin’s School about how you can live your dream if you really really want to. If you put the hard work in and take the reverses in your stride, you too might make it. It is great to see just how many young athletes from the UK have lived their dream so spectacularly in the last few days. We are proud of them all. It is good to see our local area represented on the honours board. May they inspire many more to live their dreams too.

Business Post
Rt Hon John Redwood MP

There is a nasty squeeze underway on people’s incomes. Most wages and salaries are going up by less than inflation. The prices of food and energy have soared, putting the most intense squeeze on those on the lowest incomes, who spend more of their money on the basics.
The government says it feels our pain. It is doing nothing to alleviate it. Indeed, in many respects it is making it worse. Every time the price of oil goes up, the government increases its tax take on petrol and diesel because the VAT it charges automatically goes up with the price. I am glad the Opposition has suggested a sliding scale of tax rates on petrol, which would go down when the price goes up to help stabilise pump prices, and go up when the price goes down to maintain the revenue. We need a cut now in petrol and diesel tax to reduce the rip off at the pumps.
Electricity to heat our water, and light and heat our homes is also soaring in price. The last ten years have seen no major decisions taken to licence new power stations, so we are facing shortages as the older nuclear and coal stations are retired. We need an urgent programme of new works, to produce more and cheaper power, with less waste and fewer harmful emissions than the present.
The Prime Minister’s line at the recent G8 summit was to blame someone else and pretend he could nothing. He told us the slow down or recession was made overseas, refusing to see the policy errors made here at home that have given us first an inflation and now a slow down. He told us we should waste less food to solve the food price problem, and blamed OPEC for producing too little oil. What we need is a government which not only says it shares our pain, but does something to ease it.
If only Gordon Brown had said at the Summit:
“Today we face the twin problems of energy and food shortage, driving the world prices of both higher. This is damaging the prospects of recovery for the rich western economies trying to overcome the Credit Crunch. It is far worse for the poorer countries, where more will be forced into undernourishment and greater poverty by the surge in prices of these basics. We had planned at this summit to concentrate on the response to global warming and African poverty. We need to concentrate on African poverty, and to see that any attempt to ease this requires us to grapple more successfully with the world shortages of energy and food than we have managed over the last few years. We cannot solve the African problem unless we can resume faster growth in the West and supply them with better market opportunities for their goods. We cannot resume faster growth in the West unless we can get on top of scarcity and inflation in the prices of the basics. We cannot help Africa by expanding ourselves if we drive the relative prices of the basics so high they cut Africa’s effective income further whilst raising our own overall.
The cases of food and energy are different. The West needs to change its approach to food production and trading dramatically to be fair to the rest of the world. I will be pressing to dismantle the Common Agricultural Policy, which prevents poorer countries selling us as much as they would like at the same time as restricting our domestic output by encouraging set aside and non productive use of land. At current world market prices – and at lower ones than now – we should abandon managed prices and assume world prices, allowing free trade in food. The US should also dismantle its protectionism. The European system needs to be changed, to allow idle land to be brought under the plough where farmers have been subsidised to do nothing with it.
To ease energy shortages I will be bringing forward the permits and licences necessary for the UK to construct a new set of power stations that do not need fossil fuel, and I will be encouraging the development of clean coal technology and carbon storage as the UK has plenty of coal. I am also today reversing the tax increases I have imposed on North Sea oil in a way designed to encourage more exploration, development and recovery from existing fields. I am sorry I have wasted the last ten years in doing none of these things, and now wish us to catch up on the missing years of underinvestment in new energy”

Congratulations to David Lee, the new Leader of Wokingham Borough Council. He takes on an important job at a difficult time nationally, with people feeling the pressure from their household bills and the sharp increases in the costs of food, fuel and motoring. He inherits a Council from Frank Browne which has performed well in the national local government league tables for value for money, has backed some good schools, with a strong Conservative majority that can get things done for the District.

David has promised to involve and value all the Councillors in the Group, and to use their abilities. This is important, as all Councillors have an equal mandate from their electors and have a contribution to make. He sees his job as orchestrating the talents rather than running a major portfolio himself, which is a wise call. There is quite enough to do, motivating, encouraging and advising the members in their different tasks without trying to run a department as well.

He wants to cut down the number of meetings, to give Councillors and officers more time to get on with their jobs, and to ensure meetings are focused on proper examination of the crucial decisions that need to be taken at member level. This should save money as well as time, and is to be welcomed.

