Category: Articles

Things are bad enough without talking ourselves into recession.

Some banks and commentators have already called a recession in the USA, when the figures for the last quarter of 2007 show the US economy was still growing well. Here in the UK the retailers have added to the sense of gloom by concentrating on their sales figures on a “like for like” basis, leaving out all the sales in new shops.

The current position is both better than the pundits admit, and worse than the government will let on. The bad news is that the banking systems in both the USA and the UK are damaged by discovering that some of the lending they carried out in the heady days of low interest rates and easy money may not be repaid . We are living through a difficult time as banks adjust for the losses they have made, and rein in their lending as they are short of cash. Banks need to cut their dividends or raise new capital.

In the UK commercial property values are falling fast, undermining the security for some of the loans. Residential property values are under attack from the UK government, who want housing to be more “affordable”. The price falls have not been fast yet partly because high Stamp duties and the imposition of Home Information Packs are putting people off selling their homes. There are too few homes coming onto the market at the moment to cause a crash . The UK authorities have made the problem worse by their ham fisted approach to Northern Rock.

The good news is that many companies are still trading well. On both sides of the Atlantic activity is higher overall today than it was when the Credit crunch first hit. Both the US and the UK have experienced a falling currency. As both economies need to divert much more activity into exports, or into import substitution, that will help. Both economies can export so much more to the rich parts of the world – China, India, Russia and the Middle East. Both economies now have to seek inward investment from these new giants that have built up huge cash surpluses at the same time as we have built up huge deficits by buying their oil and their manufactures. It is repayment time.

Few forecasters expect a downturn in the UK this year – just a sharp slowdown. Some commentators expect the US to get away with a slowdown rather than a recession. The US Fed is very keen to stop a slump, and is taking the right action by making cash available to banks and by cutting interest rates. Now the US President is also promising tax cuts, which will boost activity as well. The US authorities recognised earlier than the UK that they had to shift from inflation fighting to recession fighting, and they have been bolder in their actions. They will probably succeed in avoiding recession.

The UK’s position is weaker because the UK has increased public spending by too much, wasting too much of the money. At a time when other countries were reining in public borrowing and controlling their spending, the UK government went on a spending binge. This limits the UK government’s scope to cut taxes and relieve the pressure on consumers. As consumption is the largest part of activity, this means we are going to experience a slowdown which consumers will feel badly. If the government really wanted to help us out of this change of fortune, it would get a better grip on its spending immediately, cancelling the needless parts like ID cards, computerisation schemes, regional government, and larger EU contributions as well as keeping wages down. Then it could follow the US example and cut taxes to help the hard pressed private sector.

Instead the UK is only going to tackle one of the twin deficits, the balance of payments one, through the mechanism of a cheap pound. Our best hope this year is that the strategy works and the private sector does export more. That could be helped if the government would relent on its planned increases in small business tax and capital gains tax. They need the goodwill of entrepreneurs. It’s a dangerous time for the government to be sandbagging the very people on whom they rely to recreate their much quoted “economic stability”. Our economy at the moment is as stable as a row boat in a storm.

There is no need to talk ourselves into recession – we can get through with a period of slow growth. To do so, the government needs to curb its own appetite for waste and be realistic about how much it can squeeze out of us in tax.

Gordon Brown has claimed to issue his vision of Britain, in his Observer interview s few days ago. There are slightly warmer words for those of us who believe in defending and strengthening our civil liberties, with a promise that ID cards will not be compulsory. Why not just drop them altogether, as an unwanted expense and a temptation to government to intrude too far? Why not introduce proper border controls, and use the passport and visa system, to deal with immigration?

In contrast there are tough words for those who want to preserve Englands green and pleasant land ?? or what remains of it. Mr Brown has decided his crusade is to go to war with the Nimbys, using a highly overcentralised and bossy state to drive through new houses, nuclear power stations, new runways and eventually new train lines. He thinks he can make himself more popular by announcing unpopular decisions. It is an unusual approach.

I think Mr Brown is fighting yesterdays war on housing in the wrong way, instead of fighting todays war the right way. The issue today is not how to expand the supply of new housing, but how to stabilise the market in second hand homes. If he does not succeed in protecting the UK housing market from the credit crunch, housebuilders will not want to build all the extra homes in Mr Browns 12 year plan.
Mr Brown tries to create the impression that the credit crunch is made in the USA. He needs to recognise that the run on Northern Rock was made in the UK. It is banks based in London and regulated in London that are having to pull in their horns after a period of easy money and excess which occurred during his time as Chancellor. Today Mr Brown needs to come up with the right mixture of regulatory reform and money easing to prevent the credit crunch pushing house prices down too far too fast and undermining his hopes for new homes.

