Labour constantly cry that Tories will cut schools and hospitals to pay for tax cuts. It is a Labour lie.

Throughout the period of Conservative government, every year Labour claimed the government was cutting health and education to pay for the tax cuts.
So what did happen?

In 1978-9 the state spent

As the debt mountain starts to subside under the impact of the higher interest rates from the Central banks we need to remember the huge yen carry trade.
All the time the dollar remained strong against the yen and dollar assets went up it made sense to many people to borrow yen at rock bottom rates, and buy dollar assets at better rates. Once the yen starts to rise against the dollar, if people think it will rise further, that game is over. People rush for cover to avoid currency losses.
The Chinese markets are so far little affected by all of this, owing to the strong official influence over their markets, and the huge surpluses they are generating day by day. At some point there has to be a slowdown in US demand for Chinese goods brought about by some combination of weaker dollar and less spending power in the US.
There is some buying now of high quality dollar bonds, as investors switch out of some of their lower quality instruments.

We learn today that research confirms the obvious - if you concentrate Accident and Emergency centres at a few big hospitals it takes much longer for casualties to get there. This means that instead of getting their crucial first treatment at a bigger and better trauma centre, they have to receive it in a travelling ambulance, which is more dangerous.

There is another reason to be worried. Almost 6000 people died in 2005 in UK NHS hospitals where a hospital acquired infection was mentioned on their death certificate. Concentrating so much at a few large hospitals may mean sending accident victims to infection centres, where virulent strands of c dif and MRSA are proving difficult to remove. This too should be considered before the government blunders into an other round of smaller local hospital closures.

The UK troops are now camped near Basra airport, dealing with relentless fire. It is only a matter of time before the UK government ends their misery and allows them to come home. Some in the UK military think the continued presence of British troops in Basra is making the situation worse.

The US troops are being reinforced, and are trying to fight to regain control over areas of Iraq where there are forces hostile to the civil government and to the US. Some in the US military think they can win, and believe the British too could reassert control over Basra if the UK government committted more troops to doing so.

I fear the US will come to the same conclusion as the UK authorities in due course. At some point all foreign troops need to withdraw, leaving keeping the peace to the Iraqi civilian authorities. If peace cannot be kept without a very large army of occupation, and not kept to an acceptable standard with one, it implies the political settlement is not the right one.

Maybe the US and the UK should have further talks with the main groups seeking to uphold and undermine the civilian government, to gain a better understanding of the options. Street fighting has been going on for a long time now, and has not brought a peaceful settlement in sight.

It is increasingly difficult to understand why our government leaves our troops at risk in such a situation. Once opponents know your troops are leaving, it raises their aggression to claim credit for driving you out. The Americans are right about one thing - if you are staying your government needs to show resolve, by reinforcing and giving troops the equipment they need.

Falls on the Stock markets??have been????the inevitable outcome of

a) Absence of knowledge of where the bad debts lie and how many - if any - institutions are in trouble

b) Central Banks still saying interest rates in Euroland and UK may go up

c) Very public announcements of how much temporary assistance has been needed each day to see the system through the jitters

??Markets will rally and stabilise only when

??a) Market participants can form a sensible judgement of how much damage has been done

b) They think the authorities no longer want there to be more declines (so-called re-pricing of risk), and have shown that by telling markets interest rates will start to fall as inflation is under control.

??The rally on the back of the US offering some money to the banks themselves at a less penal rate is not a solution to the whole underlying problem. It stops immediate illiquidity, and allows some more slightly higher priced business to take place, but it does not tell markets that the sub prime crisis is over and we know its full effects.

Andy Burnham went on to Sky with me this morning.

He gave his usual rant about how any tax cut will mean the end of civilisation as we know it.

When I asked him how Labour had managed to cut Corporation Tax without damaging services, he admitted it could be done (the answer should have been in their case, by putting other taxes and borrowing up!)