The first priority has to be to control the Council Tax. The new Leader has rightly stressed the need for a low tax, as people are very stretched in their household budgets and have not enjoyed the way the government has used the Council Tax as a Stealth Tax, requiring more of local government without giving the grants to pay for it all. Central to achieving this will be the performance of the relatively new Chief Executive, Susan Law, the highest paid public servant in our area, and her relationship with the new Leader and majority Group.

Councillors will probably ask her to prepare a budget based on no increase over inflation. I think she can do better than this. She would be wise to come back with a lower Council Tax proposal based on further reductions in the overhead and reductions in less useful expenditure. Much of the overhead cost is imposed by responding to government and following government advice. The Council should move onto a policy of minimum compliance to stay within the law, but declining to spend money on advisory matters from government or chasing ring fenced grants when we do not agree with the underlying purpose of the policy or scheme.

Council officers during the Labour years in many other Councils around the country have tended to try to run Labour style Councils in their own career interests. They should now sense the change of mood, and seek to help Conservatives implement their approach, which is to deliver good school and social care by devolving as much power and money to each institution as possible, curbing the central bureaucracy. We do not need armies of networkers, co-ordinators and the like, and should have in place a staff freeze on administrative posts. Leave running the Health Service to the NHS, and keep selling the surplus assets.

At a time when private sector Chief Executives are seeing their salaries and bonus packages fall by an average 16% because their performance is falling in difficult times, it would be a good idea to make sure that our top local officers also have a financial incentive to deliver more for less as the private sector has to do to survive. Councillors were impressed with Susan law when they appointed her. My message to her, is to help the new Leader deliver what Wokingham people really want – good core services, no expensive extras, and a lower Council Tax.

If at the same time she can convert Peach Place development into action, and can find a way through the redevelopment of the tatty structures on Elms field without destroying the open space amenity, she will earn her large salary.

David Runciman has written a clever book. He seeks to show that hypocrisy is an essential part of political life. The main part of the book is an analysis of the views of political hypocrisy by a range of thinkers running from Hobbes and Mandeville through Bentham and Trollope to Orwell. The book also seeks to draw lessons for modern politics and politicians from the insights and philosophical approaches of Runciman’s chosen thinkers.

Runciman thinks that Trollope, the novelist with the least philosophical background, has the most penetrating insights into the nature of political hypocrisy. He shows considerable sympathy for the amusing views of Mandeville, who shocked his contemporaries and successive generations, while he argues rather more over what Hobbes and Bentham meant to say. It means that in part Runciman’s book is an attempt at a rather narrow interpretation of a small part of Hobbes and Bentham’s work, while in other ways it is an essay on the abstract noun “hypocrisy”.

The book opens with a definition of hypocrisy which is wider ranging than the conventional notion that hypocrisy is where a politician holds a set of stated public views which do not confirm to his own way of life. Runciman’s definition runs almost as wide as including all types of lying, which he sees as essential to political success. Towards the end of the book we learn that Runciman really believes that as a politician you can either be sincere and untruthful, as he thinks Clinton and Blair were, or you can be honest and hypocritical as he thinks Brown and Gore are.

It is where David Runciman tries to draw these general views out of his sources and apply them to modern politics that the book is least satisfactory. It is difficult to see Gordon Brown as honest. He has continued many of the practices of the Blair regime in spinning stories in the press in response to the public mood as gauged by pollsters and focus group research, which do not necessarily relate to what the Government he leads is actually doing. Mr. Brown has got into difficulties through seeking to sympathise and emphasise with England and Conservatives when he himself is statist and, at heart, more of a socialist. I am quite sure that Gordon Brown honestly wishes to reduce what he calls “child poverty”. Indeed, that is an aim he shares with his political opponents as well as his own party. But it is also the case that Mr. Brown wishes to pose as a tax-cutter because he sees that tax-cutting is now extremely popular with Conservative voting England, which he needs to woo over if he is going to win the next election. Given that Mr. Brown’s main method of tacking child poverty is to spend more public money on benefits, it is quite difficult to combine this with a general tax-cutting strategy, which leads him to spinning rather than acting to get taxes down.

