Yesterday during Prime Minister’s Questions, John Redwood raised the crucial question of why there is such a big terrorist threat in the UK. We need to understand it in order to combat it. The government needs to tackle both the terrorists who are wrongly allowed to enter our country owing to insufficient controls at our borders, and the disaffection of some young people legally settled in the UK:

Mr. John Redwood (Wokingham) (Con): Why are there so many potential terrorists in Britain today?

The Prime Minister: We know from the statement made by the head of MI5 that we are dealing with a small but important group of young terrorists who are operating in cells, and we know that there are distinct links in our country with the Asian sub-continent; that is one of the reasons why the numbers in Britain are so high. However, we also know that the measures that we announced last week, not only to win the battle of hearts and minds but to isolate extremists, are the right way forward. The right hon. Gentleman should agree with me that we are making substantial advances in persuading young people that this is not the right way forward and in isolating these terrorist extremists in our country, and we will continue to fight the battle against terrorism.

In the subsequent debate on how to improve our schools, John Redwood advocated giving more freedoms to schools to make decisions for themselves, and more powers to parents to choose the right school for their children:

Mr. Redwood: Does my hon. Friend agree that the people involved in a school are much more important even than its buildings, and that some of the best schools have old or tatty buildings? Is not the failure of this Government’s strategy that they have no way of changing the leadership in underperforming schools and they have allowed too many such schools to exist for too long?

Michael Gove: My right hon. Friend makes an important point: among the most important qualities in schools are leadership, motivation and personnel. One of the great virtues of academies is that their leaders? such as Sir Michael Wilshaw at Mossbourne? have the freedom to pay more than the national minimum and to reward good staff with bonuses. They also have the opportunity to recruit and retain the best, and, if necessary, to deal with any weaker teachers. I am sorry to have to say that some of the teaching unions oppose that degree of freedom, but we believe that it is concomitant with the greater freedom in the academy system and that it is necessary to drive up standards, which is our aim.

Unfortunately, there has been a pattern under this Government: instead of change and dynamism, there has been timidity, retreat, paralysis and bureaucracy. We would remove barriers to the creation of new schools.

Mr. Redwood: If the Secretary of State wishes to show substance, he should talk about the Government’s policy rather than spend the whole time talking about Opposition policy? I know that he has no style. Will he tell the House why the Government do not trust parents to make choices in enough cases and why they do not trust schools to decide how to teach?

Ed Balls: Let me turn to academies and the exact issue that the right hon. Gentleman raises. At last, we are dealing with a school reform that is mentioned in the motion.

On Monday we heard from the Chancellor about Northern Rock. He gave us no figures, but it appears they have already lent ??25 billion of our money to the mortgage bank, and have guaranteed maybe a further ??25 billion. This money is either borrowed, or will have to be borrowed if the guarantees trigger.

Later that day the hapless Chief Secretary to the Treasury came to push through a Bill to give away part of the UK’s rebate on EU contributions - one of Tony Blair’s EU poison pills for Gordon on takeover.

As we have come to expect, the very short Explanatory Memorandum supplied with the even shorter Bill cotained at least three errors, along with an errata sheet. Once again a Labour Minister had failed to supervise papers coming to the House properly.

Andy Burnham wanted to disguise the extent of the giveaway, but had to admit that the gross cost of the EU to the UK over the next seven years, after allowing for the remaining rebate, will be a massive ??70 billion. He and Kitty Ussher, the Economic Secretary to the Treasury, seemed to be find it difficult to grasp that it is the gross amount of our contribution (after rebate) that taxpayers have to pay. The fact that some of the money is subsequently spent in the UK does not mean that money is “free”. It either has to be borrowed and repaid with interest by taxpayers, or paid for from higher taxes in the first place.

So on the same day we saw the governemnt announce ??95 billion of extra borrowing - and more possible for Northern Rock - on just two spending items, the EU and a mortgage bank. They will argue that the EU money is already in their spending figures, but it is a sobering thought that they want to commit ??95 billion of money they do not have to these two causes. If we borrow the ??95 billion at 5% for 20 years that means UK taxpayers will pay ??180 billion, assuming we do not have to borrow the interest payments as well! Let’s hope if they get the money back from Northern Rock they use it to repay some debt.

How dare Mr Darling complain that the odd Conservative tax cut would create a “black hole” when he has two such massive black holes in his own figures.

(If you are interested in the EU contribution debate see the link to my speech in the debate )

When I was a Minister from time to time I needed to write to all MPs to inform them about something. Either I wrote a letter myself,or I adapted a civil service draft so it was relevant to MPs receiving it. Once the letters had been typed and printed, I then topped and tailed each one, writing “Dear Jane (or whoever)…Yours ever John” to show I had taken an interest and wanted to communicate with each of my colleagues.

Yesterday it was Jane’s turn (Jane Kennedy, Financial Secretary to the Treasury) to write to me. She apparently wanted to tell me that “all efforts are being made to ensure that such a loss (of personal data) can never happen again”. The “Dear John” was typed in. There was no “Yours ever” or “Yours truly” or “Yours sincerely”. The letter ended with a printed version of her signature, Jane Kennedy.

My name at the top of the destination address overprinted the “HM Treasury ” that appeared on the headed notepaper. The Treasury’s efforts to keep a slightly long letter on a single page meant it did not fit. It started with the abrupt “You are aware of the Chancellor’s statement to Parliament regarding the serious breach of procedure leading to the loss of personal data…” How couod I be unaware? Had she not seen me at the Statement? Which MP did not bother to go to hear? Which MP has failed to see the headlines in the papers or hear the odd thing about it on the news?

The letter went on to tell me “I am conscious that you may receive enquiries from constituents”. She then repeated some information from the statement, and told me I could always ring the Child Benefit helpline.

There was no apology.

What did this letter tell me about this government?

1. The Minister could not be bothered to top and tail the letter herself as she clearly did not think communicating with colleagues mattered that much.
2. I doubt if the Minister wrote the letter or if she spent any time thinking about the draft. if she had, she would have seen that it was not helping MPs do their job.
3. She does not mind how silly the contents are or how badly the letter is set out on the page.

