Even the Today programme could not ignore the Labour donor row this morning.
The blogger who came to their editorial defence yesterday when I criticised them for playing down the biggest political sotry of the year had as little editorial judgement and news sense as the programme he was defending.
If even the “Today” programme has to give this story some attention, you have to conclude this is big news and is changing the political climate in an important way.
John Humphrys this morning showed little enthusiaism for the story but did ask some of the questions he needed to to stay in touch with where the political and media worlds are going.
He also revealed his insouciance towards free enterprise by misquoting the extent of the Stock market rise yesterday and by saying he could not understand why Stock markets went up when the economics news was bleak. The answer, John, is simple. Markets look ahead. They understand the current problems. Buyers believe the authorities on both sides of the Atlantic, led by the Fed, will cut interest rates substantially to get things moving in a positive direciton again. Cheaper money would be good for business. Sellers look to the remaining bad news to come out as the credit crunch unfolds.Sometimes the buyers win. Markets usually move off the bottom long before the bad news is all out of the way.

The Bank is right to warn that inflation will go up again, but wrong if they think this means they need to keep interest rates up. They cannot stop inflation rising a bit this winter - they set that up by fixing interest rates that were too low during the boom times. Today they can decide how quickly we bring the credit crunch to an end,and how much damage it will do to jobs, property prices and activity over the next couple of years.

I find the dithering of the Chancellor and his Bank advisers pathetic. They have lost control of interest rates - rates in the inter bank market are well above the indicative rate the Bank of England is setting. They argue with each other, sometimes in public, about how tight or loose condtions are and whether the economy is slowing down. The MPC is as much use as an academic seminar at the moment. If they want to get back in charge the Bank has to start to lead rates down from the high real levels in the market. (4.5% above CPI inflation)

Let’s make it easier for the authorities - let’s keep it simple.

Commercial property prices are falling sharply.
House prices have started to fall.
Mortgage loans are sharply down.
Other loans are more difficult to obtain.
Credit is getting scarcer and dearer.
Banks are short of cash.

Whenever did you have a future inflation problem on the back of a credit squeeze?
How tough do they want it to get?

It has taken the Bank of England and this Chancellor a long time to undersatand the need to supply liquidity to a strapped banking system - and a run on an important bank. The US and the European authorities got the message much earlier and did not have runs on their banks. It was easy to forsee, as this blog did.

Now the UK authorities have grasped this point, can they not also understand why the US authorities have started to cut interest rates and are talking about cutting them some more?

The Chancellor talks about this credit crunch as if it were a US phenomenon. Let’s try again:

THIS IS A CREDIT CRUNCH MADE IN THREADNEEDLE STREET AS WELL AS ON WALL STREET.
SHORT TERM RISES IN INFLATION ARE INEVITABLE AND CANNOT BE STOPPED.
IF INTEREST RATES STAY HIGH TOO MUCH DAMAGE WILL BE DONE TO THE REAL ECONOMY.

If more evidence is needed by the Bank of England and by some the bloggers to this site that things are slowing down rapidly, it has come tonight in figures showing mortgage approvals down by more than a third and house prices falling, on top of the evidence of larger falls in commercial property.

The Bank of England has let it be known it will make more money available to the money markets ahead of the year ends for the leading banks. That is welcome - better late than never. The Bank should also realise that conditions remain very tight, and interest rates remain too high for the conditions. Every bank is going to want to show a strong balance sheet with good liquidity over the year end, so there will be a scramble for cash and for smaller stronger balance sheets. That is not the background to higher inflation!

Speaking in yesterday’s Opposition Day Debate on the loss of sensitive, personal data by Her Majesty’s Revenue and Customs, John Redwood highlighted the failure of Revenue and Customs to perform its basic duty of care to taxpayers, and called for a major change in the culture of responsibility and accountability in the public sector.

The full Hansard text of John’s speech is reproduced below:

Mr. John Redwood (Wokingham) (Con): I rise to support the wise words of my right hon. Friend the Member for Charnwood (Mr. Dorrell), and the words of my hon. Friend the shadow Chancellor. My right hon. Friend was right to say that, above all, we are debating a cultural issue. It is a matter of grave concern that HMRC does not regard looking after data as its fundamental duty, and that it does not consider that the customers or taxpayers whom it serves have every right to expect the highest possible standards when it comes to protecting the very important and extensive personal data that they are forced to give to the state, on pain of prison, so that taxes can be calculated and levied.

