Month: February 2008

Under this government you don’t get much for £1 billion these days. You can soon blow a £100 million on fees for advice on a financial matter, and can get through many times that on a centralised computer contract or good pay rises all round for public sector workers. I expect the political classes will soon be looking for a new unit to make it sound more reasonable.

So I have come up with a modest proposal. Why not account in “rocks”. We can’t be quite sure how much a rock is, but it is probably around £110 billion. It breaks down into 2 Granites, a smaller unit of account which works well offshore.

Recasting public spending, the total spend comes out at around 5 rocks. The Health Service is a snip at just 1 rock, whilst you can have all the armed services for a year for well under a granite and keep them mainly working offshore.

Total stated public debt is only 5 rocks. Even adding in unfunded pension liabilities, borrowings by a nationalised bank and railway, PFI and PPP you still come up with a very easy sounding 12 rocks of total public sector liabilities.

This could well catch on, and make it easier for the government to carry on spending as if we had all the money in the world.

(Based on a speech given to a dinner in the Great Room of the Grosvenor House Hotel on Tuesday night of this week)

There is a big gap between what the public (and press) think about MPs’ pay and expenses, and what many MPs think. A lot of constituents think £60,000 is a good salary, and are concerned about some of the claims MPs have put in under the second homes allowance and travel budgets. Some in the press and public think the second home allowance is wrong in principle. A lot of MPs think they are paid relatively little compared to similar people in the public and private sectors, and point to long hours, the being constantly on call, and the strong accountability which having to argue your case to keep your job every four or five years naturally generates.

So let me tell you the trade union case for the MPs, so you can get angry and tell me how the pay and the expenses of all MPs needs to be cut down to a smaller size.

During a Parliamentary week an MP’s day might begin with a working breakfast, followed by a morning of emails and letters. The MP might attend the chamber for questions and debate in the afternoon, might attend committees and other meetings in the early evening, have a working dinner in the House, and be allowed home after 10.15 pm and a vote on a Monday and Tuesday. So the week may start with two 14 hour working days. On Wednesday the Parliamentary day usually finishes around 7.15pm, but there might be evening dinners or meetings to attend. On Thursday proceedings end at 6.000pm ,allowing many to travel back to the constituency on the Thursday evening to be in situ for morning meetings on the Friday. Any hard working MP would regard a 40 or 45 hour Parliamentary week as a rare pleasure, and some claim to work 70 hours. Sensible MPs do not regard Saturdays and Sundays as days off as a matter of course, as there are civic services, party events and community events to attend. So, some MPs say, on the basis of hours worked and commitment they deserve a decent salary.

The system both expects that in a Parliamentary week an MP will work more than the usual 40 hour week, and that it is possible for many MPs to do a second job as well. About 100 MPs have second jobs as Ministers. They are paid extra, and have to fit in Ministerial meetings, running the civil service office, Ministerial visits and the other extra features of Ministerial life. Other MPs have second jobs as Chairmen of Select Committees, or of other committees of the House, for which they are also paid an extra salary. Fitting in the Ministerial job is of course much easier during the weeks when Parliament is not in session.

MPs point out that they do have a job which requires regular attendances both in the constituency and in Westminster. For some it is simply impossible for them to travel daily to and from Westminster. For others it could be done but it would mean two to four hours travel taking away time from doing the job itself, and might become impossible on nights when the House sits later than 10 pm to do the journey by public transport.

There have been several attempts to get away from the position where MPs have to settle their own pay. External experts have decided who is most comparable to MPs, and have proposed linking MPs pay to these external references. It used to be a senior grade in the civil service. That grade then became too well paid for the political reality, so a group of comparators from public and private sectors was chosen. They too are now paid much more than MPs. Some MPs think they should be assessed like a GP, or a senior executive of a principal Council, or the Head of a large school – the sort of people they have regular dealings with. That would mean a large pay increase, which is the last thing the public thinks appropriate.

Mps also have to perform a private unpaid role as senior politicians. We cannot claim any of the allowances for our work in elections, or in support of other candidates. Anything we wish to write and send that has political content has to be paid for from party sources. Any travel we undertake in our political capacity we pay for ourselves or seek party assistance.

All MPs (including me) think it bizarre that we are said to claim a six figure sum in “expenses” when the largest item is staff salaries to pay for secretaries and case workers necessary to carry out our proper duties. I know of no other group of senior employees who are thought to benefit personally from the salaries of their staff.

