2014 could be a good year for many in the UK.  The long shadow of the Credit Crunch, Labour’s spectacular boom/bust of the last decade, is receding at last. 2014 could see more people getting work, some rises in wages and even growth in living standards after a long period of squeeze.

                  The economy ends 2013 in much better shape than in recent years. People are more optimistic, with businesses now more inclined to invest in future products and capacity. The rate of new job creation has been good, and now more of those jobs are being taken by unemployed people already settled here rather than by recent arrivals.

                  Some already complain that we are sowing the seeds of the next bust. They complain that people are borrowing too much money. As the numbers living here expands, and as the numbers in work increases, so you would expect total private sector borrowing to rise. There is  nothing wrong with people borrowing against their incomes to buy a home or even a car. They need them to lead their lives and cannot afford the full cost or anything like it all in one go. It’s what has driven living standards higher in  past decades, and will do so again.

                  Of course individuals, companies and the state have to be careful not to overdo the borrowing. Businesses have overall cut their borrowings substantially and generated more cash in recent years. They can afford to borrow more if good investments present themselves. Many individuals have cut their credit card and other expensive borrowing. As home ownership expands again we should expect to see debt levels overall rise. Individuals and their mortgage advisers need to make sure they borrow amounts they can afford to service when interest rates rise again, as they will one day.

                        The state is the most exposed, as the state has built up its debt much more quickly in recent years. It has also benefitted greatly from buying in its own debt, keeping the interest charges low. This has come to an end and is unlikely to be revived, so it is even more important now that the state cuts its deficit and gets its debt to affordable levels.

                            I wish you all a happy and prosperous new year.

Some of you here are critical of the coalition for not cutting more and not removing the budget deficit in this Parliament. Some of you are critical of the tax rises that were put in as part of the policy to get rid of excessive borrowing.

The choice before us in May 2015 is a simple one. The Conservatives offer the end of the whole deficit within the life of the next Parliament, whilst Labour only wishes to remove the current deficit, borrowing more for capital expenditure.

Both parties want higher ages. Labour offers an increase in the minimum wage, with the Conservatives likely to increase it by a similar amount by relying on the independent system of fixing it currently in place. Labour wants to take more action to enforce it and to prevent undercutting by migrant labour behaving illegally, which Conservatives too have said they wish to do. Conservatives wish to cut the flow of new migrants significantly. Both parties want benefit reforms within the EU to reduce amount of benefit the UK has to pay to newly arrived EU migrants.

Labour wishes to collect less tax from the rich by putting Income Tax up to 50%, where it collected less than at 45%, whilst claiming that next time round the higher rate will in some mysterious way raise more. Labour also want to tax dearer homes with a so called Mansion Tax.

The issue is therefore a simple one? Will spending, taxing and borrowing more generate more wealth and income, or will it, as in the past, generate less? If you want more taxing spending and borrowing then Labour is your party. If not the Conservatives offer the alternative.

 

                 There have been recent fears expressed that the No campaign against Scottish independence is too complacent and could lose. I would be most surprised if that happened. My recent visit to Scotland found a business and professional community worried about the idea of a split from the UK, but a community cowed into public silence by fears of  the Scottish government’s displeasure  if they spoke out.

                  As the Yes campaign has proceeded it has looked more and more like a campaign for devo max rather than for independence. The so called nationalists want to stick with the pound, the Bank of England, the Queen and the full UK single market and borderless free movement between Scotland and England. Their forecasts  rely heavily on optimism about continuing oil revenues, when decline in Scotland’s oil output is likely. If even the main advocates of independence do not seek  true independence, it would be surprising if the Scottish people voted for it nonetheless. Much would hinge on the subsequent negotiations with England, with the Scots seeking all sorts of concessions having voted for out. The Scottish government is not simply prepared to leave the UK and get on with doing everything for itself.  

                   Meanwhile, our constitution is unsettled for two other crucial reasons. The first is the  continuing federalist drive of the EU and the ECHR, a force that remains most unpopular with a majority of UK voters. The second is the continuing attempts to break up England or to deny England its identity and voice.  Just as Mr Salmond hoped, English nationalism is on the rise in response to both the pressure for more independent government by the other countries in the UK union, and more expressly by the studied disregard for England from the EU and elsewhere.

                   England faces cultural attack from the BBC. They are ever keen to stress independent Welsh, Scottish and Northern Irish identity, but rarely allow England a say or even name us. They are keen along with their friends in the EU to try to split England into a series of artificial regions which carry little support or weight with English people. I am not a “Rest of the south easterner” nor a “South easterner”  nor even a “Thames Valley er” or a “Bucks Berks and Oxon er”. The more they try to make us fit into these varied and meaningless places, the more we prefer to be English.