It was symptomatic of all that is wrong with this government. Ministers are not doing the detailed work necessary to provide a good service to the public or to MPs. Jane Kennedy trusted the civil sservice, and the civil service hastened out something to tick the box and hit the target for “communicating with MPs”. Public money was wasted on a useless letter, and any MP who read it should see it confirms the low standards we now expect from this regime.

Many people today have woken up to the news that this government is incompetent. For the first time many have had the scales taken from their eyes, as the dreadful truth sinks home that this time the government’s incompetence has left them personally vulnerable.

Every family in the land now knows they must watch their bank accounts nervously to see if the important private data the government has lost has got into the wrong hands. For busy families struggling to get to work on the government’s congested and useless transport system, trying to pay the higher mortgage and Council tax bills this government’s policies are visiting upon them, and trying to comply with the myriad forms, regulations and requirements of an ever more intrusive state, this is just the last straw.

Many of us already had personal experience of the government’s incompetence. Farmers have felt it as payments have failed to materialise when promised, and as the government’s mishandling of disease and floods left a grief stricken countryside and many dead animals. Estranged parents have felt it, as the CSA has struggled to get a grip on their caseload. Many recipients of Tax credits have been on the wrong end of it, as case after case emerges where people are asked to repay large sums they had been awarded months earlier. Northern Rock depositors have felt it, as the Treasury and the Bank failed to keep confidence in markets this autumn. We have all witnessed it at the Home Office, with farce after scandal over borders and prisons.

Too many people have believed that Gordon Brown was a talented Chancellor who ran the Treasury well. Now his successor has taken over we can see what a tacky inheritance he received. Gordon dined out on the soundbite that he had made the Bank of England independent and this was good for the UK economy. The first banking crisis to hit showed that far from making the Bank independent he had crippled it, so it was unable to handle the crisis itself and needed the involvement of the FSA and the Treasury. Under Darling this ring of three failed to head off the run on a bank, and failed to keep the markets liquid. They lost control of short term interest rates, and precipitated a credit crunch. The Conservative Economic Policy Review chronicled how Brown had damaged the Bank of England and how it left us vulnerable to a crisis, in a section written months before Northern Rock and published well before the bank ran into public difficulty.

Over the 10 years of Gordon’s stewardship the UK had to pay higher interest rates than our main competitor economies, and ended the period with higher inflation than our main competitors. He did not even make the Monetary Policy Committee truly independent, retaining the ability to appoint all the members either directly or indirectly, and refusing to answer questions about why some were reappointed and others were not. He overrode their policy by changing targets at a crucial time.

Of more immediate impact for many British people was Gordon Brown’s raid on pension funds, taking around

The first thought I had when I heard late yesterday morning of the government’s loss of sensitive personal data was this should be the death blow to the government’s expensive, intrusive and insecure personal data computer scheme with ID cards. I encouraged the Opposition to make that the main point for the future coming out of the Customs and Revenue disaster.

In a way the loss of Child Benefit data sums up this government. Its systems are intrusive and costly, yet they do not work properly. The very people who should be protecting us and our personal details are the most cavalier with our identities and our personal safety. It is this government which presides over hospitals where infection is so common, this government which fails to control our borders and keep out criminals, and this government which now loses the bank accounts, addresses and identities of every family in the country.

Why on earth should the public trust the government to hold all the crucial data about us on one central identity computer? Why should we believe next time they will look after it better? Why should we believe they will be able to control the numbers and details of our data on such a system, when they have issued many more National Insurance numbers than there are workers in the country, and when passport forgery or false issue is all too common?

ID cards have become a NuLab soudbite, the answer to every criticism of their lamentable record at keeping our borders secure and dealing with serious crime. We all know if they carry on with them they will arive late, massively over budget and unable to do the jobs they are said to be able to do. ID cards will not keep us safe. They will cost us more, make all the law abiding have to fill in yet another intrusive form, and allow the government to carry on running the borders and the criminal justice system badly.

Let’s hope there is a silver lining to the black cloud of yesterday’s news - that even this government now udnerstands the British people will njot put up with more of their money beign tipped down the ID drain, and will ot trust this government to put onto one massive computer disc all the details fo everyone in the country just feady for fraudsters and terrorist to steal it, hack into it or be sent it in the post.

Last week some asked why 400,000 people left the UK last year to live and work elsewhere last year. I would have thought the answer was obvious.

They’ve had enough.

We live in a country where anyone who has gained some qualifications, who tries to pay their own way and to live a decent life feels targeted by this government. We have our identity assaulted, our democratic views ignored, our pockets and purses rifled by the state, our opinions criticised or banned and the public services we do wish to use run incompetently or rationed for us.

We, the English, are told our country is the one part of the Union that cannot have devolved power. Instead our country is to be split into Euro regions. We are told we have to love the EU and accept its constitution, after the promise of a referendum in order to win a General election. Many of us see the EU as a hostile bureaucracy. We are not xenophobes - most of us like our continent and appreciate its range of cultures, languages and cuisines. We just do not want to be governed by a bunch of bureaucrats who think they have to regulate every aspect of our increasingly complex lives and who we cannot sack via an election.

We are told by the government that our lifestyles are wrong. As the Health Service grapples with its inability to keep hospitals clean and infection free the government blames us for being ill in the first place. People are told they are too fat, they eat the wrong foods, and they drink too much. The government encourages a debate criticising middle class

Giving away part of the rebate was reckless and wrong. John Redwood pointed out yesterday in Parliament that Alastair Darling has just added a

Yesterday was a dispiriting sight in the Commons. We saw Lib Dems and Labour arguing over the future of a bank when none of them seemed to understand the first thing about how banking operates. Nor did they seem to understand the complicated banking regulations and company law they have put in place over the last decade.

