The government has kept its promise to increase the amount of our money it spends on overseas aid.  Last year saw the Department for International development increase its spending to £7.87 billion from £7.48 billion the year before.

          Just under half was spent on country programmes administered by the Department, or £3.4 billion.  £1.8 billion was spent through its international finance programme, sending the money to the World Bank, regional development banks and global funds to spend. A further £1.7 billion was spent under the heading  “International relations” where the bulk went to the EU and the UN to spend for us. £0.8 billion was spent on research, including £0.2 billion on climate research.

           The Department mainly talks about the good work it does under its direct programmes. It is making progress getting children into school in poor countries, vaccinating  against disease, and tackling the scourge of malaria. Many of these are good programmes with noble aims.  It talks less about its reseach work and the money it sends via the EU.

            Under its country programmes, the biggest include India ( £268m), Pakistan (£216m), Nigeria (£172 m), Somalia (£103m) and Kenya (£94 m). Some of it is dangerous and difficult work. Last year £300,000 was written off for the loss of 5 trucks of aid in Southern Somalia from problems over authority for the mission. The Department is strengthening its anti corruption checks and systems, as it is aware of the dangers of misappropriation of these very large sums.

              What do you think of the priorities and the totals? Should the list of countries be shorter?

The government’s transport budget is largely  spent on the trains. They have a report which says that our railways are far less efficient and far costlier to run than comparable overseas systems. The government has said it intends to seek out better value for money. The need to control UK public spending demands more urgent attention to securing just that.

The first thing to address is the imbalance between the trains they run and the trains people want. They run too few trains with too few seats at peak hours on the popular commuting routes. They run too many trains with too many seats on many less popular routes and at less popular times of day. They need to increase capacity at peaks, and they need to get better at selling tickets for off peak and cross country.

The railway executives tell me they are now working on new signalling and braking systems which could increase capacity. Being able to run just 30 trains an hour on excellent routes right into the hearts our cities at peak times is a luxury we cannot afford. They must rapidly find ways to increase capacity by say 50%, increasing train frequency to 45 an hour from 30 an hour. Then they could provide a better timetable at peaks, and offer more seats so there was less overcrowding.  They also need to sort out the leaves on the line/wrong kind of snow syndrome, by adding more traction to commuter stop start /trains.

The approach to ticketing seems complex and expensive. Either tickets should be inspected on trains by on board inspectors, or checked at entry and exit from the platform. Combining elements of both systems is wasteful. Control onto and off the platform is likely to be the cheapest way of doing it, and can be done by automatic equipment in the main. If there is a problem checking first class tickets in first class carriages, this can be done by catering staff as part of the payment and checking system for the food and drink offer.

The cross country and long haul railway is probably most productively used for freight. The railway needs to be more interested in single wagon  marshalling and single load  business. Rail freight has grown since privatisation, and there has been improvement in the offer. The old nationalised industry was only interested in trainload contracts. A whole generation of new business parks was built with motorway access instead of branch line connections to the railway as a result.

            The UK state needs to get some cash back from  its investment in the banking industry. Progress has been made in getting the state out of special loans and guarantees offered during the crisis. Taxpayers have received money back,  interest and fees to compensate them. There remains the big issue of the large shareholdings in RBS and Lloyds. The lack of progress in this reinforces my view that we should have done all the work supporting broken banks through short term loans, guarantees and restructuring, rather than buying shares. I am not planning to go over that argument again today.

         Instead I want to talk more generally about what customers expect from their commercial bank. Fresh from the excitement of reading more about how Terry Leahy transformed Tesco, it seems to me that our commercial banks need a big dose of asking their customers.

          My commercial bank should know all there is to know about my finances. My  income I earn goes through the current account, and most purchases I make are itemised on a card payment system. The only thing the bank does not know is how I spend the smaller amounts of cash I withdraw to pay for car parks and other purchases that require notes and coin.

                  In contrast the large  food retailer I use from time to time knows much less about my financial life. They know what items I buy when I shop there. They use this data to full effect. I am sent coupons to buy more with a discount if I undertake a larger shop in a specified time. I am offered extra bonus points or discounts on products I have bought in the past. I am invited to special promotions at the store. I get 1% back on all my purchases through the discount card system. In other words, my food retailer knows I shop elsewhere and they want more of my business. They reward loyalty, and they encourage a wider relationship by intelligent marketing.

                 My bank hardly ever approaches me with an offer of any additional service. It does not notice if I have some cash that could be put into a savings product, or am short of cash and migth need a personal loan. It may see a customer  taking out a mortgage somewhere else, or buying a car, but fails to make contact to see if they can help. The bank I sometimes use in central London regards queues as part of normal retail life, and does not match the food retailers in opening sufficient counters when demand is high. The only welcome innovation in recent years is the single queue.