When the interviewer asked him why tax cuts couldn’t be paid for out of savings from waste reduction (after all the government itself has said it is wasting

So far the US authorities have stood together - the Treasury and the Fed. They both want to lower the debt mountain. The Treasury knows this will be painful, and accepts that it will mean slower growth - fewer jobs and less business success.

This coming week will be interesting. Will the Fed decide it has done enough without lowering the Fed funds rate - and therefore the mortgage rate - or will it decide that without a proper interest rate cut the impact on the real economy may be too great?

It’s a game of chicken between the markets and the Fed, which will have serious consequences for all of us. If the Fed remains too tough for too long the US will catch a cold which will spread across the Atlantic.

I was somewhat surprised to read about the “Redwood Report” in the papers. It was the Conservative party’s Economic Policy Review. A Steering Group and several Sub groups worked away for more than a year. The final proposals were the result of collective discussion between Group members, and in some cases included discussion with Shadow cabinet members responsible for particular areas.

For example, we are grateful to John Hayes who as Shadow Skills Minister worked closely with us in shaping the chapter on vocational training, and to Chris Grayling who as Shadow Transport Secretary attended several meetings to give us his thoughts on transport policy. The analysis and proposals in these areas remain recommendations from the Steering Group.

The tax proposals were taken from Michael Forsyth’s excellent “Tax matters” Report. The occasional critic has complained that the tax section of our report is quite short, and there are no detailed costings. As our Report makes clear, we have based it on the Forsyth Report, which provides all the detailed costings and supporting arguments and should be read alongside the main Report. There seemed no advantage in doing all the work again and coming to different conclusions, given the strength of the original report and the desirability of avoiding two menus of tax reductions from the Review process.

The chapter on deregulation goes further in its proposals than the policy programme I put forward as Shadow Deregulation Secretary under Michael Howard. This reflected the strong views of many people we consulted that difficult areas like Health and Safety should be reviewed owing to the growth of a strong box ticking and essay writing mentality which does not always achieve the desired end but does cost a lot of money. Our business advisers and several members of the Deregulation sub group led by Adam Afriyie MP felt we needed to launch a debate about these areas, which has certainly succeeded! As the Times leader yesterday said so well, it is crucial that we can debate what style of regulation works best to ensure high standards of safety, and can debate how the cost the regulation imposes can be reduced where there is no great or unusual risk. Any critic who says we do not care about safe factories or good conditions of employment is simply wrong.

Labour think any Conservative proposal for tax cuts is flawed, because they think it is so difficult to answer the question How do you pay for them?

There are five easy answers to how do you pay for a tax cut?

You can:

1. Put up taxes on something else this has usually been the way Labour has financed their reductions in the main rates of Income Tax and Corporation Tax. Overall Labour has greatly increased the burden of taxation.
2. You can borrow more Labour has also done a bit of this to pay for their tax cuts. They have borrowed more as well as taxing more.
3. You can cut spending by removing things from the budget that government does not need to do a future Conservative government could scrap ID cards, abolish much unelected regional government, cut out many quangoes, reduce the size of the civil service by natural wastage.
4. You can reduce waste this government says they have been wasting

It was strange enough to see the Chancellor out and about on the media yesterday seeking to condemn my Economic Policy Report, when we are in the throes of a very serious financial crisis. You might have expected him to be working behind the scenes with the FSA and the Bank of England to assess the damage to banks and financial institutions and to keep in touch with the ECB, the Fed, the US Treasury Secretary and the Japanese authorities, rather than preoccupied by old fashioned party politics.

It was another important day in the markets, and the US change of stance had an immediate and dramatic impact on London as well as Wall Street. It is,however, unlikely to be the end of the problems caused by the move from lax monetary policy to a credit squeeze.

It was even stranger to hear him revealing his economic ignorance, when he told the nation of the damage that taking

You can download a copy of the Economic Competitiveness Policy Review here.

To have a sustained rally in markets we need lower interest rates, and a clearer statement about the impact of losses on the main banks.

