The UK has kept something  close to a two party system in General elections. Labour and Conservative have alternated in power based on their ability or lack of it to improve living  standards and preside over a successful economy. Labour’s bankrupting  of the UK and trip to the IMF to borrow in the mid 1978s led to them being out of office for 18 years. The Conservatives adoption of the European Exchange Rate Mechanism and the predictable inflation and recession that caused led to Conservatives being out of office for 13 years. Labour’s boom and bust and banking crash of 2008  has so far led to them being out of office for 11 years.

I know some contributors here want a new or third party to emerge. The Social Democrats tried that in the 1980s and failed after a few by election successes. The Lib Dems are always positioning  themselves as a potential new force but have never made it to first or second place in a General election and cannot truthfully claim to be new. The Referendum party, UKIP and the Brexit party  tried it mainly around an important single issue but only ever won one seat in a General election between them. As I always advised here, if you wanted a referendum and then wanted Brexit done they had to be achieved with Conservative MP votes in the Commons.  In Scotland the SNP has demonstrated that in the first past the post Westminster elections they have been able to break through into first place, displacing Labour, because they have made their  constitutional issue more salient than economic management for the UK as whole.

On the continent there was the same alternation between Social Democrats and Christian Democrats in office in the last century. This century in all the main EU countries the big two have lost support with new populist parties emerging. It is true they have different voting systems which can assist splintering of the  vote, but they had these same systems in the last century when Christian Democrats and Social Democrats were each  likely to get around 40 % of the vote and to dominate coalitions with smaller parties formed by the winner.

This seems to have occurred because electors realise that unlike in  the UK the once dominant  parties can no longer guarantee or mess up the economy  in the same way because they do not have the powers. EU control of interest rates, money and credit, state borrowing and some taxes changes things a lot. Elections are fought on other matters more.

The decline of the Christian Democrats has been speeded by EU policies. The lower tax greater freedom part of the conservative  vote has been alienated  by the compromises needed to accept a large and growing EU budget, independent collective EU borrowing, huge transfers at zero interest from surplus to deficit countries through the European Central  Bank, and a regulatory colossus laying down detailed controls over many aspects of life. The conservative impulse has as a  result been driven into newer parties of a more Eurosceptic tone. They are normally defeated  by a coming together of all the other parties that are broadly pro EU to prevent any Eurosceptic movement gaining power again, as Syriza briefly did in Greece before its leaders gave in. In some cases as in France this has occurred in the second round of an election. In other cases as in current Italy it comes by excluding the Eurosceptic party from any post election coalition.

The BBC and Channel 4 always go to town over any US Presidential election, and  provide comment about US Congressional  mid terms. Any error or politically incorrect comment by a Republican is played up, and suitable  bon mots by Democrats are reported. There is even sometimes commentary designed to produce a little balance.

When it comes to a pivotal and important European General election there is usually a deafening silence. In a month’s time Germany goes to the polls to choose a replacement Chancellor for Mrs Merkel. Voters will also be invited to pass judgement on how green electors want policy to be, how much more power the EU should enjoy, and how prudent the budget of the EU’s largest economy should be. Given the media’s enthusiasm for all things EU the lack of interest in all this is noteworthy.

Many  people in the UK have not even  heard the names of the 3 main challengers to take over as Chancellor. Armin Laschet is the new leader of Merkel’s CDU party (sort of Conservative). Annalena Baerbock is the chosen Chancellor candidate for the Greens. Olaf Scholz is the leader of the SDP (Labour like).

The election has been through three  phases so far. It began with a surge for the Greens when they announced their fresh new candidate for Chancellor who briefly went into first place in the polls. It swung back to the CDU . In the last few days the lagging SPD has had a strong run and pulled level with the CDU in joint first.

The Greens have fallen back into third thanks to claims that Ms Baerbock’s CV had elements of fiction in it and that her book had borrowed material from elsewhere without credits. More importantly Green  policies of raising fuel taxes and subsidising cycling are going down badly. The CDU has lost traction partly thanks to Mr Laschet’s unfortunate joke cracking as a backdrop to the German President speaking about the deaths of people in the recent floods. Mr Scholz has picked up support by avoiding such disasters.

There have been some continuities in the polls. The polls have always said the 3 main parties remain very unpopular, struggling to get much above 20% each. The polls have always said the 3 Chancellor candidates are unpopular, with more than half the voters often preferring none of the top 3. They have also said that the most talked about possible coalitions, CDU/Green/Free Democrats  (Jamaica) and SDP/Free Democrats/Green (Traffic light) are more unpopular than any of the top three parties! The polls regularly give the Eurosceptic AFD 9-11% so they will definitely have no role to play in a future German government as none of the pro EU parties want them in a coalition.