I do not agree with David Runciman that lying is a necessary or essential part of politics, and we merely have to decide which kind of hypocrite we wish to elect. The public usually loses confidence in a politician who turns out to be a hypocrite or liar in an important area of policy or life, and where the politician’s intervention is seen to be damaging to voters and to the country. Thus the Labour governments of 1974 to 1979 under Wilson and Callaghan were brought low, for whilst they said their closeness to the unions meant they could get on well with the trade unions, the long and damaging strikes over the winter of 1978 to 1979 showed the public something different and inconvenienced the voters. John Major claimed during the election in 1992 that a vote for him would lead to economic recovery starting the day afterwards, only for the electorate to discover that his commitment to the ERM entailed further grief. Indeed, the very nature of a political deal to espouse fixed exchange rates requires leading politicians to lie when they have to reassure the public that the exchange rate will never be devalued, knowing only full well (if they have any self-knowledge) that it is all too likely it will be if the other policies they are following are unhelpful.

Tony Blair got into grave difficulties with his war in Iraq. He told the public that we needed to intervene because we faced a possible threat from weapons of mass destruction. After the invasion it transpired that the intelligence was inaccurate and had been presented to the public in a rather different, positive way from that intended. This greatly reduced the Labour vote in the 2005 election and lay behind the pressure to get rid of Tony Blair for his unpopularity.

David Runciman does not think that Al Gore’s own lifestyle, jetting around the world whilst having a very large house which eats energy, is particularly damaging to his campaign to get other people to take action in their personal lives and limit their carbon outputs. I would disagree. I think the hypocrisy revealed by the Al Gore lifestyle made many people find his preaching extremely unattractive. If a politician is asking people to do something they do not wish to do – in this case, curb their travel, turn down their heating, and lead a less comofortable modern life – that politician should expect great difficulty in winning the argument and persuading people if he or she is not living to the high standards they set for others.

The fact that many politicians in the past have been hypocritical does not mean that hypocrisy is a necessary part of successful politics or that, in the way David Runciman seems to say, we should recommend clever hypocrisy to our politicians. It is not inherent in the political arts that you have to lie. Of course a successful politician builds a big coalition, which means making compromises without leaving aside more difficult issues, and seeking agreement between people who do not have a lot in common. This can be done in an honest and open way, and may be more successful for having been done in that way. Most examples of political hypocrisy one can think of in David Runciman’s canter through the politics of Clinton and Lincoln, Blair and Cromwell imply that when they were at there most hypocritical and were seen through, they faced their greatest difficulties with those they sought to govern. David Runciman has produced some interesting sidelights on some important political thinkers, and he has challenged our little grey cells to consider how much hypocrisy is essential or desirable in politics. He has not convinced me that being a hypocrite is the best model for being a successful leader, and I think he misjudges some of these leaders he seeks to analyse. It is perhaps difficult for a senior lecturer in political theory to have enough grasp of history to appreciate the interplay between ideas, actions and words in the case of so many historical figures operating at different times.

If I had to choose between being a democrat and being a Conservative I would choose democracy every time. When you see the misery of Zimbabwe, the oppression of communist states and military dictatorships, you remember just how important it is that we have the power to choose our governments, and to get rid of them by peaceful means if we wish.

For that reason I want to thank on behalf of the whole community all those who stood as candidates in the recent local elections, and all those who gave their time to deliver leaflets and knock on doors in all the parties that participated. Only if people are prepared to do that does the electorate have a choice. Only if enough people do that with differing views and interests do we preserve our liberties. I would also like to thank all those who took the trouble to vote, for that too is an important part of maintaining a free society.

I am naturally grateful that voters decided to elect a majority of Conservative Councillors. I am also conscious of the weight of responsibility that rests with them, and the need for them to serve the District well. Whilst the overall political complexion of the Council has not changed, we will soon have a new Leader of the Council following Frank Browne’s retirement. We also have a number of new Councillors. Whilst I trust they will draw on the experience and knowledge of their longer serving colleagues, I hope also they will not be shy about making their own contributions based on the experiences they have gained elsewhere and the passions and enthusiasms they bring to the job.

Some constituents imply that as the local Member of Parliament, sharing a party with the majority on the local Council, I am just a phone call away from changing anything that the Council is doing. I would like to assure you that it cannot – and should not – be like that. Our Councillors value their independence, and accept their responsibilities to exercise the legal powers they assume. Many of them would not welcome me overseeing their every move or seeking to guide them on what to do. They hire senior officers to advise them and to carry out their decisions.