Cable for the Lib Dems set the terms of the debate in an entirely false way, which unfortunately some in the media have copied. He offered two “solutions” as the only possible options - put NR into administration (i.e. bankrupt it) or nationalise it.

Neither of these courses of action make any sense and should be rejected at this stage.

Of course the government could bankrupt the Rock, if it withdrew its funding and the promise of more cash and if no private sector party stepped in with the offer of the money. That would renege on government promises and might break its loan agreement (we still have not seen what form that takes or what period it covers). It would still require the government to bail out the depositors, unless they reneged on that promise as well. It might prove to be dearer than other options, and would probably lead to law suits against the government by shareholder and other interests who could legitimately complain about the inconsistency of government actions.

The government could push a nationalisaiton bill through the Commons with Lib dem support. Presumably that would offer no compensation to the shareholders. Then the taxpayer would be on risk not just for ??24-25billion of loans and the estimated ??16 billion of remaining deposit guarantees, but for the whole ??100 billion of liabilities on the 2006 balance sheet and any additional ones added since the last year end. The government would then have to make the announcements about sacking the staff that were superfluous to the slimmed down business they would be running, would have to pay all the bills whether the company werre profitable or not, and stand behind all the obligaitons of the company. The government would need to repay the debts outstanding to other city institutions as they fell due. Why would that be good for the taxpayer? What does Alastair Darling know about running a mortgage bank that he cannot share with the external management already in place?

The only sensible course of action from here is to ignore siren pleas for liquidation or nationalisation, and to manage the debt and the deposits rationally like a proper bank manager. The government has not “nationalised” the bank by lending it money. What it needs to do, if it hasn’t already is:

1. Secure sufficient asset cover to guraantee repayment of all its lending to NR whatever happens. If it does not have enough asset cover - and in current conditions you need to take much more than100% cover given the possibiltiy that the value of mortgages will fall - it should do so as a condition for future lending.

2. Set out the repayment schedule it expects, preferably in agreement with NR but if necessary it has to impose one.

3. The shareholders and Directors of NR then have a choice - a) trade their way out of it b) find a bidder for the whole who will meet the repayment schedule or c) start selling the assets off piecemeal to meet the repayment schedule. They and the Regulators tell us they are solvent. That means that the assets cover the liabilities, so selling the assets will enable them to repay the liabilities. The government only wants one quarter of the assets of the business to repay it loans so far, so it should be achievable.

4. The deposit guarantee should continue but the governemnt should replace it as soon as possible by the beefed up general deposit insurance scheme they are working on with the City. If the deposit guarantees trigger the need for more funding the Bank of England should allow for that within its schedule of repayments.

The Directors and shareholders should be given a chance to rescue it by methods a) or b). The timetable should ensure that if they do not do so in reasonable time then method c), an orderly run off, kicks in automatically. That way taxpayers can get our money back without legal actions against the government for precipitating a crisis.

Mr Darling failed to tell us what markets and Parliament needed to know yesterday - how much money has been lent on what terms. The absence of this information runs the danger of creating a false market in the shares. It also means the task of evaluating bids for NR is difficult if not impossible . If bidders do not know how much money is available on what terms, how can they ascribe a sensible value to the company? And how can you compare bids, if bidders have made different assumptions about government generosity?

Yesterday I needed to refill my car. That meant paying

The BBC today offered two visions of the future for Northern Rock. The first is nationalisation, with the Lib Dems recommending compulsory purchase of the Rock, apparently for nothing, wiping out all the shareholders. The second was another Treasury guarantee, this time to small long term shareholders so they do not lose out if things get worse from here.

Both of these ideas are absurb. The taxpayer already has too large a commitment to Northern Rock, and should not be asked to take on a bigger one. It is not the taxpayers job to own and run a mortgage bank. Nor can the taxpayer decide to subsidise one group of shareholders amongst the wider list of shareholders. The compulsory nationalisation of the bank with no compensation to sharteholders would probably trigger law suits from them claiming their shares still had value. The subsidy to some shareholders might trigger law suits from the others claiming the division was arbitrary and unfair.

The Lib Dem acting Leader has pursued a persistent campaign against the outgoing management of Northern Rock in a way which makes offering impartial advice difficult, and has displayed a lack of knowledge of legal obligations and how banking works. That presumably is why the BBC have him on so often on this subject. His advice would put the taxpayer at risk of legal actions by shareholders and leave the taxpayer with larger problems of how to manage the whole mortgage bank.

People ask what could be done? What should the Conservative position be? I think that is obvious, bearing in mind I would not have started from here, as I recommended pre-emptive action long before the bank experienced the run.

What the Chancellor should do with the Bank of England is treat this lending to Northern Rock as if it were a commercial loan. They must agree with Northern Rock the duration and interest payments, with a schedule of repayments. They must take sufficient security to guraantee that in no forseeable circumstance can the taxpayer lose money, and then force the mortgage bank to manage its way out of the debt to the agreed timetable. If they cannot agree a sensible timetable then they have to impose one which they think the bank should be able to meet. Above all they must have enough security to ensure no taxpayer loss. Then they need to agree all that with Brussels, which may be the most difficult part of the obvious remedy. I assume they got Brussels agreement in the first place to temporary assistance - they now need to define how long is temporary.

Yesterday I spoke to the Bruges Group meeting in King’s College Hall, London about the need for a referendum on the Constitutional treaty. I proposed that all should write to and lobby MPs who promised a referendum on the Constitution before the 2005 election, and who now say they will not vote for one on the result. The bets chance we have of stopping this undesirable further major transfer of power is to force a referendum. This has been made more difficult by the apostasy of the Lib Dems, joining forces with the government to stop one after promising one. We need more popular presure on both Lib Dems and possible rebel Labour MPs to have a chance of success.

Meanwhile, Mr Miliband was surveying the damage to his career that had had been done by failure to clear a speech on European integration with the PM before briefing the press. Hearing Mr Miliband on the radio today he is a very worried man, hastening to say he is fully behind the PM, and keen to do his bidding. Miliband joins Alan West, the wayward former Admiral, in having to do some more revision before opening his mouth in public about government policy.