He also needs to understand that in many constituencies that Labour needs to hold in the suburbs and the countryside in England there are strong feelings that communities can only take so much extra development. There is growing resentment at the way large scale high density development is pushed onto reluctant communities by the centre. Trying to trap the Tories over Nimbyism is a very high risk strategy at the best of times. It is particularly silly at a time when government can force through the planning permission but cannot force a housebuilding industry under pressure to build on the scale Mr Brown thinks is needed.

In this mood we in Wokingham should not expect any favours when it comes to protecting what remains of the green gaps between settlements in our part of England. The Council has been listening to local opinion that is alarmed by three major new development proposals looming on the horizon. I trust they will reject these schemes on good planning grounds ?? there simply isnt the infrastructure to support such large scale additions to our housing stock. Thereafter we will all need to maximise pressure on the government, that in its current mood is all too likely to court more unpopularity by insisting on overturning Wokinghams settled view.

Mr Brown is right that the UK is short of transport capacity of all kinds. It has become so because this Labour government has failed to initiate any major new project to expand rail, road or air capacity. They have completed the Channel tunnel rail link they inherited, but precious little else.

I pursued their last announcement that they intended to build Crossrail, only to discover that they are not going to make the final decision about it this Parliament. I doubt if anything has changed, and assume this is another re-announcement of the same lack of progress. Their much publicised difficulties with engineering works on the West coast mainline over Christmas will not encourage them to try to speed up rail improvements, against the background of poor performance and a shortage of trained staff.

I am an optimist by nature. I would like 2008 to be so much better than last year, as there is much we can achieve together. I hope you have all had a happy and relaxing Christmas ?? or have now recovered from the exertions of catering for families reunited around the Christmas tables. I wish you and yours a prosperous and happy new year.

This year I want to see the government lift its nasty credit squeeze. The run on Northern Rock was just the most visible sign of distress in our economy. The new year is ushered in against a background of falling commercial property prices, fears about house prices, and difficulties for people seeking mortgages. High fuel prices, high taxes ?? with a further National Insurance rise to come for many ?? and general rises in the cost of running a home are all taking the shine off the new year even as it dawns. If the authorities cut interest rates and make more cash available to the banks we can avoid too sharp a downturn.

I have been very moved by the fact that there are still people unable to live in their own homes following last summers floods, and have been angered by the slow response of the authorities to the need to improve the flood protections. Too much building on low lying land in decision after decision taken over local heads by government Inspectors has put too many homes at risk. I will press the agencies and government more to try to get them to take preventative action for the future.

I am glad our troops will be coming home from Iraq after long and arduous tours of duty. I hope the US and the UK governments will put more effort this year into peace initiatives in the Middle East ?? it is time for jaw jaw, not war war. Fear, distrust and jealousy generates conflict: being positive, talking through problems, and trying to see the other persons point of view can make things better.

The government has lost its reputation for economic stability, and has seen a massive hole blown in its spin that it created an independent Bank of England, as a result of the convulsions in credit markets and the run on Northern Rock.

Ever since Gordon Brown took over as Prime Minister, things have gone badly awry in banking markets. We have lived through the end of the long financial bubble of easy credit he created as Chancellor by keeping interest rates too low and agreeing to the Basel rules for banking capital which encouraged banks to lend and lend through off balance sheet devices. The great army of regulators looked on approvingly, as all their boxes were being ticked.

This summer some in the City and I through my website, www.johnredwood.com, told the authorities that money was by then too tight. We urged them to lower interest rates and make more money available to the banking system. They ignored us, and told any bank in trouble that it served the bank right. The banks were on their own and had to sort out their own difficulties. The Chancellor was sending out this tough message on the eve of the run on Northern Rock.

Northern Rock changed all that. For the first time a UK government offered to stand behind all the bank deposits in the country if need arose. For the first time the taxpayer lent more than ?25 billion to a single company as a rescue. Late in the day interest rate cuts and extra liquidity became available. It became obvious to all that far from having an independent Bank of England, the Brown reforms had taken away important functions from the Bank that helped it regulate banking markets well.

