Yesterday’s announcement about High Speed 2 was given more significance by the media than perhaps it deserved. The route of the track from Birmingham to Leeds and Manchester, and the sites for the stations on the northern lines, remains to be finalised. If all goes according to plan the first passangers could travel on the new trains to Birmingham in 2026, and to the more northerly destinations in 2032-3.

I asked how much money will be spent this Parliament on this project. I was told just £200 million. This presumably covers the further work on consulting the public, confirming the works on the Birmingham section and choosing from the options for the northern legs. I was told that no construction contracts will be let this Parliament.

This means that a new government elected in 2015 at the scheduled General Election will in practice be able to make up its own mind about this project then, before letting the contracts. It will need to fit into the budgets being drawn up by the new government. It will need to demonstrate value for money and a good ratio of benefits to costs to the then Secretary of State for Transport and Chief Secretary to the Treasury. It would be wise to look again then at the forecasts of passenger demand, likely fare revenue, and the ratio of costs to benefits. It is also likely that voters in the affected constituencies will make this a continuing issue in the 2015 election.

I understand the strong feelings of some in the north that they would like to see this project go ahead to provide better travel links between north and south, in the expectation that it will stimulate northern economic activity. Such a view needs to grasp that we are talking about contributions to the economy from construction jobs towards the end of this decade, and stimulus to the wider economy from the transport links after 2026, 14 years away.

It makes it even more important that the present government, spared significant cost for this new railway, spends what money it does have in its transport budgets to boost other rail and road capacity for maximum economic advantage for the whole country as soon as possible. This one day railway will neither help the UK out of the recent recession by construction jobs soon, nor provide the stimulus to northern economic development this decade. This very fast train is on a very slow planning and building timetable.

The original London to Birimingahm railway took just five years to build, despite the opposition of local landowners who forced diversions of the route in places. It was also built with private sector finance. Not everything has got better and slicker.

Meanwhile, the best possible investment for the greater early success of northern – and southern – UK business might be better and faster broadband. Like the railways in the Victorian era, this is the latest technology, with much more private finance around to go into it.

I am with the Prime Minister when he says the UK Parliament should decide on when the referendum on Scottish independence is held, and what the question should be. Scottish nationalist concerns will be recognised by the UK Parliament holding a referendum on the topic, and by agreeing to their view that only Scottish voters should have a vote on this Union matter.

The referendum electorate raises issues which Westminster has to solve. Do people born in Scotland, temporarily resident in England, get a vote? Do people born in England, now resident in Scotland, get a vote? Should the referendum take the already established Scottish electoral roll, or should we allow a possible surge in new registrations as interested people register themselves at a Scottish address for it? What are the correct qualifications by residence, property ownership and employment? There are difficult issues in creating Scottish nationalist purity in the electorate when the two countries have become so intermingled by blood, marriage and residence.

The Prime Minister hopes that by offering a simple question soon to the Scots on whether they wish to remain in the union with the rest of the UK or not, he will secure a Yes vote. This makes him a very traditional Conservative and Unionist. The latest modernisers in the Conservative party now include some who are more English nationalist. Whilst for Scots arguing over their identity and external relationships the prime issue is England, for the English arguing over the same things the main issue is the EU.

The Prime Minister will discover when moving into this territory for public debate that English nationalism is on the rise. In a way that is what Mr Salmond hoped for and has helped promote. Scottish nationalism is becoming more popular in England, as more English think they could be better off without the UK. The dream ticket for a modern English nationalist is a decision by Scotland to leave the UK, followed by the ending of membership of the EU because the member, the UK, no longer exists. Paradoxically, making the traditional case for the maintenance of the UK, the government may find itself drawn into the territory it is less keen to explore, the continuation of the UK’s membership of the EU.The EU itself apparently does not welcome the idea of Scotland breaking away from the UK. This may help win Yes votes in Scotland, but will antagonise more English voters the other way. Were Scotland to leave the UK the EU would have to renegotiate its relationship with what remained, as the new country that emerged after Scotland left would need a new name and would be smaller, affecting all the numbers for votes, contributions and the rest. It would also be a more Eurosceptic country.

