Margaret Thatcher was the best boss I ever worked for. As her Chief Policy Adviser in the mid 1980s I was impressed by the honesty of her aproach, her willingness to wrestle with difficult issues and problems. Her prime wish was always to find the right answer that would make things better for the UK.

As a young man in a senior position I was to her as good as the arguments and evidence I produced for her. It was refreshing to be able to argue your case strongly without fear that any of it would be taken personally or politically.

Always very caring about people working with her, and anyone in the wider world who was suffering, she helped an American President win the Cold war, made it possible for members of unions and non members to work in greater harmony with management in many industries after the very bruising miners strike, greatly extended home and share ownership, and took up with alacrity the whole agenda of equity for everyone.

She rebuilt Britain at home and abroad, after a decade of financial collapse, a trip to the IMF and strike ridden industrial chaos.

Most of us agree that parents should look after their own children and do the best for them. Most parents do just this, and there is no problem for the state or the neighbours.

There is a problem where loving parents lack the financial means to provide properly for their children, which is usually taken care of by state income top up, free service provision and benefit payments.

There is a worse problem where parents are unwilling or unable to provide a loving and safe home for their children. There the state has to make endless difficult judgements. Should it intervene, requiring the parents to work with a Social Worker in supervision? Should the state take the children away and put them into foster care for a period? Should the children be sent for adoption? Can the wider family including grandparents become involved to safeguard and provide for the children?

Whilst it is sadly the case that a small minority of parents are a threat or a source of harm or neglect for their children, it is also the case that there have been some bad examples of children in state care in childrens’ homes also not being well looked after.

The issue currently back on the agenda is the issue of how many children should a mother or father be allowed to have where they cannot make financial provision? Should it continue to be unlimited as at present? The case that argues for allowing any number of children is based on our understandable wish of not wanting the children to suffer.

Or should there be a future limit on how many children someone can have to attract more state financial support? Should the state ever reach the point where it says to a parent that they cannot increase their drawings from the state for extra children? If they despite the warning go ahead and have an extra child, what then should the state do?

Yesterday morning interviews with the IFS, Mr Balls and Mr Alexander on the Today programme failed to do justice to the argument over the 50p tax rate. The IFS and the BBC sat on the fence, and ignored the substantial evidence that the UK has experienced a serious shortfall of Income Tax receipts from high earners since the introduction of the 50p rate.

The IFS and the BBC were strangely silent on the fact that in 2009-10 there were 16,000 people declaring incomes in excess of £1million in the UK for tax, and that this fell to just 6000 people with such incomes after the introduction of the 50p rate. Many left the country, or worked less hard, or found legal ways of declaring less income.

Evan Davies did succeed in reminding the audience that a 50p tax rate brought in to “share the burden” of the Crunch was not brought in by Labour in 2008 or 2009, during or immediately after the Crunch it was meant to help pay for. Instead they brought it in a few days before the election. This should lead people to ask whether it was a political trap rather than sound policy designed to help pay for the problems. If you really thought it was going to bring in say £3bn why not introduce it immediately in 2008 as you saw the surge in the deficit and the banks collapsing? Why not bring it in in 2009 as things started to settle down again? He also extracted from Mr Balls the wise statement that he favours lower tax rates at all income levels, rather than a pledge to restore the 50p tax rate.

Let me be unpopular. I think Mr Brown as Chancellor was right to keep the top rate of Income Tax at 40% throughout his period in office. I assume he did so not out of love of the rich, but because he realised that a higher rate would drive some high earners out of the country and lead some companies with large numbers of high paid people to locate elsewhere. Mr Brown was both a good socialist and a pragmatist. He knew that to run a successful enterprise economy he needed to do deals with the rich and with powerful international companies, even if he did not like them.

I have consistently recommended returning the top rate to 40%, both in the closing days in opposition and now to the Coalition government. I think that lower rate would bring in more tax from the rich.

