The Secretary of State for Transport asked for my views on the capacity argument for HS2.  I thought I would share them with you.

              To establish that HS2 is needed on capacity grounds the government has to be able to demonstrate three main points. Firstly, that the current WCML is full or nearly full. Secondly that there are no easier or cheaper ways of adding significant capacity to the WCML or providing an alternative  to tackle any future capacity problems. Thirdly, that the high forecasts of likely passenger growth and  use of HS2 are realistic. I remain to be persuaded on each of these three matters.

 

                The government has been coy about current usage of the WCML. Reported figures say that in the evening peak out of Euston the loadings are around 50%, but this does not take into account the move to 11 carriage trains from 9 carriage trains which probably takes it down to 45%.  As the idea behind HS2 is to encourage morning outbound to the north from Euston and inbound to London in the evenings – otherwise it is just strengthening London’s business and leisure pull – the current usage rates are clearly well below half. My own use of the outbound trains in the morning tell me loadings on some of these trains  are around 25% or less, though I accept these are spot checks, not properly calculated averages . I would be happy to publish the exact figures if the railway would supply them.  To win  the argument the government needs to show higher current usage. It is also the case that some  other train lines are considerably more crowded than the WCML, with the Paddington-west country lines probably the worst crowded operating at near full capacity already for periods of the day with severe congestion problems at peaks.

 

                   Should the WCML become more used, then there are easier ways of creating more capacity. Trains to the main destinations could be lengthened. One or more of the  first class carriages could be switched to standard class, as first class seems particularly underused. The purchase of lighter trains with better brakes and better signals could lead to more trains an hour being run on the existing line. These would be much cheaper fixes than building a new line. A report leaked this morning says that increasing capacity on the existing lines would mean disruptive works each week-end. Some of the ideas in this paragraph require different specifications of train,  which would not disrupt the track. Track works can be done at week-ends and overnight to avoid interrupting busy schedules.

 

                   The forecasts for use of HS2 services are very optimistic. HS1 forecasts were far too high, leading to a 30% overstatement of future demand. The idea that once in full operation the railway will be able to fill 18 large trains a hour seems unlikely. The forecasts assume a large proportion of the passengers on HS2 will be switchers from current WCML services. There are simply not nearly enough current passengers to do this, so the forecast relies on an assumed surge in travel on this particular route. It is not clear why.

              The architects of the project also concede that these forecasts will be very dependent on fares policy and the competitive response of the existing mainline operators and the other transport challengers – coaches, planes etc. The only way I could see that the HS2 operators could fill some of their many trains would be through heavy fare discounting, which would undermine the economics of the project even more.We should expect a strong competitive response from some challengers, leading to less fare revenue than forecast.

 

                 Commuters to Milton Keynes and Watford may well increase substantially and may need more capacity. HS2 would be a very   expensive  way of trying to do that. For the rest I remain to be convinced there is enough demand to have a viable current WCML, let alone pay for an expensive HS2 as well.

 

          I want more people to have jobs. I want more jobs to be better paid.

          One of the myths perpetuated is that the “right of centre politicians”  in the UK want cheap wages. Ironically it is we who want to limit immigration to give people already resident here more chance of a job, and to keep wages at a better level for the employee.  It was Labour who relaxed our borders, encouraged large numbers to come, and created strong competition to keep wages down for many jobs. This is something Unite as  a Union would wish to change, as do Conservatives.

        The main positive way to create better paid jobs is to drive forward higher productivity. If we work more effectively we can be paid more.  Higher productivity does not necessarily mean working harder. It can be done by  working smarter. It may mean providing employees with more computer and machine power to assist them with their tasks. It may mean better training. It may simply mean managers and employees sitting down together regularly to review how jobs are done, to identify ways of doing them better. Doing it better may mean faster, smoother or more easily. It may mean taking longer but cutting the wastage and failure rate.

          Quality is not the enemy of lower cost and higher productivity. It is the friend. Doing things right first time saves time and money overall, even if it apparently takes longer and costs more compared to dashing and getting some wrong.

           Nor do Conservatives want to favour the few and the south at the expense of the many and the north. All governments that I have witnessed in the UK during my adult years have wanted to create a better balance between north and south, between London and the rest.  All have tried a variety of policies, some different, many the same. The main emphasis has been on creating more public sector activities in the regions away from London, and pursuing a regional policy which seeks to subsidise jobs and enterprise in the slower growing and lower income areas. Well intentioned though these policies are, there is no evidence that they usually work. The list of lower income higher unemployment locations in 2013 is very similar to the lists in previous decades.

           So what does work? Our past tells us that a cluster of talent, skill and competition can work. The Potteries became the centre for ceramics, and the North East the centre for shipbuilding and steel in their day. Now the Thames Valley has a useful cluster in hi tec industries, and London in financial and business services.  The question is what can other great cities develop as their special expertise?