Reform is in the air, but MPs are very boxed in. As one who understands only too well how the public feel about the current arrangements for pay and expenses, I realise there needs to be more accountability, and MPs have to take only those expenses which they can fully justify as essential to carrying out their functions well. Some MPs think the housing allowance should be abolished and pay increased to reflect that. There is never a good time to hike MP’s pay, but this is clearly a very bad time when everyone else is accepting low rises (as MPs have just done) and are feeling under great pressure. Some MPs think that lowering the level of expense that requires a receipt combined with more audit will be sufficient. This does not tackle the sense by many that the legal allowances are too generously defined in some cases.

I would be interested to know what you think about a) What is the correct rate of pay for an MP and b) what items should an MP be able to claim on expenses? Do you think it reasonable that MPs should be assisted with second home costs, given the two centre nature of the job?

I think there are too many MPs and there is too big a support bureaucracy. I would economise over time by dealing with that.

it was good to see so many people turn up to lobby MPs for a referendum on the Lisbon Treaty. They did so peacefully and patiently, in best UK democratic style. None of them went on to the roof. I hope all the MPs who still plan to break their word on such a referendum will now feel even guiltier about doing so.

Today we hear that Network Rail faces a large fine from the Rail Regulator for its failure to complete the engineering works to its network on time over Christmas and the New Year period. A few days ago we heard that Ofgem had fined national Grid £41.6 million for its behaviour towards pre payment meter consumers. These are presented as good news stories, designed by the government and its regulatory quangos to prove they feel our pain and are standing up for us, the overcharged and under-served long suffering public.

We should ask is this approach makes any kind of sense? Making large companies – one a monopoly and one a former nationalised monopoly – pay large fines does not help the customers for the past problems. All those who have had to pay a lot for their gas, and all those who had their travel disrupted by Network Rail a couple of months ago, will draw no immediate benefit or relief from knowing these two companies have been fined. In the case of Network Rail the position is worse. Much of the money they spend comes from the taxpayer, so ultimately any large fine imposed on them will come from the same source. It is a circular movement of cash from the taxpayer to Network Rail, and from network Rail back to the taxpayer in the form of payments to a taxpayer financed quango. The taxpayer still ends up paying for the regulator, but his or her money is routed through Network Rail so there are larger handling charges. If any money is to pass it should be from the offending company to the customer that has suffered. The problem in the rail case is anyone could claim to have wanted to use the cancelled trains.

The defence for these large fines is presumably that the senior managers of these organisations will not let them happen again. I am not so sure. If the senior managements’ own bonus payments were removed because they had made serious mistakes, that might concentrate their minds in future. The impact of a fine which causes a day or two’s embarrassment in the press for a large organisation that will be used to a mixed press may not have the same benign effect.

Is there an alternative to such an approach? I think a good referee is one who tries to keep the game flowing, not someone who takes a delight in every minor infringement so the can be the centre of attention and drive as many players off as possible. Good rugby referees these days are constantly shouting advice to the players to try to prevent them breaking the many and complex rules. Only if a player flouts the referee’s clearly stated understanding of the state of the game will there be a penalty. That makes for a more interesting spectacle for the fans.

In the National grid case the regulator found against a series of long term contracts National grid had entered with five of the six main energy suppliers in that market. Given the amount of information Regulators now expect, and given the number of people the Regulator now employs, why couldn’t the Regulator have advised them before signing that these contracts would be unacceptable? Or noticing them after signing, why couldn’t the Regulator have said then that they wanted them modified, and given the industry a little time to do so before coming in with heavy handed intervention?

In the railway case, the travelling public would prefer lower fares than an industry having to pay a heavy fine out of the money the taxpayer gives the industry. The Regulator needs to think through how much of a penalty a fine is on a wholly owned subsidiary of the taxpayer, used to seeking taxpayer money for much of its costs.

The idea of imposing heavy fines to show who is boss has spread to the EU. Their Competition Commissioner has just succeeded in a case which has led to a large fine for Microsoft. At least that is a fine on a private sector competitive business, where the pain is felt by shareholders. Clearly there was a strong difference of opinion between the company and the EU over what is an acceptable practise when selling popular and state of the art computer software.

