On Tuesday, following a big row in the Commons the previous day, we were granted two and half hours to discuss amendments to the EU Treaty Bill on police, borders, criminal justice and immigration, instead of the derisory one and half the government originally offered. It was not enough, but clearly better than the first proposal.

Yesterday. on energy, the governemnt reverted to type and allowed only one and a half hours for all the amendments. Needless to say, discussion did not even finish the first group before the guillotine came down and a vote was taken.

With the Lib Dems in full support the government has large majorities. It is determined to prevent proper debate on the detail of the Treaty, preferring hours of general discussion of things like climate change which are peripheral to the impact of the Treaty.

So the government has not only broken its promise to the people to hold a referendum, but also broken its promise to Parliament to allow line by line scrutiny of all the complex new powers the EU is winning from us.

The Fed duly cut interest rates by another 50 basis points, taking them down to just 3%. We see recession fighting in full cry in the USA, where the Central Bank and the administration are uniting to pull the US economy out of its sharp slowdown.

Lower interest rates will ease some of the tensions in the housing market, allowing some people to carry on servicing mortgages which might have been too dear for them at higher rates. It makes it easier for all those businesses operating on borrowed money. It will also encourage a lower dollar, pricing US exporters back into world markets, and curbing the US appetite for imported products.

Meanwhile, on this side of the Atlantic, the authorities remain hesitant and divided over whether to carry on fighting inflation, or to see the Credit Crunch as the new enemy. UK rates are too high for comfort. Inflation will remain unpleasant this winter but will start to correct later in the year.

Yesterday the government published its review of the regulatory arrangements for banks in the wake of the Northern Rock crisis. They made suggestions and proposals in five areas:

1.” Strengthening the financial system” by introducing better risk management of banks and better supervision and rating of securitisation of loans.
2. “Reducing the likelihood of banks failing” by asking for more information and changing the arrangements for providing liquidity to banks.
3. “Reducing the impact of failing banks” by introducing a “Special resolution regime” by allowing the authorities to take action with a failing bank to achieve a rescue or orderly run off
4.”Effective compensation arrangements” including faster and bigger payments.
5. “Strengthening the Bank of England and improving coordination between authorities”.

The proposals combine the sensible with the foolish, mixing some important lessons learned with the sound of stable doors banging shut after the horse has gone.

I would suggest the government listens carefully to informed opinion before implementing these changes.

1. It is important to take action to improve the deposit protection regime, without requiring a large up front cash payment from existing banks at a time when they are struggling to re-establish strong balance sheets after the losses made on securitised loans.
2. The government should make the Bank more independent and stronger to deal with failing banks in the future. This requires transferring day by day banking supervision to the Bank of England, and transferring the necessary staff or recruiting the necessary staff with banking expertise to be able to do the job.
3. The “Special resolution regime” could give near nationalisation powers to the authorities without the need to compensate existing shareholders. These powers were not needed in previous rescues, as the Bank of England has a powerful position as only lender to a bank in trouble. It is difficult to see why they need all these extra powers. The one thing that does need clearing up is the legal power of the UK authorities to arrange rescues quickly and in private under current EU market regulation.
4. It is a moot point whether the Bank of England needs new legislation to clarify its powers and role, when it always used to be able to undertake these matters before many of its powers were taken away in the 1997-8 reorganisation. The availability of skilled and experienced staff in a banking and bank rescue is a more relevant consideration, given the removal of banking supervision from the Bank ten years ago.

As always, there is a danger of the authorities fighting the last war. There is no immediate prospect of another run on a bank. The current difficulties are those of a range of banks strapped for enough capital and cash, and a new aversion to risk as banks reveal losses on some of the paper they hold in the securitised and syndicated loans area. A sensible supervisor would be asking how can the regulatory burden be eased prudently at a time when banks have to recapitalise themselves. There is a danger that further capital adequacy and regulatory tightening, coupled with demands for up front levies for a compensation fund, will make it even more difficult to get the banks and the markets bank to balanced conditions, allowing a reasonable amount of credit to be advanced at sensible prices.

I will respond in more detail to the many individual consultation questions in the government document when I have had more time to consider all the detailed queries.

Last night in the Commons John Redwood was again prominent in the ranks of MPs remonstrating against the inevitable loss of Parliament’s legislative powers if the Lisbon Treaty is ratified.

John Redwood’s three interventions, taken from Hansard, follow.

Mr. John Redwood (Wokingham) (Con): Why did the Home Secretary not just say that Great Britain wishes to keep in place the original architecture—outside the EU treaty and European Court of Justice jurisdiction—and to co-operate with other member states where appropriate, so that we preserve our veto and future Parliaments can change their mind if they wish? The problem with her system is that future Parliaments will be bound by any decision she makes.

Jacqui Smith: I made it absolutely clear that I felt—I shall outline this when I make some progress in my speech—that having the benefits of taking EU co-operation forward through the new treaty arrangements alongside the protection of UK interests negotiated through our opt-ins on a range of justice and home affairs areas was the right balance to deliver the sorts of results that we wanted.

Mr. Redwood: Will the Home Secretary tell us how she would have felt if the previous outgoing Conservative Government had passed a series of laws that Labour did not like and had locked them all in by means of an opt-in so that they could not be repealed without the consent of most of the other member states? Is that a democratic way of proceeding?

Jacqui Smith: I would have hoped that any Government had negotiated hard in Britain’s interest. I would have hoped to see negotiating success such as that which we have seen in this case, although I am not sure that that Conservative Government would have achieved it. I also would have expected lengthy and detailed scrutiny of the proposals, along the same lines as that which we are carrying out and that will take place over the coming days. That is what the Government are delivering.

Mr. Redwood: Will my hon. Friend confirm that, every time the Government opt in to an area of competence under the treaty, the House can no longer reach a free and independent view and repeal and amend it and it cannot be debated sensibly in a general election? The people, as well as Parliament, have lost their power.

Mr. Grieve: My right hon. Friend is right and I shall deal with that point towards the end of remarks.

Today we remember Charles I, executed this day in 1649.

At 2 o clock in the afternoon Charles went through the open middle window of the great Banqueting Hall on Whitehall, to stand on the scaffold that had been erected. He handed the jewel of the George and Garter to Bishop Juxon and laid his head on the block. At four minutes past 2 pm the executioner wielded the axe as the crowd watched in silence.

