The 50p tax rate is popular according to the polls. Most people like the idea as they think it means the rich few will pay more so they will pay less. Unfortunately, the opposite is the truth. A 50p tax rate will raise less revenue from the rich, so those on lower incomes  will have to pay more.

The evidence from the period of 50p tax rates in the UK is quite clear. Self assessment Income Tax fell from £21.7bn in 2009-10 (after the crisis)  to £20.6bn last year. It is forecast to surge to £27.4bn in 2014-15 with the lower 45p rate. The Treasury figure of £100m extra revenue is not confirmed in anyway by the pattern of past tax collection. Numerous high earners left the country to avoid the 50p tax rate when it came in, meaning lower income taxpayers have to pay more.

The Sunday Times provides other figures which show a surge in tax revenue at the lower 45% rate, from £41 bn under the 50p rate to £49bn now. There has also been a sharp increase in the  number of people earning more than £1m now in the UK, from 13,000 at 50p to 18,000 at 45p. That’s a large increase in tax revenue from the rich.

There has been a political spat about this recently.  The Conservatives are right that if you take changes in pay, and adjust those both for price inflation and for the tax cuts through the rising tax threshold, people are on average better off.

It is also correct that not all people are in the position of the average. Some have not had any pay rise, some have not benefitted so much from the tax cuts because some benefits go down as income goes up. Many people do not feel better off. We all tend to notice the items like petrol and electricity which have gone up, and not notice so much the items which have stayed the same or gone down.

Sometimes in these political exchanges it is a good idea to go to neutral source. Asda publish a regular income tracker. Their latest tracker says that family spending power has risen in each of the last three months, an improvement on recent years.

Clearly there is more income overall, and more income being spent, as we can see from the GDP and consumer spending figures. Retail sales have been rising. These of course need adjusting for the numbers of people in  the country and in the workforce, as there has been some further growth in the size of the population.

There is one category of people who must now be better off – all those who were out of work and have now got jobs thanks to the rapid growth in employment in the last three years.  Many budgets are still very tight, and pay has been lagging prices for much of the time since the crash of 2008. No wonder many people do not feel well off, given the large loss of spending power they experienced in 2008-9.  It is taking  time to get back to where real  incomes were   prior to the crash.

Those who write in to say the UK does not need to curb spending or to  control its deficit and who think monetary and financial excess is rewarded should take heed of the messages coming from emerging markets.

At the end of last week the Argentinian peso fell 11%, making imports much dearer and people worse off. The official rate of 8 pesos to the dollar compares with unofficial market rates of 13 pesos to the dollar.  President Christina Kirchner has now had to impose restrictions on internet shopping , and tough  foreign exchange controls to try to stop the flight of money out. Inflation is around 25%. Her policy of higher social expenditures and some nationalisation is not bringing prosperity but a crisis.

The Brazilian real has also been falling. It has moved from around 2 to the dollar a year ago to almost 2.5 to the dollar now. Interest rates have been raised to 10.5% to try and stem the flow. The balance of payments deficit is large. President Dima Rousseff is finding her more generous policies are backfiring and cutting living standards and growth.

The Turkish lira has also fallen sharply, from 1.7 to the dollar a year ago to 2.32 now. Interest rates at 7.75% are thought to be too low by many in the markets. The balance of payments is heading for a very large deficit this year.

Spending and borrowing more do not help in situations like these. These countries are being  forced into new austerity to stop the slide. The art is avoiding getting into such trouble in the first place. That requires some prudence.

Since Mr Carney arrived as Governor, the economy in the UK has taken off. Unemployment has come down. Inflation has come down. Output and jobs are up. There are even signs that real incomes are stabilising after a large fall in the recession and further downwards movement since.

Is this just good luck and good timing? After all, many of the policies which are now yielding and assisting recovery were in place before he arrived. I think it’s a bit more than that. You do have some influence over your own  luck. If you do the right things you can get luckier. The Governor has helped.

Mr Carney clearly decided from the outset that what the UK needs is a decent recovery. If you wish to solve the continuing weakness of some banks, what better way than to assist more profitable businesses, and rising asset prices? Those assist a bank by reducing the number of bad assets, and improving loan cover.  If you wish to help bring down welfare spending and cut the government’s deficit, what better way than to have an economy generating a lot of new jobs in the private sector that people can take instead of being on benefits. If you want to bring down inflation, why  not encourage more output to ensure competitive prices, and obviate the need for so many tax and government inspired prices rises.