Whilst the Prime Minister can take comfort from the fact that he can deny the English a vote on the Scottish question, and concentrate on the debate north of the border, he may find there is more debate about Englishness and English nationalism as a result of events in Scotland. He will need to build on his “No” to France and Germany over Treaty change, and demonstrate that he understands the EU frustrations of many English nationalists and of those who are thinking of joining them. He will need to offer more to avoid the divorce of this movement from the Conservative party.

It is a bold move to challenge Mr Salmond’s apparant leadership on this issue of identity. Saying bring it on, and providing focus to the debate is fine. Some in Scotland will counter that this is a Scottish matter, not a Union one. Mr Cameron needs to win this argument rapidly with a few well chosen soundbites. It has to be understood, however, that the politics of identity and belonging is about the most explosive type of politics there is. The English have been quiet for a long time, but the English lions are awakening. This may just be the alarm call they were wanting. The English too have an independence agenda. It mainly relates to the EU. The problem for the Prime Minister is the EU is now strongly linked to the union of the UK, both legally, and in people’s minds.

The government wishes to get the UK out of extreme debt. So far on its watch the private sector has done its bit. It has reined in credit card excesses, and gone soft on mortgage borrowing. The banks won’t lend 100% of a property any more, and many people are circumspect about taking on high debts to support high home prices. Many people have saved from their incomes so they have something to fall back on if things get worse.

Meanwhile the public sector has carried on with near record borrowing, whilst talking about cuts. It has made some, but overall it has raised its spending more. It has kept official interest rates at record lows, as it suits the government to be able to borrow at very cheap rates. The government has continued policies of taxing those who might save more at high levels, reducing their saving rate.

It has continued the past government policies of taxing pension savings more, confirming the death of many a private sector pension fund. The very low rates of interest on offficial debt have also been a death blow to pensions, as the pension funds rely on government bond income to purchase annuities to pay the pensions. The large deficits today are in no small measure the direct result of low government bond interest rates, as funds need to buy so many more government bonds to get the income they need to pay the pensions.

The way out of excessive debt is to save more. The way out of excessive dependence on state welfare is for more people to have savings and future pensions they can rely on, so they do not need so much money from the state. In order to encourage more self reliance and less state and individual debt, saings need to be more rewarding. We are at the point where the very low interest rate policies are doing damage to this wider social and moral issue. We need to make savings worthwhile. If it cannot be done by realistic interest rates, it needs to be done by sensible tax breaks. A balanced economy needs plenty of private savings, and wortwhile ways of investing them. A healthy society needs more families providing for themselves, where savings have a role to play.

Some of you have written in to say you do n ot agree with encouragement to people to buy their own home. The big advantage of home ownership coems before you retire, on the day your mortgage is paid off. Surely it is good to look forward to an old age where you do not have to pay rent? It is cheaper over the typical adult lifetime to buy your home than to rent it, even if renting from the subsidised public sector.

Many of the emails and blog replies I receive effectively ask just this question. I am bombarded with many examples of how our welfare state rewards people who do not get a job, do not buy their own home, do not save hard for a rainy day, and fail to provide a decent pension for their old age. Those who have worked hard to make provision for themselves and their families ask why do I have pay twice, once for myself and once for those who did not bother to be prudent?

The answer is in one sense very easy. I want to live in a society where we all contribute to provide an income to those who are disabled, who have fallen on hard times through no fault of their own, who cannot find a job despite looking hard for one. Few of the toughest critics of welfare would make the case for letting people sleep rough on the streets for lack of a roof over their heads, or would wish to see children go without food or basic amenities for lack of money.

The problem is in the tests we apply to see who should be eligible. All three main parties and most voters agree that much of our welfare provision should be means tested. No-one wants to offer unemployment benefit to the billionaire who does not need to work, or to pay for the children of the banker or footballer on the seven figure salary. Most agree we need to target the aid and assistance on those in need.