The decision to kill the King had not come easily or swiftly to the revolutionaries. Cromwell himself was a late convert to the cause. The purge of Parliament left only 26 MPs prepared to vote to put the King on trial, with a further 20 voting against. Many of the 135 Commissioners appointed by Parliament refused to serve. Lady Fairfax shouted down from the gallery during the trial that Cromwell was a traitor. Charles himself attended the court, set up in Westminster Hall, but rejected its jurisdiction. In an attempt to rally his supporters, he argued ? The King cannot be tried by any superior jurisdiction on earth. But it is not my cause alone., it is the freedom and liberty of the people of England?. Some agreed with him, but not enough in the corridors of power, purged of royalist support.

Cromwell found it difficult to persuade many to sign the death warrant, as he tried to involve as many of the senior politicians as possible to spread the blame and create the impression of wide support for the deed.

It was a huge event in English history. In a strange way it may even have been an important part of the reason why monarchy survived. Soon after the death stories circulated that were far more favourable to the martyr King than anything that people had thought whilst he was still alive. Eikon Basilike, the ghosted account of his meditations in his last days, was a popular work that fanned the more favourable impressions of the dead monarch. As the English Revolution went on its middle class way, based on the alliance of Parliament with the much improved English army, the navy and the City, it suppressed the more radical and democratic ideas of the Levellers and ultra puritans. Cromwell assumed more and more the powers of a King, and followed a policy of conquest in Ireland and commercial expansion and anti Dutch activity overseas.

The final Restoration of Charles II completed what some of the MPs had set out to achieve ? a more limited monarchy that usually needed to govern in consultation with Parliament. The death of the King in 1649 was a step too far not just for royalists but for many moderates. The absence of a King for 11 years made it more likely the monarchy would be restored on terms acceptable to the people with power in society, the merchants, the landowners, the City and the military establishment. Charles had pushed the nation’s patience too far and had ignored Parliament for too long in the 1630s. The revolutionaries went too far by killing the King for the good of their own radical ideas. We should mourn the savage death of the man, and be grateful for the very English compromise that emerged in 1660.

Last night I attended a dinner to discuss the railways. It turned out to be a lively and interesting event, moving on from the usual train spotter’s enthusiasm for the past and the anorak’s belief that the only way you can run a railway is the way Network Rail do it.

I began my attempts to provoke new thinking amidst the assembled galaxy of railway directors, regulators and former regulators expecting to end up as isolated as the UK arguing for an EU which repeals legislation, but was pleasantly surprised by the turn of the conversation.

I complained that Network Rail has a monopoly hold over the best routes into all our city and town centres, yet can only account for 6% of the goods and passengers travelling. I urged the railway to change its mode of operation and its technology so it could carry far more people. I asked for lighter trains, more frequent services, more trains per hour on any given stretch of track following changes of weight, braking, traction and signalling. I asked why fares were so high yet subsidy still paid more of the bills than passenger receipts, condemned the over regulatory approach and the way the UK railway was outpaced in efficiency and service by many overseas railways.

The early defence that the technology and trains have to be as they are, and that you can never run more than 24 trains an hour safely on any piece of track soon transposed. I was told that the Engineering Director of Network Rail does agree that lighter trains are a must, and they will produce better performance, speeding up more quickly, braking more quickly and saving energy. I learnt that powerful figures from the industry and regulatory background also agree that Network Rail should be decentralised or split up, and some agree that track and train should be reunited in regional companies. Many agree that contestability is important, and as much competition as possible would be a welcome replacement for too much regulation.

I pointed out to Network Rail that they have all too many tatty or inadequate stations, like Wokingham’s. Property deals could release capital from commercial development on railway land to pay for new stations. Stations could invite in other businesses to supply services train users need – car servicing and cleaning, safe parking, food shopping, business services – as another source of franchise revenue.

All agreed by the end of the dinner that the current performance is not good enough, and that it requires substantial change to create a good working railway growing at a fast enough pace for travel demand. There was a lot of agreement that monopoly is at the root of much of the poor performance. One informed observer said that when Labour nationalised Network Rail, it took away all the private sector banker/shareholder pressures. As a result the cost base of the existing railway doubled rapidly! Network Rail is not the answer. It is a largely unaccountable monopoly, gobbling taxpayers cash but not yielding much by way of improved results.

John Redwood has today made a submission to the Post Office consultation on the proposed closure of Barkham Road and London Road sub-post offices in Wokingham, in which he makes strong representations against the closures on behalf of local constituents. Both branches evidently offer an exemplary and convenient service without which many local residents would be significantly worse off. He also urges that, if the closures were to take place, there would need to be significant improvements in the service provision of the Broad Street branch to accommodate any migrating custom.

The submission and its covering letter follow.

Mr. Tim Nickolls
Network Development Manager
C/O National Consultation Team
FREEPOST CONSULTATION TEAM

John Redwood

Submission to the Post Office Proposal for West Berkshire and Wiltshire by The Rt Hon. John Redwood MP

The concerns communicated to me by my constituents regarding the proposed closure of the London Road and Barkham Road sub-post offices in Wokingham take two forms: (1) that existing demand for the two sub-post offices is considerable; (2) that provision for migrating custom in the main Broad Street branch is wholly inadequate; and 3) closure will be most inconvenient for many of the branch post office users. My constituents are therefore against the closures.

Several constituents have raised the important point that a number of large-scale housing plans are currently being considered for the Wokingham area, some of which will undoubtedly be approved, if not by the local authority then possibly by the Planning Inspectorate, increasing the already existing demands made on the Broad Street branch.

1.1 Concerns over the proposed closure of the London Road sub-post office

A petition against this proposed closure has been sent to my office. The petition contains 653 names and has been co-ordinated independently of the sub-branch management and workers. All the signatories have put their names to the statement that they are regular users of the London Road branch, that they think it is a busy branch, and that it is an essential part of their community. Those sending the petition to my office also expressed concern over the method used by the Post Office to estimate customer numbers at the London Road branch.

Constituents have praised the efficient service they experience at the London Road branch.

Some of its elderly customers cannot drive or walk the extra distance demanded by this proposed closure, a problem compounded by the poor bus service. A couple of local businesses have also stressed that they depend on the proximity of this branch for the efficient running of their business.