Clearly Mr Miliband mistook the PM’s enthusiasm to ram the EU Constitutional treaty down our throats for genuine pro EU enthusiasm. Miliband wanted to wax lyrical about more defence integration, at a time when the PM was aware of the danger to his position of going ahead with the Treaty without a referendum. Brown used to brief in a Eurosceptic direction before he became PM, and must know he has moved such a long way from those briefings in his recent stance pro more EU integration through the Treaty. He has lost support in the Sun and the Times, and jeopardised what relationship he has with the Telegraph, as a result of his pro EU stance on the Treaty. To be seen to be advocating a European army before the Treaty is through would be unfortunate timing from the PM’s point of view. That can come later, once the dirty deed of ratification is done amidst protests that nothing important is happening!

It is interesting to see how lacking in political skill and understanding Mr Miliband is. This government is more treacherous than Blair’s or Major’s when it comes to Ministers making speeches or statements that say something new. It is important to nail down the PM’s view, and to understand whether the PM really means the view he expresses, if you are to have a quiet political life and a long one!

How many more interviews of these two are we going to hear on the BBC with no question about Europe?

Both these men believe in selling our country down the river to the Brussels bureaucracy.
Both campaigned for a referendum on the Constitution to win their seats for the first time in 2005, and both intend to rat on this promise when we get a chance to vote for a referendum on the Treaty soon.

Surely they should be asked why they have torn up their promise on the Constitution?
And shouldn’t they be asked why they want the organisation that has given us the Common Agricultural Policy and the Common Fisheries Policy to be given more power to mess up more of our country?

I still think Clegg will win, as friends of Clegg are clearly better at helping the media write anti Huhne stories, than the friends of Huhne are at hitting back. It is good to hear the underdog critcising the front runner more - it makes the egg and spoon race of the Liberal leadership a little more interesting.

The Chancellor has to be careful not to create a false market in Northern Rock shares.

The amount and duration of government lending to the mortgage bank is fundamental to valuing the shares. If this funding is to be there for as long as Northern Rock wants, the company will have one value. If the funding is to be phased down it has another value. If it is to disappear rapidly it has yet another value. In circumstances where the funding is withdrawn quickly the value of the bank then rests on what private sector funding is available at what terms. The differences between these values will be large.

In such circumstances it is vital to avoid a disorderly market in the shares that the government makes a statement tomorrow saying:

1. How much money has been lent to Northerhn Rock so far via the Bank of England?
2. How much more might be lent under the guarantees in place?
3. What time limit if any there is on this arrangement?
4. What if any agreement is there over repayment schedules?
5. Is this funding available to any buyer of Northern Rock, or only to the independent company that first asked for assistance?
6. If funding is available to a buyer of Northern Rock, what will be the requirements concerning repayment by them?

The markets need this information so people can value the shares sensibly. Parliament needs it so we can do our job protecting the taxpayers’ interests. I fear a false market in the shares unless we are told what the government’s position is on these and related matters.

As Gordon Brown must be fed up with Alex Salmond and the Scottish National party running rings round him, fomenting English dissent with the Union, I suggest the following advice to the Prime Minister:

To :Prime Minister
From :Senior Political Adviser

I understand your reasons for turning down a referendum on the EU Treaty, even though I still think it would have boosted your ratings and made you appear different to the age of spin under Blair. I have been thinking how you could at one and the same time show you are concerned about what people think, and deal with the Scottish problem created by Alex Salmond’s persistent campaigning against the Labour government from his platform in Edinburgh.

The one good thing in the opinion polls for us in Scotland is the way support for independence has fallen sharply. As Salmond is about creating the conditions for Scottish independence, his biggest failure so far is to see support for such a venture falling rather than rising, the more he does as First Minister. I suggest you take advantage of this by giving Scottish people a referendum on independence.

We could present this favourably. We are listening to the wishes of the Scottish people. We would be giving to the First Minister what he says he most wants, a vote on the Union, at a time when he least wants it. We would call his bluff.

It should be easy to secure a “Yes” vote for the Union in Scotland - it would be far more difficult in England at the moment. All the main parties apart from the SNP would line up with us, and the polls allow plenty of leeway for a poor campaign for the Union. Once we had secured it, it means the issue of Scottish independence is off the agenda for a generation, and Alex Salmond will go from hero to zero in three short weeks. It should create internal dissension within his party, and lead many of them to ask what it is all for if they have already lost the hearts and minds of the Scottish people on the main thing that matters to them. Thereafter we would be free to adjust the financial settlement between England and Scotland to some extent, blaming Salmond for any cuts that had to follow in Scottish spending. He would not get another term as First Minister, and his minority government may even break up before the end of their term.

It still leaves us the problem of England, but it would mean English nationalists could no longer look forward to the early exit of Scotland from the Union which many of them favour. My advice on that remains not to wind the English up more by pressing ahead with strengthened regional government which they hate. Indeed, why not as part of the efficiency reviews look at ways of reducing the cost and intrusiveness of regional government in England to show them you understood the meaning of the North East referendum result? At the time you thought the Blair/Prescott combination had really messed that up, so why not accept the verdict of a very Labour part of England on that issue?

This government often lacks a sense of irony and timing.

This week they proudly announced 20 minutes had been lopped off the train journey time from a London station to Paris, after substantial taxpayer expense.

At the same time they announced that they intended to introduce some security scanning at larger stations, including St Pancras, and make it more difficult to get a car anywhere near the station.

When I asked Jacqui Smith sometime ago to explain why they introduced such time consuming security at Heathrow but not at railway stations, I did so in the hope they would streamline the airport system. Instead the government, as always, has opted for levelling up misery rather than levelling down government encumbrance.

We may discover after further large expenditure on physical barriers and security systems at St Pancras that passengers lose the 20 minutes gained by a faster train in more delays getting to the station and on the station before being allowed to board the train.