So far so good. It is the next step of the argument that causes the practical problems, and some of the moral argument. It is the need to offer the money to those who not only need it but deserve it. Most people and the three main political parties do not think benefits should be given to the individual who simply will not work, despite work being available. Difficult judgements have to be made case by case. Was this individual unlucky in not having a job in an area of relatively high employment? Was this individual trying to put employers off by his approach to job interviews so he could stay on benefit?

I always want us to be more generous to people who are blind or deaf or unable to use their limbs. These are visible and debilitating medical problems. It is more difficult if someone claims they are depressed or have a bad back. The condition could be life sapping and make it impossible for them to work, or it might be something many put up with without stopping them earning their own living. These tricky decisions are having to be made by adjudicators and medical advisers, to offer justice over claims.

The welfare system largely provides help to individuals and families with insufficient independent income, but some of the money is also based on spending patterns. Instead of giving people a fixed amount to take care of housing needs, housing benefits are based on the actual cost of the person’s accommodation. There does seem to be widespread support for the reform that says there needs to be some upper limit on how much a family without income can spend on housing to receive state support.

The issue I would be interested in comment on is how tough should the state be when assessing eligibility for benefits? How do we answer the question Why should I be prudent? At the very least it must always be worthwhile working. It also needs to be worthwhile saving, a topic I shall return to later this week.

I was pleased to see the Shadow defence Secretary acknowledge Labour needs to show what it would cut. They have always found cutting national security easy – they did some of that in office whilst presiding over the huge overall surge in public spending elsewhere. I await with interest how they would cut this far bigger area of social security, where cross party agreement could add to the authority of the decisions. This year national security or defence is scheduled to cost £40 billion and social protection or social security to cost £200 billion.

I was pleased the Prime Minister tackled the difficult issue of nursing and nurse leadership yesterday in his speech. Many of the problems I see in the public sector stem from poor management, just as companies which go bust are often badly led.

There are big differences between being a senior manager in the public and private sectors. In the private sector the danger is the boss has too much power. You have the power to hire and fire, to reward and to penalise. Your approval is sought by the ambitious, and your disapproval can cause angst and worry for your staff. In a private sector company the problem for the boss is to get honest advice from employees. The boss has to beware. A throw away remark or an ill formed thought can become a mantra or a command which people take too seriously. The danger is rash action based on the boss’s poor understanding or unchecked prejudice.

In the public sector the Minister has no power to hire and fire, to set salaries or award bonuses. There is plenty of honest – and some self serving or badly informed- advice available. A clear Ministerial decision or instruction can be treated as an invitation to a seminar by civil servants. It might become a challenge to them to see how they can rally forces against it. Ministers need to learn how to get the system to do as they wish, as it is not easy. The danger is nothing new or better ever happens. The forces of inertia can be very great. It is especially difficult for a Minister who wishes to do more with less, as the whole culture is in favour of spending more as a signal of success.

Nursing, as the Prime Minsiter observed, should be about caring for patients. Record keeping is important. A good hospital needs to be meticulous in recording drugs needed and treatments administered to avoid errors and to check on results. This need not get in the way of patient contact. Indeed, the records should mainly stem from nurse and doctor contact with the patient, and can be mainly carried out at the same time as the conversation with the patient. The drug taking needs to be recorded at the bedside when it is administered. The patient’s condition needs to be recorded along with their feedback when the nurse or doctor calls.

Good leaders or managers know when to listen, when to seek advice, when to consider, and when to decide. They decide based on good evidence, and carry through their chosen course. They need to explain it to staff and all affected by it. They need to carry as many as possible with them, but at times they may need to make a decision which does not meet with the approval of some involved. In such cases it is even more important to be right, when you need to draw on superior experience and knowledge to make it worthwhile going against the viewpoint of some of the team and those affected.