                        England faced a political attack from Labour in government , but they gave up when they lost the referendum to create an elected government for the then most Labour of regions, the North East. They were forced to recognise the reality, that England does not wish to be balkanised.

                           I predict that the only big force  of unrest with our current constitution in 2014 will be the wave of Euroscepticism generated by  unpopular EU policies on energy, migration, human rights and the rest. Politics in 2014 will be dominated by our relationship with the EU, and maybe more people will come to understand that when we are discussing energy prices, living standards, jobs and even public services, the EU involvement is now big and often damaging.

 

          As 2013 draws to a close the bond markets have been quietly increasing UK government interest rates. The rate on a 10 year loan by the  government has reached 3%, double the low point of 2012.

            The official forecast by the OBR assumes gentle but consistent rises in the UK government’s borrowing rate. They measure the average rate on the UK government’s debt, and expect this to rise from 1.6% in 2012-13 to 3% next year to 4.2% by 2018-19.  As so often with these predictions, the markets are taking the rates up faster and further than the official forecast suggests. 

              The OBR expects the Bank to keep official short rates down for longer. They are forecast at 0.5% this year, 0.6% next year and 1.2% in 2015-16, before rising to 3.1% in 2018-19.

              The Governor of the Bank of England made a lot of his wish to keep official short rates down to very low levels for a couple of years or so. He wanted to reassure borrowers, and force investors to take more risks, by holding out the prospect of poor returns on deposits, bonds and other “safer” investments. He was keen to see more growth, which he recognised would require more money in circulation and more borrowing.

                   The markets immediately challenged his view by driving up government bond rates, and through a series of comments arguing that the property market would require higher rates earlier to prevent a  bubble. The Governor responded by saying he could always take action other than interest rate rises to deal with any excess credit in the property market. He then showed what he meant by stopping Funding for Lending   money being available for mortgages.  He could take future action to demand higher capital ratios, special deposits or other quantitative controls to slow mortgage lending.

                         Recent polls show that higher interest rates would be popular.This is no surprise, as the number of savers is greater than the  number of borrowers. Quantitative Easing has been seen as a kind of additional tax on the prudent. It has transferred income and wealth from savers to the state. The issue before those making the judgement about whether and when to raise rates is the issue of what impact an interest rate change would have on output and jobs.

                              It seems likely that 2014 will see more of the same that we have witnessed in  the second half of 2013.  Market forces are likely to raise interest rates on government debt higher, given the absence of further quantitative easing.  The Bank is likely to keep official short rates down at very low levels, to be surer of the recovery and to assist with more jobs and better growth.

                            The Bank thinks there  is currently no case to raise official rates to cut inflation. At last, after a period of excess inflation, it is coming down. Persistent weakness in many commodity prices, coupled with recent strength in the pound, gives a better inflation outlook. This implies the Bank will keep official rates lower for longer.

                             Meanwhile, the upwards movement in government  bond rates may lead to some improvement in longer term savings rates generally, which will be most welcome for the prudent.

 

In the run up to the European elections we will hear the oft repeated claim from UKIP that they are going to “win” the European elections. They aim to obtain the highest share of the vote of any party and therefore gain the largest minority of the UK  seats on offer through the EU’s complex system of PR. UKIP followers who love to set out their case on this site have been “warning” us of this possible outcome for many months. Today I am giving UKIP supporters a free chance to make their case.

Last summer it was revealed that our current UKIP MEPs have the worst attendance and voting record of any party in the European Parliament. Four of their MEPs turned up for less than half the votes. As Mr Nuttall said at the time ” I’ll hold my hand up, as my attendance record is flaky to say the least”. The UKIP defence has been based around the proposition that they do not think it their job to try to amend or block new EU rules by turning up and voting. They prefer to draw the pay and support staff costs to help them campaign and take up issues  around the country. UKIP also enjoy the biggest loss rate of MEPs by a long way, finding it difficult to keep people in their party once elected to office.

It would be good to hear some answers from UKIP on what we could expect if UKIP MEPs are elected in 2014.

1. Would it continue to be UKIP party policy not to try to amend or block much EU legislation, leaving the detailed work of the Parliament to others?

2. Should people wanting an MEP to represent their view in Brussels look to MEPs of the other parties, given UKIP’s view on the irrelevance and undemocratic nature of the EU?

3. Would UKIP MEPs continue to draw  salaries and allowances whilst not wishing to be participating Parliamentarians in a full sense? What will the support money to spent on?

4. How would the presence of UKIP MEPs speed the UK’s exit from the EU ?  What have the current UKIP MEPs done to speed our exit?

