John Redwood was among those MPs scrutinising the Bank of England’s attempt to improve liquidity in the financial markets and its likely impact on mortgage borrowers when the Chancellor made his statement to the House yesterday. The exchange, taken from Hansard, follows.

Mr. John Redwood (Wokingham) (Con): How much extra cash do banks in the UK now have to deposit or keep for prudential reasons, as a result of the regulator’s change of rules? That will offset the beneficial effects of some of the package. Will the measures be enough to bring mortgage rates down?

Mr. Darling: In relation to the first point, the right hon. Gentleman is aware that the FSA is responsible for the prudential supervision of the banking system and specifying what arrangements are required, first under Basel 1 and then under Basel 2, which is in the process of coming into force.

In relation to the right hon. Gentleman’s wider point about mortgages, we want to make sure that financial institutions are in good financial health, as I said in reply to the hon. Member for Twickenham (Dr. Cable). That means that some of them will have to restore their capital position. I believe that this is a way of helping to restore the position in relation to financial markets. I have made it very clear that, as most people in this country would expect, in taking action through the Bank of England—either in direct interest rate cuts or through today’s support—the Government are entitled to expect that businesses, individuals and, in particular, mortgage payers see the benefits of what we are now doing.

Later, in the debate on the Finance Bill (implementing measures from the Budget 2007, the pre-Budget report last year and the Budget 2008), John Redwood reminded the House of those who would be hit hardest by the highly contentious abolition of the 10p starting rate. When the debate moved on to the fiscal position of the UK and its ability to withstand any economic turbulence, Mr Redwood pointed the huge amount of public sector borrowing as a major concern. His two interventions, taken from Hansard, follow.

1) (Mr Hammond:) …Then, it unravelled. Table A1 of the Red Book exposed the sleight of hand that paid for the tax cut with the abolition of the 10p rate. Then, the Institute for Fiscal Studies identified who the losers would be; the Chief Secretary to the Treasury apparently cannot say the figure, but I will: 5.3 million of Britain’s poorest families. That figure was confirmed, give or take, in the Treasury’s evidence to the Select Committee, and that is after taking account of the increases in tax credits.

Mr. John Redwood (Wokingham) (Con): My hon. Friend is making a very powerful case. Is it not even odder that the people who are going to pay this extra burden through the abolition of the 10p band are exactly those who are hit most severely by the surge in food and energy prices and by the further big hike in fuel duty when they want to travel in their car?

Mr. Hammond: That is what makes the timing of this all the more poignant, and I suspect that that double whammy has focused the minds of many Members in this House.

The thing is that the Prime Minister knew that his tax cut would be paid for by an increase in the tax burden of the poorest. The tax-cutting Budget became the tax con Budget, and boy, is the Prime Minister paying for his five minutes of glory.

2) Mr. Redwood: Does the right hon. Gentleman agree that if we add the unfunded pension liabilities, the PFI and PPP off-balance sheet liabilities and the off-balance sheet liabilities for Network Rail and Northern Rock, public sector total obligations are in excess of gross national product, at around £1.5 trillion? That is an enormous figure.

John McFall: As the right hon. Gentleman knows, the Treasury Committee comprises members of all parties—his own, the Liberals and Labour. We have concluded that the fiscal position of the UK is strong in comparison to other EU countries.

I am pleased the Prime Minister has commented on the surge in food prices, and the impact this is having in the poorest parts of the world.

He is right to ask whether diverting food to fuel is a good idea in such circumstances. Why doesn’t he go further, and tell the EU it should stop its energy from crops programme, as it is another twist of the knife of high food prices in the empty stomachs of the starving world?

As the Asian economies flourish the world needs to put more under the plough. The Prime Minister needs to look at the damage the Common Agricultural Policy is doing to world food markets, and work with others to find a pattern of incentives to bring more land under crops, and a freer pattern of trade to give the poorest countries some hope.

The developing world needs to know the EU will open its markets to the cheaper food they can produce and sell for much needed cash. The starving world needs to know western politicians are working urgently to bring more land into use so there will be more food next year than this.

World hunger and poverty is the biggest international moral challenge that still faces us.