1.2 Concerns over the proposed closure of the Barkham Road sub-post office

Constituents writing to me about the possible closure of the Barkham Road sub-post office have again emphasised the efficiency of the service and the convenience of on-street parking they experience at this branch, in notable contrast to the experience of Broad Street customers.

They also maintain that the number of people living in the Barkham Road area is increasing rather than decreasing, with plans for at least 80 new homes in nearby Wellington Road and Molly Millars Lane.

According to correspondence from my constituents, the bus service, on which many elderly customers would have to rely in order to use the Broad Street branch, is infrequent.

2.1 Concerns over inadequate service provision in the Broad Street branch

Those writing to me on the matter of these post office closures have been unanimous in their concern for the service provided by the main Broad Street branch, to which custom from the two sub-post offices is expected to migrate.

The queues in this branch are notoriously long, often extending into the street – an obvious problem for elderly customers, especially in inclement weather. For disabled customers the space limitations of the branch also present difficulties. Ten to fifteen minutes is not an uncommon time for customers to wait in the branch. Anecdotal evidence suggests that customers have been known to wait over an hour to be served, seemingly because only two positions were open.

Parking is also a considerable problem for the customers of the Broad Street branch, something which will clearly become a more common grievance if former customers of the sub-post offices are now driving to the main branch. The proposed redevelopment of the adjacent shopping area would also likely compound the problem of parking and traffic congestion. There is only one disabled parking bay by the branch and two bays adjacent to a nearby bank branch with a 30 minute limit. Otherwise the nearest parking is chargeable and 250 yards away.

2.2 Suggestions for improving the Broad Street branch

I urge that detailed proposals for upgrading and increasing the capacity of the Broad Street branch are budgeted for following this consultation. Such proposals should take into consideration the expected migration of customers if you intend to close either or both branches, as well as any pending planning proposals for the area which might further increase service demand.

I suggest that increased capacity on the scale demanded might best be achieved by rationalising the Broad Street site’s use. Sorting activity could be moved from the current location at the back of the site to better premises. This would release cash for much-needed expansion and modernisation of the existing customer facilities from the sale of the development.

Staffing the positions at peak times is also essential to improving this facility. Providing a means of achieving this should be considered in the consultation’s conclusions. The Broad Street front building should be retained and additional counters incorporated. There is room to do this on the left of the building.

John Redwood made two interventions in the Commons debate on the Lisbon Treaty yesterday. He stressed the need to devote sufficient time to debating its implications, over and above the limited time currently allocated by the government. Such careful consideration is needed now, since the treaty’s dubious opt-in system is very wrongly paraded by the government as a protection of Parliament’s decision-making powers.

The interventions, taken from Hansard, follow.

(1) Mr. John Redwood (Wokingham) (Con): Does my right hon. Friend think that the reason why the Minister needs only an hour and a half for amendments on each of the topics is that the Government have only one argument—“We’ve given the powers away, we’ll drive the Bill through with Liberal Democrat votes and we don’t care a damn what you think about it all”?

Mr. Hague: My right hon. Friend is certainly right that the Government want to drive the Bill through, although I suspect that this evening they will not have even the Liberal Democrats’ votes, so I shall not be as rude about them as I usually am. No doubt the hon. Member for North Southwark and Bermondsey (Simon Hughes) will make his case in a moment—or for most of the evening, in all probability.

(2) Mr. Redwood: Would my right hon. Friend confirm that the danger of the opt-in system is that if the Government opt in, we cannot debate the matters in question in a future general election, offer to change a particular view or get powers back because it is a one-way ratchet? That is why we need hours of time to consider this grave step that takes away the people’s right to change their minds and have a better Government.

Mr. Hague: Once again, I agree with my right hon. Friend.

The government has failed to give us the promised referendum on the EU Treaty.
Now it is failing to give us the promised full Parliamentary scrutiny.

Yesterday we had a bad tempered debate on how much time would be made available to go through all the powers transferred and the complexities of the EU proposals.

The 20 days floated in the newspapers has come down to 14 days including 2nd Reading and the debate on the timetable. The ability to probe and examine amendments on every part of the Treaty and Bill, has transposed into just one and half hours tacked on to the end of themed debates to consider amendments. Today that is just one and half hours for any amendment covering cross-border crime, justice, policing, human trafficking and asylum and migration policy.

This is not Parliamentary scrutiny, this is a government riding roughshod over Parliamentary accountability. Normally MPs can table and debate a wide range of amendments on each Bill, with time in committee to consider each amendment and each clause on a line by line basis. That will be quite impossible on this most complex of documents, with so little time for proper committee discussion.

Why can’t the government cancel one of the weeks of holiday pencilled into the Parliamentary diary? Why can’t it remove some of the Topical debates on Thursdays, which are always on subjects the government wishes to highlight, and give the time to this issue? Why do we have to pack up at 7pm on a Wednesday, when we go on to 10 pm as on Mondays and Tuesdays?

The truth is there are plenty of ways of finding the time, if they wanted to. There are plenty of us wishing to debate a wide range of amendments and new clauses.

Yesterday the government showed they do not want Parliament to do a proper job on this Bill, any more than they want the people to have a vote on it. Clearly the government is worried about this Treaty, and knows it is unpopular. That may be why Mr Brown did not wish to be in family photo at the signing ceremony, why he did not have the 2 nd Reading on a day he could be represent and voting, and why now his business managers are artificially restricting the time for amendments.

In one sense the government is right. Because Parliament is debating it after the government has signed it, it is take it or leave it. The Opposition has voted against the whole thing, but lost thanks to the support of both Lib Dem and Labour MPs. The battle now over the substance of the Bill is to expose just how much power the government is giving away, in the knowledge that from here the Lib Dems are going to support the government when it matters, making the government casual about needing to explain itself to Parliament and people.

I do hope all those who voted UKIP in the General Election, helping federalist candidates to become MPs, now wish they had not. We need votes now in the House of Commons. Splitting the anti Constitution vote in 2005 has damaged our cause.

PS: Today. Tuesday the government made a small concession - we now have two and half hours for an amendment and three and a half hours for the general motion each day.

Things are bad enough without talking ourselves into recession.