              The past tells us that  a transforming entrepreneur or two can make a huge difference to a city.  The Potteries owed a great deal to Wedgwood, and then to a range of talented designer-potters in subsequent decades and centuries. Twentieth century Us success owed a great deal to dynasties of the Rockefellers and Carnegies. Great cities have to live with the riches and talent of the few, as they can produce jobs for the many.

            The past tells us that government rarely transforms a city and creates that energy and dynamism that success needs and breeds. What government can do is ensure taxes are competitive, transport links good, the potential workforce well educated. Modern industry does not need a large amount of low cost labour. It needs limited numbers of dedicated professional managers, engineers, designers, salespeople and the rest. Above all industry in the UK needs a new generation of Brunels and Dysons, Wedgwoods and Bamfords.

 

                It is good news that the UK economy is growing again at a decent pace. It remains true that London and the South-east are growing faster than the rest of the country.

               Labour complain about this. Reading the Guardian they seem to think success in London and the south-east is a bad thing. What they and Labour need to do is to study why and how London has done so much better than the rest of the country. They need to ask themselves why was this true when Labour was in power for 13 years, dedicated to spreading the growth  and prosperity more widely around the country. They can of course also ask why hasn’t the Coalition succeeded in  changing this trend so far, despite wanting to?

              I start from the proposition that it is good news that a big part of the country is working better. I do not want to damage that by taxing it more or undermining it in other ways. We need to learn from it so the rest of the country can do as well or better. We need to see London’s success as a strength for the rest of the country, not a problem. London’s taxes are certainly needed to sustain the levels of state spending elsewhere.

                 London demonstrates that you can create a virtuous circle. London wages and salaries are on average higher than the rest of the country. London creates more and better paid private sector jobs than many other parts of the country. London attracts and retains a lot of talent, capital and business from around the world.

                 As the world ‘s growth is dominated by cities, the UK needs to have a similar success in some of its other cities to that experienced in London. Manchester or Leeds or Birmingham have the scope to be faster growing world class cities that can too attract their share of wealth, talent and business from overseas, and draw in more home grown talent and enterprise. They need bigger private sectors to reduce their reliance on the public sector.

                The Guardian complains that London has received the Crossrail investment from the public sector. It was not the decision to build Crossrail that made London successful. It was a necessary catch up investment to cope with all the extra people and work journeys that London is generating. If other great cities in the UK are attracting similar volumes of additional travel, they too should have extra transport capacity. London is still a net contributor to the UK coffers, with a much lower public spend per head than that enjoyed by other regions.

              Tomorrow I will look at what other changes to public policy could help other great UK cities to grow as quickly as London. The changes needed are ones that are friendly to the private sector. Building a bigger and more expensive public sector in these cities has been tried but has not achieved the results wanted.

 

              Just when David Cameron has put on the EU agenda the need to repeal and amend regulations and Directives that are destroying jobs and making the EU less competitive, France and Germany decide to hijack the EU summit to complain about US intelligence methods.

           I am not going to defend Mr Obama who clearly has to apologise to Mrs Merkel and explain what he has been up to. I suspect that Germany too employs people to research US policy and to find out things that are not generally available so Mrs Merkel is well briefed about her US ally.  German staff probably receive off the record briefings, have sources inside the White House to pick up the gossip and do many other things to understand the past and likely future actions of the world’s superpower. If they discovered some private remarks of Mr Obama I suspect they would forward them to Berlin.

           Anyone in public life knows that people are out to pick up their inner thoughts or their unguarded comments to shine more light on what they are likely to do next, or to exploit any mistake or weakness. As a backbench MP I have experienced eavesdropping of my phone and private conversations. These days any private conversation in a public place is liable to be recorded and used by someone.  It must be much worse if you are the Chancellor of Germany.  What I do want is the EU summit to address the problem of the poor economic performance of the EU as a whole, dragged down by too many bad laws and poor public policy at EU level. Picking a public row with Mr Obama is not the best use of this expensive meeting.

 

             The nation is gripped by a debate about the cost of keeping our homes warm this winter. There is another important matter to raise – the impact high energy prices has on our industries.

                Industry transforms raw materials into valuable products. To do so it uses a lot of heat. Gas is also an important feedstock for the chemical industry. Activities like petrochemicals, steel making, ceramics manufacture, general chemicals, glass production and cement require large quantities of energy and gas.

                 At the centre of the Grangemouth closure is a loss making petrochemicals plant which has been losing £10m a month. The dispute with the Union is the immediate cause of the possible  closure. The Union was unwilling to accept a rescue plan  based on maintained salary levels with a less generous pension deal.  The underlying reality is dear energy and dear gas feedstock making it difficult to run a profitable business. Meanwhile US competitors buy gas at much lower prices. It is good that the Union is thinking again about their refusal to accept the recovery plan. The management tell us  that the average wage at Grangemouth is twice the Scottish average. The recovery plan requires substantial expenditure on new facilities to import US gas.

