Labour are reissuing their old lie that the Conservative party in Opposition backed Labour borrowing plans and advocated light touch regulation of the banks or even deregulation of the banks. They have always wished to duck responsibility for the great crash that occurred on their watch in 2007-8.

There are strong grounds to reject these allegations. I have dug out the relevant quotes of the Opposition Economic Policy review, written early in 2007 and published in the August before the banking crash. The Policy Review included Simon Wolfson, Andrew Feldman, Greg Hands and myself on its steering committee.

1. We warned that there could be a crash as Labour had allowed far too much debt to build up in the system…
P3 “…there is considerable uncertainty in world markets about how far the Fed, the ECB and the Bank of England may go in raising rates to squeeze inflation out of the system. They must know there are huge pyramids of debt throughout the system, and inflation will not be killed unless the appetite for more debt is blunted. They also know (apparently they did not!) that if they push interest rates too high for too long they could bring the debt structures crashing down, as we have seen with the sub prime mortgage collapse in the USA, leading to falling asset prices, rising unemployment and even recession”

2. We opposed in Parliament Labour’s regulatory reforms for banks at the time they put them in in 1997 and reminded people why in 2007:

P14 “We are concerned over the division of responsibility between the FSA and the Bank over banking and market regulation….We think it would be safer if the Bank of England had responsibility for solvency regulation of UK based banks, as well as having the overall responsibility to keep the system solvent. Otherwise there could be dangerous delays if a banking crisis hit, with information having to be exchanged between the regulators and there might be gaps in each regulator’s view of the banking sector at a crucial time, when early regulatory action might have spared a worse problem.”

3. We advocated better control of debts and deficit, and itemised the wider state debts which Labour did not report.

P15 said “ We believe that governments should not as a rule borrow to pay for current spending but instead should run healthy current account surpluses in the good years of an economic cycle, so that some latitude is possible in weaker years. We also believe there should be a limit on the total borrowings of the public sector as a percentage of national income……..borrowing is simply deferred taxation, which ultimately will have to repaid by taxpayers with interest.”

P14 “Under Labour there has been a rapid build up in debt, and official figures show the UK’s public sector net debt at £497.7bn (April 2007)….the true extent is almost three times this stated amount”

4. We advocated strict controls over reporting and capital adequacy for all banks, the opposite of saying we wanted to deregulate deposit taking institutions.

P59 “We agree that institutions which take clients money and place it on their own balance sheet or mix it with other funds, should have to meet capital adequacy requirements, and strict reporting requirements. “ Our deregulatory proposals were elsewhere “there is not necessarily a good reason why a regulator should have to be involved in product design and marketing for rich and sophisticated investors”

We decided to use understated language as a responsible opposition. On this site I myself used stronger language to explain how the Bank of England and government could bring on a crash if they did not change policy, and pleaded with them to take action to stop the crash.

On July 5th 2007 I wrote: “So far the general view is that the sub prime mortgage market (in the US) will continue to be in distress, but these problems will not spread. However a similar pyramid of debt has built up around company borrowing….The Central Banks can literally go for broke and hike rates substantially. They will trigger a major decline in corporate debt as well as sub prime lending. …The worst case would be that they do to the USA and the UK what the Japanese authorities did to Japan in 1990, leading to a decade of recession or little growth”

and on July 26th : “On 6 July I warned about the debt mountains built up on both sides of the Atlantic during the decade of easy money, and forecast that the central banks would carry on tightening, leading to further collapses after the sub prime crisis……. I assume the Central banks will back off quite soon. If they don’t it could be quite a collapse”

There were many other blogs along these lines explaining how to stop the crash by intelligent central banking and government intervention.

Angela Merkel is a skilful politician who has stayed at the top of German politics for a long time. This is not the same thing as a strong Germany. She inherited a tradition of making compromises for the Euro and the EU, and has made many more as the contradictions and tensions of the Euro scheme have come to the fore. Judging by what Germany has done on a whole range of “red lines”, we must conclude that Germany does give in to pressure if the cohesion of the Eurozone or the EU is under attack.