It is high time transport experts and Ministers started thinking about total journey time, not just about station to station journey time. For many people in southern London a cross channel train from St Pancras is going to take a lot longer than one from Waterloo, as they will take longer to get to the station, whilst for those to the north of central London they will have a gain. It is important that we do not go from redistributing the pain to inflicting more on anyone trying to reach and use a station.

Improved security should come from improved concourse monitoring, better intelligence and intelligence inspired checks on those who might be terrorists, rather than on blanket checks on everyone.

The government has to be very careful in how it handles the Northern Rock situation. This morning on the Today programme there was a call for them to nationalise Northern Rock, offering no compensation to shareholders. That is not an attractive proposition for either taxpayers or the remaining shareholders. It could fall foul of the government’s general duty to be fair to the shareholders of a company it is lending money to and of EU competition rules if they then give the bank favoured access to funding. The shareholders would think they had been robbed, as the market currently ascribes a value to their shares. Taxpayers would be on the hook for the long haul, with a new owner with no expertise at running a mortgage bank and all the problems of nationalised industry control.

The problem has arisen because of the actions of the government so far. The current share price of Northern Rock is based on the continuation of loans from the Bank of England and the deposit protection put in place by the government. Those who think the shares have value must believe either the Bank of England will continue to lend the money for as long as necessary, or that there will be a private sector rescue which will ascribe value to the shares (which also probably requires some continuation of government/Bank of England support). In other words, in the immediate future the value of the shares is heavily influenced by what the government and the Bank do over the financing of Northern Rock. If Northern Rock were capable of refinancing its Bank of England loans in the private sector market it would resumably do so.

If the Bank of England is too generous in its loans and guarantees to Northern Rock, then a private buyer may well emerge who can make money out of the situation, benefitting from the taxpayer support. If the Bank is too severe in removing funding from the mortgage bank before there is a suitable alternative available then it retriggers the problems it has been trying to avert.

So what are the government’s options from here?

The first is the completion of a sale to the private sector that the shareholders accept. The government does have to set out what its position is on how much money will be lent to Northern Rock under new ownership for how long. Presumably the government’s interest in a sale is to reduce both the quantity and duration of the loans it makes to Northern Rock. The Chancellor should make an early statement so we the public and Parliament know, as well as presumably making some statement in the Sale Memorandum drawn up on behalf of Northern Rock shareholders. If a buyer can be found who has the balance sheet strength or the access to funding to repay all the current public loans, that would be ideal.

The second is to agree a schedule of repayments and lending reductions with the new Board of an independent Northern Rock, as they have to believe they can trade themselves out of their problems, and can gradually replace public sector loans with normal market borrowings.

The third is to impose a date for the repayment of some or all of the loans, and leave it to the Board of Northern Rock to decide how they are going to meet this, with or without a takeover or new partners.

It is difficult getting accurate information about this on the media. The BBC this morning told us that the Board of Northern Rock had resigned, and this meant a deal must be imminent otherwise Northern Rock was left without a board. Yet the Times says this morning that two new Non executive Directors joined the Chairman on the Board whilst Mr Applegarth, the outgoing CEO, had agreed to stay on for a further two months to help with the sale process. The Times on this occasion sounds more reliable than the BBC. That news is compatible with the view that there is no immediate deal but that serious negotiations are underway with a view to sell the bank. The deal will still need shareholder approval.

From the taxpayers point of view, we need to to be told why so much of our money has now been committed and how the Chancellor expects to get it back and when.

The immediate questions for him are:

1. Where did the ??25 billion advanced so far by the Bank of England come from?
2. What guarantees/ comfort letter has been issued by the Treasury to the Bank of England to enable it to take on so large a commitment in relation to its own size?
3. How long is the money going to be available to the Northern Rock?
4. How does the government envisage it being repaid?
5. When will there be a loan agreement which we the taxpayers can see, with the security, covenants and repayment schedules that one would expect in a large commercial loan?

It is high time Parliament was told more about this huge taxpayer commitment, now bigger than the annual defence budget.

Interest rates remain high in the UK, whilst US rates are coming down quickly. As a result the pound has surged to $2.10, putting more pressure on anyone trying to export from the UK into the dollar area.

The US authorities have taken the credit crunch and the mortgage crisis seriously. They think they have a battle on their hands to keep the US economy moving ahead, despite the most recent growth figures coming in at a lively 3.9%. They understand that the future is going to be much tougher than the immediate past. Many of the mortgages lent to people over the last couple of years were based on a initial teaser

The papers today ask why 400,000 left the Uk last year to live and work somewhere else. I would have thought the answer was obvious.

They’ve had enough.

We live in a country where anyone who has gained some qualifications, who tries to pay their own way and to live a decent life feels targetted by this government. We have our identity assaulted, our democratic views ignored, our pockets and purses rifled by the state, our opinions criticised or banned and the public services we do wish to use run incompetently or rationed for us.

We, the English, are told our country is the one part of the Union that cannot have devolved power. Instead our country is to split into Euroregions, and we are to be told we must be loyal to the South-east, or go round telling people we are east Midlanders. The North East told the government in a referendum they wanted nothing to do with regional government, so the government told them they would have more of it.

We are told we have to love the EU and accept its constitution, after the promised of a referendum in order to win a General election. Many of us see the EU as a hostile bureaucracy, tying us up in ever more rules and regulations. We are not xenophobes - most of us like our continent and appreciate its range of cultures, languages and cuisines. We just do not want to be governed by a bunch of bureaucrats who think they have to regulate every aspect of our increasingly complex lives and who we cannot sack via an election.

We are told by the governement that our lifestyles are wrong. As the Health Service grapples with its inability to keep hospitals clean and infection free the government blames us for being ill in the first place. People are told they are too fat, they eat the wrong foods,and they drink too much. The government encourages a debate criticising “middle class” lifestyles. Maybe it’s a prelude to a crisps tax or a further increase in alcohol duty.