                           One of our leading steel makers has warned the EU that European carbon targets and related costs are pushing more steel making to other continents.  BASF have just announced the closure of their Paisley chemical plant, owing to high energy prices and other costs.

                         Tata Chemicals closed its soda ash factory at Northwich owing to high gas prices.

                          The EU summit has been discussing the need to remove unhelpful EU regulations that are damaging business and destroying jobs. Dear energy is one of the worst features of an EU regime that is giving a big competitive advantage to Asian and Amercian industrial competitors.

                                 If the Uk wants to rebuild its industrial base, it has to extract a lot more of the gas under our feet as quickly as possible. It also needs to use cheaper forms of electricity generation than wind farms. It is not just the high energy using businesses at risk. Modern assembly plants have very large power bills as they have automated extensively.  Power can often cost more than wages in a modern factory.

 

The suggestion that the government should  impose a windfall tax on energy companies may be attractive to some at a time when energy companies are far from popular. It would be revenge for their price hikes, when many are feeling the pinch as a result.

Sir John Major is right to say that Conservatives need to show concern for people on low incomes and benefit incomes who feel the squeeze from high energy prices more keenly than those on higher incomes.

However, a one off tax rise to provide some additional one off help to people on tight budgets does not go to the heart of the problem. The following year after the windfall tax energy prices might be just as high or higher. The underlying problem, dear energy,  has to be addressed.

Nor does it make any sense to say to Conservatives we need to concentrate on bread and butter issues like jobs, incomes and prices, and turn aside from consideration of our relationship with the EU. It is the relationship with the EU that is causing the disruption of family budgets.

In this case of energy we need  the EU to suspend or repeal its renwables requirement. Demanding that we generate a rising proportion of our electricity from renewables is forcing the cost of energy up. The EU needs to suspend or amend its Large Plants Directive. Then we could run our older power stations for longer, saving us a lot of cost, keeping energy prices lower, and delaying the need to spend large sums on replacing them with something dearer.

In Sir John’s day arguments over Europe were not some abstruse diversion from the politics of jobs, incomes and daily life. They were then about how high interest rates had to go and how high they had to stay. The ERM he took us into did  economic damage, destroying jobs and businesses,  and squeezing family budgets. That is why the Conservatives lost in 1997. It was only when the party apologised for ther ERM mistake that it could move on, and it was only when Labour made a worse mistake with its Big boom and bust that Conservatives had a chance of winning again.

The Conservative poll rating fell dramatically on the collapse of the ERM policy. It did not fall during the long arguments over Maastricht. On the doorsteps in 1997 voters were not angry that some Conservatives opposed the single currency. They were complaining about the economic damage the ERM had done to them and their families.

 

 

             The Prime Minister announced an important new policy today, following on the Chancellor’s outline of it last month. He wishes to cut energy bills by cutting some of the green levies placed on our energy bills by the last government. I am all in favour of this new approach.

            So what is there to remove or cut? The following is the list of extra charges on an average combined fuel (gas and electricity) bill, showing there are plenty of targets:

Eco  (Energy company obligation to pay for Green Deal)   £47 

Warm home discount  (levy to pay for discounts for vulnerable consumers) £11

Smart meters     £3

Renewable obligation   £30

Feed In Tariffs      (solar subsidy etc)  £7

EU ETS   (EU’s system for taxing CO2 emissions)     £8

Carbon floor price  (UK’s system for also taxing CO2 emissions)   £5

Total   £111     (9%)

There is also £60 of VAT  (5%)  courtesy of Sir John Major’s government and all subsequent governments

Energy and climate change policies add 14% to an average electricity bill, and 5% to a gas bill.  Last year the large energy firms received £900m in wind subsidies, paid for by consumers.

What could they cut? The domestic subsidy regimes for particular programmes could be removed. The EU ones would be more difficult to budge, though taking the issue to the EU for change would be worthwhile doing. The government will probably not want to remove the better purposes of domestic schemes to help poorer consumers and to promote better insulation. In these cases they might transfer some of the cost to general taxation.

The way to achieve cheaper power, as explained before on this site, is to reopen closed mothballed older power stations, keep open  the remaining lower cost older stations, and to generate more power from them at the expense of renewables. The subsidies for future additional renewable power should be reduced sharply or removed if you wish to cut future bills.

 

If the government does not change the mix of its current and future electricity generation, it will have  limited scope in the years ahead to lower the cost, given the trend to rely more and more on on dear forms of energy, and the need to continue subsidies promised to those who have provided these dearer forms of energy supply.  