As Governor there were some things he could do to encourage that recovery. He told markets he was going to keep interest rates low, so businesses borrowing to expand would not face large bills. He presided  over the Funding for lending scheme which helped banks find the cash to lend more to business.

The markets have been fighting him, by putting up longer term interest rates despite the Governor’s reassurances, and arguing for an earlier increase in Base rate than the Governor seems to want. Events have also surprised the Bank’s forecasters, with unemployment falling much more quickly. The Governor has moved to reassure those who want low interest rates. The fall in unemployment to 7% does  not mean an early short term rate rise.

Most things are looking a lot better for the UK economy. However, the government does need to respond to the beginnings of a shift on energy policy in the EU. Dear energy remains a foe of a UK industrial revival, and an enemy of the consumer, delaying rises in real incomes to power more growth. I will return to this soon.

The excellent news on job creation in the UK has taken the unemployment rate down to 7.1%. It now hovers above the magic 7% level. That’s  the level the Bank of England said it would need to reach before they would even consider a rise in interest rates.

Clearly the economy has excelled compared to the Bank’s forecast. The Bank thought it would take longer for unemployment to fall that far. They would have taken into account the new job creation rate, the rate of public sector job loss and the likely flows of migrants. So why has it fallen more quickly?

The main reasons are good ones. The economy is growing faster than they thought. More of the new jobs are going to people already settled here and out of work.  Some are now saying they were wrong about unemployment because productivity has disappointed. Is that true? Does it matter?

I have not been expecting productivity to do that well, given the continuing decline of North Sea oil and the loss of high end jobs in banking and financial services. I have commented before on how we have by accident and design been cutting our highly productive well paid activites. The former  50% tax rate, a high CGT rate and a mature oil province were all going to cut incomes and productivity.

I wonder if something else is also happening. Could it be that output is understated, because more is being done in the informal or cash economy? By definition the authorities cannot estimate reliably the amount of economic activity that some people do not put through the official books.

Now we are fast approaching 7% unemployment, that Bank will review interest rates. I expect they will conclude they need to keep short rates low for longer, as they will argue that at last inflation is coming down and is under better control. They will not want to do anything to curb the recovery. Meanwhile, the markets have put up other interest rates. Government bond yields and some savings rates are edging upwards, away from the crisis levels that left savers with a rotten deal.

Savings does need to be more worthwhile. We are gradually getting there. Good jobs news is another step in that right direction.

The wide ranging review of how much power the EU has is still continuing throughout government. Yesterday I had the opportunity to explain to the Treasury offical in charge of their review how I think powers should be brought back in their area.

Those of you who simply wish to leave the EU will argue this reveiw is a waste of time. As there is no prospect of this Parliament voting for the UK’s exit from the EU, nor even approving a referendum to allow the people to vote for Out if they wish,  there is something to be said for the review. It will firstly inform more people of just how wide ranging the powers now taken by the EU are. Secondly it could provide a substantial platform of powers we need back under any renegotiation  before UK voters would consider voting to stay in. It will inform the negotiation.

The Treasury has one major area where the case for complete repatriation is overwhelming – banking regulation. As the UK knows to its cost, if a government gets banking regulation wrong and manages to preside over a collapse, it is the UK taxpayers,  not the EU, that pays money to prop up the system. The UK is still a sovereign nation in a crucial respect where the members of the Euro are not. The UK can decide to pump as much money as the Bank of England sees fit into money markets and the inter bank market to keep solvent banks liquid. Euro members have to look to the ECB and European level decisions.

As we pay the bills for any bad banks a UK government wants to help, and as we still have the capacity for our Central Bank to act as lender of last resort and decide how much money to create or allow, we have no need of banking regulation from the continent. There needs to be clarity. The solvency and liquidity of British banks depends on the actions of the Bank of England, supervised by the Treasury. Let us repatriate all banking regulation to the UK, and have a system of co-operation and information sharing with the ECB and EU regulators as we do with the US Fed and regulators for their banks.

PS I am told not many Eurosceptics are writing in to those conducting the Review of competences. It is important they do so, as officials like weighing the balance of submissions before concluding their reports.

This week the EU Commission has reported that the EU’s energy bills are much higher than the US or other major world competitor nations. They say this is causing problems for European industry.