Some banks and commentators have already called a recession in the USA, when the figures for the last quarter of 2007 show the US economy was still growing well. Here in the UK the retailers have added to the sense of gloom by concentrating on their sales figures on a “like for like” basis, leaving out all the sales in new shops.

The current position is both better than the pundits admit, and worse than the government will let on. The bad news is that the banking systems in both the USA and the UK are damaged by discovering that some of the lending they carried out in the heady days of low interest rates and easy money may not be repaid . We are living through a difficult time as banks adjust for the losses they have made, and rein in their lending as they are short of cash. Banks need to cut their dividends or raise new capital.

In the UK commercial property values are falling fast, undermining the security for some of the loans. Residential property values are under attack from the UK government, who want housing to be more “affordable”. The price falls have not been fast yet partly because high Stamp duties and the imposition of Home Information Packs are putting people off selling their homes. There are too few homes coming onto the market at the moment to cause a crash . The UK authorities have made the problem worse by their ham fisted approach to Northern Rock.

The good news is that many companies are still trading well. On both sides of the Atlantic activity is higher overall today than it was when the Credit crunch first hit. Both the US and the UK have experienced a falling currency. As both economies need to divert much more activity into exports, or into import substitution, that will help. Both economies can export so much more to the rich parts of the world – China, India, Russia and the Middle East. Both economies now have to seek inward investment from these new giants that have built up huge cash surpluses at the same time as we have built up huge deficits by buying their oil and their manufactures. It is repayment time.

Few forecasters expect a downturn in the UK this year – just a sharp slowdown. Some commentators expect the US to get away with a slowdown rather than a recession. The US Fed is very keen to stop a slump, and is taking the right action by making cash available to banks and by cutting interest rates. Now the US President is also promising tax cuts, which will boost activity as well. The US authorities recognised earlier than the UK that they had to shift from inflation fighting to recession fighting, and they have been bolder in their actions. They will probably succeed in avoiding recession.

The UK’s position is weaker because the UK has increased public spending by too much, wasting too much of the money. At a time when other countries were reining in public borrowing and controlling their spending, the UK government went on a spending binge. This limits the UK government’s scope to cut taxes and relieve the pressure on consumers. As consumption is the largest part of activity, this means we are going to experience a slowdown which consumers will feel badly. If the government really wanted to help us out of this change of fortune, it would get a better grip on its spending immediately, cancelling the needless parts like ID cards, computerisation schemes, regional government, and larger EU contributions as well as keeping wages down. Then it could follow the US example and cut taxes to help the hard pressed private sector.

Instead the UK is only going to tackle one of the twin deficits, the balance of payments one, through the mechanism of a cheap pound. Our best hope this year is that the strategy works and the private sector does export more. That could be helped if the government would relent on its planned increases in small business tax and capital gains tax. They need the goodwill of entrepreneurs. It’s a dangerous time for the government to be sandbagging the very people on whom they rely to recreate their much quoted “economic stability”. Our economy at the moment is as stable as a row boat in a storm.

There is no need to talk ourselves into recession – we can get through with a period of slow growth. To do so, the government needs to curb its own appetite for waste and be realistic about how much it can squeeze out of us in tax.

Our water pipes are leaking, our gas pipes often need replacing, our telephone cables need expanding and even our electricity wires may need fixing. Each time one of the utilities needs to do such work, they have to dig up the streets.

The government is aware of the frustration this causes. Its own highways legislation asked Councils to limit the time utilities have available to disrupt the streets, and requires them to penalise delayed works. It asked the bodies that often themselves do as much or more as the utilities to impede our progress to work, as Councils themselves have a fascination with rearranging the street furniture and with digging up and reshaping the roads.

Much of the problem could be solved over the longer term is we started to alter the way we arrange our utilities. Every time a builder puts in a new housing estate, a developer puts in a new business park, and every time major roadworks are carried out, it would be possible to alter the way we organise our utilities.

We could create concrete box tunnels under one of the pavements in urban areas, and by the side of the road in rural areas. These box tunnels should be large enough to take the water and sewage pipes, the power cables, telephone cables and the gas mains. No-one would dream of embedding all these features in the walls or concrete floors in new commercial buildings – they are placed in the space between floor and ceiling, and in the basement, allowing easy access to mend or improve. These new box tunnels should allow entrance to workmen to fix or change, without needing to dig up the road, and usually without even having to disrupt the pavement.

There would be more cost at the time the facilities were put in, but huge savings in time and effort subsequently. It is madness that we sit and watch as our roads are regularly wrecked, often just after they have been resurfaced at public expense, because the main utilities run down the middle of the road and are buried in the soil and hardcore.

This government’s policies have meant much reduced flows and capacity on many of our roads through traffic mismanagement schemes. They have created extra congestion and pollution by all red phases on traffic lights, by chicanes, lane removal and artificial narrowing. The very least they could do to help the flows and the busy commuters would be to start to cut the number of times the precious highway has to be coned off and dug up.

The government has come up with a sure fire winner for students this time.

Here is the A level you may not have to study for when it is snowing, or when the leaves are in fall.

Here is the A level you can take your time over at Christmas and the New Year.

Will it come in the heavily subsidised and in the much delayed versions?

You should be able to borrow to pay for it, and not have to put your loan on your personal balance sheet.

It sends the right signals and may even engineer you on the right track.

Commercial property has fallen by 10-15% as a result of the credit crunch in little more than three months. The Stock market has fallen, with property and housebuilding shares halving from the market peak. Yet central London property had a fabulous year of price rises throughout 2007, and still there is no sign of major price weakness. In a credit crunch you would expect the very inflated central London residential market to fall as well.

There are reasons to worry about these prices:

1. They have become very high in relation to UK earnings. The central district prices rose by as much as 30% last year alone.
2. Mortgage approvals are down 40% this month
3. There are fears of City lay offs and lower bonuses
4. Non doms and overseas visitors are facing the threat of paying more tax, which could persuade some of them to sell up and leave.

So why has the market so far stayed high?