To me, the urgent question today is how will the taxpayer get all the money back that has been lent to Northern Rock, or offered as guarantee. That should be the overriding concern of the Chancellor, representing a government which said originally that all the money would be repaid. The choices for handling Northern Rock have been narrowed to three by the spinners for the government and the Lib Dems.

The first is sale of the bank to a third party who could repay some of the government loans immediately, and take care of Northerns financing needs thereafter. The best chance of doing this was the Lloyds expression of interest before the crisis became acute. The authorities failed to respond positively.

Since then we have not been told of any large organisation emerging as a bidder which has the balance sheet strength to take it on and solve the problem itself. The two ??preferred?? bidders need access to substantial market funding, and one only wishes to buy a minority stake. Even Lloyds needed financial help from government and the markets, as Northern is big even for a bank the size of Lloyds. Anyone needing access to substantial market funding will face the same kind of difficulties that caused the problem in the first place ?? the drying up of credit in markets.

Everyone agrees the sale to a third party who could solve the financing problem would be ideal, although there remains scope for disagreement about how to value the existing shareholder interest in such circumstances, and scope for disagreement about how much money taxpayers should expect to get back immediately, and for how long the remaining money could be lent to the new owners.

The second is nationalisation, the Lib Dems recommended ??solution??. The new Lib Dem leader showed his folly by rushing in to back this irresponsible proposal as one of his first acts, after appointing a pop star as an adviser! He clearly does not want to be taken seriously and does not think things through before issuing the press release.

Taking on over ?100 billion of risk in a single mortgage bank at a time of falling house prices and credit crunch is too big a bet for taxpayers. Many of us think taking on ?25 billion of risk is dangerous, but quadrupling that is absurd. The government itself has stupidly increased our risk by an amount the Chancellor told us on December 19th he could not quantify! It shows they are being far too cavalier with our money.

As the Lib Dems themselves admit, the government would not bring any especial expertise to running a mortgage bank and would need to seek professional management from the City. They say it would be temporary, leading to a sale at a later date. They forget that nationalising would mean the taxpayer had to pay for any one off losses or write downs that may be necessary on inspecting the books, and for any running losses the bank might incur under nationalised management.

If it turns out the bank cannot sustain its current level of employment, the taxpayer will have to pay for the redundancies. If the bank needs to expand its branch network or invest in new computers, the taxpayer will have to make a judgement about that use of public money as opposed to school and hospital spending. Given the scale of Northern Rock ?? total liabilities bigger than the health budget ?? any government would be mad to take on those risks. Just losing 1% of the assets costs more than ?1000 million.

The third is Administration. The government could demand repayment of its loans (subject to any legal promises it has made about their duration, which the government refuses to tell taxpayers and Parliament) which could trigger administration in current circumstances as there is no lender prepared to replace the taxpayer at the moment. That too would be a foolish policy. Shareholders would be aggrieved, as they have been told by the authorities that their bank is solvent and been led to believe taxpayer funding will see it over a difficult period. There is no good market in mortgages and the other principal assets Northern Rock owns, so any fire sale at these levels would guarantee the taxpayer lost money. The Administrator is no more likely to find a big buyer for the whole bank than the current auction team. There cannot be any potentially interested party in the world who is unaware of the sale process. If the government favoured this route it should have refused to lend the bank any money in the first place so no public money was at risk.
There is a fourth option which needs proper discussion. I call it the ??tough bank manager?? approach.

The option starts from where the government has got us ?? from the position where taxpayers have lent money and guaranteed loans but do not own the mortgage bank. It recognises that when you are in a hole you should stop digging. We have to accept that the Treasury/Bank of England combination are the principal bankers to Northern Rock. It is high time they started acting as a bank manager faced with an over borrowed client who cannot repay in a timely way.
They need to:

1. Explain the limits of their funding to Northern.
2. Set out the interest rate and interest payment dates for the loans.
3. Set out a schedule for capital repayments.
4. Take all the asset cover there is left in Northern to secure their huge loans.
5. Insist on daily cash and profit monitoring.
6. Place a cash sweep on the business that returns surplus cash to the taxpayer at regular intervals.
7. Insist on approving all increased spending of any kind on capital and revenue account.

The repayment schedule should not expect repayments currently, whilst the main banks are trying to arrange their own affairs to show strong balance sheets for the year end. It should start phased capital repayments later in 2008. It would be up to Northerns management to decide whether these repayments could be met from trading profits and cash generated within the business, or from refinancing in commercial markets, or from selling assets. Where assets are sold, the government team needs to insist on a minimum price to protect its asset cover position.