I want a better service when I go to an airport. London airports lack capacity and provide a poor service to the travelling public all too often. They are not assisted by government refusal to put enough border control staff onto the task, and by some of the regulations that contribute to the bad experience of trying to get to the aircraft.

It is wrong in principle that one private sector company owns all three of the main London airports. I think the Competition authorities should tell BAA that if they want to own Heathrow they should not also be able to own its two main competitor airports, or if they want to own Stanstead and Gatwick they should sell Heathrow. We need some competition. Each of these airports need substantial investment:it would be easier for more than one company to raise the money and manage the projects.

It might also produce some innovation. I do want the airlines and airports to offer a greener way of air travel. If we had more runway capacity we would not need to have so many planes flying around in stacks above London waiting for their place in the queues to land.

If we had some vision, planes on the ground could be taken around the airport by surface vehicles pushing or pulling, to spare the main engines until flight.

If we had more airport capacity, airplanes could go straight to a gate and switch off, instead of hanging around on the tarmac with engines running.

If the airport owner streamlined the process of getting to the gates instead of telling people they need to arrive two hours before they can fly anywhere, they could cut the fuel usage and the required capacity of the terminals.

I am a green. I do not want them to build over too many greenfields and green gaps between settlements in England. I like to be able to breathe clean air,swim in a clean sea, and gaze into clear water in streams and rivers. I understand the need to curb our appetite for burning too much energy, and to find cleaner and better ways of travelling, making things and heating and fuelling our homes.

My latest car is 50% more fuel efficient than the one I drove six years ago. I have put in a condenser boiler at home. If we ever get hot days – and we didn’t last summer – I open the windows rather than ordering an air conditioning unit. In the endless cold days of this spring I usually reach for another jumper rather than turn up the heating. I try to do more things on web and phone to cut down the travel. I try to turn the lights off when I am not using the room.

When I work in my public sector office, many of these sensible approaches to energy is possible. The lights stay on all day and night in the corridors, whether people are there or not, whether it is bright outside or not. I cannot open the windows if it is hot or to change the air. I cannot control the heat that flows in winter or the cooler air that circulates in summer. The system carries on burning energy whether I am using the room or not. Across Whitehall lights blaze and heating systems belt out the warmth regardless of use. Control systems are rudimentary or not personalised.

The public debate seems to be dominated by people who hate the car and ascribe a disproportionate part of the problem to people who drive, only surpassed by their hatred of air travel. They favour trains and buses, as if they in some miraculous way produced no dirty emissions and were carbon free. They ignore the role of the domestic heating boiler, the electricity to power domestic appliances and the huge amounts of energy used by government and other office based activities.

It is time we had some sanity in the debate, based on realism about the relative importance of the different ways we use energy.

When I last drove into London I kept a record of my fuel use. I travelled 31.1 miles on the M4 at a good average speed, consuming just half a gallon of diesel – or 61.1 miles per gallon. I then had to travel 8.1 miles on main road within London. These roads have been messed up with lane closures, perverse traffic light programming, artificial narrowing, road works and many other obstacles. My mpg halved to 32.4 so I used a quarter of a gallon to go just 8.1 miles. On a busier day it could have halved again.

It shows just how important having uncongested roads are for curbing wasteful use of fuel and limiting emissions. I was , however, probably using less energy in the car than if I had stayed at home with my heating full on – I turned the heating off whilst I was away.

It is the second half of April, yet many people still have their heating systems blasting out the heat because it has been so cold outside, with frosts at night, even snow and hail. We need a programme of adjusting our heating and ventilation systems to the new reality of dear and scarce energy. It is high time the public sector showed some leadership by seeking to improve its own control over and use of energy. At the moment its use is wanton. We feel it in our tax bills.

I come to praise the sub prime mortgage. It has had such a bad press in the last eight months. Sub prime is now used as an excuse to explain why banks fail, shares go down and why fear stalks the markets. All the wise acres and most of the commentators now know the world will not be right until the sub prime is no more. The Regulators are busily slamming doors long after the horse of confidence has bolted. They wish to root out sub prime wherever they find it, put off balance sheet lending back onto stretched balance sheets, and warn people off lending to people who need the money. The new conventional wisdom is that banks should only lend money to people and companies who are already rich. They have discovered that the problem with lending to the poor is they might not be able to pay it back.