The government has estimated that they have lost £7bn of top end income tax as a result of the 50p rate. They have identified a large number of people on very large incomes who have left the country. The loss of these people also means less revenue from the higher rates of CGT, Stamp Duty and luxury taxes they have imposed. It is a great pity the UK establishment will not allow an honest examination of the causes of the large reduction in top end income tax. It is too much of a coincidence to deny that the 50p rate has done damage to revenues, though of course there are other factors as well depressing some higher incomes post Crunch. The fact that there were still so many people declaring £1m incomes post Crunch prior to the 50p rate shows it is not a simple matter of the damage done by the recession. A medium sized open economy cannot get away with substantially higher rates of tax than competitor countries.

I expect neither Labour nor the Lib Dems will pledge to raise the top rate of Income Tax in their next Manifesto.

The global market is good news for the skilled, the active, the energetic and the ambitious. It is often seen as a threat by others, who fear it means no job or a low paid job. After all, the other side of access to the world’s better off as a much larger market, is access to the world’s lower paid as a potential workforce.

In the UK there has been a paradox. The same people who welcome access to ever cheaper and better value products from China, India, Malaysia and Korea complain that UK wages are too low and that too many new migrants are being allowed into the Uk to undertake work at modest pay levels. The very same people who are paying the poor wages of the Chinese or Thai factory worker when they buy the foreign product, recommend a higher living wage or bigger benefit top ups here at home for the jobs that remain. They are not prepared to pay the UK workers higher wages themselves by buying the UK product if it is dearer.

It leaves us with a problem. Of course all UK elected politicians want people here to have well paid jobs. If you could do that by legislating for a high living wage, Labour would have done it when in office. They did not do so, opting instead for a minimum wage which is a low wage by western standards, because they feared that a higher level would simply destroy more jobs in the UK, exporting the opportunity to lower wage countries. Like the Conservatives before them, they embarked on a programme of taxpayer financed add ons to low pay, so that those in lower paid employment had a better income through benefit and tax credit top up.

The long term solution to the problem favoured by most political parties is better education and training, so more people in the UK have the skills and qualifications necessary to command higher wages in the world market. If we want to enjoy living standards more like bankers or lawyers, then more of us have to have skills and offer services as valuable to the world market as lawyers and bankers. We need to accept that this can only be a partial answer, as there will remain people who cannot achieve the level of skill and enterprise necessary to command high wages.

In the shorter term the Coalition like the previous government will seek to find the best blend of income top up and minimum wage to provide a minimum income that offers the many participation in the success of the fast moving global economy. That requires tolerating the rich and successful in our country, and welcoming more to us. The way to earn higher wages is to work well for someone or some company who is rich enough to pay you well. The London economy benefits from the concentration of wealthy foreigners who now occupy much of the best central London housing. The other model, of relying on ever higher taxes on the rich and successful to pay more out in benefits for those who cannot find decent jobs , will in the end be self defeating. The rich leave, as Mr Hollande is discovering. Far from paying more, they pay less, leaving the country unable to afford such a generous welfare system.

In a global economy experiencing rapid technical change there are plenty of opportunities to start new businesses, create large and growing companies, exploit skills and talents for a worldwide audience, and generate jobs. A few even manage in their teens and early twenties to become multimillionaires by being internet revolutionaries.The US has been especially good at riding this new wave.

UK sports, singing and film stars benefit from global media exposure, earning fabulous sums as they can now entertain the world, not just the UK. UK bankers, lawyers and business consultants can earn large salaries and bonuses by offering their services to a worldwide clientele. Famous brands offering everything from cosmetics to clothes, and cars to watches can command premium prices from the rich in many countries. Some of the world’s wealth rubs off on the UK economy.

This more globalised world is richer overall than the world of more entrenched nations with more enclosed economies it replaces. National governments have been losing power, as more and more countries join the global marketplace, their people seeking access to the opportunity, the products and the services that the market generates. The biggest change came with the ending of the USSR, followed by the gradual transition of China to a more capitalist model of economic development. When people demand the advantages of the global market, a government’s opportunity to control economic life and information flows is reduced.

This transformation has posed big political issues for many of the countries caught up in it. Given that the active and successful rich will get richer, as they benefit from a much larger market with many more better off people and companies to sell to, how do we take care of thsoe who cannot do that? It has also posed a big political issue about how government is conducted. Given the limitations on any individual nation, should a nation join a major continental grouping, or should it pursue its interests by Treaties entered into with the wider world community?