The extraordinary thing is that apparently many of these basics of banking have not been observed by the nations top financial team. The Chancellor on December 19th in the news conference once again told us little. I hope they are doing more than they are saying, but there is no evidence that they done a good job on securing the taxpayers position, either by means of securing full specific asset cover or by means of repayment schedules that are tough but achievable. Its high time they started. We are told they have asset cover for the loans, but specific questions have not been answered about how the protection works. There has been no hint of any repayment schedule.

It appears they hoped the Branson bid, and then the nationalisation idea, would reassure depositors, reducing the pressure for taxpayers to put up more money to replace lost deposits. The best way to secure the deposit base is to take strong and sensible action, so it looks as if the government as bank manager has a professional grip on its over borrowed customer, and will stand behind them until it is sorted out. If a buyer emerges who can raise the necessary money then all well and good ?? the bank manager can agree to the sale if that is what shareholders want to do, having secured the taxpayers interests.

All this assumes Northern is a solvent business ?? which we know it has to be as the regulators are letting it trade. Assuming they are right there is no need for taxpayers to lose a penny ?? so why wont the Prime Minister repeat his promise about that? His hesitation damages confidence. If they nationalise it the taxpayer is likely to end up with a huge bill given the past track record with nationalised businesses, as well as legal actions from unhappy shareholders assuming they offer little or no compensation to them.

I naturally wish those trying to sell Northern every success in finding a good answer, but I do want the government to protect the taxpayers money fully in those negotiations.

In the last couple of weeks I have visited several sites that were badly affected by floods last summer. In several cases people did not have their homes back in use for Christmas, as builders scrambled to complete the new plastering ,wiring and other tasks to restore the properties.

Each location has a different version of the common problem. In some inadequate surface drainage led to sewers overflowing as well, in others proximity to a river or stream bursting its banks just engulfed the low lying areas in flood water. In each case there is an argument between the authorities over who is responsible for the maintenance and improvement of the drainage.

The Environment Agency, after a series of meetings, has accepted that it is responsible for the Emm and for the Loddon. However, responsibility does not mean that riparian owners, the Highways Authority and others are free of all duties. The Agency does seem to accept that too much water can try to come through the Emm brook, and spill over into homes at pinch points along the stream. They have suggested an improvement scheme to hold surplus water away from homes, releasing it at a manageable rate. I am keen they should press on with working this up into a firm proposal and putting it in their budgets.

Thames Water is still reluctant to commit to spending where its facilities have been overwhelmed by flood water, taking out pumps or exposing inadequate capacity in pipes and manholes. I do think that where foul water reaches into peoples homes they should move quickly to improve facilities to prevent that happening again. I will keep at the task of trying to persuade them to do something to sort it out.

In some places ditches, culverts and drains have not been kept clean. In other places they are simply not large enough. We seem to have plenty of lawyers, administrators, assessors and experts writing letters and arguing over liability. It is high time more of the budget was spent on some people to go out and scour the ditches and widen and deepen the watercourses so next time heavy rain hits people can be assured it will not come into their living rooms.

The Environment Agency itself did not maintain its systems to a sufficiently high standard, and had to admit as much in its annual report. It now has extra money from the government for anti flood investment for later years, but needs to get more out of its current ?1,000 million a year budget to reassure us. Many of the schemes we need locally are small and relatively cheap. I want to see a greater sense of urgency. It is no good just spending money on putting all our homes on maps on the internet, and placing lines around the unlucky ones to say they are prone to flooding.

This government has been particularly keen to require more and more homes be built in places like Wokingham. Much of the land is low lying. Much of the open land that remains is flood plain. Planners have a duty to consider the impact more tarmac and concrete will have on the rate of water run off when it rains, and the impact converting flood plain into housing estate will have on the neighbours as well as on the new properties. It is heart breaking to see peoples dreams shattered when their brand new homes are awash with dirty water. It is high time the authorities sanctioned fewer houses, and improved our flood defences. This is not global warming, this is bad planning.