It is noticeable that there is a shortage of property on estate agents’ books in central London, and the volume of transactions has fallen considerably. It appears to be the case that the market is being held up by a shortage of supply for the following reasons:

1. Stamp duty at 4% is a very large tax on moving home. Someone with a three bedroom flat in the better postcodes would have to pay around £50,000 to £60,000 in Stamp duty to move, along with other fees of say £30,000. People think twice before spending more than a year’s salary on the costs of a move.
2. Councils will often give permission for a basement addition, a new floor in the roof, or for more space by pushing out the back wall. That is a cheaper option than moving. The large number of builders skips around shows this is an attractive option.
3. Whilst the Non doms tax is rumoured, the final details have not been worked out. Maybe Non doms hope the worst will not materialise, or maybe their UK lawyers and accountants are telling them to wait as there may be a way round the rules.
4. City redundancies have not yet shown up in overall unemployment figures, and City bonuses are still being paid on last year’s earnings before the crunch.
5. Home Information Packs have put off speculative sellers from testing the market, as they do not want to incur the costs.

Will these factors continue to protect the market? It seems unlikely, as house prices are very expensive, and the credit crunch would normally have an impact. Foreign money is important to maintaining the strength of prices in the best districts, and it is true that there is still plenty of cash in Asia and the Middle east. That’s why watching the Non doms tax developments is especially important. If the Non doms think the tax regime is still OK here, then expect the prices outside the top districts to fall first, as redundancies, fewer mortgages and lower bonuses have an impact.

A year ago the luminaries, power brokers and business leaders at Davos were very optimistic. The discussion in private sessions ranged widely over ever larger bids based on heavy borrowings. We were at the peak of the rule of King leverage. The attendees foresaw a continuation of the securitisation bubble and thought it represented the new economic stability.

In other words, last year Davos did not predict Credit Crunch, securitisation meltdown or the coming slowdown. The world’s most powerful and best informed got it hopelessly wrong.

So why this year, when they are predicting recession and meltdown, should we think they are likely to be any more accurate? We should recognise that Davos is heavily oriented towards Western leaders and economies. To understand the current world economy you need to understand India, China, the Middle East and Russia, as well as the USA, EU and UK.

This year will see a sharp slowdown in the Western economies thanks to the boom and bust monetary policies the Fed and the Bank of England have been following. We will also see another year of good global growth, with the new power houses continuing to grow rapidly. This year is about three main issues:

1. How quickly will the Western banks recapitalise themselves? Will the Western monetary authorities - as the Fed is doing - accommodate to limit the downturn?

2. How quickly will the world financial system find ways to transfer the huge cash surpluses in the East and Middle East to the West to keep the wheels running well?

3. How big a shift in world economic power will there be this year? How much of the world running will now be made by domestic demand in the Asian and Middle Eastern economies?

There is a chance that the Fed’s actions coupled with efforts to sure up the Western banking system will be sufficient to prevent Western recession, whilst commodity prices tell us demand is alive and kicking elsewhere in the fast developing world.

So cheer up - the experts in Davis are probably wrong again. Soros has grabbed a topical headline but he may not be right.

The Chancellor has promised a statement next week to try to sort out the regulatory mess that characterised the Northern Rock debacle.

What he needs to do is the following:

1. Ensure the Bank of England is more than just a monthly tea party for a group of academic economists sitting round talking about interest rates. The Bank needs to be given the power to direct and deal in government debt (currently with the Treasury).

2.The Bank needs to be a hands on operator in the money markets, so it does not allow in future the markets to become as illiquid as they were in August and September 2007, nor as loose as they were a year or more earlier. The Monetary Policy Committee became entirely academic last year when market rates diverged from MPS rates by up to 100 basis points. If the Bank is to set interest rates, it has to have all the powers and knowledge to operate successfully in money markets, to enforce the rates the MPC recommends.

2. Transfer banking supervision from the FSA to the Bank to allow the bank to operate properly in markets.This would ensure the Bank saw the main positions of the big banks daily, and understood the minute by minute pressures in money markets better.

3. Press for amendment of the EU MAD Directive to allow the Bank to organise rescues for ailing financial institutions in private and rapidly if needed.

4. Renegotiate Basel II to strike a better balance between off balance sheet and on balance sheet items, and to avoid Basel II becoming a further tightening of the capital rules at a time when banks are already finding it difficult to lend through balance sheet pressures.

5. Announce that the UK will not support any more EU regulations of financial services - there are too many new ones that have not yet bedded down, and we need a period of reflection and implementation to see how they will work.Some will need amendment or repeal, as they are too proscriptive and will drive busienss offshore from the EU.

6. Review the operation of the Rating agencies with other overseas jurisdictions, to see if they can operate more cautiously in future.

The sub prime crisis, a run on a UK mortgage bank, and now the loss of $7 billion dollars through rogue trades at Soc Gen: and still they say regulation works!

I accept that financial services businesses can be different. Where they take money from people, on the promise they will repay it at some date in the future, people need reassurance that the promise will be kept. In most other businesses the business takes the risk and supplies the good and service before the customer pays.

It makes sense to have deposit protection, and it should make sense to have some additional checks and requirements to reduce the risk that a business will steal people’s money, or will fail to keep enough capital to pay for losses and mistakes and still be able to give people their money back when they want it or are entitled to it.

This proposition has led to a vast regulatory industry, where clever regulators try to interfere in ever more details of the banks’ lives in the belief that this will prevent mistakes being made. As the last few months have shown, it does not work.

We need to ask how did the world regulators get it all so wrong, and what changes do we need to reduce risks in the future?

The biggest problem is the so-called sub prime crisis, which is in practise a world crisis, not just a US one, and is not confined to mortgages alone. It is a securitisation and off balance sheet crisis – too many banks packaged up too many loans born of the easy money conditions the authorities encouraged, and spread them around the system. The Regulators through their Basel I requirements positively encouraged this, asking for less capital if you securitised your lending and pushed it off your own balance sheet. This crisis should be called the Basel regulatory crisis, rather than the sub prime crisis.

The solution is for monetary authorities to be more careful about making money too easy – not that this is an immediate problem in the middle of the Credit crunch! They also need to revise rules over capital requirements, without lurching to a position where too much banking capital is required, intensifying the Credit Crunch. The whole thing is complicated by the move to Basel II, which needs urgent review in the light of current circumstances.