Of course I work closely with the Council when they want to influence government, for that is my task. Of course when constituents complain about something the Council is doing I refer it to Councillors or officers as I want my constituents either to have a good explanation of what is happening, or hope the Council will change its mind if constituents have a good case. If something is going badly wrong I will add my voice to the clamour for a rethink, if I believe that would help rather than being counter productive.

The forthcoming change of leadership gives me an unusual opportunity to say bit more about the direction I would like to see. I do not myself have a role in the choice of Leader, and have no vote. It will be decided by the elected Conservative Councillors. I think that is the right answer, for they know their colleagues best, and can judge who would give them the best lead. I do not have a preferred candidate, and do not know the WB Councillors from outside my constituency as well as I know the ones from within.

Whoever they choose, I would offer the following advice. Deliver more than you promise. Make sure something can be done and can work before making a firm promise. Remember just how squeezed people fell, so be ever vigilant to control costs and keep the administrative burdens down. Even prudent Conservative Councils can do things better and cheaper, and Council taxes generally are high.

As Leader listen as well as lead. There may be times when you need to lead Councillors in a direction that make some unhappy, but always seek to persuade rather than boss or assert. Do not have favourites, do not exclude any colleague from decision making through the Group, and never stop listening to the criticisms you will receive from all quarters. The Opposition will not always be wrong. Great leadership is strong and subtle – it happens without people noticing. Weak leadership is characterised by endless calls for loyalty, botched attempts to stifle debate, and reliance of an ever dwindling band of admirers and supporters. For all our sakes please avoid that.

I come to praise the sub prime mortgage. It has had such a bad press in the last eight months. Sub prime is now used as an excuse to explain why banks fail, shares go down and why fear stalks the markets. All the wise acres and most of the commentators now know the world will not be right until the sub prime is no more. The Regulators are busily slamming doors long after the horse of confidence has bolted. They wish to root out sub prime wherever they find it, put off balance sheet lending back onto stretched balance sheets, and warn people off lending to people who need the money. The new conventional wisdom is that banks should only lend money to people and companies who are already rich. They have discovered that the problem with lending to the poor is they might not be able to pay it back.

I have no time myself for sub prime salesmen who pushed the hopeless and the helpless into a mortgage they could not afford by offering a year or two of easy terms and seeking to play down the reality that at some point a commercial rate of interest kicked in. Nor do I have time for the many who now seem to think people on low incomes should not be able to buy their own home. Home ownership is one of the great breakthroughs an individual or a family can make. There is nothing like the freedom of being able to shut your front door, and then do what you will with the property inside. I welcome all positive moves to make mortgages and homes more affordable for all.

In the USA the authorities do seem to have realised that pushing thousands of sub prime mortgagees into default is not a clever – or pleasant – thing to do. The cuts in interest rates have come thick and fast from the Fed, as they fight to get rates down to a level where more people can hope to pay the mortgage and keep their home where they have mortgage rates linked to market rates. On this side of the Atlantic, we have authorities who see the time as suitable to preach a few homilies about the evil of debt. They are keeping interest rates high to “teach borrowers and bankers a lesson”. They risk bringing house prices down, and with them the dreams of many a heavily mortgaged home owner.

The Credit Crunch so far is a story of two rival traditions responding in very different ways. When the UK experienced a run on Northern Rock it took six months to offer financial support, look around for a private sector buyer and eventually to nationalise the luckless institution. When the US saw a run developing on Bear Stearns it took a week-end to find a private sector buyer, put in place a Fed package of loans and announce confidence boosting proposals to markets, including another interest rate cut.

The US authorities are fully into recession fighting mode. The President, the Treasury Secretary and the Fed act as one, supervising a tax cut plan, boosting the market with substantial liquidity and slashing interest rates. They work together, they each have their clear responsibility, and they give the impression they will do whatever it takes.

The European authorities look paralysed by comparison. The UK budget deficit is too high to allow easy tax cuts. There is little effort to root out the waste and unnecessary spending that would allow tax cuts. The Bank of England and the ECB both have to concentrate on low inflation, unlike the Fed which has a general duty to help sustain economic health. The European Banks keep interest rates inflexibly high, and are sparing with any extra liquidity to their markets. For Northern Rock it was a sad case of too little too late supplied to the market, to be followed by a colossal bill for the taxpayer. The ECB remains mesmerised by the divergent behaviour of the different Euroland economies under its gaze. It watches as the Euro soars, making great swathes of European industry uncompetitive.