The long retreat from German principles began under Mrs Merkel’s predecessor when Germany allowed Greece and other countries that came nowhere near meeting the criteria to join the Euro to be part of the project. Under Mrs Merkel Germany has conceded over the issue of making all member states keep their budget deficits below 3%. Only recently again France has been allowed more leeway. Germany unsuccessfully opposed lending large sums to banks in trouble in the zone. Germany gave in over the huge programme of quantitative easing. Germany has been persuaded to accept a currency that regularly devalues against the dollar, yuan and sterling instead of maintaining a strong currency as Germany always argued for.

The concessions have been biggest over Greece. Germany stated strongly that Greece would not be able to borrow a Euro more unless it stuck to the loan agreements and continued with budget austerity and economic reform. Instead in recent months the European Central Bank has made available large new sums to Greece. This is money some commentators think the ECB and its main shareholders including Germany will not get back. The European authorities have also allowed Greece to borrow more through Treasury Bills to pay for the costs of government. Meanwhile Greece refuses to cut pensions more, to implement labour market reforms, and to cut the deficit as much as the European authorities want. Now there is talk of Germany relaxing the requirements for reform to allow new longer term loans to start to supplant the weekly doses of more lending from the ECB.

It appears that Germany, like the ECB, is extraordinarily flexible. It appears that the budget deficit targets, demands for economic reform, limits on borrowing and requirement for a strong currency mean little, and all can be changed if a country digs in enough. Mr Cameron should take note. It appears Germany wants to keep the UK in the EU. That means we have plenty of bargaining power, given Germany’s well known flexibility. If Germany can be flexible on printing money, on lending more to countries that have already borrowed too much, and on having a weak currency, I am sure she could also be flexible on how many EU decisions the UK just has to accept. They can carry on selling us cars whatever happens, but at risk for them is the UK’s large financial contribution to the EU.

Yesterday the Commons passed another EU Finance Bill. UK voters will have to pay more tax to send a bit more money to the EU as a result. The Minister assured us it would have been a lot more if the UK had not cut the EU budget, and if the UK had no rebate. He reminded us just how much we have lost thanks to Labour giving away an important part of the rebate for no gain.

The two main opposition parties, Labour and the SNP, supported the Bill. They told us they wanted to fund the EU as they wished the UK to stay in come what may. UKIP did not attend the session. Conservative Eurosceptics asked questions and highlighted the problems with sending more money to the EU, aided by the Labour member for Luton North, Mr Hopkins.

I asked Labour if there was any tax demand from the EU that they would oppose. Their front bench confirmed there was not. In office they had allowed a large increase in the EU budget, an increase in UK contributions, and had given away an important part of the rebate. For once SNP and Labour seemed to be in agreement about something.

I made the point that if we have a new relationship based on trade, friendship and co-operation we would not need to pay this huge subscription, and could have a tax cut. Jacob Rees Mogg pointed out they needed to consider the gross contribution after abatement, because if we were free to choose for ourselves we might choose to spend the money the EU does spend in the UK in other ways. Labour said the details of EU finance were not clear, and that the change they wanted was a better explanation. I cannot see what is unclear about the UK’s large net contribution to the EU. It is tax money we pay them so they can spend it in other countries. Voters understand that, even if some MPs do not.

For me the negotiation and referendum is a win win. If the negotiations creates a much better relationship for us that is progress. If it does not, then we can simply leave. To me it is all a question of how do we restore our democracy.

We are spoilt for choice when it comes to seeing the advantages of leaving the EU.

Out of the EU we will be freer, more democratic, and better off.

Out of the EU the UK Parliament will be able to settle the immigration and welfare policies we want without the EU stopping us.

Out of the EU we will be £11 billion better off as we end the net contribution to the EU.

Out of the EU we will be able to spend the £5bn that gets spent today by the EU in the ways we want.

Out of the EU we will not be dragged into subsidising the Euro area or standing behind failing banks in the Eurozone.

Out of the EU we will be able to set our own levels of VAT, and avoid any new taxes we do not want.

Out of the EU we will be able to decide how much regulation to impose on business trading in the UK or the rest of the world outside the EU.

Out of the EU the UK will be able to accelerate free trade agreements with the USA, China, India and the other important growing markets of the world.