               Customers want to feel the bank is on their side, but all too often feel it is not. A healthy dose of getting to know the customers, and offering us the services we want at good value prices would be most welcome.

The Energy and Climate Change Committee of the Commons has complained that the Treasury is undermining renewable energy. They say a lack of Treasury guarantees for future subsidies and revenues is going to make it dearer to put in renewable capacity, and therefore dearer for energy consumers in the future.

The Treasury are asking the right questions. They are attacking the high level of subsidy which some renewables attract. They point out that the price of supplying solar panels and even of windmills is coming down, so surely the subsidy should as well? There is  an argument within government between the Energy Department, reluctant to bring the guaranteed prices and subsidies down quickly, and the Treasury, impatient to get them down to provide consumers with a better deal. Sensible people should be on the side of the Treasury. If the guarantees from the Treasury are essential to the finance for such capacity, it means there is a worrying liability on taxpayers.

There is a more fundamental weakness in the situation which even the Treasury seems unable to counter. The EU renewable targets and carbon dioxide policies does mean substantially dearer energy for compliant European countries than for Asian and American competitors. No-one seems to discuss repealing or altering the EU frameworks, which are doing damage even to German industry as well as to the UK. Apparently the EU thinks it makes the world greener and cleaner if we hobble ourselves with high prices, large subsidies paid for by consumers, and  high carbon dioxide taxes, whilst the US drills for shale and Asia buys the cheapest fossil fuels it can find.

I am all in favour of more effort being put into fuel efficiency , insulation, smart industrial solutions and the rest. What seems stupid is for the EU to make it too dear and too dificult for higher energy using industries to prosper in the west, exporting them to the east. The Treasury needs to push back not just on the UK Energy department over subsidy levels, but also tackle the EU elephant in the energy room. We need cheaper energy all round. We need to save more on the subsidies.

Let the games begin! The UK will be a good host. We welcome our visitors and wish the athletes well as they reach for new heights of sporting achievement.

Last night’s opening ceremony produced a superb forging of the rings and ended with a spectacular sequence to unite the flames.Many in the worldwide audience will have enjoyed the misbehaviour of Mr. Bean and the way the Queen and Mr Bond appeared to drop in, avoiding surface transport.

I will leave any more contentious issues about the historical and cultural presentation to a later day. I would be interested in your reactions now. Eurosceptics will I am sure appreciate that our various European visitors respected this Eurosceptic isle by leaving their EU flags at home.

          Lee Rotherham’s latest publication “The EU in a nutshell” (Harriman House) is an excellent guide to the history, costs and law making of the EU. He sent me a copy of it to review on this site, which I am happy to do. 

         From the opening remarks of David Starkey, reminding us of England’s history seeking independence and distance from the continental powers, to the country by country guide, it is packed with useful information.It could, for example, be a useful source book for trying to answer the crucial question ,what are the costs and benefits of UK membership?

       The UK’s total payments into the Union, after deducting the rebate, amount to a mighty £170 billion so far. We have also paid more for our food, though have benefitted from some tariff reductions on other products.  A Treasury study under the last government is said to have concluded that the total costs of EU membership amounted to a massive 28% of UK GDP. This comes from adding 7% costs of EU protectionism, to 6% costs of overregulation, to 3% transatlantic barriers to trade, to 12% being  the EU’s competitive gap with the USA. This combines imposed costs with missed opportunities and can be criticised for that. It is however, undeniable that the extra costs of EU regulation and protectionism are real, and limit our ability to compete with the rest of the world.  

        We have run a large balance of payments deficit during our years of membership with the rest of the EU, whilst often running a trade surplus with the rest of the world despite the extra costs and regulations imposed on that trade by the EU.

        The book also charts the rise of EU powers and law making. It demonstrates just how many different views have been expressed by the various authorities over how much law is now EU derived. All the figures point to it being an important amount, and some suggest it is the large majority in many areas.  It analyses the viewpoints of the differing countries, and stresses just how different the balance of costs and benefits are for the various states of the Union.

        If you want to be reminded of how the Euro came about, know how voluminous the law codes or or just browse through the vast array of EU institutions and quangos, this book is for you. You will not find much evidence of benefits to the UK,  but I do not suppose that will surprise most of you.

             The biggest area of expenditure which would yield welcome cuts for many UK voters is the EU. Recent work by MPs on what a new relationship with the EU might look like for the UK has highlighted huge areas of wasteful or less desirable spending in EU budgets that the UK would be well rid of. I appreciate many of you would like to be completely out and stop all the EU spending.

             When Mr Blair foolishly gave up part of the UK’s hard won rebate he told us he was doing so to get the larger prize of fundamental reform and reduction in the costs of the Common Agricultural Policy. No such deal followed. The  UK, with relatively efficient and larger farms, still has to pay large sums to subsidise small and inefficient farms on the continent. Farming is a policy which would be cheaper and better run from home.