If we dare to drive our cars we are treated like criminals. The government has put through so many new laws and rules that most drivers I see on the roads daily are breaking one or other law. Motorists do not accept the government’s demonisation of speed in all circumstances and want to see instead proper policing operating against the minority who are driving stolen vehicles and uninsured cars, and those who are driving dangerously for the conditions. Motorists feel picked on when they are just trying to get to work or to the shops to buy the family food.

If we are foolish enough to make some honest money then the tax collectors descend. The government only wants to know us when they are out to take our cash. The Revenue and Customs have become much more aggressive and in some cases unfair, as this greedy government raids us time and again to pay for their army of helpers and advisers, to swell their drinks cabinets and pay their first class airline tickets as they fly round the world lecturing the rest of us on the need to travel less.

We are not allowed to make comments on immigration for fear of a false accusation of racism. We are discouraged from criticisng the EU for fear of being called xenophobes. We are told if we want fairer and lower taxes it means we are nasty people wishing to worsen the few health and social services we all do want to be better financed and conducted. Our government snarls about success and privilege, disliking good grammar and independent schools and the best universities. It tells us the two big issues of the day are obesity and climate change. That’s not whay they are saying in the Dog and Duck.

They use the “war on terror” as an excuse to whittle away our civil lliberties. I can scarcely believe that under a Labour government people can now be arrested and held without charge for a month, and the government wishes to be able to do this for two months.

The threaten us with useless and expensive ID cards, when they cannot control our borders or run a National Insurance numbering scheme which works. We are made to go through all sorts of difficult security checks at public buildings and airports, but not at tube stations and most train stations. Once again it is the law abiding who are made to suffer.

Should we want something back for the huge taxes we pay, we are often out of luck. There is insufficient road capacity for the needs of a mdoern economy, in a country with a third less good roadspace than our contiental rivals(relative to size and population). There are still queues to get access to healthcare despite all the extra money spent. Many people do not live near to a first class state school, so their children are out of luck.

If Ministers cannot understand why people are leaving, I have this advice for them. Leave the Ministerial car at home next week, and try getting yourself to the office for 9 am each day. Work out what it is like paying the mortage, buying the petrol, paying the Council Tax and the family food on average earnings in this country, and ask yourself if people really are paying too little tax when you’ve done those sums. Try and imagine what it is like to be English, when the government is directed from a Scottish perspective on so many things. Ask yourself if you think it’s fair that Scotland has a totally different deal in the Union to the majority.

If you still can’t figure out why so many people are leaving, then you are not cut out to be a politician. You are simply, hopelessly and comprehensively out of touch. If you can, then DO SOMETHING ABOUT IT.

The BBC now assert daily the climate change orthodoxy, using many of their news and documentary style programmes to press home their view of climate change. I find the more they do this, the more many members of the public take a different view. There is a danger of climate change fatigue setting in, given the endless repitition of the litany.

There are 3 central precepts in the orthodoxy:

1. The world is warming up
2. This is caused by the human element in CO2 production, which is increasing.
3. There has to be a substantial reduction in human CO2 production to save the planet.

As the BBC now tell us, 1 and 2 are facts established by the scientific community. All that remains is for debate and action to ensure 3 happens.

The public tends to take a different view. Many people tell me

1. They accept the world is now warming up.
2. They think governments and political parties go on about climate change because they see it as a good way to raise taxes, in order to spend the money on other things
3. They do not feel they can have any impact on the problem, given the huge increases in CO2 likely from China and India in the years ahead.

Ministers also seem to take a different view in practise from the view they express. The government would say it agreed with the BBC orthodoxy, yet they show by their own actions they do not really believe it is a serious problem. If they did they would stop jetting around the world so much themselves. They would get out of the Ministerial car more often. They would change the heating, lighting and control systems on public buildings and get on with the task of making large cuts in the huge energy bill the government itself pays. Daily I see evidence of enormous energy waste throughout Whitehall, and am one of the few people who ever bothers to highlight it, or to turn a light off where there is a switch that allows me to do so when leaving a room.

In practise there are several more possible view points than the 3 set out for us by the BBC and the political elite.

1. The world is warming up. Yes, but it was cooling down between 1940 and 1975 - so much so that many of the climate change experts then were predicting a new mini ice age from continued global cooling. There needs to be more explanation of what was going on in this earlier period.

2. This is caused by human CO2. Some people think it may be caused by the much more voluminous natural CO2 and other greenhouse gases, some by changing patterns in the sun’s output.

3. We must curb our carbon output to save the planet. Some think it would be easier and cheaper to adapt the planet to the possible harmful consequences. It would be possible to build flood barriers to protect main settlements, and to install proper water supplies in areas subject to drought or shortage.

There are also a number of other important disagreements about how to green the world.

1. Multilateralism or unilateralism. Should the UK anyway raise green taxes and impose green regulations, even if others are not? Unilateralists say we should, as a rich country we should give a lead. Multilateralists say that one country action will simply export energy intensive actions elsewhere, losing us jobs but not curbing total carbon output worldwide.

2. Curbing the car and plane, or taking action against the whole range or carbon generators? Some left wing politicians are just the old haters of flexible private transport and international travel who have repackaged their dislikes. They think carbon (and dirty diesel fumes) coming out of a train is fine, but out of a car is evil. They wish to target around 15% of carbon output, ignoring the bulk of it which comes from residential central heating, domestic appliances, commercial space heating, power generation and industrial process. They do not look at the full carbon account. With a train journey they ignore the carbon component of the journey getting to and from the station, and when recommending cleaner vehicles they ignore the carbon production from making the new vehicle.

3. Doing it by incentives or by taxes and controls? Many seem to think it is best to try to change human behaviour by taxing and regulating people more. Others think it better to offer incentives.

So come on BBC - there are some good debates to be had here. Not everyone who fails to agree with your 3 “facts” is foolish or immoral.