The green arguments are especially important. Mr Laschet as current head of the government of Rhineland has to defend the decision to allow the loss of six more settlements and a major expansion of the strip mine for lignite at Garzweiler. The CDU/SPD coalition federal government led by Merkel has just agreed that Germany will continue to mine coal and burn it for electricity until 2038. This means Germany will not make much of a contribution to COP26 and the climate change pledges, refusing to match the UK by ending electricity from coal early. German electors seem worried by the lignite expansion but not enough to make the SPD less popular. They seem even more worried by the Greens wish to use taxes and subsidies to change things faster. There are also important differences over taxes, spending levels, borrowing and the size of the EU budget. I will keep you posted.

When income per head is $63,543 in the USA, around $40,000 in the richer European countries  and under $6,000 a head in poorer countries it is no wonder that many people want to  be economic migrants. The USA is the most popular destination for migrants, followed by Germany, Saudi Arabia and the UK.  Millions of Indians, Mexicans, Syrians, Bangladeshis and others have made the often arduous journeys to new lands in search of a better life.

These strong patterns of economic migration have been reinforced by waves of migration as people flee authoritarian regimes, civil wars and individual threats to their lives. The West struggles to distinguish between economic migrants and refugees fleeing genuine threats of persecution and violence.  The difference is fundamental to policy, as the need of the refugee is greater than that of the economic migrant, and the numbers should be much smaller and more manageable .

There are three broad views over how we should react and respond to these impulses. One group including Labour and the Lib Dems thinks the west should  be even more welcoming of any kind of migrant. It is to them our duty to be generous and kind. One group thinks it best to concentrate our policy efforts on aid and trade to try to create better circumstances in the poorer countries so people there can seize more opportunities and enjoy some hope of a better future. Our generosity should  be limited to defined groups and individuals who face persecution, with the west sharing the responsibility by taking manageable  numbers of people from crisis areas. Some targeted economic migration should be allowed where we need the people and skills concerned.  A third group thinks we take too many migrants with stresses on our housing and public service provision and wishes to see numbers reduced in the best way possible.

The UK debate has not been helped by poor and misleading official statistics. The argument was intensified by the arrival of a large number of people under EU freedom of movement rules. The official figures told us EU migration was lower than non EU migration, and the Blair government gave a very low figure for eastern European migration which was soon proved to be massively wrong. More recently the ONS has apologised for the large errors and produced new figures showing EU  migration did run consistently at higher levels than  non EU migration over the last decade, that EU migration was under recorded  and non EU migration was overstated. The revised figures are still problematic as they do not include children and have to be adjusted for students that do not also get some part time work. The dodgy numbers have led opponents of the current pace of migration to think this was  more than an embarrassing error.

Many countries in Europe, the Middle East and the Americas have put up border walls and fences to try to stem the flows of economic migrants. Some counties like Turkey and Pakistan shelter large number of  migrants from broken states near their borders. International aid is often directed to camps established near to a country people have left in the hope that some order can be restored and they can in due course make their way back to their homeland.

The UK according to the latest revised figures was welcoming at least 300,000 additional people every year up to 2018. In 2015 and 2016 EU net migration hit 282,000 a year with another around 100,000 from non EU. These numbers of non EU  migrants are  a small proportion of those who would like to come, but they are large numbers when it comes to finding new homes, school places, doctors surgeries and transport capacity so they can enjoy a decent lifestyle. Given the magnitude of the problem and the persistence of low incomes in too many populous countries in the world, more of the answer must lie with helping those countries to succeed rather than with helping drain them of talent by fostering more migration.

The UK now has more control over how many people to welcome. With a new borders Bill going through the Commons the government should be able to be more precise over how many each year it wishes to help and accommodate. What would you like to see them do? I think the totals of economic migrants in recent years have been too high.

The world must say that Taliban rule is already unacceptable in Afghanistan. A country should not block its citizens from taking civilian flights to places that will accept them. A government in waiting  should not so terrify many of its citizens that they queue up at an airport to try to get a flight  to anywhere that  might take them. It is tragic that they live  in the hope they can start a new life somewhere else with nothing more than a suitcase of personal items to show for  their life to date. Nor should those who claim to have control allow chaos to make the suicide bomber’s task easier. The sad deaths in Kabul yesterday made the tragedy worse.