We live in the age of the regulator. In the two UK cases the government appears pleased that unpopular outcomes – rising gas bills and a shortage of train services – have led to large fines on the offending companies. Consumers would be happier if a solution to the underlying problems could be found. Large fines are not going to make taxpayers and customers feel better off, because they are not going to be better off. It is time the government thought again about the scope and style of regulation, to see if regulators could become better referees, keeping business flowing within the rules rather than waiting for the offences and then coming down like a ton of bricks.

It’s the same thing these days in the money markets, where a movement of the Governor’s eyebrows used to ensure the old clearing banks took appropriate action to avoid stresses and strains. The modern “reformed” Bank of England no longer uses the eyebrows in the same way, so we ended up with a run on a bank for the first time in more than a century.

The silly stunt pulled by the LibDems in Parliament yesterday was the ultimate cynical manoeuvre. The LibDems wish to break with their election promise of a referendum on the Constitution. They think demanding a referendum on In-Out will get them off the hook. They call for it knowing that the Labour Government and most Labour MPs are against it, so they know it cannot happen. Their refusal to vote for a referendum on the constitutional treaty is born of the knowledge that with all Conservatives voting in favour and some Labour rebels there would be an outside chance of gaining one. Clearly the LibDems don’t want a referendum on the constitutional treaty because they know the public would be very likely to vote it down. As we know, Lib Dems want the EU to have more powers and are enthusiasts for the new Treaty.

The difficulty with an In-Out referendum at the current juncture would be deciding what you were voting on. Would you be voting to stay in the current arrangement or would you be thinking ahead to the rather different position if the Lisbon Treaty is implemented in every country? It makes much more sense to have a referendum now on the big changes that Europe is proposing rather than on a Europe in transition. Some voters would vote ‘Yes’ to the current European Union, but ‘No’ to Europe after Lisbon has been implemented. Some voters would vote ‘No’ to any version of the European Union. Some would vote ‘Yes’ to the original Common Market. What Briatin needs is to have a referendum on Lisbon first. Assuming the British people voted ‘No’ to Lisbon there would then need to be a renegotiation. Once all that was known, we might then need a referendum on the result, of the renegotiaiton. That would be a vote on “Do you wish to stay in the EU on the revised terms, or would you rather pull out?”

No wonder people have so little confidence in modern political parties. Both Labour and the LibDems have broken their word. The LibDems have now behaved childishly and cynically, seeking a referendum they know they will never get. The public has every right to feel cheated by all those MPs who promised a refernedum on the Constitutional treaty, and who now refuse to vote for one. I look forward to voting for a referendum, as I promsied in 2005.

Today’s claim that some anti depressant drugs are little or no better than pretend pills for all but the most severe kinds of depression poses some interesting questions about medicine on the NHS.

The drugs bill is huge and growing. All too many patients expect a visit to the doctor to produce a prescription as a solution. Many doctors have learned that offering tablets is the best way to handle their patients, and to ensure a swift and satisfactory consultation. I can understand the pressures and why they might come to that conclusion. The last time I went to a doctor some years ago I found it quite difficult to get out without a prescription, when I had merely gone on the insistence of a family member for a check up. People are less willing to hear that changing their diet, their lifestyle and their routine might do them more good than swallowing another tablet.

Depression is all in the mind. Some depressed people come to see their MPs. They may have a genuine case for an MP, but sometimes they are externalising their unhappiness. I take the problem they tell me they have seriously, but sometimes have to explain that I do not think anything can be done about it as I do not wish to raise false expectations. It is a pattern I well remember, from years of family experience. The depressed person often thinks there is an objective external cause of the unhappiness. If they can change their job, their home, the conduct of their wife or husband, their friends or their neighbours, they believe their unhappiness will vanish. All too often they discover that having made the change they are still unhappy, so the search for another cause begins and the pressure for another change builds up to try to appease the depression gods.

Taking a pill that is nothing but well disguised sugar might well work. If the patient believes in it, it could bring some relief from the inner darkness. The problem is the NHS feels it has to prescribe the expensive real thing, and not the substitute, so the doctor-patient relationship is not based on a white lie. The placebo pill is cheaper. It might be almost as good in its effects, according to today’s study. It is guaranteed not to have side effects, but under the rules it cannot be widely used. It poses an interesting ethical dilemma. What should the doctor do? What should the NHS require?

The English question is analysed today in a Think Tank Report, who warn that if the government does nothing to tackle the injustices to England the problem will worsen.