Out of the EU we could go for cheaper energy, to allow us an industrial revival.

Out of the EU we can decide our own criminal justice policy, and who to deport.

Out of the EU we can decide our own foreign policy, and not get sucked into the EU’s conflicts with others.

Out of the EU we can be a democracy, restoring the sovereignty of the British people. We can live again in a country where if the people want something from government, Parliament can deliver it whether the EU allows it or not.

The UK and Germany both have large economies with certain strong sectors. Germany flourishes with a strong car industry. The UK flourishes with a strong financial sector.

There the similarities end. Germany does everything possible to back and support its car industry. The UK has spent the last seven years exposing the faults and defects of its banks, and hurled many accusations against them.

I fully understand the unpopularity of banks, and have no time for malpractice or bonuses paid to senior executives who have actually made losses for the shareholders. I opposed the bank bail out purchases of shares by the Labour government. If offences have been committed then the perpetrators should be dealt with by the law.

I do think now the hostility to banks has gone too far. There are many decent, hard working people working for banks. Our banks are involved in and facilitate practically every transaction that keeps our economy going. We need successful commercial banks to lend sensible amounts of money to individuals and companies to fuel our recovery. We need a strong globally competitive banking industry based in London to sustain our balance of payments and tax revenues, which have in the past depended on the financial sector for a large contribution.

It is currently fashionable to attack the top end business of banks because they supply expensive services to rich individuals and companies. In this they are in exactly the same place as the German car industry, which specialises in making expensive cars for the rich and for companies. The German government does not go on a moral crusade telling their high end car producers they should make fewer dear vehicles for people who already own cars and who by definition do not”need” the latest high priced product. The German government does not even take very strong action to cut the average CO2 emissions of the vehicles made by the German industry, although it is signed up to global warming worries.

The German car industry should affront all Greens and people with left wing ideas. It consumes large amounts of natural resource, uses big quantities of energy in making the product, and sells machines which are relatively fuel intensive in use. Some people dare to own several cars, though they can only use one at a time. The government subsidises energy for industrial use in Germany, conscious that EU energy policies are damaging to industry without subsidy. The German administration seems to take the sensible view that what is good for the car industry is good for Germany. Selling more cars to the rich creates more jobs for German workers.

The UK recovery has been impeded in past years by the regulatory demands that the banks should hold much more cash and capital. As someone who said the banks should hold more capital and cash prior to the crash, I see the wisdom of demanding good standards to ensure liquidity and solvency. I think the regulators have now done enough, and should allow more lending by banks. There are many good projects and investments that could benefit from more long term loans. The regulators should ask themselves how much more is it wise to take from the banks in fines and compensation demands for past mistakes? If they fine too much the banks will be able to lend less and will be looking for additional ways to put up fees and prices. When the government comes to tax banks it also needs to ask how much more can it afford to take out?

We read that HSBC is considering leaving London to establish its headquarters in Hong Kong. There are a variety of reasons given. If none of the reasons are tackled they might go.There is the bank levy which is charged on non UK activities as well as on UK ones.There are the higher capital demands from the EU and the Bank of England limiting the ability to lend and to earn a good return, when the bank is a strong one with plenty of capital already. There is the move to segregate regular banking from investment banking. There is the EU control on bonus payments. Taken together these are leading some to argue that HSBC should take its headquarters away from London and from the EU. I think it is time to reconsider, and to create a climate where large and successful banks are willing to base themselves here. If we lose too many of our major financial companies, we will lose tax revenue, sales revenue for exported services and spending power in our economy as well paid executives go elsewhere.

Many people who want us to stay in the EU also like higher levels of public spending and more government. That is why they support EU membership, as it brings both in a package UK voters cannot influence much and cannot control or veto. The large gross and net contribution to the EU budget is one of the reasons this country continues to live beyond its means and runs a large deficit.

It is one of the many cruel ironies of the EU that it takes too much of our money and spends it, whilst lecturing us and other EU states to cut our domestic budgets to keep our deficit down. In recent years the UK has simply ignored the requirement to have a deficit below 3% of GDP, but all the time we remain in the EU there is the possibility that the EU will take tougher measures to try to enforce its strict budget rules. Doubtless those who like the current EU agree with their approach to budget discipline.