The run on Northern Rock was an unfortunate event for London. I do not agree with the MPs who say the FSA got it all wrong. As I understand it, the FSA was warning about the problems of Northern Rock well before the run on the bank began. The failure was a system failure, which owed a lot to the failure of the monetary authorities to keep money markets liquid, and to the dithering of the Chancellor who was meant to hold the ring and make the decisions in areas of overlap between the Bank and the FSA.

The UK government should decide that in future the Bank of England will get back its old powers to regulate banks and to run the government’s debt financing programme, so it once again sees the whole range of business going through the money markets. The Bank should have prime responsibility for banking the commercial banks, ensuring adequate liquidity in markets and avoiding any future run on a bank. They always used to be able to do this before Brown’s botched reforms.

The Soc Gen debacle is difficult to believe. Most banks make dealers deal in open dealing rooms where colleagues can hear what they are up to. I thought most require two signatures on larger deals, most have real time reporting through a common system, and anyone needing cash to pay margin or settle transactions would need someone else to certify or check the requirement. As the trader apparently acted without other authority he must have found ways to circumvent the checks in the system. The regulator presumably was completely unaware that such a thing was happening.

I do not think Regulators can stop a Soc Gen event. Only better internal controls and procedures in a bank can do that. The fact that Regulators cannot should make more people suspicious of the cry that what we need is more regulation. In this case what we needed was better bank management.

When I was Secretary of State for Wales, the National Coal Board was embarked on a substantial pits closure programme. In each case they reported to the Energy Minister and Secretary of State (DTI) that the particular pit was worked out. They claimed to have surveyed it accurately, and discovered either that there was no more coal to be extracted, or that whatever coal remained could not be worked for a sensible cost.

One of the pits they decided to close was Tower Colliery in South Wales. I was suspicious of the Coal Board?s view. Experience had taught me that they were not great managers of our national resource. They had a glittering legacy of losses, subsidy demands, closures, redundancies and poor employee relations to their credit. Their safety, productivity, profitability and social records were far from perfect. I was not inclined to believe them that so many pits had suddenly become uneconomic. Looking at their accounts, the high overheads they imposed on their mines was a striking feature.

I was therefore delighted when I was told by my private office that miners representatives from Tower Colliery wished to come to see me to put the case for keeping open the mine. I was even more delighted to learn that they believed their case so strongly that they were prepared to take the pit over and mine it themselves, if the Coal Board would give them the chance. The bad news was the Coal Board refused consent, and the Energy Ministry backed the Coal Board?s judgement.

When the miners arrived in my office, I think they were surprised by my enthusiasm for their cause, and by my explanation that their task was not to persuade me, but to work with me on our joint case to the Energy department and Coal Board to give them the opportunity to run the mine. As it meant being allowed to prove the Coal Board wrong it was not going to be easy, but I felt that between us we could do it.

So was forged a partnership in British politics that none had predicted. I joined forces with Tyrone O ?Sullivan, the charismatic Lodge Secretary and leader of the buy out team to persuade Coal Board and government the should give the miners a chance. I was the only person who saw nothing strange in the alliance. I had always believed in workers participation and employee ownership. Here was a chance to show its magic in an industry that had been gravely damaged by the them and us mentality of the large corporation.

After correspondence and conversations tackling the obduracy of the Coal Board position as retailed by the government, our view finally prevailed. What harm could there be, I argued, in letting the men have a try. If they were right the community would be saved and jobs would remain. If the Coal Board were right and the coal was not plentiful a valiant attempt would have to be abandoned. Nothing was lost ? other than some Coal Board pride - by letting them have a go. I was always supremely confident that they would succeed, because they had impressed me by their enthusiasm for the cause and I was sure the cost structure of the Coal Board was wrong for their pit.

It was joyous day when I learned our view had won. The announcement was made to the Conservative Conference in the autumn, and the miners became the preferred bidders to buy the pit. Much of the consideration was to be deferred, to be payable if they were right and the pit had a future, which seemed fair. The leading miners still had to put up ?8000 each for the down payment, which was a substantial sum for them. Their wish to do so was further proof of their belief. I accepted that only because I share the miners? confidence. By the end of December 1994 the deal was done.

I was delighted for them when they took possession of their mine, improved conditions and wages, and set about demonstrating that there were 13 years of profitable workings left. Today I will be sad that this great enterprise has come to an end, but pleased that they made some better paid jobs and shared in some profits over the later years of that mine.

I like to think it will be a model for the future. One day I hope and expect more mines will be opened again in our country, to produce the coal for clean coal technology uses. I want those mines to be ones where there is more machinery, more safety protection and a share in the profits for all who venture underground. If that turns out to be the case, I hope people will remember the pioneering work of the Tower miners. They showed grit and determination. They took a personal and financial risk. They proved the Coal Board wrong. They showed you can mine successfully, with miners playing a leading role in the management of their pit.

After the miner?s strike, I tried to persuade Margaret Thatcher to allow the sale of pits more generally with substantial free shares for miners so they became co-owners in the project. Whilst I got the support of John Moore, an early leak of the scheme unfortunately led to its demise. Had we gone ahead with co-owned pits in the eighties I think we would have had a much bigger and more successful mining industry today.

Earlier today (Thursday the 24th January), John Redwood met with Sir Michael Pitt, author of the official review into what action should be taken to tackle the problem of flooding, in the House of Commons to discuss his interim report.

John Redwood visited the affected areas in Wokingham over the weekend of last July’s floods, and has visited several of the sites subsequently to learn more of the problems and to try to direct help from the Agencies involved. His evidence to Sir Michael Pitt’s enquiry included the following main points:

1. In all too many cases there has been a lack of clarity over which body or authority is responsible for maintaining and improving the flood defences. This can lead to delay or failure to take the necessary action in time before heavy rainfall occurs. John has recommended that the Environment Agency draw up a list of the principal bodies with their responsibilities detailed on a district by district basis. He also proposed that an independent Adjudicator be established to decide in cases where public bodies and water companies are in disagreement about their responsibilities.

2. The Environment Agency, the water companies and the local authorities should be expected to maintain their flood defences to a higher standard than the EA has been achieving in recent years. There should be an immediate programme of cleaning and scouring to improve the flows and capacity of the ditches and culverts.