I wish over the next few days to explore the first of these quesitons. My answer to the second vis a vis the EU is well known and often rehearsed. I do not see why, just because we have to accept limits on the UK government’s freedom to choose placed by market influences, we should surrender even more power to a mezzanine regional government. The world market does limit what we can charge in taxes and what types of goods and services we produce, but that is no argument to give up our still considerable powers of self government.

The Uk economy has performed quite well recently if you take into account the damage done by declining oil and gas production, by the impact of the financial crash on the lead financial sector, and the collapse of construction activity which is also the direct result of the boom and bust building and investment finance of the last decade.

As I have argued before, there is no “productivity puzzle” as the Bank suggests. UK productivity has fallen and employment risen in the last two years owing to large structural changes in the economy. It is good news that there are many more jobs, reflecting growth in numerous UK sectors.

A further decline in oil and gas output means the losss of highly productive and valuable output and some of the jobs with high wages traditional in the sector. In 2012 gas output from UK production fell by 14.1% and oil output fell by 14.3%, an unusually large fall. Quarter 4 2012 oil and gas production was 20% down on Quarter 4 2011. Most of this decline was unavoidable, reflecting the ageing reservoirs with much of the valuable material extracted in earlier years. A more favourable tax regime introduced recently may stimulate enough oil and gas exploration to stop the decline or reverse the decline in due course, but the previous government simply presided over decline.

The financial services and banking sector grew at twice the pace of the economy generally in the decade up to 2007, and generated large amounts of tax revenue to pay for welfare and public services. It was Labour’s favourite helper with the expansion of public spending, with Labour politicians especially keen on promoting RBS and Northern Rock from their northern bases. That went into sharp decline during the crash, and fell 10% by 2010. It is still unable to grow and produce profits and tax revenues in the way it did, with the largest bank still mainly owned by taxpayers and making losses.

Construction too has been struggling. Housebuilding collapsed along with the crash of the mortgage market and the distress of four major mortgage banks during the Credit Crunch. Labour cut public capital spending just before leaving office, cuts which the Coalition largely accepted. Private sector investment has also been constrained by a lack of confidence resutling from the Crash and by the fall in domestic demand the Credit Crunch created.

If you allow for these large falls in activity in three important areas, it shows that the rest overall is growing. We know the public sector has made a real contribution to economic growth, but so has much of the rest of the private sector. The task of recovery would be easier if tax changes kick in sufficiently to promote more oil and gas exploitation, and if more action is taken to allow profitable but this time sustainable financial sector activty to make a bigger contribution as in the Labour years before 2007.

When Iain Duncan Smith was asked if he could live on £53 a week he answered instead of sidestepping it as a politician is expected to do with such a question. The better answer for an MP and Minister on a good salary faced with such a question would be to say “I do not want anyone to have to live on £53 a week, which is why we are promoting work to raise people’s living standards, and why we have a range of benefits and pensions for the disabled and elderly higher than £53 a week”.

The Coalition government has pointed out that benefits to people of working age amount to £90 billion a year. That takes one sixth of all the taxes we pay. Most people agree that it would be better if more people on these benefits could find work, and most people agree it should always make people better off to opt for work rather than for staying on benefits, where work is available.

The government has made some changes to try to make it more worthwhile to work. Taking many people out of income tax altogether is the positive way of doing this. When people return to work they now face benefit withdrawal but no income tax bill at lower income levels.

The government has also introduced two caps to benefits. The first is a cap to Housing Benefit. No-one can now claim more than £400 a week in Housing Benefit. So if someone living in a very expensive rented property needs help with the rent, they now have to find a property at a lower rent if they want all the rent paid by the state. The second is a cap on total benefit payments, at £26,000 a year for families and £18,000 a year for a single person.

The £26,000 a year cap is much higher than the £53 a week of recent debate, working out at £500 a week. Neither figure is representative of what many on benefits receive.

How much do you think we should pay to those who are not working? How far should the state go in helping and checking up on people’s wish to find a job? The level of benefits is designed to help people over a rough patch, not to become a lifestyle choice. Many people on relatively low benefit incomes will go on to find work and enjoy better lifestyles as a result.