They tell us this as if it were nothing to do with them. Surely they both knew that European energy bills are very high by world standards, and wanted them to be so as part of their green policy?  The EU takes the view that global warming caused by man made CO2 is the world’s worst problem. They want Europe unilaterally to cut its CO2 output to show the rest how to do it. So why the surpise that they have succeeded in making  energy dear in Europe? Why the surprise that that policy will drive business away from Europe to places where energy is cheaper?

The crowning  irony is of course the fact that Germany’s high CO2 emissions are not coming down. In the US cheap shale gas is also cutting CO2 output, whilst Germany is increasing her lignite coal burn to cover for renewable windfarms that only function part time. Its not only CO2 coming out of the chimneys.

German industry is now lobbying strenuously to change policy. There are signs that the EU after 2020 may relax its CO2 controls. They are talking of putting another aim into their energy policy – of helping competitiveness by sensible prices. That would also help the hard pressed domestic consumer.

The trouble is, it is all taking so long to change. In the meantime more energy using industries will quit the EU, whilst the USA industrialises on the back of cheap gas and does better at CO2! We haven’t seen the end of the EU price rises, nor the end of the problems balancing a system with too much wind in the mix.

A rebellion is in effect any attitude or vote of an MP or group of MPs that the leadership of the party does not agree with. Sometimes it only becomes clear to an MP after the event that what he has said or backed is rebellious. On other occasions the MP clearly knows the official position, has no reason to think it is going to change, but wishes to express disagreement so he rebels.

The decision of a group of MPs to write to the Prime Minister backing the Select Committee Report on UK sovereignty did not intend to be  a rebellion. It was well meant advice of the kind MPs are paid to give, urging the government to a future action apparently in line with the policy of greater UK democratic control  they have set out. It only becomes a rebellion if the government condemns it out of hand  and escalates the disagreement  with counter measures tabled for votes.

A party leadership has several ways in which they can minimise the number and size of rebellions:

1. Avoid provocative decisions and requests to their MPs. A party is more likely to breed rebellion if it is trying to do things or change things. Where it wishes to do so it is best if the change is very clearly in line with the last Manifesto, or in line with the principles and values of the party. There is always more likely to be trouble where a governing party decides to do something which is against the party’s instincts and was not argued about in the previous election.

  The big past  rebellions have been over entry into the EEC and  the Maastricht Treaty on the Conservative side. This Parliament has seen large rebellions over the Syrian war, an increase in the EU budget  and Lords reform, three  things Conservatives did not want to see and were not  in the Manifesto. Conservative MPs remember Mr Cameron saying before the election that there was no consensus on Lords reform or desire to do it this Parliament. They also supported the idea of curbing public spending, so naturally wanted the EU  budget cut and an expensive new  war avoided.

2. Where the government and leadership do wish to make changes they need to seek to carry the party with them by explaining and consulting before launching the policy as a fait accompli.

3. Where backbenchers wish to amend legislation or make their own proposals in motions or bills, the government can  seek to find some good in them rather than seeking to dismiss or defeat them. If a backbencher’s proposal merely seeks to take the government further in a direction it says it wishes to travel, there is a lot to be said for accepting the amendment, or proposing a counter amendment that moves some distance in the direction the backbencher seeks. Where the backbencher is against the stated policy and principles of the party then of course it needs to be voted down.

4. Allow more free votes. The Conservative MPs who voted against gay marriage were not rebels. They were exercising their conscience in a free vote in a different way to the leadership. Where an issue does not split on party lines, like gay marriage or abortion there is every reason to allow free votes to decide it.

5 Where MPs seek to put something on the agenda which the government does  not want on the government can quite often keep it off. If  there is considerable public pressure behind the MPs requesting it, and/or if events are going to force the government to come to a view and decision anyway, then the government  cannot cimply avoid it. The EU is such a perpetual issue. Public concern about EU policies on borders or energy is going to be high, and there  are endless action points thanks to the activist approach of the EU. Such matters cannot be delayed or buried. Others can.

There has been some commentary recently on loyalty and rebellions in the Conservative party. I want to explore some of the reasons and consequences. Today I wish to dispel the wrong notion put around by some commentators that the rebellions are by the old and grumpy in the Conservative Parliamentary party, sitting in safe seats with no hope of preferment or recognition by the present leadership. We read that this small group of malcontents rebel and disrupt, causing difficulties for everyone else and making it more difficult for people in marginal seats.  The briefing usually distinguishes between the 2010 intake, the future, and the rest, implying it is some of  the rest who are the problem. This simply is  not the case.

