In a way I was one of the first modernisers. In 1995 I told the Conservative party it was a case of “No change, no chance”. I had in mind especially a change of policy and approach.

So when people tell me the Conservative party has to change or modernise, I do not automatically disagree. It is one of the ironies of conservatism, that a doctrine that wishes to preserve the best and keep some of the continuity of our lives, has always had to embrace change. Indeed, some of the most successful Conservative governments have been some of the most radical. Maybe we are at our best when we are boldest.

Conservative radicalism is based around delivering to the many the advantages of the few. Just as enterprise capitalism retains support and gains friends by ensuring that the luxuries of the rich in one generation become the commonplace of the many in the next, so Conservatism at its best brings the rights and duties of the privileged few of a previous generation into the lives of the many. Conservatives have in the past campaigned to abolish slavery, to  extend the franchise to all,  to encourage the many to own their own home, and to seek an ownership revolution. It has supported more generous welfare and health provision for the many paid for out of taxation.  We want higher living standards and more civil liberties and see no contradiction between the two.

I was surprised in the early opposition years after 1997 to read that Conservatives were split between mods and rockers, between libertarians and authoritarians. It seemed like an artificial conflict, as most Conservatives seek a balance between liberty and the rule of law. I was also surprised to see some advocate a modernising agenda which meant moving closer to Labour’s positions just in time for the implosion of Labour’s model of more European integration, more migration, more public spending and debt, and the eventual inevitable financial crisis.

There is nothing wrong with the underlying principles of Conservatism – belief in the individual, the family, the small platoons, the independent charities and companies, the wish to spread ownership and property, to defend the individual’s liberty against the overmighty power of the state, the wish to conserve the best of our institutions and countryside, the wish to see the inherited tradition improved and developed by the present, and the wish for the state to help those who cannot help themselves. Of course these need updating, with policies based on the modern context, on a regular basis. The ideals and values do not need overturning. Most Conservatives do not lack compassion, charity, decency or belief in  liberty. We just do not believe these things can simply be bought by the government spending more of other people’s money. There needs to be money and oxygen left for the many to provide for themselves, to work for family and the common good, to profit the nation as they profit themselves.

At the end of the last century I wrote a book predicting that Labour’s constitutional revolution would be very destructive of the UK. At the time Labour derided my language, claiming it was excessive to argue that their modest constitutional changes were revolutionary and would lead to the destruction of the UK as we knew it, and to overturning its way of government.  I think it is time to look again at the forecasts and to ask what has happened?

I wrote then

“The UK is in the grip of a constitutional revolution. The cumulative effects of the (EU) treaties are made more radical by the quickening pace of European integration on the continent….The ECJ is making more and more advances…The Court now overturns Acts of Parliament…. The Labour government has adopted much of the European agenda as its own…Labour willingly advance the cause of more European government…the Social Chapter…the European Charter of Human Rights…limiting our legislature in criminal and judicial matters.  Labour’s plans to split the kingdom into regions are often urged to ensure that we have regional governments that can act as supplicants for European funding… Even their plans for proportional representation are part of a scheme to bring us into line with the continent. ..The British government has decided to introduce these (PR) for elections to regional Parliaments and the European Parliament. Undoubtedly the government’s devolution plans will create more tension and conflict, not less. It is helping to fuel nationalist movements in Scotland and Wales…

“Third Way politics is allied to a hatred of Parliament, which remained stubbornly confrontational and argumentative. …Ensuring Parliament met as infrequently as possible, arranging set piece meetings on subjects like Northern Ireland more likely to produce cross party agreement, and scaling back Prime Ministerial appearances…were all part of the plan to try to prevent parliamentary argument disrupting third way consensus.  A Parliament elected by a different means that did not produce a majority government would be the ultimate conclusion of this course of action.

“devolution Labour style will devolve more power not to people but to politicians and administrators. Far from cementing the UK, it will pull it part as advocates of a Europe of the regions intend. ….the relentless drive to a European state continues. It is time to ask the question, will this government break the UK apart? How far do they wish to go in transferring government from London to Brussels and regional centres?”

Much of what I feared came true. Over the following decade Labour signed the Nice, Amsterdam and Lisbon Treaties, transferring 168 major areas of policy from UK control to majority voting in the EU. That included control over our borders and immigration policy, energy and some criminal justice amongst many.

Their devolution policy, far from settling the kingdom, gave a huge boost to Scottish nationalism and has led directly to a vote on whether Scotland wants to stay in the Union at all.

The Human Rights policy has led to senior Judges now pointing out that Parliament has lost its sovereignty in crucial areas of law, and to many domestic complaints about actions and judgements that the UK can no longer decide or control.

Parliament has been damaged by moving to shorter hours and fewer days in session, by a single PM Questions each week, and above all by now facing many areas where Parliament cannot change the law even if it wishes to, owing to EU law.

Labour changed the UK and its constitution radically. We no longer have a constitution based on a powerful  Parliament subject to  the sovereignty of the people, expressed at election time in the ballot box and the rest of the time as public opinion. We are now a member state under European control in many fields, and a divided nation arguing about whether to stay together or not. I rest my case.

The change of direction that was partially flagged this week by the EU’s review of its energy policy from 2020 to 2030 has all the hallmarks of ineffective political compromise and none of the qualities of good leadership for Europe’s troubled industries. The underlying truth is that EU energy policy today is the same as last week, and going in the wrong direction.

Recognising the danger of more factories closing and more businesses setting up in cheaper energy parts of the world, the EU now talks of the need for competitiveness to be part of the consideration when making future energy policy. Still keen on being the greenest part of the world, the EU has also decided on setting EU level targets to increase the amount of renewable energy from 20% to 27% over the next decade, and to continue the drive to cut the output of carbon dioxide gas. This time they want to cut it by 40% on 1990 levels by 2030. How does this square with wanting energy priced more like that in the USA so we can compete?

We need to ask how this will happen, what consequences it will have, and  how the EU plans to enforce the policy.

The big change is to shift from individual member state targets for CO2 reduction and renewable power to EU wide ones. The member state targets could be enforced by EU court action and fines. I guess the fact that Germany is unable to curb her CO2 output at the moment is making the EU nervous about enforcement action anyway. Once they shift to an EU target there does not appear to be any way they could prosecute an individual member state for failing to increase its renewables or for increasing its carbon dioxide output. Which countries will want to carry on with these initiatives to try and hit the EU targets?

The quest for more renewable power is also being questioned  by another branch of the EU authorities, the competition authorities. The attack upon subsidies for solar and wind power could make it difficult or impossible to increase these forms at the rate needed to hit the EU target, given the importance of subsidy to current rates of investment in these expensive forms of electricity generation.

The EU is not changing the member state targets for the period up to 2020, so in theory all stays the same with the EU enjoying another six years of the pursuit of dear energy  before changing course somewhat in 2o20. The member states remain under pressure to increase solar and wind output, and to carry on getting rid of older fossil fuel electricity plant even though it produces much cheaper power.

The ailing energy policy of the EU will become one of the major disasters of this superstate experiment, alongside the Exchange Rate Mechanism and Euro which has cursed so many countries with high unemployment. Industry is today highly automated. It needs cheap energy. Europe’s competitors abroad have not embarked on anything like the EU’s dear energy strategy, so they have a large advantage. The latest EU moves recognise the problem, but do nothing this decade to correct the error, and leave us uncertain about how  it might start to be improved after 2020. Try harder EU.

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.