3. The leading authorities, including the Environment Agency, the Water companies and the Highways Agencies should draw up a programme of works to improve the capacity of their systems where it proved inadequate for the volumes of water last July. In many cases the work will entail a digger enlarging a ditch or creating an additional one, to take the surplus water.

4. Government Planning Inspectors should not grant new planning permissions on flood plain, unless they require the developers to pay for enhancements to anti flood systems which not only handle the extra water the development will generate, but make some contribution to the backlog of inadequacy in systems.

5. Consideration should be given to requiring new housing and commercial developments to include rain water collection from roofs for reuse on site as grey water for cleaning purposes, to reduce the flow into the drainage systems.

6. The Environment Agency should press ahead with its plan for a larger retaining area on the Emm Brook to control surplus flows during heavy rainfall.

7. The Environment Agency should examine flows and volumes on the Loddon and see if a longer term larger scheme is needed to improve the capacity of the river.

In addition to his submission and meeting with Sir Michael Pitt, John Redwood has repeatedly raised these issues in the House of Commons.

Speaking about his meeting with Sir Michael Pitt, John Redwood said: “The public does not just want the Environment Agency to publish better maps of flood risk, and to publish earlier and clearer warnings of floods. It wants the government as a whole to find ways of preventing floods by better water management”.

“I hope the Pitt Report will include these proposals in its final version. More importantly, I hope the Environment Agency and the other bodies will now turn their attention to better maintenance and a programme of improvements to the flood defences.”

No wonder people are cynical about many politicians.
The Home Secretary finishes a consultation where 90% of the respondents tell her they do not want to see any increase in the 28 day period of detention without charge or trial.
As a result, she concludes she must press ahead with legislation to allow detention for up to 42 days.
All the Consultation has done is to persuade her to use a softer tone of voice, and to dress it up as a contingent arrangement. The truth i sthat it still remains the same underlying proposal - to lock people up for up to a month and half when there is insufficient evidence to bring any case to court.
Just as the government is unable to understand “No” to regional government in England - which was shouted loudly enough when they lost a referendum by 80% to 20% - and unable to understand the passionate wish that they keep their word to hold a referndum on the latest EU Treaty, so the Home Secretary is unable to understand “No” to longer periods of detention without trial.
When I and my colleagues were on IRA death lists - and when 3 of my colleagues were murdered by terrorists
- we did not see the need to turn Parliament into a fortress or to extend detention without trial in Great Britian. It is now generally agreed that changing the rules in Northern Ireland did not help bring the troubles to an end.
Think again, Home Secretary. Many of us are scandalised that you can lock someone up for 28 days without charge or trial. We will never accept 42 days. We value our freedoms.

Over the last decade the UK has been marooned with a high standard rate of capital gains tax, whilst many other countries have decided to be friendlier to savers and entrepreneurs by slashing CGT rates.

I welcome Mr Darlings decision to cut the wholly uncompetitive 40% UK rate to 18%, a rate closer to the norm amongst advanced nations. It is exactly what he should be doing.

Unfortunately Mr Darling could not resist a sideswipe against enterprise, with his wish to hike capital gains tax on investors in businesses by 80%. This has understandably caused a massive furore, and has lost the government much support in the business community. It has undermined the good work of his general CGT reform.

Today I am pleased to hear that Mr Darling intends to change his mind on gains up to ?750,000. It is a small step in the right direction. It is unusual in this government for a Minister to listen and to amend. He now needs to listen more, as his proposals are still damaging.

It is one of the ironies of Mr Darlings troubled times at the Treasury, that he should choose to assault the one tax change his predecessor Mr Brown had brought in which had won universal acclaim from business. The 10% CGT rate was compelling and competitive. It succeeded in attracting large amounts of new business to London, and underpinned a large pool of venture capital and private equity activity. Last year as this government and some in the media always do, it was time to slate people for their success and to cast envious eyes on their rewards. Against this backdrop the Chancellor foolishly saw a pot of gold he could tax. He did not seem to understand how footloose that money and skill is, and how much other centres in the world want it.

In todays difficult climate for enterprise the government should expect redoubled competitive attacks from other countries, who will want that accumulation of capital and that financial talent. Our competitors were thrilled when Darlings politics of envy started his move against private equity and against non doms. His partial climb down today is welcome, but not sufficient to ensure all the money and talent will stay here. In a world fighting recession fears, jealousy and government greed are dangerous bedfellows. They are the enemies of enterprise, and the progenitors of lower growth and less prosperity. The UK has a lead as a world financial centre, but New York is about to benefit from the next round of Bush tax ciuts, whilst Mumbai, Shanghai, Dubai and many others are all out to take whatever London carelessly fails to look after.

When quizzed by John Redwood yesterday in the Commons debate on freight rail, the Secretary of State for Transport surprisingly conceded that road rather than rail activity was a much more viable option for businesses, and that commercial companies can only be expected to make this choice.

The question and answer, taken from Hansard, follow.

Mr. John Redwood (Wokingham) (Con): Why did the nationalised Post Office transfer so much of its activity from rail freight to the roads? Does the Secretary of State have any plans that might encourage the railways to win that business back?

Ruth Kelly: The answer is a very simple one: it was a commercial decision for the Post Office. The fact of the matter is that rail freight is growing incredibly quickly; it has increased by about 49.5 per cent. over the past 10 years. We can do more

In the debate on rail transport in the Commons yesterday, John Redwood asked the Minister when Network Rail is going to understand the cash-raising possibilities for refurbishing stations such as Wokingham.

The question and answer, taken from Hansard, follow.

Mr. John Redwood (Wokingham) (Con): When will Network Rail, a publicly owned company, get to grips with problems such as a very tatty and run down station in Wokingham that could be rebuilt from the proceeds of planning gain on its very valuable site?

Mr. Harris: The right hon. Gentleman has been misinformed. Network Rail is a private company over whose operations I have no direct control. He takes a close interest in these matters, so he will know that in the White Paper published in July we announced

Three cheers for the Fed. One cheer for each 25 basis point cuts in interest rates announced as an emergency measure yesterday. It did the trick, limiting the savage market decline, and turning round the Asian markets which had been in freefall the previous day.