5. How will UKIP MEPs be whipped to ensure the elected party sticks together and delivers in relation to its manifesto?

Some UKIP supporters seem to think voting UKIP is a kind of referendum on coming out of the EU, and that more people voting UKIP makes coming out of the EU more likely. The problem with this approach is that as UKIP will poll less than 50%, if UKIP insist on saying they are the only true Eurosceptics it means commentators can use their approach to say the UK wants to stay in the current unreformed  EU. It makes more sense to recognise the Europscepticism of the Conservatives, and to accept that it will take Conservative votes in the Commons to sort this problem out.

It would also be interesting to see how many possible UKIP voters like Mr Farage’s latest policy of more immigration from the Middle East.

 

 

 

 

                Many of us awake to the sounds of the Today programme on Radio 4. It likes to think of itself as an agenda setting news and comment programme. This week we are treated to “Guest editors” who so far have served to remind us that the professional team knows a thing or two about how to construct an agenda and keep the audience engaged, even if we are shouting at the radio, annoyed  at the continuing human made global warming big government EU friendly bias of their interviews.

            Sir Tim Berners Lee is a great man whose role in the development of the internet can be recalled and celebrated in various ways. Asking him to choose the items for Today produced a turgid show based around his one main interest. The regular presenters struggled to generate dispute, varied opinions  and criticism in the interviews and selection of guests.  Eliza Manningham Buller avoided the error of filling the entire programme with stories of a secret service reluctant to have much airtime to expose itself, but ended up producing a timeless and harmless magazine of a  programme with features on house plants and actresses which added nothing to the Today tradition of tackling more serious topics.

         I will tune in for the remainder of the week in  the hope that a Guest editor with something to offer appears – and will turn off much more rapidly than usual if the present pattern persists. I long for the day that the programme contains stories like the attitude of the French to EU migration, the problem of ultra high  youth unemployment in Spain, or  the growing resentment of the Germans in the struggling Eurozone countries. I have got used to the Today diet assuming that anything European is great.

             I long for a few stories which suggest public spending is too high, not too low, that taxpayers money is being wasted,  how  the public sector could easily become more efficient, or how we could gain a few million jobs by leaving the single market. I would like some audit stories to run back over campaigns and spending plans that have been pushed through with the encouragement of Today programme guests, to see if any of them worked as planned.

            I would like to hear about all the jobs that higher taxes and higher energy prices destroy. I would like to hear from climate change “experts” in response to yesterday’s report that our wildlife flourished last summer when it at last warmed up, and that wildlife is very capable of adjusting to different temperatures.  It would also be good to hear them answer how they are getting on with their predictions of sea level rise, disappearing islands, higher temperatures and ice levels in Antarctic.

             Indeed, many of us would welcome a day or two when the Today programme conducted all its interviews from the opposite perspective they usually adopt without thinking or realising the bias implicit in most of what they do. Big government is not always best. Higher and more  taxes are not always a good thing. More government action may make things worse. Overseas aid may go to the wrong people and causes. The EU may damage our wealth. The single market may be more about laws and less about free trade. The 3 million jobs that “depend” on the EU may be a ideological myth. The climate may change in unpredictable ways, and may change for reasons other than man made CO2. Some public services might run better with fewer people and fewer levels of hierarchy, not more. Maybe people could take more responsibility for their own lives, and we could look to government less in some areas. England has a right to self expression, just as Wales and Scotland enjoy on the BBC.

             I yearn for just a few of these ancient heresies, as I think we might need some of them back.  

 

 

               Yesterday the papers splashed a long range forecast which said the UK economy would soon overtake the French in size, and by 2030 would be larger than Germany. The reasons given were the UK’s relatively low tax regime compared to the continent, a younger and growing population compared to declining and ageing populations on the continent, and our avoidance of the Euro. All that makes sense.

             However, what the forecasts and figures also reveal is the growing irrelevance of Europe to the progress of the world economy. The individual large EU economies will lose out to China, India and other emerging market countries, as they surge. According to UN population forecasts Europe’s overall population will shrink from 728 million in 2000 to 632 million by 2050. Meanwhile China’s population will grow to be more than twice that of Europe’s and India’s will be more than 2.4 times Europe’s. As India and China get bigger and as they raise their living standards and output per head, so they will come to dwarf the economic output of the main European countries.

            Mrs Merkel has wisely asked the question how can such a small part of the world’s population in Europe account for one quarter of world output and one half of world social spending? It looks as if the answer to the question on the share of world output will be answered by Europe’s share contracting over the next two decades, as the emerging economies outgrow the west. Our living standards can only remain substantially higher than those elsewhere if we continue to develop the companies, the products and services with high value added that command good prices around the world. This is going to get more difficult as the rest of the world catches up with brands and technology and as EU government does its best to undermine enterprise.