We are discussing accountability. We have held this debate because we think that the Chancellor of the Exchequer did not tell us enough when he first made a statement to the House

This morning the “Today” programme asked what was new in the Labour funding story! Mr Humphrys ruminated on when they could call a halt to running items on it, implying his impatience with such a turn of events. What is remarkable about this story is how quickly it is changing and how it is snowballing. If Labour do not make a more definitive statement soon about who knew what when, the press will continue to pick away at the Labour version to show just how much was left out.

John Humphrys should try reading the newspapers - as he usually does. That would tell him what is new and what remains to be found out in the story:

1. Mr Brown’s personal fundraiser did know about the Abrahams donations - we were originally told only the Labour General Secretary knew. What was Mr Mendelsohn going to say to Mr Abrahams when they met? Why didn’t he tell the Prime Minister? How long did he sit on the knowledge? If he accepted the advice that Labour thought this was legal why did he want to change it?
2. The Daily Telegraph has posed questions on where Mr Abrahams got all the money from.
3.We need to know who Margaret Jay told about the nature of these donations, and whether Hilary Benn passed on his intelligence about it.
4. Did the Gordon Brown campaign turn down money from Mr Abrahams and if so why?
5. Which events did Mr Abrahams attend and why was he invited?
6. Who made the decisions and who put in submissions for any planning perimssion Mr Abrahams obtained?

Some of us spoke out against the lop-sided extradition agreement the UK government struck with the USA. Under it the US authorities have wide ranging powers to detain UK business people, whilst the Uk doesnot have the same claims on US suspects. I still think the arrangements are unfair and need revision.

It was not helpful that in the first high profile case, the Nat West 3, they have switched from protesting their innocence to entering a plea bargain, pleading guilty to a serious crime and accepting 3 years in prison if the Judge agrees.I understand that they might revert to arguing their innocence to charges if the Judge does not agree.

I was standing up to protect the innocent from the delays and difficulties of transatlantic justice where there was no case to answer in the home jurisdiction. My case is weakened by the any switch to pleas of guilty in the first high profile case to hit the headlines, but it does not undermine the principle. There will be entirely innocent people, who do not have to stand trial in the UK because the Uk authorities do not think they have committed an offence who may now be under threat of extradition. I do not think the government has put in enough safefgurards, and it is notable that the US does not accept for itself the regime it now imposes on us. It is still necessary to revise this inequity despite the setback of this case.

Today we held a debate in Opposition time on the missing data of 25 million people and their Child Benefit records.

Mr Darling told us little extra, repeating his original Statement of 20 November and claiming that he had been right to say the banks needed extra time before he went public with the news. He failed to tell the banks between the department first knowing on November 8th and contacting the banks on November 16th, implying his cocnern about leaving the banks enough time came to him late in day. He conceded that the “junior official” involved in the loss was in fact a junior “manager”, and confirmed that in March when data had been sent in a similar way without mishap a senior manager was involved.

His junior Minister, Jane Kennedy, winding up the debate told us a bit more. Apparently the Treasury and HMRC are changing their arrangements for data transfer, limting the volume and frequency of transfer, encrypting more and improving the authorisation and postal arrangements. It was difficult to understand why Mr Darling did not tell us all this at the beginning of the debate. Maybe he did not because this implies it was a systems failure, and not an occasional mistake by juniors.

Will this make our data secure? It is difficult to be sure it will, given the lack of information coming from the top, and the apparent lack of purpose in putting these matters right at the top.

Stephen Dorrell and I pointed out that there is a cultural porblem in the department. If the senior Ministers stressed repeatedly that offering a good service to taxpayers was fundamental, and holding data securely was an important part of that, things might be better. As it was a senior manager in the Treasury, told on November 8th of the problem did not tell the Chancellor until November 10th, suggesting the Chancellor had not made his overriding interest in the quality of service clear. He in turn did not tell Parliament until November 20th, meaning 12 days elapsed before proper Parliamentary and public disclosure, leaving more people at risk of data abuse for longer.

We will need a further statement when the government receives an interim report from the reviewers looking at the whole problem of data security in HMRC. As so often this governemnt fails to take command, watches as things go wrong, and then brings in consultants to tell them what to do next. Why isn’t the Treasury and HMRC capable of sorting its own problems out, with all the staff they have? And why can’t this Chancellor offer some strong leadership, stressing the importance of better client relations and ensuring by chairing the relevant meetings that this wish will be reflected in practise.