I myself do believe we need to curb our energy use, by adopting new technologies to save fuel and to generate electricity in greener ways. The biggest impact the UK could have would be to build a new generation of power stations urgently that produced less carbon and wastee less fossil fuel, and to export these technologies to the developing world. I also favour incentives to people and busiensses to curb energy use and be more fuel efficient. I do want the government to take a lead, and make significant reductions in the energy use of the public sector. I also want urgent action to strengthen our flood defences and to improve our water supply.

The Chancellor is ever keen to claim a Tory “black hole” in the Opposition figures for any odd billion needed for a tax cut or a spending improvement. Yesterday when I asked him about the ??23 billion “hole” in his own figures he was unable to answer.When I asked Peter Hain at the end of the debate the government still did not know. Ministers had failed to use the hours of the debate to get properly briefed on this important subject - yet they raised Northern Rock themselves in the Chancellor’s opening remarks.

The Chancellor authorised the Bank of England to make ??23 billion (so far) available to Northern Rock. The Bank of England is a company wholly owned by the Treasury on behalf of taxpayers. It is a relatively small bank, with total equity of just ??1.8 billion, and a total balance sheet of around ??40 billion before the Northern Rock crisis.

I asked the simple question, where did the ??23 billion come from? Which account? How will it be accounted for in the government’s reports to Parliament and the nation?

The answer has to be that the public sector has borrowed the money to lend to Northern Rock. I appreciate they believe they will be repaid it as some point - maybe some of it not for several years according to latest leaks - but in the meantime it is money spent. As the public sector overall has been spending more than it raises in taxes, and as it is heavily in debt, the most likely source of the cash is borrowing. Buying a mortgage portfolio should have the same effect on public spending and borrowing as buying property or vehicles or any other public asset.

It appears from the Banking returns of the Bank of England that there has been some reduction of the other assets on the Bank’s balance sheet to make some room for the Northern Rock loan which helps. But it also appears that the Bank has increased its overall borrowings to help finance this loan, which means public borrowing as a whole has increased. We should be told how we are paying for this special finance. We should be told what guarantees the Treasury has offered the Bank of England to enable it to take such a large loan onto its books, distorting prudent management of risk at the Bank of England.We should expect the Chancellor to know how it was done, as he authorised it. We should expect him to tell us, as he is always urging the commercial banks to be more open about their assets and liabilities. As this is our money at risk we have a right to know. I will go on asking these questions until we get an answer.

Today in the Commons it was the Chancellor’s turn to show he has gained his diploma in Tory bashing from the Ed Balls academy.

Apparently the failure to build Crossrail during the last fifteen years is all down to the Conservatives who were in power for five of the fifteen years. Meanwhile we are told that every policy difference between Conservative and Labour is the cause of a “black hole” in the figures.

Can you create a black hole by saving all that money from abolishing ID cards, or slimming down regional government and quangoes, or cutting the regulatory bureaucracy? And how does that mythical black hole compare with the gaping black hole in this government’s figures, filled by borrowing through the government debt market, borrowing through PFI and PPP, and by offering guarantees to others that are not recorded on the government’s own balance sheet? Ever since Gordon divorced Prudence, this government has run up collosal debts, whilst criticising others for being masters of black holes. This Chancellor has added massively to contingent liabilities by offering ??23 billion of loans to Northern Rock and offering to guarantee the deposits of any bank in trouble.

When in a black hole of his own, the Chancellor should stop digging.

In view of fears about more flooding in the coming months, John Redwood has asked the Department for Environment, Food and Rural Affairs, when the Environment Agency will announce its new plans for the improvement of flood defences, and what the current state of the EA-maintained flood defence infrastructure is.

In a written answer received today, Mr Redwood has been told that the EA’s proposals for the improvement of flood defences will not be announced until February 2008, pending a review of its business plans in light of the Comprehensive Spending Review.

According to the latest figures for EA-maintained flood defence infrastructure, only 55% of raised walls and embankments are in a good or better condition. For other defences such as sluices and outfalls, this figure is a slightly higher 69%.

For the questions in full, see below.

Mr. Redwood: To ask the Secretary of State for Environment, Food and Rural Affairs (1) when the Environment Agency will announce its new plans for the improvement of flood defences; [161944]

(2) what recent assessment the Environment Agency has made of the present condition of flood defences for which they are responsible. [161945]

Mr. Woolas: The Environment Agency is currently reviewing its business plans for 2008-09 in light of the recent Comprehensive Spending Review settlement. It will announce its proposals for the improvement of flood defences in February 2008.

The Environment Agency currently inspects assets on a risk based programme and assesses the national position on a quarterly basis.

The proportion (by length) of flood defences such as raised walls and embankments, maintained by the Environment Agency that were in good or better condition in April 2007 was 55 per cent. A further 40 per cent. were in a fair condition.

The proportion (by number) of flood defence structures, such as sluices and outfalls, maintained by the Environment Agency that were in good or better condition in April 2007 was 69 per cent. A further 26 per cent. were in a fair condition.

Yesterday in Parliament, John Redwood urged the Secretary of State for Health, Alan Johnson, to take immediate action on the unacceptable level of hospital-acquired infections. Waiting eighteen months for a new quango to tackle the problem will not address people’s justifiable fears of hospital treatment.

Later, during the debate on entitlement to work in the UK and Security Industry Authority licensing checks, Mr Redwood asked the Home Secretary, Jacqui Smith, if she could tell the House how many illegal immigrants are working in the public sector and what she proposes to do about it. The Home Secretary declined to provide a figure.

For the questions in full, taken from Hansard, see below.

Mr. John Redwood (Wokingham) (Con): Given the urgency of tackling the more than 6,000 deaths a year from hospital-acquired infections in our hospitals, why does not the Secretary of State take urgent action on the issue, rather than waiting 18 months so that a new quango can be set up? Whatever that quango might be able to do should be done now, because the problem exists now and people should not live in fear of dying from going to hospital.