Nurses above all have to carry the patient with them, and must regard the patient as the most important person and the ultimate decision taker. Many patients will trust their medical advisers to do what is best. Others need explanations and need to be persuaded to consent to the interventions thought helpful. All this requires more time with patients. If the Prime Minsister achieves anything from his speech , it is important he achieves this simple thing. Nurses need to spend more time with their patients. The “paperwork” as it is called in a rather old fashioned way has to stem from the work done at the bedside, and has to to be fitted into the relationship with the patient.

Yesterday Italian unemployment figures came in at 8.6%. That is bad news for many Italians, but by Euro area standards it was a good performance.An astonishing 23% of the Spanish workforce is unemployed, including 45% of young people. 18% of the Greeks of working age, 14% of the Irish and 13% of the Portuguese rely on out of work benefits for their living. Even in France almost 10% of the workforce is without a job.

The Euro area chiefs do not seem to worry unduly about this waste. They seem unconcerned that their currency scheme is one of the main reasons why unemployment is so high in these countries. The Euro has delivered a series of uncompetitive economies in the south. It delivered a credit and property bubble in Ireland and Spain which is proving painful now it has burst. It has created a very weak banking system throughout the Euro area. The currency requires countries in trouble to follow mutually assured deflation as their prime policy.

Yesterday was another bad day for the Euro in other ways. Uni Credit bank shares fell another 14% on the back of their deeply discounted issue of new shares to buttress their capital position. In sympathy Euro area bank shares generally fell by around 5% on average in just one day, after a prolonged period of weakness. Investors worried about the volume of new bank shares the other banks will need to issue, and assume they will be able to buy those at well below current prices, as UniCredit shareholders have now discovered.

Hungary, a candidate to become a member of the Euro saw her bond rates forced up to almost 10% and is now seeking help from the IMF. Italian state 10 year borrowing rates went above the magic 7% again, whilst Spanish 10 year rates also rose to 5.63%.

The ECB’s giant injection of more cash has not injected the confidence in the system that all hoped. Mr Monti, the new technician PM of Italy, has had to travel to Brussels for more talks. Sarkozy and Merkel will be back together attempting another package to save the Euro, probably next week. The truth is the Euro system has unleashed a banking crisis on the back of a sovereign debt crisis. They failed to keep banks’ capital up to sensible levels in the better days, and are now behind the curve in the bad days. Meanwhile the overborrowed governments are struggling to raise the collosal sums they need to keep going.

If they were at all worried about the unacceptably high unemployment, they would be plannning and early and orderly exit from the currency of the weakest economies. They would also be sorting out the banks in need of state support, deciding which bits to back and keep and which to put into orderly administration. Spain announced this week another 50 billion Euro hole in its banks and related property market.

On Tuesday I was invited onto the Today programme to talk about the Dilnot Report. I explained to them it was not an issue I had been campaigning about, not even an issue where I had come to a strong or different conclusion to current policy. They were still keen to question me about the subject.

The news peg was a letter in the Daily Telegraph from numerous leading charities and other interested parties. They said there is a crisis in care for the elderly. They urged the main political parties to continue talks to reach a cross party consensus on reform of the system. It is difficult to disagree with that. Cross party agreement to change could guarantee less future change or disruption, if the parties hit on a good answer.

I suggested that we should start from the question of how do elderly people get access to the care and support they need? If there is a crisis, it is because too many elderly people are not being looked after well enough or do not have a good choice of future care home provision. I have been worried by some reports of the poor treatment some elderly people have experienced in care homes. I am concerned that some elderly people living in their own homes do not get the help they need with shopping, cooking and other basic daily chores, making their lives uncomfortable and even dangerous. Reading the Dilnot releases again, they seemed more preoccupied with the issue of who should pay for the care and accommodation, and spent considerable time discussing how to preserve more of the childrens’ inheritance from parents who need expensive care and accommodation in their old age.