I remember when Labour started their nasty sleaze camapign in the 1990s against the Tories I thought they were fashioning a boomerang. It was over the top, and unnecessary - the Conservative party was going to lose the election anyway. It was bound to damage politics as a whole and to make the life of a future Labour government more difficult.

I also remember that the BBC was willing to glorify little known Tory backbenchers who had made a mistake or were the subject of allegations as “Top Tories” caught in a “sleaze row” or just in “sleaze”. Experts were wheeled out to tell us it was a government in crisis. Tory interviewees were subject to endless interruption and innuendo, as the party was confused with the individuals.

How different it is today from the BBC. Labour’s Chief Whip Mr Hoon is allowed to tour BBC studios to make statements about how it will all be sorted out in an enquiry, and how the government is moving quickly to show it is a model of probity, without interruption or innuendo. The BBC does not line up experts to comment on the seriousness of the possible criminal charges, or the seniority of the Labour figures involved. Nick Robinson is an honourable exception, as he is doggedly trying to get to the truth.

When Labour came to office they changed the climate of journalists towards sleaze overnight. The fiat went out that in future husbands cheating wives - or wives cheating husbands - was not sleaze, but a personal matter that the BBC should ignore. Several of the cases of so-called sleaze for the Tories were stories of broken relationships. Under the new regime a succession of broken marriages and affairs received their lurid coverage in certain newspapers, but were not given the sleaze treatment by the BBC in genuflection to Labour’s new settlement.

The Ecclestone affair alerted Labour to the dangers of funding sources to their own reputations. It and other crises led them into legislation to tighten up the regime for reporting sources of funds. They introduced the double jeopardy system for MPs receiving money to help with their political campaigns - the need to report it to the Register of Members’ Interests in the House and in certain cases to the newly created Electoral Commisssion as well. Labour wanted belt and braces, and submitted MPs to their form filling compliance culture.

It is not without irony that it should be this very form filling culture that they have fallen foul of in these latest revelations. It was a failure to register the true donor of large sums of money that led the Prime Minsiter to admit that the party he leads had broken the rules. The first defence mounted was that the General Secretary - Labour’s own senior Compliance Officer - did not know the rules and was resigning because he and he alone had made the mistake. Many in the press doubt that only the General Secretary knew of the arrangement. The testimony of Hilary Benn, Margaret Jay and Harriet Harman - and their respective assistants - will be important in working out just how many people did know.

Today the position has been made worse for the PM by the revelation that his own fund raiser, Jon Mendelsohn, wrote a letter to the donor Mr Abrahams implying he too knew he was an important donor. This takes the whole issue that much closer to the doors of the PM’s study.

We should not lose sight of the reticence of the Communities Secretary Hazel Blears yesterday to answer questions how the decision was made to grant planning permission to Mr Abrahams. If the PM knew on Saturday of the problems, Hazel Blears and her department had some time to find answers to the obvious questions MPs and journalists were going to ask, but so far has not done so. The sooner she can give us an authoritative statement on how this was handled the better as far as the government is concerned.

There is also the question surrounding the gift of monies to intermediaries to pass it on to the Labour party. How have these transactions been accounted for? Are they all tax free transactions? Were there agreements in writing given the size of some of the sums involved? Why did the intermediaries agree to do it, as from their point of view it could prove to be all hassle and no reward if they received nothing in return for their deed?

Speaking in the House of Commons yesterday, John Redwood first highlighted the failure of Britain’s border controls at keeping out illegal immigrants to the Immigration Minister. Later that day, he also questioned the Secretary of State for Innovation, Universities and Skills on whether the Government’s proposed welfare reforms will see benefits withdrawn from those who refuse a training place or job offer.

The full Hansard text of John’s questions follows:

Mr. John Redwood (Wokingham) (Con): These illegal immigrants are here only because our border control failed in the first case. Why does the Minister not strengthen the surveillance of passports and visas when people first apply for entry into the country, and ensure that people we do not wish to see here, or those who are a threat to this country, are not admitted in the first place?

Mr. Byrne: I hope that the right hon. Gentleman will forgive me for saying that that is a slightly 20th-century way of looking at border control. If we are to have adequate defences against illegal immigration in the future, we need to strengthen our checks abroad. That is why biometric visas are preventing would-be illegal immigrants from coming to this country before they get on a train, plane or boat for the UK. We have to secure our borders in the UK even further, which is why we are introducing a single border force.