I have no time myself for sub prime salesmen who pushed the hopeless and the helpless into a mortgage they could not afford by offering a year or two of easy terms and seeking to play down the reality that at some point a commercial rate of interest kicked in. Nor do I have time for the many who now seem to think people on low incomes should not be able to buy their own home. Home ownership is one of the great breakthroughs an individual or a family can make. There is nothing like the freedom of being able to shut your front door, and then do what you will with the property inside. I welcome all positive moves to make mortgages and homes more affordable for all.

In the USA the authorities do seem to have realised that pushing thousands of sub prime mortgagees into default is not a clever – or pleasant – thing to do. The cuts in interest rates have come thick and fast from the Fed, as they fight to get rates down to a level where more people can hope to pay the mortgage and keep their home where they have mortgage rates linked to market rates. On this side of the Atlantic, we have authorities who see the time as suitable to preach a few homilies about the evil of debt. They are keeping interest rates high to “teach borrowers and bankers a lesson”. They risk bringing house prices down, and with them the dreams of many a heavily mortgaged home owner.

The Credit Crunch so far is a story of two rival traditions responding in very different ways. When the UK experienced a run on Northern Rock it took six months to offer financial support, look around for a private sector buyer and eventually to nationalise the luckless institution. When the US saw a run developing on Bear Stearns it took a week-end to find a private sector buyer, put in place a Fed package of loans and announce confidence boosting proposals to markets, including another interest rate cut.

The US authorities are fully into recession fighting mode. The President, the Treasury Secretary and the Fed act as one, supervising a tax cut plan, boosting the market with substantial liquidity and slashing interest rates. They work together, they each have their clear responsibility, and they give the impression they will do whatever it takes.

The European authorities look paralysed by comparison. The UK budget deficit is too high to allow easy tax cuts. There is little effort to root out the waste and unnecessary spending that would allow tax cuts. The Bank of England and the ECB both have to concentrate on low inflation, unlike the Fed which has a general duty to help sustain economic health. The European Banks keep interest rates inflexibly high, and are sparing with any extra liquidity to their markets. For Northern Rock it was a sad case of too little too late supplied to the market, to be followed by a colossal bill for the taxpayer. The ECB remains mesmerised by the divergent behaviour of the different Euroland economies under its gaze. It watches as the Euro soars, making great swathes of European industry uncompetitive.

Some love the sense of the rich and mighty in the financial world being brought low. Prosecutors sharpen their pencils to take evidence in possible fraud and corporate irregularity trails. Regulators thumb through their huge rule books to see which rules in practise had been broken during the heady days of off balance sheet loans and sub prime mortgages. Politicians sound off with all the certainty of hindsight about the errors of the bankers and the mortgage companies. They should all calm down and grasp these self evident truths.

Lending is important to help the economic wheels go round. You do need to lend to people who need the money, and the poor have every right to expect a mortgage service as well as the rich. Lending was overdone, thanks in no small measure to monetary authorities who kept interest rates too low for too long, and thanks to Regulators who through the Basel rules encouraged banks to push their loans off balance sheet.

We need to get from our current fragile over borrowed condition to a position where normal levels of transaction can take place again. To do so we will need lower interest rates on both sides of the Atlantic, not just in the USA. The banks have to recapitalise quickly, raising money from shareholders, bringing in new shareholders with new capital or by cancelling dividend payments. The authorities have more to do in the days ahead to make the markets more liquid. The problem now is not inflation, but too rapid a deflation.

Today we will hear a statement from the Chancellor announcing a much heralded statement offering up to £50 billion of near cash to the banks in return for some of their mortgages.