In all the debate between the Churches and the government, Labour is reluctant to engage. We do not know which, if any, of these Coalition measures a Labour government if elected would want to reverse. Labour just keep complaining about the cut in the 50p tax rate to 45p. They remain silent when asked why they now favour a 50p tax rate when it means the rich pay less tax. They remain silent when asked why for practically their whole time in government they correctly thought 40p was a better top rate. They remain silent on whether they would restore the 50p tax rate if in office. They just try to whip up anger over the 50p tax rate to avoid discussing the tough issue of just how much we should pay people of working age who do not have a job and how we should reform our welfare system.

Prior to the last election I argued that the MPs’ pension fund should be closed, preventing any new members joining and stopping further accrual by existing members. I suggsted it be replaced by a modern money purchase scheme similar to the experience of most private sector companies. There are few final salary schemes left for new members in the private sector. This could be the prelude to a wider public sector pensions reform to limit future costs to taxpayers by changing the terms on which future contributions could be committed.

My view did not prevail. The Coalition government did, however, agree that public sector pensione generally were unaffordable. They recommended higher contribution rates for MPs and others in the public sector, and said these would control the costs of provision.

It is interesting to compare the costs of public sector pensions in the first Coalition Red Book in June 2010 with the costs in the latest version, Budget 2013:

2010 forecast £5.8bn 2012-13, £8.9bn 2014-15, £10.3bn 2015-16

2013 forecast £10.5bn 2012-13, £12.4bn 2014-15, £13.6bn 2015-16, £16.2 bn 2017-18

Michael Johnson and the CPS have done good work on this, setting out what they see as the pensions cost timebomb for taxpayers and making proposals to tackle the issue. A small part of it is the state assumes responsibility for the Royal Mail pensions scheme payments (£1.3bn). The rest is the rising cost of pensions in payment compared to contribution income.

The Red Book certainly reveals that action to date, seen as tough by some in the public sector, has not been sufficient to avoid a very large increase in taxpayer contribution to public sector pensions.

Today various papers and commentators have come out to say the Coalition government is dismantling the welfare system, cutting it beyond recognition. It is difficult to reconcile these extreme claims with the figures.
In 2009-10, the last Labour year, social security benefit expenditure amounted to £163.7bn and tax credits were £22.9bn. The forecast for 2013-14 is £180.4bn on social security benefits and £29bn on tax credits, an increase of 12.2% in cash terms. This is after the creation of many more new jobs and a small fall in the unemployment benefit claimant count.
Those who say they do not like Coalition attempts to reduce the pace of increase in benefit expenditure should tell us how much more than £209bn they wish to spend on benefits and tax credits, and where this money would come from.

The departure of David Miliband for the USA is a wise move for the Labour party. As David is said to believe, his continued presence would add to speculation against his brother and allow all sorts of stories to run about disagreements, splits, and fraternal unhappiness, whatever the truth of it all.

I never thought Labour elected the wrong Miliband as their Leader. For all his abilities and charms, David Miliband had one fatal flaw in someone wishing to lead the UK. He remains a convinced Europhile. I like to think that the UK is now such a Eurosceptic country that anyone serious about leading it has to show a willingness to challenge the current EU orthodoxies, and talk about a new relationship for the UK as Euroland hurtles towards greater union. David Miliband is stuck in the past over the EU vision.

Rumour has it that Ed Balls has had to battle against David Miliband over Labour’s stance on the EU. More pragmatic and hungrier for power than David Miliband, Ed Balls has sought to move Labour away from unthinking support for all things European. Ed Balls after all wanted Labour to join Conservative rebels to vote for a smaller EU budget, an argument he won. There could also be pressures from within Labour to match Mr Cameron’s offer of a referendum on our membership of the EU in the next Parliament.

The pound was only safe and the Euro defeated in the UK when those of us pressing to keep the pound secured a pledge of a referendum before joining from both Conservative and Labour leaderships. It was the cross party support for such a move that made the pound safe. Mr David Miliband’s withdrawal from the fray is an important loss for the out of date Europhiles, unwilling to see that the new Euro government emerging is something the UK cannot be part of. Now Mr Ed Miliband has the chance to offer a new deal with the EU to reflect the growing impatience with the curreent EU here in England. Is he able to take that chance? Does he now see he is liberated to take his Europhile party nearer to the healthy and sensible scepticism of most UK voters?