I define a major rebellion as a case where a group of MPs votes against a 3 line whip on a motion or piece of legislation that the Conservative leadership and whips say is important, and where the rebels can change the government’s stance as a result. There have been four such large rebellions in this Parliament, with the amendment to the Immigration Bill to continue last year’s arrangements for Romania and Bulgaria  also a possible major rebellion depending on what happens next.

These five rebellions have all been led by MPs who first entered Parliament in 2010, not by old timers with no prospects of preferment. 3 of the five MPs sit for marginal seats, and decided their cause was just and would be attractive to their constituents.  One has a majority of 536, and another 2243. They are listed below:

24 October 2011    David Nuttall proposed a referendum  at a time when it was not official Conservative policy. The 81 Conservatives who voted for his proposal helped make it Conservative policy later to hold a referendum.

10 July 2012  Jesse Norman led the opposition to a certain type of Lords reform which the Coalition government wanted. 91 Conservatives voted for his rejection of the government changes, and the proposals were dropped by the government.

31 October 2012  Mark Reckless proposed a cut in the EU budget and helped defeat the government, with 53 Conservative MPs voting for his proposal. The government has now arranged a lower EU budget than planned.

Andrew Bridgen led the opposition to military engagement in Syria by organising a letter to the PM requesting a vote, signed by 81 Conservatives.  A vote was granted  leading to the defeat of the government’s policy  and a new government policy opposing military intervention. He did not himself vote against on the eventual  Commons vote which was held, as the government had by then changed the motion to exclude authorising the use of force so the case was already won.

Currently Nigel Mills with 74 Conservatives has proposed an amendment to the Immigration Bill.

These are all talented MPs who might have become Ministers had they chosen a different approach to this Parliament, and may well be Ministers in future. They are by no means old. They are recently elected MPs, with ages from 39 to 52. They are not grumpy or pessimistic. They just believe in things and are seeking to represent their constituents and the values of their party. Those who write in general terms about rebellion should remember the names and backgrounds of the leading rebels. They should also take into account that most Conservatives prefer the policies which these rebellions triggered. Most of us are far happier proposing a referendum on the EU than not, happier seeking a smaller EU budget rather than a bigger one, and pleased that the UK did not go to war in Syria.

There is a clamour to build more homes. All parties agree we are short of homes, and hope that building more will meet demand and reduce house price rises. Today I wish to look at this without reproducing the long debates we have already had about migration which of course also is part of the picture. Whatever the outcome of the stricter controls on migration there is unsatisfied demand for homes.

Some now say we have a problem with builders and speculators sitting on land which has planning permission to build. They think that if we have new laws or rules to make them build we can solve the problem. As part of Labour’s wide ranging attack on the private sector, or attempt to remodel it, they are talking of penalising developers who do not get on with developing.  The truth is more complex than this.

The English planning system is driven by a most important requirement placed on each local planning authority. They need to demonstrate there is a five year supply of land in their area at any given time. The local plan specifies the build rate on which this is based. This in turn is partly a reflection of past experience of demand, and partly a planning judgement made by the Council subject to review by an Inspector.

This means that under planning law at any given time the government requires the private sector to “hoard” or sit on a lot of land with planning permission. There is good reason for this. A housebuilder with a large site may take three years or so to move from putting in the detailed planning application to selling the last completed home. He is not hoarding the site, but proceeding as fast as planning applications, building work and buyers will let him. Time is money for the builder, and turning the land over quickly improves profits.

The same housebuilder will probably want the security of another large site to start work on when he has completed his present projects. He may decide the best way to secure it is to buy it outright, or he may buy an option from the owner who then has to hold it for a further period of years until the builder is ready to work on the development.

If a future government now wants less land holding then it could of course remove the requirement for a five year supply. That might reduce the total amount of land with permission held in the system, but there will still need to be quite a lot given the nature of the housebuilding industry. When trying to intervene like this there is always the possibility that the intervention will work in a perverse way. In this case it could reduce the amount of land where planning permission is sought.

There remains the issue of the gain that occurs when land without permission is granted permission. This is partly a reward for ownership and partly a reward for whoever goes to the trouble of preparing the land for development and applying for permission. However, increasing amounts of the gain are taken by local and national government through requirements on the developer to provide public facilities or a cash sum for such facilities. The arrangements amount to a development tax that is negotiated on a case by case basis in the light of final values of the properties and local infrastructure and service needs.