I do not think that we will make real headway against illegal immigration until we stop the cause of it, which is illegal working. That is why we have to increase the penalties for businesses that break the rules. It is also why we have to make it easier for businesses to know whether a foreign national is who they say they are, and whether they have the right to work. That is where ID cards will help.

Mr. John Redwood (Wokingham) (Con): Are the Government going to withdraw benefit if someone refuses a training place or a job on offer?

Mr. Denham: We have said today

I suggest the following advice to the PM from a Labour source:

To: Prime Minister
From: Senior Politicial Adviser

The drop to 27 % in the polls is serious, and the lack of trust in politics is tangible. Your well judged campaign to restore faith in politics has been badly damaged by Northern Rock, the loss of HMRC data and the Abrahams donations. I know how upset you are by these developments, and feel they are not of your making. Unfortunately they have changed the political weather, and the Tories are now claiming that Northern Rock is related to your changes to the regulatory framnework in 1997, and the data loss to your merger of Revenue and Customs. No-one said politics was fair.

You have rightly decided to try to change the subject of discussion, and have decided to say that you are going to be making the long term decisions the country needs. I think that is the right approach.

However, you have highlighted three decisions which are at best contentious - nuclear power, genetically modified crops and a 3rd runway at Heathrow, and at worst will increase the antagonisms. Whilst nuclear does remove carbon emission when generating power, many greens dislike it and draw attention to the carbon footprint of the new build as well as to disposal issues for the waste. A 3 rd runway at Heathrow is much needed to reduce queues and delays but will be presented as a contradiction to your stance on cutting emissions. GM food remains very unpopular according to all surveys of opinion, even though the government’s scientific adviser sees it as a key technology. You may be right that these things may need doing, but to highlight them in your current positon is, as Sir Humphrey might say, “brave Prime Minister”. Critics would say if you think they like data loss and the run on the bank, they will love GM food and nuclear power.

There are long term decisions the country needs that could portray you in the right light that are not as divisive as the ones you have started to highlight. The decision to make training or a job compulsory for those who would otherwise claim benefit is a bold step which could also prove popular with the large majority of people in work who are paying taxes. The decision to cut capital gains tax for all from 40% to 18% could be received favourably if a more generous treatment of those investing in their own businesses or through employer share schemes currently paying 10% was incorporated in the changes. If you reconsidered your position on a referendum on the treaty that could help to reduce the scepticism about politics.

Above all you need Ed Balls to come up with ways of raising the performance of state schools. The growing gap between the grammars/independents on the one hand and the comprehensives on the other is worrying. The large number of school leavers who cannot read and write to a reasonable standard lies behind the disappointing figures for the numbers of young people not in education, training or a job. You have always stressed the need to offer opportunity to all - we do need to raise our game here. If we could break through on jobs and training for all young people, the electorate would start to forget the noises off, and the costs of economic failure (which you waxed lyrical about in Opposition) would start to come down. This is one area where we are lucky that our Opposition is not as good as you used to be at blaming the government!

The prompt resignation of the Labour party General Secretary implies this is a big problem for Labour.

Much of the money passed to the Labour party after Gordon Brown had taken over. There are many questions to answer:

1. Harriet Harman received money for her deputy leadership campaign from similar sources. Was this properly reported? Did she know of the connections?
2. David Abrahams was given a good seat at Tony Blair’s farewell. Who organised this? Did they know he was a big donor?
3. Mr Abrahams passed money onto staff and business associates. How did they account for this money? Was any of it taxable?
4. Hilary Benn did not take money from Mrs Kidd but did accept a donation from Mr Abrahams. Were his team told of the links by Baroness Jay? If so, who else did she tell? If Hilary Benn did not know via her, how did they know?
5. What checks did the Labour party carry out before filling in its return for these donations?

All of this is very depressing for politics. It reminds us of the dangers of big money politics, and shows how Labour thought the rules they had invented did not really apply to them.

I just hope this is not used as another excuse to demand more money from taxpayers for political parties. The best answer is for the main parties to spend less on national campaigns, and to accept less from individual donors. Gordon Brown should do a deal with the other party leaders, accepting a cap of

Yesterday the Home Secretary stumbled when David Davis asked her what we should do if our biometric identities are stolen or mislaid when in government possession. She also revealed complete ignorance of the work in her own department to have a common system of identity control throughout the EU.