It’s been a tense run up to Christmas in the Commons. I have gone hoarse trying to get the government to understand the gravity of the credit crunch, and the need for more careful handling of the Northern Rock crisis. The inflation we now have is the result of low interest rates and sloppy lending in the past – mistakes made months ago. Today’s mistakes by the Bank and Treasury are the other way. There is too little lending and too little money available in the months ahead, which threatens house and commercial property prices, job losses, closures and bankruptcies. I have been asking for some action in the markets to ease the squeeze.

The Opposition has been pressing for a referendum on the EU Constitutional Treaty. The government said that it would let Parliament decide instead of the people. When we pressed for a vote on whether the Prime Minister should sign the Treaty or not, Parliament was denied one! The PM signed the Treaty a few hours late without a single vote being cast in Parliament, let alone in the country, in favour of such a course of action.

I have offered a fall back way of handling the Northern Rock crisis. I would be happy if a buyer does emerge who will take responsibility and offer to repay the loans made by taxpayers, but there are worries about whether one will complete a transaction. I oppose early Administration, as it would be difficult selling off all the mortgages and other assets in these conditions at a discount, threatening to realise less than we need to pay off all the creditors including the taxpayer, after accounting for the big costs of such an administration. Administration is clearly not in shareholders interest and prevents them leading a recovery of the bank and its business. I do not think the taxpayer can afford to nationalise the bank. . It is bad enough having up to ??30,000 million of taxpayers money at risk. Why on earth would we want to put ??110 billion at risk? How would we pay for that?

Plan B, if a bid does not succeed, is for the Bank of England to act as a stern bank manager setting clear repayment dates for tranches of loan, and demanding the bank use much of its cash when generated to repay taxpayers. This process can be phased, to allow recovery in the market for mortgages before Northern Rock needs to sell them on to repay the taxpayer, and giving shareholders and managers the chance to make a success of the business . The Bank of England should take all the security it can, and then manage the loan well.

This is a heavy agenda a few days before Christmas, but these issues are pressing now. How they are handled will determine how prosperous and successful our New Year will be. In the meantime I wish you and yours a very happy Christmas. My Christmas message is more in the spirit of the holiday!

Incompetence has become the middle name of this government. Incompetence at Revenue and Customs, losing many bits of data, culminating in the loss of personal records for 25 million people. Incompetence at DEFRA and the Environment Agency, unable to keep the drains and ditches clear or to use some JCBs to dig land drains capable of taking all the water their developments rush into inadequate pipes. As a result we had serious floods this summer and watch nervously every time we have heavy rain. Incompetence at a government laboratory complex letting dangerous disease escape into our cattle. Incompetence at the Home Office, unable to control our borders properly or to keep records of who has legally entered the country. Incompetence at the Health Department, where hospital acquired infections stalk the wards of many NHS hospitals. You name a department, and they have made blunders.

The incompetence that worries me most because it will damage so many people is the incompetence at the Treasury and Bank of England. The bungled rescue of Northern Rock has left taxpayers with a staggering ??30,000 million at risk. Each adult has now been forced to lend around ??700 to the distressed mortgage bank. Our Chancellor refuses to tell us how much security we have for this money, or when Northern Rock will start to pay it back.

The Monetary Policy Committee of the Bank of England kept interest rates too low for too long in recent years, partly because Gordon Brown changed the target before the last election in an effort to keep rates down. As a result we have had more inflation than is desirable.

In October and November the hapless Committee was making the opposite mistake, keeping rates too high for too long. The results are becoming quite obvious. House prices are falling. Commercial property prices are falling. Mortgage advances are down. The money markets have seized up. Today’s problem for the banking sector is tomorrow’s problem for everyone else. It will mean less money in circulation as less borrowing is transacted, which will then reduce sales and jobs.

When Gordon Brown altered the Bank of England in 1997-8 he made a dog’s breakfast of it. He wrongly said he was making it independent. Instead he stripped it of its powers to run the government debt, and to supervise the daily workings of the clearing banks. This left the Bank distanced from the money markets it is meant to run. Because the bank does not see all the business in the way it used to it has lost its feel for the markets.

He also imposed the rickety tripartite structure on us to deal with banking crises. The Bank shares responsibility with the Treasury and the Financial services Authority. This summer they bickered over what to do about Northern Rock instead of getting on and solving it. We now know this does not work, as the three regulators together were unable to work out a solution to the Northern Rock problem, even though they knew the difficulties a month before the run on the bank began. When the Bank used to do these things on its own runs on banks were avoided, and money markets were kept more liquid.