We should not regard it as a norm that civilian aviation is cut off from a country, or that a group of armed individuals can settle the fate of thousands of people wanting to move by making instant judgements with a gun pointing at the applicant. One of the most attractive features of advanced democracies is the ability and right to travel freely within your own country or to leave it to go to anywhere which will let  you in without  needing permission.

There are some in the UK who think we should be willing to take tens of thousands of Afghans who would like to leave their country now. I strongly support the heroic efforts of our troops and border staff in seeking to get all UK citizens home who wish to come, and to give free passage and the right to live and work in the UK to all those who worked for our government and military in the past and are now at risk  because of that. I am  not convinced that it would be right to make a wider offer to Afghans more generally to come to the UK.

The first sad truth is we will only get a limited  number of people out in the time left with access to a runway and with permission to fly in and out to pick people up, a right we have to share with our allies who all need to do the same. The second is even if we offered more places to Afghans to come and could find a safer route to let them do so we could only ever offer it to a small fraction of the 40 million living in Afghanistan today. Helping cream off more of the bright and motivated people with more liberal views from the society will make the plight of the millions who remain worse. The Taliban might behave even more unpleasantly  if too many more Afghans are assisted out.  We would wish to make sure that anyone invited to live and work in  the UK can do so with a decent living standards. We are already very short of homes, and there are limits to how many more we can house from  overseas to acceptable standards.

There is no alternative to working with the world community to try to prevent the return of the Taliban to the barbarism of their past. The former policy which President Biden undermined of assisting  a far from perfect democratic government in Afghanistan to widen human rights and raise living standards made sense and was working to some extent. Given the way an armed group has displaced an elected government, we have to accept that our influence is much less. However, all the time the Taliban led country needs western currency and goods and expects some continuation  of aid and technical support there is the basis for some agreements to try to limit the damage. It is also the case that countries with more influence than us like Pakistan and China need to be brought into the conversations, as they too should not want a rogue state that harbours terrorists who might harm  them as well.

Yesterday President Biden contradicted his promise to end the for ever US war in Afghanistan. He instead threatened retaliatory action against the people who murdered so many at the airport, implying a future new chapter in America’s war.

We cannot afford to spend around £10 bn a year subsidising the railway to run nearly empty trains around the country. Nor is it a green option to run diesels and electrics  drawing some electricity from fossil fuels when they have so few people on them.

The railway management need to use the current lull in railway use to make two important sets of changes. The first is to establish new timetables geared to the big change in work patterns COVID policies have brought on. The railway is currently planned  to earn much of its fares revenue from five day a week commuters wishing to travel at peak times. This business will be massively  reduced. We need new flexible ticketing to allow people rolling and increasing discounts the more they travel the same route for work purposes.  The railway is now trying to tempt many more people to travel by train for leisure. It is difficult to see why this should be highly subsidised as it is discretionary and is more likely to be taken up by the better off.

The second set of issues are based on technology. Modern trains can be more  fully automated in ways which may enhance safety and certainly raise productivity. Safety must remain the prime consideration.  Managements need to sort out with the Unions new manning arrangements that reflect business needs, timetable changes  and train automation opportunities.  There can be offers of no compulsory redundancies around programmes of change to get the workforce and its skills and job descriptions  into line with new needs.

Doubtless many of you still think HS2 should be cancelled. There is no sign of the government wishing to do this, and it has now committed substantial resource to carving an expensive route out of London. I am not expecting a change of decision on the London to Birmingham part of this  project.

Many former commuters seem to be singing “I don’t want to go to work on a train in the rain” to adapt on old pop  song parody.  It seems increasingly clear that the COVID  lockdowns have  made something snap in many five day a week train commuters minds. They have discovered they can do much of their job from home.

They have saved  serious money on not buying season tickets. Above  all they have been spared the difficult local roads to the station, the fight for a car park place and ticket and the lottery of getting a seat on the train.All  that  strain and worry has gone out of life.

On that busy office day will the train come on time? On the morning when you need to meet the boss will your train be delayed by leaves  on the line or the late arrival of the train in front? Will you get drenched walking from the station to the office? Going home might you have one of those nightmare journeys when you are stuck in a stationary  train for too long, ringing home to apologise and say you haven’t a clue when you will make it back.

Many commuters with all too many memories of late and cancelled trains, an absence of seats and a dearth of reliable information about what has gone wrong suddenly see the chance to duck out of many of those journeys and opt for a different working life. It looks as if many offices will be adapted for hybrid working with many more people logging in remotely. Employers who may prefer more to come and work in the office will decide that to keep some of the best talent they need to be flexible. They will decide to downsize their floor space to get a property saving out of the change.