I asked a Home Office Minister who was telling us about introducing ID cards for foreign nationals in the UK why we didn’t police our borders properly when people first arrived. I pointed out that everyone coming to the Uk should have a valid passport and visa where needed. Surely it is easier and cheaper to make the checks on first arrival and only allow in legal entrants?

The Minister responded that that was a “very twentieth century view”! Well I never. That was the boomerang quote of the session, which is so revealing about attitudes in the current Home Office.

They spend lots of our money on border controls, and claim they are beefing them up. When I ask that they are made to work properly so we do not need to introduce ID cards as well, I am told that it is out of date. Labour want to carry on spending money on ineffective border controls, and then spend more money on issuing cards and presumably checking up on people on the streets as a back up system, based on their assumption that they will be incompetent at running the borders. If people can forge passports and trade in illegal ones, why do they think it will be any different with ID cards? Why do we need both?

No wonder we pay so much tax, and no wonder nothing works. Wanting things to work is so “twentieth century”.

I was looking up something about schools and stumbled onto the Ed Balls website.

If you dare do so, they warn you you become a “User”. You automatically agree to “not publish,reproduce,store or retransmit any information contained in this website” as it remains “the property of Ed Balls…”

Ed, please keep it. I see from your website you have not run a new campaign since 2005. I see you have only carried out two events in your constituency that appear in website news in the month of November, and that a normal constituency event is the lead news item. I don’t think it’s going to be difficult to keep all that private.

Why does Mr Cable want to wreck any proposal to solve the Northern Rock crisis? Today he sought to belittle the Branson bid, telling people it was unlikely to go ahead. I won’t repeat what he said about the risks to the taxpayer as the statement was unacceptable. He also accused sharebuyers of being “spivs and sharks” and said he wanted to stop any shareholder, big or small being able to sell shares any more by suspending them in the market!

Mr Cable’s shrill interventions are not going to win the Lib Dems any friends amongst the business community, and will put off anyone who cares about the small shareholders, depositors and taxpayers caught up in the Northern Rock crisis. If Leader Clegg (or Huhne if there is a late swing) has any sense he will terminate Cable’s role as Treasury spokesman before he is allowed to do much more damage.

What have we learned during this race?

“Calamity” Clegg and “Euro” Huhne have slugged it out, only to hear from the former Leader, Charles Kennedy, unflattering judgements. He does not think either of them have made their positions clear, in a way which will rally the Lib Dem cause. He does not feel motivated enough by either to declare for one of them.

I think Charles is being a bit harsh. Several things remain crystal clear:

1. Both promised a referendum on the EU Constitution before the last election. Both have ratted on their promise.
2. Both are former MEPs who want more European integration.
3. Both want more regional government in England on the European model.
4. Both want to impose a local Income Tax, so Councils can tax us more.
5. Both favour more green taxes.

The biggest difference between them is Huhne draws attention to the manifest contradictions of his rival, Mr Clegg, who likes facing both ways on big issues, whilst Mr Clegg just watches innocently as others brief about Mr Huhne’s past in the newspapers.

This site has forecast Mr Clegg’s victory. I go further today, and say how much I would welcome a Lib dem flip flopper with so little experience as their Leader. It would be as good having Ming Campbell from my political point of view. His rambling interviews reveal an inner inability to make up his mind and to lead, which capture the spirit of his party.

Were the Liberal membership to be awkward now and vote for Huhne, the Lib Dem MPs would look even sillier than usual, as they have voted by a majority for Clegg. Most of them would have acquired a touch of the Lembit’s.

Today we hear Richard Branson has become the preferred bidder for Northern Rock. It is good news that there is some movement, and there could be an outcome which keeps some of the Northern Rock staff trading with a new owner and looking after the customers and loans.

The scheme outlined on the radio implies the Bank of England and the Treasury did not take proper security for all the loans they advanced. It is high time Mr Darling explained the true position about this, and if they failed to take sufficient security for all the lending to explain why they made such an extraordinary decision.

According to the briefings so far, the taxpayer will get around half the money back immediately, and the other half back over a 2-3 year period. In the meantime the taxpayer will get similar security to other creditors. Presumably it also means no more government lending to Northern Rock, compared to the current position where the taxpayer is on the hook to lend more all the time there are deposit withdrawals. That would be a welcome development.