Part of the problem is economic, and the economics of the problem are worsening by the day. Between 1998 and 2006 the UK grew by 27%. London grew by 41% and Scotland by 16%. Throughout the Labour years the richer parts of the country in London and the South East increased the gap between their incomes per head and the incomes further away from the capital. A higher proportion of the population took jobs in London and the South-east, and a higher proportion of those jobs were well paid. London and the South-east attracted in talent from around the country, and grew more of its own talent, creating a virtuous circle of the kind the government would like everywhere – better achievement at school, more university graduates, more well paid jobs, more entrepreneurs creating jobs.

During the good years for the world economy London and the South-east grew quickly enough to accept the higher taxes it was required to pay to send money to the rest of the UK to help them. The combination of easy money around the world, with the relatively low interest rates and the Basel banking regulation which encouraged it, and the price cutting activities of the emerging giants in Asia meant people felt reasonably well off. Many taxpayers did not resent the taxes creeping up to pay for the rest, so they voted Labour or abstained.

In recent months this has all changed. As I warned in August last year in the Foreword to “Freeing Britain to compete”:

“We should not rely on these two very favourable trends (low interest rates and Asian competition) continuing to allow us an acceptable rate of growth…there is considerable uncertainty in world markets about how far the Fed, the ECB and the Bank of England may go in raising rates to squeeze inflation out of the system. They must know there are huge pyramids of debt throughout the system, and inflation will not be killed unless the appetite for more debt is blunted. They also know that if they push rates too high for too long they could bring the debt structures crashing down, as we have seen with the sub-prime mortgage collapse in the USA, leading to falling asset prices, rising unemployment and even recession. …. We should also recognise that China and India will not continue to exert strong downward pressure on prices to the extent that they have in the last ten years. Their workforces are now expecting better rewards. Raw material prices are being bid up by their large demands. The price of transport rises when capacity is stretched by their needs. “

Instead of reasonable growth, low interest rates and low inflation, we are entering a period of slow growth, relatively high interest rates in the UK and worrying inflation (the result of past monetary mistakes). In other words, people are feeling the pinch. This is exacerbated in the UK by the impact of higher taxes and more regulation, squeezing people’s income and time to earn money from serving customers and clients. Real incomes are going to fall.

The government seems to have targeted the very successful London economy to pay more tax in particular. The Non Doms (foreigners as some tax raisers see it) were a politically attractive target – a tax increase imposed on people who do not vote. The danger of the government’s approach is it might send lots of people and some businesses packing, to places with lower taxes or a less hostile Revenue service, which will take some of the gloss off London’s economic success. Council Taxes are set to go up by more than the CPI or wages, as the government heaps more public spending obligations on Councils without offering the funding to pay for them, and as some Councils join in the public sector spending spree.

Squeezing people with higher taxes, when they are already feeling the strain from higher fuel bills, high house prices, penal Stamp duties if they wish to move, congestion charges and higher Council taxes will only increase the feeling of English injustice. As people come to see they are worse off, they naturally resent waste in public spending, and look carefully to see what they are getting for the extra money they are paying tax. They ask where the money is being spent, and on what. The English see more money per head being spent in the UK outside England and ask Why? The Scots with their nationalist government claim the UK government is short changing them compared to past settlements. The worse performance of the economy, and growing imbalance between London and the rest and between England and the rest will cause more frictions.

Politically this will fuel demands for “English votes for English issues”, and for the more radical English Parliament proposal. This, however, will not tackle the underlying problem – that the UK is really three different economies. There is a successful London economy, growing quickly, open to the world, with huge talent. There is a moderately successful rest of the South-east economy – with similar performances in some other suburban areas in England – and there is a slow growth high public sector economy in Scotland, Wales, and parts of the north of England. Instead of improving the slow growth lower income areas, the Labour approach of sending more and more public money to these areas has not solved it. The gap has got bigger. All the time good world growth and easy money gave some momentum to all parts, it could work. Now there are strong headwinds from the global economy and growth will be slower, the injustices and the deep set problems will become more important to people.The Irish example (up 76% whilst the UK managed only 27% overall) shows that lower taxes provides the way to make an economy really motor.

Today for a change I want to write about something I am no expert on – binge drinking. I would like your thoughts on it.