             Whilst some of the high proportion of the world’s social spending will be eroded by the same process, by growth elsewhere, it looks as if the brutal logic of the Euro will continue to put downward pressure on social spending, forcing higher retirement ages, lower pensions and meaner social benefits. That is what Mrs Merkel implied in her remarks.

            Europe will make its position worse by continuing with high energy prices, relatively high taxes, and an excess of poor regulation. EU government specialises in  the hammer of regulation to miss the nut, and will probably continue with more of the same. This will compound Europe’s difficulty in earning a good living and boosting value added and real wages. The pressures from EU government are mainly in the other direction, forcing EU companies to do less with more.

             And what of the UK?  If  the UK could cut lose from the EU’s dear energy and excessive regulation it could grow faster still. It has an advantage from being out of the Euro, and another from relatively low corporate taxes. If it added more competitive personal taxes and dug itself out of the excessive burden of so called single market regulation it could do even better. Above all it needs a more plentiful supply of cheaper energy, which is probably beneath our feet as we think about it. Lots of cheap gas would power an industrial recovery, which would add to the present recovery underway.

 

 

 

 

              David Cameron and Enoch Powell are or were very different kinds of politician. Dr Cable’s recent abuse of the Conservative party was designed to equate current Conservative  thinking on migration with the “rivers of blood” extremism of Mr Powell’s most infamous speech.  It shows a lack of respect for the Prime Minister he serves, and a lack of knowledge of Mr Powell’s general work on government and the EU.

              As always with people like Dr Cable his rude remarks are loaded with contradictions and errors. Two years ago Dr Cable was happy to sign up to a government decision to put off for another two years opening our borders fully to Bulgarians and Romanians. Why was it the case that two years ago this deed was neither damaging to our relationships with eastern European countries, nor Powell like?

               Now that Mr Cameron and Mrs May are trying to find legal ways to prevent overloading our welfare system by too many new arrivals, Dr Cable changes tack and accuses them of Powellite tendencies. They are seeking to implement the Coalition agreed policy of curbing immigration, something he signed up to at the beginning. How does he propose to hit the government’s target for reduced migration, as he disagrees with the measures needed to achieve it?   Where does he think the UK is suddenly going to get a large amount of extra public cash to provide generous public services and benefits to more new arrivals?  What is he suggesting we cut in our public budgets to make this extra cash available? One of the left of centre think tanks is already saying we do need to give more cash to local authorities likely to receive new  migrants.

                 Dr Cable is also clearly against the UK government seeking to change the EU rules to give a country like the UK more control over its own benefit system and  borders. Does he not read his emails or talk to his own constituents? I cannot believe his voters are keen on all this close EU integration that many people write to me to complain about.

 

       Thanks to all the contributors. Enjoy your day.

Sleigh Ride conjures images of Christmas, set to infectious music. It tells us “ These wonderful things are the things we remember all through our lives”. That song is part of the magic of Christmas. I always look forward to hearing local schoolchildren play it at the annual Carol concert.

On my recent visit to Bearwood School questions on the role of an MP soon became a more lively exchange about Christmas. Young eyes fired when I asked them for their view of Christmas. They all thought it was a time to be happy, to relax in the warmth of their families and to enjoy the special treats and presents that the season brings in most homes. As children get older so they learn the rhythms, traditions, words and music of Christmastide. It stays with them for the rest of their lives, though the wonder is probably brightest when it first fills a young mind.

All accept that at Christmas we should be friendly to others. We should say thank you for all those who have worked hard for us and our community. It is a time to remember service. It is also a time to extend friendship and kindness more widely. Visiting elderly neighbours or relatives who might be lonely, inviting people with no warm home to go to into our homes, ensuring young people who lack family support have presents and some cheer is all part of the tradition of the season.

I still love Christmas. Making the puddings, enjoying the turkey, decking the house, seeing the reflections of the tree lights in the bay window, exchanging presents and cards are all part of a special time. Betjeman painted a picture of Christmas that included some of his wry irreverence, but even he expressed the joy as well. “And girls in slacks remember Dad. And oafish louts remember Mum. And sleepless childrens hearts are glad. And Christmas morning bells say “Come””

I wish you and yours such a happy Christmas. Small acts of kindness, acts of love and memory are more important than the cost of the present. Christmas is a time to be generous to others in spirit, and to recognise the good in others. Let’s all try to add some magic and do something wonderful, so we will all share great memories of a Christmas well spent.