That may be a good outcome. To be able to judge it, the taxpayers’ representatives need to know how bad our starting position is. What, if anything, has been promised on repayment dates for the current loans? How many of them are secured on specific assets, which is better than a floating charge assuming they are secured on good assets in sufficient quantities? I have asked all these questions, but the taxpayer is still in the dark about how much money has been committed and on what basis.

Mr. Darling has made it impossible for the market to value the shares, as the market does not know the basics about how much money for how long is available to the company. If he is to persaude us all that he now will do a good deal for the taxpayer and for the UK fianncial system - his two legitimate aims - he needs to tell us more about the current position. The BBC this morning themselves asserted that there is a false market in the shares. The reason must be the lack of government transparency. That is unacceptable, after the Chancellor’s lecture to bankers that they needed to be more transparent!

I do hope Mr cable is getting ready with his apology for his irresponsible behaviour, if there is a successful rescue bid for Northern Rock. He has been so keen to attack Northern Rock and all involved with the company, making a rescue that more difficult.

The new government in Australia announces a change with the past by saying it will sign Kyoto promptly.

The real question is what will the government do to cut carbon output? We have several countries in the EU who signed up to Kyoto, but whose carbon output has been rising.

Gestures are easy - takign action which people will accept that will change people’s behaviour to burn less fuel is much more difficult. Is the new PM going the usual labour rotue of higher taxes and more regulations to try to get carbon output down? Or will he try the Conservative way, of offering incentives for greener behaviour? Or maybe he is just wanting to pose as a green, with no serious intention of doing anything. Wheh we know which way he is really going we will be able to come to a view on whether he is making a good or a bad difference.

Over the last decade I have made many speeches trying to point out that Gordon Brown did not make the Bank of England independent, and did weaken the Bank’s ability to respond to financial crises. I reminded any audience willing to listen that in 1997 he took away the Bank’s power to regulate individual banks, and removed its role of running the public debt. He did not even make the MPC completely independent in the way advertised.

These two changes greatly weakened the Bank’s ability to understand and control the money markets. When the mortgage bank crisis hit the Bank of England did not itself monitor the daily cash and credit positions of the banks, and did not itself organise the daily intervention of the government in the market with its own debt instruments.The need to respond to a banking problem in negotiation with the FSA and the Chancellor was bound to slow things down and make it difficult to come to a timely and sensible answer.

I reflected this in the more meaured prose of the Opposition’s Economic Policy Review (Freeing Britain to compete - available as a download on this site). In that we wrote:

“We are concerned about the division of responsibility between the FSA and the Bank over banking and market regulation. Fortunately conditions in the last decade have been benign internaitonally, with no threats to banking liquidity. We think it would be safer if the Bank of England had responsibility for solvency regulation of UK-based banks, as well as having the overall duty to keep the system solvent. Otherwise there could be dangerous delays if a banking crisis did hit,with information having to be exchanged between the two regulators; and there might be gaps in each regulator’s view of the banking sector at a crucial time, when early regulatory action might have spared a worse problem.”

If we could see that from Opposition, why was the government unable to do so?

Typical of the BBC to protect Gordon Brown and Alastair Darling by inserting the word “international” in front of “credit squeeze” when correctly reporting this morning that the credit squeeeze is now hitting the “real economy”.

Do you remember all those pompous commentaries from “experts” when the credit crunch first hit, assuring us this was just a problem for all those overpaid financiers and bankers in the City? Many took a dellight in the llikelihood of the well paid financial sector being brought to earth with a bump. This site said at the time this was a serious credit crunch which would have an impact on all our daily lives and on many businesses. So it is proving.

It is also a credit crunch made in Downing Street and Threadneedle Street. There is no home made credit crunch in much of Asia, and in the USA they are already moving to relax their credit crunch. Only in the UK this summer did the Central Bank resolutely tell bankers to sort themselves out, refusing to supply liquidity to markets and refusing to cut interest rates. I warned at the time they were being too tough.

Our accident prone Chancellor made a speech explaining that banks had made too many dodgy loans and needed to tighten up their lending. He warned banks there would be no bail if they did this, just days before he announced a gurantee for all bank deposits for any institution in trouble! We will now count the damage in falling property prices, cancelled investment projects, shortage of mortgages and loans and fewer jobs.