When the government proposed relaxing the licensing hours, they argued that there would be a drop in drunkenness and rowdy behaviour. They said it would end drinking up time in pubs, and avoid too many people all being pushed out on to the streets at the same time on a Friday or Saturday night much the worse for wear. We would naturally transform from a rowdy, drunken late night town centre culture to a sophisticated well behaved European café culture, once people were trusted to drink in public places after midnight.

I did not believe them when they told us this. The latest figures for drunken behaviour – and anecdotal evidence from places I know – tells us this miraculous conversion has not taken place. Instead people seem to have taken advantage of the opportunity to drink more in pubs over longer time periods to do just that.

As always with this government I do not know whether they were incompetent or dishonest when they told us longer hours would cut down on the problems of drink in our towns. It is possible their polling told them late night opening was popular amongst groups they wanted to vote for them, so they decided to relax the laws for straightforward political reasons. They then foolishly invented a “decent” reason for wanting to do it. Alternatively, they might have thought the abolition of closing time could make a difference, as they claimed. This was a view shared with very few other people who looked at the problem.

When I looked at the issue as an MP faced with a choice to make, the freedom lover in me favoured the relaxation of hours, but the representative had to accept that many of my constituents did not want their towns and villages changed by people spilling out of pubs and clubs much later, in the early hours of the morning. There was an understandable fear that the government would be proved wrong, and the problems of rowdy behaviour could extend from the early hours of the night to the later hours of the night as well.

Now the miscalculation has come to light, the government itself is looking around for culprits to blame, and other possible solutions to the underlying problem. Their eyes naturally fasted upon the private sector – they tried to blame the supermarkets for selling alcohol too cheaply. Their surveys – no doubt at our expense – told them people often get well oiled at home on cheap booze before hitting the pubs and clubs. Why not ask the supermarkets to put their prices up?

This suggestion has been handled well by Tesco and others. It was always unfair on the many people who drink in moderation at home, and who like the lower prices the best retailers deliver. The supermarkets pointed out that they were not allowed under Competition Law to get together to put their prices up to deter drinking. If any individual supermarket did, it would simply divert business to the others. So it’s back to the drawing board for the government on that one.

When I went to university I discovered a divided world. One group of my fellow students took to soft drugs, and the rest of us enjoyed the alcohol. The treatment of the two by government was – and remains – different. Drugs were banned by law. Those who took them often enjoyed the fact that they were illegal, as well as the pleasure they thought they brought. I did not experiment with them, because I did not wish to jeopardise a place at university I valued greatly by running the risk of a criminal prosecution. There was no such restraint on alcohol. What soon put me off drinking too much was the sleepless nights, the dehydration and the hangover that followed the social occasion where we were too generous with the liquor. It was easy to resist any social pressure to take drugs, because it had to remain under the radar. It was less easy to resist pressure for heavy drinking, as that was a social activity where there was no good excuse for declining.

In more recent years the pressure to drink excessively to show yourself a good sport or to join in has been changed in one important respect by the successful campaigns to stop drinking and driving. People at dinner parties now accept you need to stay sober if you are going to leave in your car. It is one of the few examples of how legislative change and stricter enforcement of the law can lead to a change in behaviour and attitudes. Prohibition of drugs continues to work for some people and not for others. This government tried a back door way of relaxing the law for cannabis, only to find it needed to reverse its position.

As someone who likes good wine, I have long since come to the conclusion that my pleasure is increased if I drink it in sensible quantities. As I often have to drive, that rations my intake as well as it is safest in my position not to drink at all if I am about to take charge of a car. If others want to drink more in the confines of their own home, that is no business of the government, and they should not be trying to stifle it by higher prices so only the better off can do so. If people want to drink in public places, there does need to be some regulation, as we need to think of the neighbours and the town centre dwellers who will be affected if things get out of control. I don’t think putting the hours of the pubs back to what they were would abolish the problem of drunkenness in towns, but nor can we say the changes to the hours has done what it said on the tin. Controlling drunken and rowdy behaviour will take much more patient work and effort by many who care about society. It is only when many more people get pleasure from other ways of life that they might wish to curb their own drunken excess. If your sense of pleasure is to get plastered once or twice a week, only to have to suffer the after effects that night and the next day, then there is much missing in your life. It means so much of the beauty, excitement and potential in the world has passed you by. It is a mighty task for parents, teachers, friends, relatives and above all for each person themselves. There are limits to what legislators can do. Sermonising and taxing are unlikely to work. Stronger laws will only work with some, and may encourage others to misbehave the more.