The honest way to tackle this for those who do want to stay in on current terms would be to impose a tax to pay for our European contributions. The public would then see how much the EU costs each taxpayer and the deficit would get closer to the EU ceiling. As recent judgements on VAT, welfare and borders remind us, the EU regularly taunts the UK by its decisions. I therefore propose calling this new tax JEST – Joint European Solidarity Tax.

I know many pro EU people are good sports who sometimes pride themselves on having a better sense of humour than mine, so they will enjoy selling a good Jest to the British people to pay for the EU and to live by its fiscal rules. So bring on the Jesters. Tell us why we should pay this tax. You don’t have to pay a tax in order to be a customer of the rest of the world, so why do you do so with the EU? Why does the rest of the world trade with the EU without paying EU contributions?

The government has announced it is going to sell more Lloyds Bank shares, and start selling RBS shares. That is a good idea. The Labour government was wrong to buy the shares in the first place, as we discussed at the time. They should have found other cheaper ways of supporting what had to be supported in the banking sector, by loans against security with controlled administration for banks that could not meet their obligations. The state should not be an owner of banks, as it has to be their regulator and financier of last resort.

I see in recent press coverage the issue of the Bank levy is being discussed. One of the factors the government should take into account when setting the levy is the impact it has on the value of the taxpayer shareholdings in banks. If you tax yourself too much, you lose out on the capital value of what you own when you come to sell.

Lloyds and RBS each pay around £250 million a year in bank levy, a total of £500 million. Barclays shares currently sell at 14 times adjusted net profits or earnings. Lloyds and RBS are still recovering their earnings, so their multiple of past profits is far higher. If we take say 12 times profits as an approximation of what the market would pay for additional profits of a bank, allowing a discount for the two banks with large government share overhangs, gives us a capital cost of £6 billion in the total value of the two banks from continuing with the Bank levy. The actual loss will be smaller, as the government does not own 100% of either bank,though it still owns most of RBS. That of course is a one off loss, whilst the levy is annual. The bank levy is also paid by banks where the government does not have a shareholding.

Nonetheless, it does pose a question for the government. If you were thinking of reducing the bank levy for other reasons anyway, there would be some compensation in a higher receipt for bank shares being sold.

(PS I do not have any financial interests in banks and last worked for a merchant bank 26 years ago)

Before the Euro crisis the IMF was the model of financial rectitude. It lent sensible sums of money to distressed countries, imposing strict requirements for change on them to ensure it would be repaid and to help the country back onto the path of solvency and growth. It usually combined a fiscal squeeze, recommending lower deficits and lower public spending, with a monetary expansion, allowing the private sector to grow. Devaluing the currency was usually part of the remedy, to divert more work into exports and to cut the volume of imports.

That IMF had its critics. Some thought the medicine too acerbic. Some wanted the IMF to lend more on more generous terms. The IMF mainly lent to poorer countries, and was often part of a pressure by the world community to encourage healthy financial discipline by the borrowers.

All this has been stood on its head. The IMF now seems to be primarily a prop for the Euro and for the wider EU area of influence. It is amazing that three quarters of all the IMF’s current lending is to just four European countries. Three are Euro members, Portugal, Greece and Ireland. The fourth is war torn Ukraine. These countries remain amongst the world’s richer countries despite the damage the Euro and in the case of the Ukraine civil war has inflicted.

What is worse few think Greece can repay all its debts, including the IMF loans. There are question marks over how the Ukraine is going to manage, all the time civil war destroys economic activity, kills people and reduces productive assets to rubble.

The new IMF has allowed itself to be used as a prop and source of finance for the ailing Euro project and for the unsuccessful foreign policy of the EU. The IMF has swung from arguably being too tough on poor countries in need of help, to being too lenient on richer countries locked into a foolish monetary union which is damaging their output and jobs. How can the IMF defend its actions over Greece, as the extra loans have become part of the problem. Some in the Greek government do not even recognise the legality of many of Greece’s borrowings, let alone the wisdom of making the advances and the feasibility of repaying them.