Mr Cable is being praised by the BBC for his “success” as acting Lib dem Leader. This “success” is to pursue a nasty campaign against the shareholders and management of Northern Rock, in an attempt to politicise a difficult situation and force a nationalisation of the bank. Mr Cable seems to want to wipe out the value of Northern Rock shares, being no friend of either the small or large shareholders of the bank. Rightly asking how the government secures and retrieves the taxpayers’ ??25 billion, he then makes a fool of himself by suggesting taxpayers take on all ??100 billion of the liabilities instead!

I have a few questions for the garrulous Mr Cable:

1. If he is worried about security for the ??25 billion, why does he think taxpayers securing all the ??100 billion of total liabilities which the state would take over if it nationalised the bank would improve the taxpayers’ position?

2. What could the government as owner of the bank, that it cannot do as bank manager to the bank?

3. How much skill would this government show at running a mortgage bank? What skills do they have that the market lacks?

4. Why does he wish to bail out all the creditors of Northern Rock by guaranteeing their position through nationalisation?

5. How would he pay for the nationalisation? I appreciate he thinks he should take over the shares for nothing, but the whole ??100 billion of assets need financing, and all of that borrowing would then fall to the taxpayers’ account.

Mr Cable has shown little understanding of the complexities of a mortgage bank, and no statesmanship. Some of us commenting and asking questions have been very careful not to say or do anything which could make the position worse. When I was warning of the dangers of the UK credit crunch before the run on Northern Rock began I made sure I did not repeat market rumours about Northern and other institutions by name. Mr Cable seems to revel in trying to make things worse. The BBC fails to ask Cable the difficult quesitons about his wish to condemn all involved with Northern Rock, and fails to expose the folly of his nationalisation scheme. Nationalisation would be expensive at a time when the government is already over borrowed and over committed; would delay tackling the real problem of refinancing the Rock in the private sector; and could lead to shareholder actions against the government for failing to recognise the potential value of the Rock’s assets.

If it’s Calamity Clegg, it’s also Calamity Cable.

The data loss at the Revenue has done one good thing. It has made the world wake up to a problem frequently highlighted on this blogsite the incompetence and waste of the UK public sector. Perhaps now we can have a proper discussion of how the public sector can be changed to give us a better service at a lower cost.

So many things have to change before we have a smaller and more effective public sector. Government has to stop prying into so many facets of our lives, and move away from the idea that Whitehall can manage all the schools, hospitals, police stations and other public facilities from the centre.

This government treats new legislation as just another press release, pushing too many Bills through Parliament at breakneck speed without proper scrutiny, only to fail to implement them or make them work properly. We need to legislate less, and legislate better. We need to reduce the volume of legislation on the books, and make sure what is left is well drafted and effective.

This government treats a press announcement of some new initiative as mission accomplished. Instead we need Ministers who understand that announcing a new measure is just an early step in a long journey. Successful Ministers have to supervise the implementation, and make sure the measure works and is well administered.

This government has introduced higher pay with performance elements for senior staff. The problem is the performance elements are not well designed, allowing too many staff to achieve the criteria for the pay out even when the underlying service is poor or when major errors occur. There needs to be an overhaul of performance pay, containing a personal element and a service wide element, and there needs to be tougher adjudication of whether the criteria have been met before making any payment.

Ministers need to take more interest in how their departments run, and learn to be clearer in setting objectives and sticking to them. Whitehall’s target driven culture does not work because there are too many targets and too many changes. Most departments do not know what winning means. If you set a department or an individual five targets you can assess their achievement and hold them to them. If you set them 100 targets they are off the hook, as no-one expects they can hit all 100, and there will be contradictions between the differing targets giving people a good argument as to why they have failed to hit any particular one.

We need to blend the best of the public sector ethos, with the best of the performance orientation of the private sector in a new way of managing the public service. Wherever possible the public service should have a choice of supplier. Where something is done in house it should be done by people who want to do more with less, not by people who think their aim in life is to spend more money and employ more people whatever the issue before them.

Old initiatives in Whitehall never die, they just fade into the background. When a Minister wants the department to do something new, he or she will be told it needs more staff and more money. He should reply that he wishes to shift money and staff from the old initiative that is no longer required, rather than allowing those officials to slip into the background but remain on the payroll for the old purpose.

The public sector is cost plus it always assumes dearer is better, and lower cost is impossible. The competitive private sector company either delivers more for less or perishes.

The public sector is regulation plus it always takes the longest way round to comply with its own regulations, is slow moving and cumbersome.