               Regional policy is another area of waste and unfairness. The subsidies in EU regional  policy do not all go to the poorest regions, where more of a case can be made. The scale of payments is large for an intergovernmental organisation, but too small for a common currency area. As the Euro countries work out their political union, regional policy is a prime case where the responsibility and the costs should fall entirely on the Euro area players, with the UK disengaging. The UK can run its own regional policy. It does not need to send payments to other parts of a relatively rich continent for no good reason.

            Propping up the Euro is going to cost hundreds of billions. It is money we cannot afford, for a cause we do not believe in. The UK did Euroland a great service by staying out of it. Now we should reap the reward of not having to pay any of the bills, as they reap the reward of not having to prop up the UK’s large and weak banks in state hands.

              The UK has a veto over the next period of budget planning,. Instead of building alliances for no increase, the UK government should call for a major reduction in its contribution to the budget by opting the UK out of the farming policy and the regional policy completely. We were promised CAP reform which they have never delivered. They need a new and larger regional policy we do not wish to be part of. So let’s use the veto to negotiate something the Uk wants – much less of our money going to EU  policies.

             For the next few days I am going to look at a range of departments to see how they are getting on with controlling public spending. Let us begin with the biggest of them all, the Department for Work and Pensions.

               In the original Coalition spending review they proposed increasing current  spending from £158 bn in 2010-11 to £171 bn in 2014-15.  2010-11 turned out to be £160 billion, and last year spending reached £166.7 billion. This was  £3.3 billion or 2% more than the 2010 plan for that year.

              So why has it proved so difficult to keep to plan?  The main reason for the increase was the substantial uprating of pensions. The state retirement pension accounts for 44% of the total spend. The Coalition made the policy more generous with the triple lock pledge for better upratings. Higher inflation did the rest, requiring a larger increase.

                The second highest area of spending is housing related benefits. Housing benefit, Council Tax benefit and rent rebates added up to £27 billion last year, or 16% of the total. This year should see the first impact of the new housing cap at £26,000 per home. This remains high, so it will not do much to cut the rate of climb of housing benefits. Upwards movements in rents, especially in London, and the failure of most Councils to cut Council Tax mean continuing upwards pressure on the costs of this benefit.

                The department has made a substantial reduction in its running costs. These have fallen from £9 billion in 2010-11 to £7.7 billion in 2011-12. Staff numbers are down from 126,272 in March 2010 to 104,182 in March 2012.   It has not yet achieved a break through in the inherited high levels of fraud and error. These are still estimated at 2% or around £3.3 billion. The Coalition government thinks policy change, bringing in the new universal credit, should cut this fraud and error rate substantially.

                 As more people get jobs benefits to unemployed people will fall, but these are a small proportion of the total budget. Disability Living allowance is expected to rise as a cost over the life of the Parliament. The falls in unemployment benefit  cannot offset the higher pensions and disability benefits, so this budget will continue to rise.

         The second quarter provisional figures for the UK economy’s output show a becalmed  services sector, little changed overall on the previous quarter, and over 1% up on a year earlier. The smaller construction sector has had a second sharp quarter’s fall, along with a lesser decline in manufacturing and mining.

           Within the large services sector, once again rising real public spending makes a positive contribution to measured output. Financial and business services are also up, though now showing slow growth.  Transport and communications are down.

          The preliminary figures are based on estimates for June which assume poor performance resulting from the incidence of two bank holidays with the additional time off for Jubilee.  The sharp fall in construction so far this year  reflects survey evidence, and is probably accounted for by three main changes. The first is the ending of the major Olympics contracts. The second is the impact of the outgoing Labour government’s cuts in public capital spending, which were largely endorsed by the incoming  Coalition government. The third is the atrocious weather in the second quarter, which will have delayed work on many sites.

          Overall the economy is down 0.9% on a year ago. It leaves us still 4.5% down on the peak prior to the 2008-9 crash. Public current spending remains high. Private demand is less buoyant, where the tight tax and price rise squeeze has left consumers short of cash to spend. Falling inflation should help and is much needed.  The construction sector needs more orders. This is why the government is pursuing a number of schemes to try to get private finance into sensible projects.

          We have all been told not to drive to London. Anyone with tickets to Olympic events is told to take the train. You would have thought the railway industry would welcome this huge opportunity to show what it can do. What a chance to woo us to the trains.

          Instead the mainline from East Anglia decided not to stop some trains at Stratford as it was too hot yesterday.Various  tube lines have experienced  signal problems in recent days, delaying services. People who attended the rehearsal for the Opening Ceremony report long delays in getting onto the tube and other difficulties in getting home. To cap it all some in the RMT Union think this a good time to work to rule!