All this will knock a big hole in railway revenues. I will look at what government should do with the trains in a later post. The commuter revolt is the result of poor and expensive services over many past years.

In their March forecast this year the Office of Budget Responsibility stated that the UK government would borrow an additional £354.6bn in the year ending that same month. The latest government figures for what they actually borrowed was £298 bn. So the outturn was £56.6bn or 16% lower than the official OBR forecast. They underestimated revenue and overestimated spending.

The latest figures we have are for July, one third of the way through the new financial year. In March the OBR forecast £233.9bn of extra government borrowing this year. The July figures saw the actual borrowing fall by more than £10bn that month or almost a half of the July 2020 total. Once again spending was lower and revenue higher than official forecasts. If the economy records similar progress from here as over the first four months of the financial year there will be another welcome substantial undershoot of the OBR estimates for the current year.

These large changes to forecast matter, as it shows the Chancellor is called to make judgements about spending, taxing and debt based on a model of the economy which tends to pessimism on both spending and revenue outturns. The model seems to be pessimistic about the ability of the UK economy to recover, and shy of accepting that the best way to get the deficit down is faster growth. Revenues are highly sensitive to extra activity, as the huge increases in Stamp duty receipts and taxes on entrepreneurial activities demonstrate this July.

I share the OBR and Treasury wish to get the deficit down, but I want to get it down by cutting the need for special spending to offset a weak economy and lockdown costs, and seeing revenues rise thanks to more activity. Of course government also needs to manage the large public sector well and avoid waste and low productivity. That requires daily action by Ministers and  senior officials over a range of activities, which I will be exploring from time to time in specialist pieces here. The message today is lifting lockdown restrictions has boosted revenues and cut public spending for the right reasons. We need more and faster growth to bring the deficit down further.

All my adult life I have witnessed the political and civil service establishment urging bad ideas on our country in order to avoid the UK being “isolated”. There is a passion to make the UK dependent on allies and trading partners, and to force the UK to do what our allies and trading partners want for fear of upsetting them. There was a long concerted effort to realign us from  the USA as “best friend” to the EU as “best friend”. The whole Remain campaign , just like our long period of membership was based on the theory that you had to go along with whatever the EU wanted to show “you had influence”and to avoid this famous isolation.   In practice both the very pro EU large faction and the smaller pro USA faction accepted the need to try to be good friends with both. Both shared the same naivety that you keep a best friend by always doing what they want and never adding your own unique contribution or sometimes saying you wish to do something different on your own. It is very difficult to get respect or a good deal if all the time you are giving in.

Anyone who has read some English and UK history will know that quite often the UK has been estranged from the main powers of the world. Indeed, if anything characterises our foreign policy over the years prior to 1972  it is that we have been one of the principal sources of resistance to any leading European power that would become the hegemon or dominant country. Along with  the Dutch we stood up to the might of Spanish dominance in the sixteenth and early seventeenth centuries. With an alliance of smaller states under threat of invasion  we stood up to  Napoleon’s attempts to enforce European Union by conquest. In  the twentieth century we led the resistance to German aggression. These positions often entailed being isolated from the main powers and tides of opinion.

Today some are worried about a cooling of our relationship with the USA. They need not  be. Our relationship with the USA has been troubled and at times distant over the two and a half centuries since the birth of the USA as a separate power. We began by trying to put down their rebellion, when the USA rightly stood up for the excellent principle of no taxation without representation and used it to craft their own great democracy. We deserved to lose and should have accommodated their legitimate wishes  They joined the Napoleonic wars on the wrong side and we had to defeat the alliance they had joined. Relations improved in the twentieth century though the USA never liked our Empire and was reluctant to be drawn into what they thought of as European wars. Between 1939 and 1941 the UK did stand with the Commonwealth against the might of Germany, fighting a cause which should have been America’s as well. Only once the Japanese hit the USA hard at Pearl Harbour and Germany declared war on the USA did we become working allies and did the USA then come to assume part of the huge burden of the war in Europe and to dominate the war in Asia. History  tells us that we now often have interests in common with the USA and work closely with her through Nato. That is likely to stay true but we do not have to debase or efface ourselves to make it happen.

The UK is best when we do what we think is right and construct alliances and support groups accordingly. The Prime Minister is right that we should  not seek reassurance from every new President of the USA that we have a special relationship. We have close working relationships in  many areas and some clear defined common views and goals that can lead us to collaborate but we do not need to fawn as these will only happen if they are real and in our mutual interest. The EU was never our best friend and has revealed since we left just how much it still wants to control us in its interests and those of its two leading powerful members, France and Germany.