The Dilnot proposals suggest that allocating £1.7 billion more a year to this area would ease the problems. This money seems to go primarily to lessen the amount that individuals would pay from their own resources when they needed to live in a nursing home. The Dilnot suggestions include raising the means test threshold from £23,000 of assets to £100,000 of assets before you need to make full payment, and capping the total that anyone had to pay for nursing or care home fees to £35,000 however long they lived in such a home.

The current cross party consensus is based on three main principles. The first is that medical care should always be free, under the NHS. Elderly people tend to need much more medical attention than younger people, and should not face financial penalties for this need. The second is that if an individual has little or no money and property of their own their nursing or residential home would be provided free to them, so they could have a dignified and warm old age at no cost to themselves. The third is that if an individual who has financial and property assets needs to live permanently in a care home, they should pay for their food and accommodation all the time they have the means to do so.

Some object strongly to the fact that the old family home has to be sold to pay for the nursing home, if just one parent is still alive, needs to move into a nursing home, and has no other money. There is no question of using the asset of the family home if the other parent still wishes to live there. I would be interested in your thoughts on whether you think the current system is based on the wrong principles, and if so what changes you would like to see in the provision of care and payment for it.

Since 2005 I have been ever ready to criticise the Bank for helping the roller coaster ride we have experienced. I disliked their super lax monetary policy up to 2007 which helped pump up the bubble and brought on inflation, warned against their super tight bust the banks policy in 2007-8, and expressed concerns about their bring inflation on policy of 2009-10.

Today I find myself in agreement with them, that inflation this year will fall. This month the VAT rises drop out of the figures. We have had a relatively stable year for the value of the pound, which will help. The pressures from commodity prices have subsided for a bit. There is cut throat competition on the High Street, with poor footfall figures so far this year. We should expect more price discounting to attract customers back. The advancing internet captures more sales by offering better value and clearer price comparisons. It’s another force for lower inflation.

The tight squeeze on living standards brought on by rapid inflation, low wage increases, and substantial tax increases, has driven more people to shop for the cheaper brands and the better value goods. The discount stores are thriving whilst many of the higher priced stores are struggling.

I do not expect the government to add to inflation again by further VAT or sales tax rises. They may continue the long term trend of faster inflation for public services than for private sector offerings. The large rail fare rises this January may well be repeated next year, as there is little sign of the railways getting more efficient or learning how to fill all those little used early and off peak trains that I seem to encounter when using the network. Many a quango or government department likes to put up licence fees and charges rather than controlling costs, and will doubtless do more of that this year. Councils reckon taking more money off us in parking charges and other fees is now the easiest way to bring down their deficits. So we cannot say the public sector will now be angelic when it comes to inflation, but no more VAT rises will help, after two years in a row of Labour and Coalition VAT increases.

We do need to recognise that China is now allowing its currency to rise a bit, and still has some inflation in its system. We must factor in some price increases affecting some of those very good value goods we see in so many shops with “Made in China” on the packaging. There is always the danger that the pound could fall again, as there is going to be no shortage of pounds given the policy of quantitative easing. However, there is now a race to the bottom, with many other countries trying to engineer devaluations which limits the scope for a large fall in sterling. Recent weeks have seen the pound go up against the ill fated Euro, though not against the dollar.

I do not expect to see much price cutting by manufacturing companies. They are enjoying the lower pound, and wanting to make better margins as a result. There is less spare capacity in the system than some at the Bank think. Manufacturers are reluctant to put in additional capacity, as they are concerned about Eurozone recession and poor demand elsehwere over the next year or so.

I do not expect quantitaive easing to have much impact on inflation this year. Two large banks are still weak and with the others are under a regulatory cosh. The commercial banks are unlikely to be able to gear up their balance sheets on the back of the cheap newly printed money. QE seems to be more a device to try to keep gilt rates down so the government’s large borrowings can be accommodated. The recovery needs more private sector bank lending to worthwhile projects. That still awaits reform of the state owned banks, a task not yet given to the Old Lady of Threadneedle Street.