I raised at the time of their first loans to Euro countries the question how could a traditional IMF programme work for a Euro member, when they could not demand looser money within a particular Euro state, and they could not encourage a devaluation of that state’s currency against the German currency because they shared the same money. Perhaps with the encouragement of the IMF the whole Euro zone is now following a looser money policy and devaluing its currency, but the great imbalances between the richer and poorer countries within the zone remains as they cannot sort that out by currency adjustments.

The IMF has become the Irresponsible Money Fund. It needs to be aware that many in the developing world will think this deliberate skew of IMF funds to the richer advanced countries is unjustified. Many IMF shareholder states will be even angrier if it turns out that some of the excessive sums advanced will never be paid back. The IMF owes us an explanation of how Ukraine will be stabilised and turned into a fast growing productive economy again. Above all we need to hear from the IMF how they think Greece can repay all her debts and enjoy proper economic growth, to try at least to recapture the 25% of output and incomes they have lost so far since 2007.

IMF Lending June 2015 in SDRs

Portugal 17.8bn
Greece 16.8bn
Ukraine 7.0bn
Ireland 3.8bn

Total 45.4bn
World total 60.8bn

The UK’s quota or IMF share is 4.51%. The UK’s share in the ECB where the losses on Greece could be much larger than the IMF ones is only 0.7% as we are not a Euro member. The main losses will fall to Germany, France and Italy, the largest members and shareholders in the ECB.

If the British people vote to come out of the EU our budget deficit is immediately cut by more than £12 billion a year from that day onwards. There will be no more net contributions to the Union. We also gain the right to decide how to spend the money we pay over and above the net contribution which is sent back to us as EU payments.

Today I invite you to talk about what we should do with all that money if we do decide to leave. Should we be prudent, and simply borrow less, using the end of our contribution to speed getting rid of the deficit? Should we speed up the tax cuts, giving every family an EU exit bonus of around £660 a year? Or should we mix increased public spending and tax cuts, spending say an extra £350 per household on health and education whilst having a £330 tax cut?
Those favouring more spending should remember we will have the chance to spend more on the things that matter to us as we gain control over the EU spending amounts as we repatriate that UK tax revenue as well.

It will be a nice problem to have. I favour the tax cuts myself, as I think the current plans to get the deficit down are sufficient. The boost to incomes, jobs and activity from accelerated tax cuts would show this is indeed the prosperity policy I want. It would also make such a good contrast with the European austerity policies of Greece, Spain, Italy and Portugal, where governments are indeed following genuinely austere policies at the behest of the EU.

Yes, you are right. Controlling the numbers of people coming to the UK to live and work is an important part of restoring balance to our housing market. The Prime Minister has promised to do that.

Now I have got that out of the way, I want to talk about the supply of homes, and effective demand from people already legally settled here. The most recent house price figures show prices going up by 4.6% a year, down from the 11.8% annual rate recorded last June. They show people having much more difficulty in raising a mortgage than prior to the crash, thanks mainly to much tougher regulation today over eligibility and suitability for a loan. The most recent figures show mortgage approvals up by 10% (April compared to March) but still running at little more than half the levels reached just prior to the crash of 2007-8.

The government’s Stamp duty reforms have smoothed the market by removing the unhelpful steps in duty at the points on the scale where higher rates kicked in. The missing areas in the price ranges can now reappear without the slab tax. Homes under £925,000 now attract a bit less Stamp duty than before. Stamp Duty remains, however, a substantial cost which does add to the difficulty of buying your first home, and can deter people from moving to a better home. At present duty rates the buyer of the £250,000 property pays £2,500 in tax, of the £500,000 property £15,000 in tax, and the £750,000 one incurs a £27,500 charge. Lower and smoother Stamp duty is a modest assistance to home buyers.

More new homes are being built than during the crash. The construction of private sector new homes is now 75% above the low point reached in the third quarter of 2009, though still below past peak levels.It is likely the build rate will rise from here, with more land now available for construction and a reasonably healthy housebuilding industry enjoying the profits of recent growth. There are still substantial imbalances between different parts of the country. Success with the Northern Powerhouse could help reduce some of the pressures on London and the South east, and release more money for improvement and extension of the substantial Northern residential estate, just as the London stock has undergone transformation in recent years.