 

Yesterday I  received the letter below from the Immigration Minister summarising the new Bill before Parliament to help control immigration. In view of the large number of comments on this site on this topic I thought I would share it with you:

“Today the Immigration Bill had its second reading in the Commons. This marks another important step in our work to clear up the mess we inherited from Labour, by building an immigration system which is fair to hard-working people and legal immigrants, while cracking down on those who are here illegally.

As things stand, it is too easy for people to live and work in the UK illegally and take advantage of our public services. The appeals system is like a never-ending game of snakes and ladders, with almost 70,000 appeals heard every year. The winners are foreign criminals and immigration lawyers – while the losers are the victims of these crimes and the public. It is too difficult to get rid of people with no right to be here.

This is not fair to the British public and it is not fair to legitimate immigrants who want to come and contribute to our society and economy. The Immigration Bill will stop immigrants using public services where they are not entitled to do so, reduce the pull factors which encourage people to come to the UK, and make it easier to remove people who should not be here.

Specifically, the Immigration Bill will make it:

i.          easier to identify illegal immigrants by extending powers:

• to collect and check fingerprints;
• to search for passports;
• to implement embarkation controls; and
• to examine the status and credibility of migrants seeking to marry or enter into a civil partnership.

 

ii.          easier to remove and deport illegal immigrants by:

• cutting the number of decisions that can be appealed from 17 to 4 – preserving appeals for those asserting fundamental rights;
• extending the number of non-suspensive appeals – where there is no risk of serious irreversible harm, we should deport foreign criminals first and hear their appeal later;
• ensuring the courts have regard to Parliament’s view of what the public interest requires when considering Article 8 of the European Court of Human Rights in immigration cases; and
• restricting the ability of immigration detainees to apply repeatedly for bail if they have previously been refused it.

 

iii.          more difficult for illegal immigrants to live in the UK by:

• requiring private landlords to check the immigration status of their tenants, to prevent those with no right to live in the UK from accessing private rented housing;
• making it easier for the Home Office to recover unpaid civil penalties;
• introducing a new requirement for temporary migrants who have only a time-limited immigration status to make a contribution to the National Health Service;
• prohibiting banks from opening current accounts for migrants identified as being in the UK unlawfully, by requiring banks to check against a database of known immigration offenders before opening accounts; and
• introducing new powers to check driving licence applicants’ immigration status before issuing a licence and revoking licences where immigrants are found to have overstayed in the UK.

The Home Office has produced a series of factsheets that cover the detail of each of the measures in the Immigration Bill. These can be accessed online at https://www.gov.uk/government/ collections/immigration-bill, along with other important information about the Bill.

The Immigration Bill builds on the immigration reforms we have implemented since 2010. These reforms are working: immigration is down by almost a fifth since its peak in 2010 and net migration is down by a third. We have reformed the Immigration Rules to cut out abuse where it was rife, while at the same time maintaining the UK’s position as an attractive place to live and work for the brightest and best migrants.

We will continue to welcome the brightest and best immigrants who want to contribute to our economy and society and play by the rules. But the law must be on the side of people who respect it, not those who break it.”

 

I have one fundamental disagreement with those who designed EU energy policies. I think the UK needs cheaper energy. They want us to have dear energy, to make  us  use less of it.

I do not think it a good idea to drive industries  to foreign climes because our energy is much dearer than Chinese or American. It does not cut total CO2 output, merely changes where the CO2 comes from. It gives others the jobs we need.

I do not think  it a good idea to worry the elderly and frail about the size of the fuel bill to keep warm, or to squeeze families with ever higher energy prices.

In the last decade the dear energy advocates  were far more influential on energy policy  than people like me. They persuaded the Labour government here and the EU government in Busssels to build in dear energy as the only alternative. Out would go coal and oil based power stations. In  would come wind farms and solar panels. It meant a big increase  in costs and prices.

Now people see the extent of their victory many are unhappy about it. The Chancellor has stated clearly that he does want more affordable and reliable power for industry and homes, but finds the UK entangled in a dangerous web of EU rules and requirements which make this difficult to achieve.

The ijventors of our EU energy policy  should be rejoicing at the large price rises the energy companies are putting through. It represents the success of their drive for dearer energy, with more to come. Yesterday’s announcement of the nuclear deal shows just how much extra we will have to pay for low carbon fuel. The price was made higher by Labour’s failure to sign up such a deal some years ago when power was cheaper and the UK had more options. It was also probably  made higher by Labour’s decision to sell our nuclear industry.

At least action is beign taken to keep the lights on. All the time we are in the EU on current terms it has to be done within the framework of a dear energy policy.

 

        The September figures for Uk spending and tax revenues showed strong growth in tax revenue more than offsetting the 2.5% increase in cash current public spending (compared to last year). Income tax revenues have been well up so far this year, following the cut in  the higher rate, despite the increase in the tax threshold taking more people out of paying any income tax. Extra public borrowing  fell by £1bn this September compared to last.