It is time to end the large squeeze on the private sector. Many in the media seem to be unable to distinguish between the private sector squeeze, and cuts in the public sector. They regard the two as the same thing, and often seem to equate what public sector spending cuts there are with the feeling of the many that we are worse off. This feeling has been brought on not by the spending cuts but by the tax rises and the high inflation eroding the purchasing power of our incomes.

As Table 1.1 of the Treasury’s own Autumn Statement book makes clear, in 2011 private consumption fell sharply. Business and dwellings investment also fell. The public sector, taking both current and capital spending together, showed a real increase. Would commentators please just read Table 1 and understand they are quite wrong to keep on talking about the deep public spending cuts so far? Overall there have been none, so the “cuts” cannot be the reason for poor economic growth.

The growing share of the public sector is astonishing. It has been shielded from all overall real cuts so far since the recession hit in 2008. The Treasury figures show that the public sector spent 41% of our total national output in each of the years 2005-6, 2006-7 and 2007-8 before the recession hit. It shot up during the recession and is now running at 47%. Because the public sector so expanded its share of a falling total, the squeeze on the private sector was intensified. The private sector not only had to absorb the hit from recession, taking away revenues from its businesses and employees, but also had to absorb the hit of a large increase in tax revenues to help pay for the expanding public sector. This year taxes will be £46 billion higher than in 2008-9, despite national income being lower than at the pre recession peak.

Some of this change was of course the so called automatic stabilisers. Public spending does go up in a recession as more people lose their jobs in the private sector and rightly qualify for benefits from the public sector. Some was a planned fiscal or Keynsian boost to demand, which did not succeed in preventing a sharp reduction in private sector demand. It did help intensify the tax squeeze and inflation squeeze on the private sector.

So let us assume that the high levels of public spending achieved under Mr Blair and Brown before the recession struck are the desirable norm, the levels the UK public wishes to vote for. That means getting UK public spending back to 41% of our national output, from the current 46% planned for this year. In order to do this without making any real cuts to public spending the UK private sector needs to grow more quickly.

If the UK economy grows at 2.5%, its old pre crisis growth rate, the UK could reach Labour’s preferred level of public spending by 2016-17 by freezing current real levels of public spending and allowing the private sector to grow. If the rate of growth of the UK economy is now around 1%, as some fear, by 2016-17 UK public spending would still be a very high 45% of national output without real cuts.

All agree we need more growth. The way to achieve it should not be in doubt either. It is back to our old favourites. Cut tax rates on earning and making profits, reward savers better, fix the banks, and get many more of the costly but less desirable regulations out of the way. Public spending has risen, continued to rise under the Coalition, and needs to fall as a proportion of our national income. It is easier to do that if the economy is growing.

For the next few days I am going to explore work and jobs. Today I want to explore the political paradox about work.

Both Labour and the Coalition praise the idea of everyone of working age having a job. Most politicians buy into the proposition that if you can work to support yourself and your family you should do so. Some think this from Cbristian and Protestant roots, some from the Marxist labour theory of value, some because it just seems like common sense.

Both pursue policies they say are designed to make it more worthwhile or more likely people will go to work rather than stay on benefit. Political rows are about who has the best way of doing that.

Yet both Labour and the Coalition in office tax work. They tax jobs through National Insurance, and tax pay through Income Tax.The Coalition has  cut Income Tax on the lower paid and removed some Labour increases in NI which helps, but has had to stay with heavy taxes on jobs and work. Both governments have used strong rhetoric against those who choose to work long hours in order to earn high salaries and dividends from their businesses. Overall the rhetoric is anti financial success, with all the attention on how hard working people can be made to pay more of their income in tax.

It would be better if more of the tax burden were shifted away from taxing jobs and earning. That way here would be more jobs and the would be less need for top up benefits. We ended to create a virtuous circle where people keep more of the profits of their labours so they need less financial support from the state so the state needs to raise less in taxes. One of the main reasons we have such a high benefits bill is hat we tax earning and creating jobs too much.