Indeed, countries do not normally have best friends. Nations have interests and join alliances of likeminded nations for stated purposes or on a case by case basis.

In the run up to the last US Presidential election  I drew attention to how much continuity of policy Mr Biden was offering beneath the heavy spin that Trump’s attitudes and actions were all unacceptable and needed changing. Mr Biden backed the Trump made in America policy. He supported taking a tougher stance against China and imposing trade sanctions and tariffs on them. He supported the large fiscal stimulus supplied by President Trump, and wanted the Fed to go on printing more dollars. He agreed with Mr Trump about withdrawing forces from the Middle East.

The three major differences which he understandably played up in his campaign were to open US borders and welcome in many more economic migrants, to work with allies and International bodies much more collaboratively, and to reverse the cheap energy policy in the name of net zero. Eight months into office President Biden has gone a long way to match or exceed  the Trump positions on these matters. He has changed from a attempted opening of  the borders  to many apprehensions and a lot of expulsions under Trump’s Health Title 42 procedure to try and stem the much larger flow he has encouraged. . He has pulled out of Afghanistan without securing the consent of allies or even consulting properly with them, with unfortunate consequences.  He has damaged the careful structure of alliances between Israel, Saudi Arabia and the Gulf States that Mr trump had constructed. He has not yet produced a full net zero plan, nor taken penal action against oil and gas companies.

Perhaps now we will see a differentiation in ways commentators did not expect. President Biden went further than President Trump in upsetting NATO allies. Mr Trump’s Doha Agreement it is true was a bilateral between the USA and the Taliban without wider NATO signatures. However  Mr Trump made withdrawal of US troops in it conditional on various good conducts by the Taliban and did not himself remove the troops much as he would like to have done prior to the election. President Biden will go further than Mr Trump in increasing both spending and deficit, with added  ideological edge to increase the state sector substantially. He will through his Treasury Secretary, the former Chairman of the Fed Janet Yellen expect the Fed to keep interest rates down and keep printing the dollars. There is likely to be less push back from the Fed than there was against Mr Trump’s wish for easy money, not least because the current Fed Chair wants to be reappointed early next year. President Biden will take more risks with inflation than President Trump did.

President Biden’s foolish decision to pull out unilaterally overnight from Afghanistan has done great damage to alliances and to the Middle East. A small force of US led  NATO troops who did not in the later years usually have to fight sustained for several years a democratic government in Kabul and helped them keep some semblance of law and order. Whilst that government had obvious flaws it could have been replaced in due course through an election. Instead President Biden has ushered into power the very movement NATO went to remove twenty years ago.

The recent minutes of the Fed’s Monetary Policy Committee show they think there is still insufficient recovery to justify any reduction in the amount of dollars they create each month. They plan to continue with  an extra $120bn a month and renew their discussions at their next meeting. Meanwhile the Bank of England has signalled an end to creating more pounds by the end of this year, and has throttled back the monthly amount in the meantime. The UK has received much less monetary stimulus than the USA relative to the size of the economy. UK inflation on the official numbers is at 2% and US inflation is at 5.4%.

In addition the US Congress and President are contemplating further large increases in public spending and the deficit whilst the UK Treasury is rightly letting recovery bring the deficit down as it will do without further government intervention to spend more.  This week’s foreign policy disaster by President Biden will not  be good for confidence and consumer sentiment in the short term in the USA and may give the Fed further excuse to seek to run the economy hot. There is a lack of clarity over just how far the Congress will go in crafting a big spending big deficit budget for next year, though with Bernie Sanders as Budget Committee Chairman there are plenty of pressures to spend on a huge scale.

The main Advanced countries and the EU have shown they can get away with substantial money printing and large deficits for a limited period of artificially depressed demand brought on by their choice of anti pandemic policy.  There is however no proof that they are all now like Japan and can enjoy zero inflation, huge budget deficits and endless money printing as the state buys back much of the debt it issues. Japanese society and its economy has a strong savings culture, an ageing population that is cautious and a long post 1990 crash  tradition of no inflation. The US economy is showing that it still has a lively turn of speed on prices when stimulus is applied. The Fed assures us the rises will be temporary. That would be a more certain outcome if the Fed recognised as the Bank of England has done that Quantitative Easing has to come to an end as the economy recovers. It seems quite a lot of the dollars end up wanting to invest in UK companies, with a rash of bids outstanding.