Some love the sense of the rich and mighty in the financial world being brought low. Prosecutors sharpen their pencils to take evidence in possible fraud and corporate irregularity trails. Regulators thumb through their huge rule books to see which rules in practise had been broken during the heady days of off balance sheet loans and sub prime mortgages. Politicians sound off with all the certainty of hindsight about the errors of the bankers and the mortgage companies. They should all calm down and grasp these self evident truths.

Lending is important to help the economic wheels go round. You do need to lend to people who need the money, and the poor have every right to expect a mortgage service as well as the rich. Lending was overdone, thanks in no small measure to monetary authorities who kept interest rates too low for too long, and thanks to Regulators who through the Basel rules encouraged banks to push their loans off balance sheet.

We need to get from our current fragile over borrowed condition to a position where normal levels of transaction can take place again. To do so we will need lower interest rates on both sides of the Atlantic, not just in the USA. The banks have to recapitalise quickly, raising money from shareholders, bringing in new shareholders with new capital or by cancelling dividend payments. The authorities have more to do in the days ahead to make the markets more liquid. The problem now is not inflation, but too rapid a deflation.

Nor did they tell us at the last budget they would be charging us more than 70p a litre in tax on unleaded with a pump price of 110p.

Who would have thought that a few months into Gordon Brown’s premiership the main Forties pipeline would be closed down owing to an industrial dispute that stems from his taxation of pension funds and the consequent closure of many funds to new members?
The more the government says “Don’t panic” the more people worry that the government is not in charge and there may be shortages at the pumps. You can feel the authority draining away from the government by the hour.

The government did not tell us when first elected in 1997 that they would want to damage our liberties in the name of security. They did not stand for election as the party that would give us more surveillance cameras than a communist state, nor did they campaign strenuously for much longer detention without charge or trial, yet that is now their stock in trade.

The government did not tell us in 1997 that putting education first meant changing the exams system into a succession of short term cramming exercises to get through modules so schools could hit their targets. Never before have children been so often examined, in so many different exams, to so little purpose.

The government did not tell us in 1997 that they would spend unparalleled sums of money on public services, spending so much on spin doctors, glossy brochures, management consultants and extra administrative staff. Can the Prime Minister really need £2 million a year of spin doctors as recently reported? Wouldn’t spending more time on sorting out the underlying problems be a better way?

They did not tell us that their anti poverty programme would entail large armies to take tax off many people, and more large armies of officials to give some of it back in the form of tax credits.

They did not tell us they would give away so much power to Brussels, claiming each time an unpopular law came in from the EU that Britain was winning the argument.

They did not tell us that lop sided devolution for Scotland would fuel English nationalism, creating resentment at the better financial deal many English people now think Scotland gets from the Union.

They did not tell us their idea of local government devolution was to seek to create uniformity of policy and approach through hundreds of rules, regulations and guidance notes, and a star system to grade the results as if the electors had no role in judging.

They did not tell us they would face headlines in papers complaining of fraud and error in our electoral systems.

They did not tell us that government to them meant a continuous conversation with the media, rather than seriously trying to identify and solve economic and social problems that government can tackle.

Professor Anand Menon of the University of Birmingham has responded to John Redwood’s article, Britain in Europe, published on the e-International Relations website. The text of Professor Menon’s criticisms can be found here, and John Redwood’s response, is reproduced below.

I thank Professor Menon for his apology and change of tone. He may not agree with my views, but they are sincerely held and based on a sustained argument and a view of how the world works. In a democracy it is best to meet such positions with courteous and well argued disagreement.

I am also delighted to learn that Professor Menon agrees with me that the Uk should not join the Euro, and wishes to rule out any idea of more political Union or the creation of a country called Europe. Like him, I think such a course wrong for the UK. Unlike him, I do think that is the direction of travel of many of our partner countries and the Commission. The language and centralising powers of recent Treaties underlines this point.

I do argue strongly for different and better policies from the EU. I want to see the end to the protectionist CAP, which puts up food bills at home and deprives developing countries abroad of markets for their produce. I want to see many regulations withdrawn, as they are not necessary to be able to trade with each other. They can limit competition, choice and innovation. I want to see lower taxes, which requires less government at all levels including the European one.