Why is all this happening? It is happening because this government believes the business of government is amusing the media, and spinning stories. They still do not seem to have grasped that a Minister’s job is primarily supervising, leading and checking the work of his or her Department. It is detailed, voluminous hard work. We pay these Ministers large salaries. It would be good to start getting some productivity out of them for all the privileges they enjoy.

The Treasury could start by restoring the powers to the Bank of England they need to run the money markets and to regulate the banking sector properly. The Chancellor could follow that by apologising for the idiotic speech he made just before the run on Northern Rock when he said any problems for the banking sector served them right and there would be no bail-outs. He should instead say he is worried about the credit crunch and has instructed the Bank to take any measure necessary to restore liquidity and order to money markets. If he does not, if he continues to dither, more damage will be done to the economy needlessly.

My job has become the pursuit of incompetence. Each day brings more evidence of how Ministers fail to control and direct their great departments in the interests of the taxpayers. Each day some new Minister comes before Parliament to make a confession, offer an apology, or show brass neck in claiming all is well when their administration is in tatters.

Last week the Opposition hauled the Chancellor back to the House to explain how the personal records of 25 million people in the UK were lost by sending them on CDs through the post. The original apology in the statement of November 20th implied it was a one off mistake by a junior official. On further inspection it turned out to be one of many occasions when data was lost. The policy of putting the data onto discs had been approved by senior officials, and senior people at the Treasury knew of the loss 12 days before the public and Parliament were first told.

I tried with other MPs to find out how much money taxpayers now have at risk in Northern Rock, what security the authorities have taken for the loan, and when and how it is going to be repaid. Mr Darling either does not know these simple facts, or wishes to prevent Parliament and taxpayers finding out these basics about this whopping loan. Every time an Opposition MP asks anything about the security, size and repayment of the loan he is treated to a rant about how the Conservatives no longer support this measure. It really is a disgrace that a senior Minister treats the House and taxpayers with such contempt. We are left in doubt as to whether he is simply incompetent and has failed to take proper security for the loans and to demand a sensible repayment timetable, or believes he has some divine right to spend ??30 billion of our money without a by your leave or any rudiments of Parliamentary accountability.

My colleague David Davis asked the Home Secretary to explain how she was progressing with Project Stork, a pan European project to develop identity data storage and ID cards. She showed she had no knowledge of such an important project within her own responsibility. This is the lady who cannot see that the loss of 25 million personal records by HMRC has driven a coach and horses through the idea that a national data base for Identity Cards. Why on earth should we trust the government with our most personal details, when they lose our National Insurance records, details of our children and our bank account numbers? Far from making us safer, a national database would be a nightmare for us all, leading us to worry about when it will all be put on CD and find its way into the underworld.
Our borders remain porous. I recently asked a Minister to get a grip on our frontiers, and to use passport and visa controls to make sure criminals, other undesirables and illegals are not allowed to enter Britain. I was told that view was very twentieth century?. The government apparently intends to spend more of our money on more checks at our frontiers, but does not think any of it will work, and tells us that only an ID card scheme could do the job. What arrant nonsense. Of course it is much easier to stop illegal migrants and suspected criminals at the frontiers, where all have to show their identity passes, rather than using random searches of any of us on the streets once the dangerous minority of undesirable migrants has blended into our society.

The worst feature of it all, is there is never any sign that Ministers are about to get a grip. In statement after statement, they just look helpless and out of their depth. They keep on spinning, but they are still not governing.

Last week some asked why 400,000 people left the UK last year to live and work elsewhere last year. I would have thought the answer was obvious.

They’ve had enough.

We live in a country where anyone who has gained some qualifications, who tries to pay their own way and to live a decent life feels targeted by this government. We have our identity assaulted, our democratic views ignored, our pockets and purses rifled by the state, our opinions criticised or banned and the public services we do wish to use run incompetently or rationed for us.

We, the English, are told our country is the one part of the Union that cannot have devolved power. Instead our country is to be split into Euro regions. We are told we have to love the EU and accept its constitution, after the promise of a referendum in order to win a General election. Many of us see the EU as a hostile bureaucracy. We are not xenophobes – most of us like our continent and appreciate its range of cultures, languages and cuisines. We just do not want to be governed by a bunch of bureaucrats who think they have to regulate every aspect of our increasingly complex lives and who we cannot sack via an election.