The public sector can be very jobs worth. Ministers have created a cynicism in their staff, which leads staff to think the best course of action is to argue This problem is not within my power

Mr Cable cannot go on the media without saying something nasty about Northern Rock. Today he was accusing a leading shareholder of “blackmail”, when all the shareholder was doing was poiting out that this is a regulated solvent company according to the FSA and the Bank of England, still trading and with a valuable mortgage portfolio. Mr Cable should stop attacking it, and understand that there are ways to protect the mortgages, the deposits and the taxpayer loans without nationalisation. Any sensible person who cares about the living standards of people in the UK should want a successful outcome to the rescue, and would understand that attacking the current shareholders who still decide the future of this bank is counterproductive.

I am glad there are bids on the table that may offer a way forward. There is also the option of running the bank to ensure the taxpayer is repaid, following agreement on the timing of repayments, without a takeover. I still think the government should set out in public how much money it will advance for how long, so every bidder bids on the same basis, and so the taxpayer can see how his or her interest is going to be protected. The taxpayer also needs reassurance that the government/Bank have taken sufficient security over Northern Rock’s assets to protect the position. If they haven’t so far, they should do so now and publish how much collateral they have for the loans.

The absence of public information over how much the taxpayer has committed. Parliament should be told about this large sum. Those assessing the bids should also want to know that all bidders had bid on the same basis concerning the available public support, and should want confirmation that there are no misunderstandinbgs about how much money is on offer for how long. You cannot value Northern Rock shares today, as Mr Richards the shareholder said on the radio, unless you know how much public money is on offer on what terms.

The European Central Bank has decided to keep interest rates up and to threaten higher rates still. Meanwhile, the Fed is moving to recession fighting, with many expecting lower interest rates despite recent rhetoric. The dollar drifts lower, the Euro rises.

The higher Euro is making it very difficult for companies in many parts of the Eurozone to set competitive prices for their products in world markets. In the US there is an export surge underway, and European companies are coming to realise that the US is now a cheaper and better place for manufacturing than countries in Euroland.

Airbus is going to have to cut its European costs or put some if its manufacturing into lower cost places elsewhere. They should not expect immediate relief from the European Central Bank, and should remember that the stronger German currency needs higher interest rates than the weaker parts of the Eurozone.

European politicians like the French President are keen to take the Euro and European interest rate down, but many Europeans will want the counter inflation strategy to continue. Whilst Euroland battles over its future the US will enjoy being a magnet for investment and a stronger exporter. Airbus may whinge all it likes, but it needs to become more efficient.

An update - more policies and views announced:

Clegg: Adopt the EU constitution
Huhne: Adopt the EU constitution

Clegg: Probably enter the Euro
Huhne: Enter the Euro sometime

Clegg: More regional government in England
Huhne: More regional government in England

Clegg: Build more Council houses
Huhne: Build more Council houses

Clegg: Don’t apologise for the anti Huhne stories in the press, as they are nothing to do with him
Huhne: Apologise for “calamity Clegg” aphorism, as it was nothing to do with him

Clegg: Make climate change a priority
Huhne: Make climate change a priority

It’s a real cliffhanger, as the egg and spoon race roars into life with a genuine spat over the “Calamity Clegg” briefing.

I asked the Leader of the House today the simple question:

When will the government seek Parliamentary approval for the ??25 billion they have spent so far on Northern Rock, and the ??25 billion they have guaranteed and where did the Treasury and the Bank find the ??25 billion?

This should not be a difficult questions to answer. The Leader of the House is meant to know Parliamentary procedure. Every item opf public spending has to be approved by the House under a vote for an estimate. There was no estimate for Northern Rock when Parliament approved this year’s budget. Clearly the government is either going to have to put through a supplementary estimate for the money, or to seek to argue that it does not have to bother, on the spurious grounds that it hopes to get the spending back.

Clearly also, as the govrnment is already borrowing heavily this year, the money for Northern Rock was either borrowed or came from selling other Bank of England assets.I suspect it was mixture of the two. I suspect there is also a Treasury guarantee to the Bank of England.

It is high time Ministers worked out how they are going to report and control this massive spending, to look as if they know what they are doing. Miss Harman told us that the ledning to Northern Rock was made available, amongst other reasons, to ensure shareholders did not lose money. Has she looked at the share price recently? Wouild she like to apologise for getting that wrong?