The Fed tried offering cash to the market but that on its own did not work. Now they are cutting the rate they lend to the banks, but not the main Fed funds rate. That helps a bit more.

This financial crisis has been created

If any government Minister wishes to allege I want lower standards of health and safety in the workplace,

The Chairman of a Hospital trust has sent me a list of 94 different bodies and officials who “have an oversight role” in the case of a hospital.

The list includes necessary ones like the General Medical Council, the Department of Health and the auditors.

The fact that it runs to 94 does make you ask can anyone run an organisation for 94 different bosses, and how can the government ensure no needless overlap and no gaps in supervision when so many are involved?

It also leads on to ask how effective all this regulation is, when nationwide in 2005 almost 6000 patients died with

It was not surprising to see a further fall as markets reflected on the absence of good information on how big the losses have been so far on difficult loans, and who has incurred them.

The Central Banks

In Doughty News Hour, Iain Dale speaks to John Redwood, Chairman of the Conservative Economic Competitiveness Policy Review Group, whose report was published on Friday 17 August 2007. They discuss who will read the report, what is its message and some examples of the issues it tackles. Click here for the full programme here

Falsehood has travelled half way round the world before truth gets her boots on.

Error One:

I warned that Central Banks pumping cash into markets was a short term fix, not a solution to the problems. Yesterday markets fell again, as people realised they still do not know when Central Banks will start cutting interest rates, and still do not know enough about how much the commercial banks have lost so far in the collapse of dodgy loans.

UK inflation fell to 1.9% on the CPI last month, back below target. It remains too high on the RPI measure, the one

Labour told us that if we granted Scotland its own junior Parliament there would be no pressure for independence and the

The cash injection from the ECB and Fed worked in the short term. Markets rallied, and then yesterday calmed down.

The markets now need more information. The sooner banks can update shareholders on what their true asset and liability positon is, the better. Markets have to know sometime, and sometime they have to price bank shares based on the true position. If more can be revealed sooner, the adjustment can be made. Assuming all the major banks are still solvent and capable of writing new business, up to date knowledge of their financial position would enable traders in the market to regain confidence so banks can again lend more to each other, and sell on mortgages and other loans they have written. If any bank is too stretched, again it is better that this is revealed and sorted out promptly. If it is not rumours spread, and the uncertainty taints others and prevents business being done.

Markets are stalked by fear and greed. Fear has had a good run for a couple of months now. Fear thrives on lack of information, and on rumours of what might have gone wrong. Fear is always increased by Central Banks raising interest rates.If banks and regulators want more orderly markets they should publish updates and help people quantify the damage so far.Central banks still need to think more about how far they can go in forcing a “re-pricing of risk” without precipitating a major crisis in the real economy. “Re-pricing risk” means lowering the value of many of the loans banks and funds own, which in turn means cutting the amount of money banks have to lend to people in the rest of the economy. Less credit means less business. Less business means fewer jobs. We did

Markets have rallied because the Fed as well as the European Central bank have stopped short rates going immediately

Spending part of yesterday at the beck and call of the media reminded me why so many people hate the news programmes and don’t like politics.

The day began with my arrival to appear on the BBC AM news programme. At 9 am they read out their headlines, which included the

The Labour spin doctors have been out in force today to try to frighten Conservatives and voters off any idea that we should take action to allow the enterprise sector to create more and beter paid jobs. Apparently the government believes that every word and paragraph of the thousands of regulations that crowd down on us are essential. They also seem to believe that if any one of them were removed businesses would be busy treating their staff badly and taking risks with health and safety.

The tough stance of the Fed to banks that have made foolish loans was altered somewhat yesterday when like the European central Bank they supplied cash to the market to allow banks and others to settle their debts.

Yesterday, share markets around the world were in free fall.

That came hard on the heels of the Bank of England forecasting a further rise in UK interest rates, and saying people owning high risk debt had to accept it was overvalued. They should expect no bail out.

It followed the Fed keeping rates on hold and telling holders of risky debt to