The Secretary of State for Health (Alan Johnson): If the right hon. Gentleman is referring to the care and quality commission, I should say that legislation needs to go through for the regulator to be given those extra powers. However, that does not mean that we should freeze everything in aspic. As was mentioned earlier, there are a whole series of initiatives. I did not mention the doubling of the number of improvement teams, nor the fund of money available to nurses at the front line so that they can access things, such as curtains and fittings, that they know very well need to be replaced. I did not mention that we are going to move from 2,000 to 5,000 matrons and that they will be given power over the cleaning contract and given whistleblower protection to report on such issues to the trust and beyond. The right hon. Gentleman is right to be concerned about the issue; it is a matter of concern to the public. However, there are a whole series of measures, none of which we need wait 18 months for.

Mr. John Redwood (Wokingham) (Con): Since the Home Secretary reminded all public sector employers of their duties under the legislation, how many illegal immigrants have been found to be working in the public sector, and what action is she proposing to take about that?
Jacqui Smith: Never mind whether it is the public or the private sector, there is rightly continued enforcement activity, including, for example, the 3,700 successful Border and Immigration Agency enforcement operations against illegal workers last year. All that work would have been decimated by the Conservative party’s proposals in its manifesto at the last election to halve the money made available to the agency. It is a bit rich for Conservative Members to demand enforcement activity when they would have halved the agency’s ability to carry it out.

The Chancellor’s contribution to understanding the credit crunch has been lamentable. So far he has told us it is an American problem based on bad mortgage lending in a far away country; that Northern Rock is a one off problem in a mortgage bank which has a good mortgage book; that he wants more transparency about off balance sheet financing; that he thinks banks should not be bailed out for the mistakes they have made with poor loans, and believes there should be a re-pricing of risk.

Let’s look at this in relation to his own actions:

1. Whilst lecturing banks on the need to tighten up lending because there would be no bail outs, he has offered a gurantee on all the deposits in any bank subject to financial problems in the market. Such an offer is without precedent.
2. He has through the Bank of England lent ??23 billion to Northern Rock. Recent sale documents for Northern Rock suggest taxpayers will still be lending ??6 billion to them in 2010.
3. Despite his wish for more transparency and less off balance sheet lending and borrowing, he does not put the full details of the government’s PFI/PPP borrowings onto the government balance sheet, and continues to encourage off balance sheet borrowings by government.
4. He has failed to sort out the muddled responsibilities between Treasury, the Bank and the FSA over banking regulation and money market operations.

What is wrong with his analysis?

1. This is not just a US problem. The Credit crunch in the UK will raise the mortgage failure rate here. The world banking system has bought and sold loans between banks from different countries, so it is a global problem.
2. This is not just a mortgage problem. In the UK there will be the need to write down some loans in the private equity, property and business areas as well as some mortgages. People today in the city are finding it difficult to value a range of differing debt instruments, and the property that is often the security for loans.
3. The US banks have started reporting to the market how much they think they have lost in the credit crunch so far. The UK banks do not report for a while, and are probably pondering how to value some of their assets in this volatile and constrained market. There is no sign that Darling’s call for greater transparency has resulted in any changes to reporting or reporting requirements, so why did he call for it?

Mr Darling should take better advice and understand the nature of the coming problems the banking system, the property sector and financial markets face. Property share prices are anticipating a double figure percentage fall in commercial property values in the UK. Housebuilding shares are warning that the housing market is going to be damaged. Some early indications suggest that other forms of debt are going to be marked down by a significant amount.

Mr Darling should start looking forward, and understand his overall responsbility not just for banking regulaiton but for the money and credit markets, as they are heavily influenced by what government and Bank does day to day by way of market operations, and month by month in terms of supplying cash and issuing government bonds. He cannot duck his involvement or responsibility, so he had better start learning how to carry it out. So far his record is poor and full of contradictions. The City’s reputation requires skillful handling by Treaury, Bank and FSA. Over the last 10 years financial and business services in London have been the stellar performers within the UK economy. Mr Darling still needs them to do well.

The danger for him is he allows the crunch to go on for too long, and forces an extreme re-pricing of risk which weakens credit creating institutions too much. If balance sheets are weakened too far by big write downs, then the banking system will be unable to deliver sufficient credit to the market. That will mean fewer jobs, fewer new homes and all that goes with it.

Ed Balls came to the House for a debate on Education and Health with a soundbite in mind. He intended to share it with Parliament, the media and anyone else still listening. It praised the government and ran down the Conservatives in a predictable and foolish way.

The soundbite was that Labour wants educational excellence for all, the Conservatives for the few.

Like so much from this government, the soundbite was too clever by half. It seeks to mislead people about Conservative policy, and confuse them in a favourable way about Labour policy. He did little to explain how his policy would work in practise, and why we should believe standards will make a great leap forward on his watch. There was little detail on how the large number of students who do not do well at GCSE and leave school at 16 would suddenly be transformed by another two years of school or College.

The truth is both the Labour and Conservative parties want to extend educational opportunity to all, and both strive to make public sector education better for the many who will rely on tax financed schooling. The Conservatives do not wish to limit excellence to the few.

The truth is also that under either a Labour or Conservative government there will be students who do not achieve the excellence that Ministers and teachers would like. Labour’s aspiration is not very different from the Conservative one, and Labour’s results are disappointing judged by the grand claim of their Schools Secretary. Conservatives are more honest in admitting that not everyone will be able to achieve academic excellence or vocational excellence, whatever policy is adopted. We are a long way from that happy outcome today, yet the Secretary of State showed no humility before the scale of the task, or even any recognition of how many pupils find school a disappointment that does not work for them.

The debate should have been about the detail. Given that all main parties want the best for all children, the debate should be about whether new diplomas replacing A levels and the current raft of vocational qualifications will make such a difference to real achievement as the goverbment asserts. The debate should be about how courses and curricula can be made more relevant - whilst maintaining or raising standards - to engage more students willingly in learning. The debate should be about whether compulsion to 18 will work where compulsion to 16 does not work for all too many at the moment. I am not proposing a lowering of the school leaving age but a recognition of the reality that some 14-16 years olds do not value school as it is today, and more work to engage the 14-16 year olds before compelling the 16-18 year olds to stay.