The US authorities have made it clear to the markets that they are going to stop a recession if it is in their power to do so. They have made aggressive moves in reducing interest rates. This will help a great deal. It means that many mortgage holders and companies in debt will now be able to afford their interest payments and repayments, improving the quality of the loan assets on the balance sheets of the banks and those held in securitised form. It means that all those financial companies that have borrowed so much to sustain the easy credit of earlier years will also have some relief on the amounts they have to pay in interest. The whole financial structure in the US is a little less unstable as a result of this development.

As I argued yesterday, two conditions need to be fulfilled for recovery to get underway. The first is lower interest rates. The second is the recapitalisation of the banks, so they have the stronger balance sheets they are going to need to lend people and companies more money again. This process can happen by the passage of time, as they trade profitably. It can be speeded up by cutting or cancelling dividend payments, or by raising new money from shareholders.

The gyrations of world markets in the last few days shows that the Indian, Chinese and Japanese markets are still very influenced by perceptions of the state of the US economy. All three are important exporters to the USA and are influenced to some extent by US conditions. The internal strength of the Indian and Chinese economies is becoming more obvious, but it is not thought sufficient to offset the full blown US recession which some market participants feared.

The Governor of the Bank of Englands remarks showed how far behind the plot the UK now is. The worse circumstances of the UK economy as a result of recent policy are now dragging it down relative to the US and the Asian giants. As the Governor pointed out, we have a bad inflation problem this winter. The governments own borrowing requirement was far too large before Northern Rock hit, only to be made far worse by the Northern Rock debacle. The big build up in UK public spending and borrowing, and the poor productivity of the enlarged public sector, all limit the UKs room for manoeuvre, at a time when the UK too needs lower interest rates to relive pressure on its financial system. The government is trying to control public spending at last by clumsy interventions on public sector pay, but still lacks a grip on large projects and staff numbers.

A recession can be averted in the US. The UK will experience a sharp slowdown, which will be made worse if the Chancellor presses on with plans to increase capital gains tax on entrepreneurs and with damaging plans to tax non doms too much.

Having a referendum on the EU treaty is central to restoring trust in politics, insisted John Redwood last night in the Commons. Being the first to intervene in the debate on the Lisbon Treaty, Mr Redwood demanded of the Foreign Secretary, David Miliband, that he give the country a say on such a reckless surrendering of powers, just as his party had promised to do in the last election.

John Redwoods four interventions and speech, taken from Hansard, follow.

Mr. Redwood: Why will the Secretary of State not give us a referendum, given that his party promised one and that all the powers that we worried would be transferred under the constitution are now being needlessly and recklessly given away in this document?

David Miliband: For the same reason that the right hon. Gentleman voted against a referendum on the Maastricht treaty in 1992

Yesterdays vote and proceedings in the Commons show the grim reality that unless the Lib Dems honour their promise of a referendum there is no chance of us gaining one.

Yesterday was the Second Reading. The issue was simply

The collapse of Stock markets around the world should come as no surprise. As readers of this blog will know, the years of easy credit were decisively ended last August when the financial community woke up to the reality of the securitised loans crisis, aided by the Central Banks at last in tighten mode after years of sloppy credit.

A credit crunch means there is little new credit available at a time when too many people and companies are desperate to sell assets to raise the cash they need. Investors with cash suddenly decide they want to hold more cash. Investors who have been investing on borrowed money have to rein back their activities and pay down debt. Banks that were able to lend people money and then package the loan up as security to sell to someone else suddenly find there are no buyers for these packages. As a result asset prices crash.

A credit crunch ends when two conditions are met. The Authorities have to signal they want easier credit by lowering interest rates, so high borrowings become affordable again. Banks have to sort their balance sheets out so they have the capacity to lend more. It is this latter condition which may take some time to get right this time round, because so many banks have been involved in syndicated credits and in trying to put their loans off balance sheet in structured vehicles. The sooner the banks sort out what all these investments are worth, write them down, and raise the new capital they are going to need to be able to carry on their business, the better.

The weakness of banks is not solely a US phenomenon, and the so called sub prime crisis is not just a US or a property related difficulty. This is a crisis in the global banking system, where there are worries about the Bank of China as well as about the European and US commercial banks. They have to contract their balance sheets as they value their loans more realistically, and then many of them will need new capital ??whether by cutting dividend payments and keeping more of their profits, or raising new money directly by selling new shares to shareholders. Doubtless the worlds regulators, led no doubt by the UK authorities, will make it even more difficult to by tightening the rules on capital adequacy at exactly the wrong point of the cycle.

The worlds economies are in different conditions to meet this sudden lurch from easy money to tight money. The Italian and Spanish economies are going to be made to suffer for their membership of the Euro, with interest rates and money growth dictated from Frankfort leading to painful adjustments in their domestic economies. The US economy is so far mainly suffering in the real estate and banking sectors, with some signs of a good export led recovery emerging in other sectors from the lower dollar. The UK economy is badly placed, thanks to the very high public deficit and poor productivity performance of the much bloated public sector. The bungled approach to money markets and banking which uniquely gave London the only run on a bank does not help either. If the Chancellor follows this up by taxing the rich out of London then we will have a major residential property price collapse to add to the current woes. The Indian and Chinese economies may find exporting to the US and the West more difficult, but they have the cushion of rapidly growing domestic demand and China has the huge foreign exchange reserves its successful exporting has built up in recent years.

We have seen a sharp contraction in real estate in the US, in Spain, and in commercial property in the UK. We are now seeing a sharp fall in share prices, as investors adjust to the new reality that banks and property companies will find it difficult to maintain earnings, and as the growth rate of the worlds main economies slows.

There remains plenty to worry about. Some are still worrying about the price rises that are coming through this winter as a result of the years of easy money. Others are worried looking forward, fearing a recession in the US and elsewhere. I still think a full blown US recession unlikely, and do not see an inflation problem looking out a year, but recognise that these fears will remain real to many unless and until my two conditions are met for a recovery.

There will be growing pressure on the US, UK and European authorities to lower interest rates, and lower rates will help. There also needs to be a concerted drive to clean up banksbalance sheets and establish some kind of a market in all of these securitised loans that characterised the years of easy money. Once we can know what is left on banks balance sheets, markets can get on with the necessary task of recapitalising the banks so more normal credit conditions can be recreated.

PS: The Fed’s move today to cut interest rates by 75 basis points, taking them down in one go from 4.25% to 3.5% is a good start.