We are told by the government that our lifestyles are wrong. As the Health Service grapples with its inability to keep hospitals clean and infection free the government blames us for being ill in the first place. People are told they are too fat, they eat the wrong foods, and they drink too much. The government encourages a debate criticising middle class? lifestyles. Maybe it’s a prelude to a crisps tax or a further increase in alcohol duty.

If we dare to drive our cars we are treated like criminals. The government has put through so many new laws that most drivers I see on the roads daily are breaking one or other law. Motorists do not accept the government’s demonisation of speed in all circumstances and want to see instead proper policing operating against the minority who are driving stolen vehicles and uninsured cars, and those who are driving dangerously for the conditions. Motorists feel picked on when they are just trying to get to work or to the shops to buy the family food.

If we are foolish enough to make some honest money then the tax collectors descend. The Revenue and Customs have become much more aggressive and in some cases unfair, as this greedy government raids us time and again to pay for their army of helpers and advisers, to swell their drinks cabinets and pay their first class airline tickets as they fly round the world lecturing the rest of us on the need to travel less.

They use the war on terror? as an excuse to whittle away our civil liberties. I can scarcely believe that under a Labour government people can now be arrested and held without charge for a month, and the government wishes to be able to do this for two months.

If Ministers cannot understand why people are leaving, I have this advice for them. Leave the Ministerial car at home next week, and try getting yourself to the office for 9 am each day. Work out what it is like paying the mortgage, buying the petrol, paying the Council Tax and the family food on average earnings in this country, and ask yourself if people really are paying too little tax when you’ve done those sums.

If you still can’t figure out why so many people are leaving, then you are not cut out to be a politician. You are simply, hopelessly and comprehensively out of touch. If you can, then do something about it.

Interest rates remain high in the UK, whilst US rates are coming down quickly. As a result the pound has surged to $2.10, putting more pressure on anyone trying to export from the UK into the dollar area.

The US authorities have taken the credit crunch and the mortgage crisis seriously. They think they have a battle on their hands to keep the US economy moving ahead, despite the most recent growth figures coming in at a lively 3.9%. They understand that the future is going to be much tougher than the immediate past. Many of the mortgages lent to people over the last couple of years were based on a initial teaser? or soft interest rate. After a defined period the interest rate is pushed up, making it more likely more people will be unable to pay and increasing the number of defaults. Many of these mortgage increases will happen over the next few months on the more recent loans. US banks are keen to keep more cash and lend less money, and they are coming forward with substantial write-downs and losses, recognising the problems they are already experiencing from so-called sub prime? or poor mortgages.

Meanwhile the UK authorities look on as if none of this applied over here. They seem oblivious to the damage the run on Northern Rock did. They ignore the way inflation has fallen like a stone to 1.8%, below their target. UK banks have still not made statements setting out in detail what if any impact there is from the sub prime crisis on their balance sheet and profits. The Monetary Policy Committee meets, draws its salary and sets its interest rate, but market rates are above its rates and no-one seems to think they should try to sort out this gap. UK banks, just like US ones, are fighting to improve their balance sheets and increase their cash resources. It means here, as in the US, money is going to be tighter. That means less inflation, not more.

The UK authorities seem to think that because oil and petrol prices have gone up, and food is also getting dearer, an inflation problem is just around the corner so they had better keep rates up. The sad truth is that is the UK government which is doing most to raise the inflation rate in this country. It was the tax hike on petrol and diesel which was the killer, as tax represents around two thirds of the pump price so we know who to blame for our sky high petrol prices. Council tax has gone up too much, and mortgage rates have risen substantially in the last couple of years, thanks to the actions of the UK monetary authorities. The UK could afford lower interest rates, if only the public sector did a better job of curbing its impact on our inflation rate.

Commercial property prices are falling in the UK. Residential house prices are falling in the US. UK house prices have fallen gently over the last couple of months the market seems to have held up better partly because people have been put off trying to sell their homes by the advent of the much disliked Home Information Packs. US business is now able to increase its exports as a result of the falling dollar. UK business is seeing more competition emerge from overseas, and some British businesses are taking their jobs abroad as a result of the current combination of relatively high interest rates and a strong pound against the dollar. Maybe one day the Bank of England and the Chancellor will see the need to do something over here. In the meantime the UK authorities behave as if Northern Rock had not happened, and decide to flight the last war against inflation rather than the next one against a downturn.
It’s time to be cautious. The banking problems are not over, the Bank of England does not want to cut rates, and the US as well as Asia is much more competitive.