It is good to know that the Professor too, shares some of these aims. The problem is, I see no chance of achieving them in the near future given the attitude of the main political parties on the continent of Europe.

I come to praise the sub prime mortgage. It has had such a bad press in the last eight months. Sub prime is now used as an excuse to explain why banks fail, shares go down and why fear stalks the markets. All the wise acres and most of the commentators now know the world will not be right until the sub prime is no more. The Regulators are busily slamming doors long after the horse of confidence has bolted. They wish to root out sub prime wherever they find it, put off balance sheet lending back onto stretched balance sheets, and warn people off lending to people who need the money. The new conventional wisdom is that banks should only lend money to people and companies who are already rich. They have discovered that the problem with lending to the poor is they might not be able to pay it back.

I have no time myself for sub prime salesmen who pushed the hopeless and the helpless into a mortgage they could not afford by offering a year or two of easy terms and seeking to play down the reality that at some point a commercial rate of interest kicked in. Nor do I have time for the many who now seem to think people on low incomes should not be able to buy their own home. Home ownership is one of the great breakthroughs an individual or a family can make. There is nothing like the freedom of being able to shut your front door, and then do what you will with the property inside. I welcome all positive moves to make mortgages and homes more affordable for all.

In the USA the authorities do seem to have realised that pushing thousands of sub prime mortgagees into default is not a clever – or pleasant – thing to do. The cuts in interest rates have come thick and fast from the Fed, as they fight to get rates down to a level where more people can hope to pay the mortgage and keep their home where they have mortgage rates linked to market rates. On this side of the Atlantic, we have authorities who see the time as suitable to preach a few homilies about the evil of debt. They are keeping interest rates high to “teach borrowers and bankers a lesson”. They risk bringing house prices down, and with them the dreams of many a heavily mortgaged home owner.

The Credit Crunch so far is a story of two rival traditions responding in very different ways. When the UK experienced a run on Northern Rock it took six months to offer financial support, look around for a private sector buyer and eventually to nationalise the luckless institution. When the US saw a run developing on Bear Stearns it took a week-end to find a private sector buyer, put in place a Fed package of loans and announce confidence boosting proposals to markets, including another interest rate cut.

The US authorities are fully into recession fighting mode. The President, the Treasury Secretary and the Fed act as one, supervising a tax cut plan, boosting the market with substantial liquidity and slashing interest rates. They work together, they each have their clear responsibility, and they give the impression they will do whatever it takes.

The European authorities look paralysed by comparison. The UK budget deficit is too high to allow easy tax cuts. There is little effort to root out the waste and unnecessary spending that would allow tax cuts. The Bank of England and the ECB both have to concentrate on low inflation, unlike the Fed which has a general duty to help sustain economic health. The European Banks keep interest rates inflexibly high, and are sparing with any extra liquidity to their markets. For Northern Rock it was a sad case of too little too late supplied to the market, to be followed by a colossal bill for the taxpayer. The ECB remains mesmerised by the divergent behaviour of the different Euroland economies under its gaze. It watches as the Euro soars, making great swathes of European industry uncompetitive.

Some love the sense of the rich and mighty in the financial world being brought low. Prosecutors sharpen their pencils to take evidence in possible fraud and corporate irregularity trails. Regulators thumb through their huge rule books to see which rules in practise had been broken during the heady days of off balance sheet loans and sub prime mortgages. Politicians sound off with all the certainty of hindsight about the errors of the bankers and the mortgage companies. They should all calm down and grasp these self evident truths.

Lending is important to help the economic wheels go round. You do need to lend to people who need the money, and the poor have every right to expect a mortgage service as well as the rich. Lending was overdone, thanks in no small measure to monetary authorities who kept interest rates too low for too long, and thanks to Regulators who through the Basel rules encouraged banks to push their loans off balance sheet.

We need to get from our current fragile over borrowed condition to a position where normal levels of transaction can take place again. To do so we will need lower interest rates on both sides of the Atlantic, not just in the USA. The banks have to recapitalise quickly, raising money from shareholders, bringing in new shareholders with new capital or by cancelling dividend payments. The authorities have more to do in the days ahead to make the markets more liquid. The problem now is not inflation, but too rapid a deflation.