How is this done?
The government itself will borrow the money, by issuing bonds – IOUs – on the taxpayer.It will lend this money to the banks. It will secure these loans with banks’ mortgages. It will require a discount on the mortgages – in other words it will accept the mortgages for say 90 pence for every pound of mortgage. This discount will give us, the taxpayers, some protection against mortgages within the packages of loans that go wrong and are not repaid, and against failure to pay the interest on some of them. After the transactions the banks have £50 billion more of government bonds which can easily be sold in the market for cash, whilst the government has security of around £55billion of mortgages. The interest received on the mortgages should exceed the interest on the loans. The government/Bank will ask for top up of security if the values of mortgages continue to fall.
The taxpayer will not be out of pocket if the government judge it correctly, but the taxpayer will be at some small risk until the transactions are unwound once the crisis has gone away. At some point the government and taxpayer have to get rid of the mortgages again and repay the borrowings with which they have paid for the loans based on them.The exact arrangement is more akin to loans to the commercial banks, which gives the taxpayer more protection than buying the mortgages.

Good news or bad news? Will it sort out the mortgage market?
This transaction will of itself help in alleviating the shortage of cash in markets, and on its own should lead to new lending by the mortgage banks. As the mortgage banks acquire more cash/short term government bonds so they can lend more money to people seeking mortgages. It was a shortage of cash to meet depositors requirements and the lack of confidence in Northern Rock that led to the run on the Rock. If money and government bonds had been available like this in September 2007 there would not have been a run on the Rock.

However, it has to be seen in context. There are at least three other considerations which will limit the impact this helpful proposal will have:

1. At the same time the authorities are tightening regulation of the banks, demanding that they keep more cash on deposit at the Bank of England for any given amount of lending. Every pound of additional cash they have to keep cuts the value of this package, as it becomes a circular process. The authorities demand more cash for security from the banks. The banks do not have such cash. The authorities then give them the cash to meet the tougher requirements. No-one can borrow an extra penny, as the new cash is frozen.
2. The larger banks are international. Whilst the money will be offered to the UK subsidiary and intended for the UK mortgage market, in practise international banks look at the balance of their global business. Not all of the extra money, after allowing for bigger reserve requirements, will necessarily find its way into the UK mortgage market.
3. The UK market still has the problem of Northern Rock, which remains a negative influence on reviving the mortgage market because the government nationalised it. If instead of nationalising Northern had been offered this kind of support, it could now be offering new loans on a significant scale. Because it is under strict controls to repay the £24 billion taxpayer debt, and under strict surveillance not to be too competitive as a subsidised bank, it cannot play an important role in reviving the mortgage market in the UK.

So will it work?
It is a helpful package. Whether it is enough depends on how much further the authorities go in tightening reserve and cash requirements, and how quickly they want the Northern Rock money back.

Between the 19th and 28th April 1770, 238 years ago, Lieutenant James Cook was sailing off the Australian coast near Botany Bay. As Master of the barque Endeavour, he was sent by the Admiralty to chart the southern seas and discover what land lay there. He made his first landfall at what he named Botany Bay on 29th April. He had already completed the circumnavigation of both islands of New Zealand, demonstrating that they were two distinct islands and not part of a southern continent.

After his first voyage Cook was promoted to Commander, and entrusted with a larger ship and support vessels to undertake two more expeditions with better equipment. He became Captain between the second and third, and met his untimely death on the beach of a Pacific island in 1776 in circumstances which still give rise to argument over who was to blame for the breakdown in relations between hosts and visitors.

The significance of Cook’s voyages was great. It gave Britain the initiative in settling and developing the trade of both Australia and New Zealand. It demonstrated the substantial advances Britain had made in charting and navigating, with the advent of the marine chronometer for longitude measurement, and it led to the huge geographical reach of the English speaking world. It confirmed that the UK has a global presence, not a European one. The presence was based on seapower, and sustained by doughty settlers in the far flung continents of the world.

When the UK joined the Common Market in 1973, one of the most difficult features of the arrangements was the future of agricultural trade between the UK and Australia and New Zealand. The bad rules and protectionist instincts of the CAP damaged both trade and relations between ourselves and kith and kin in the new world of Australasia. As it turned out, they have prospered mightily despite it, whilst the UK has backed trade with a slow growing part of the world, Europe, to some extent at the expense of the far faster growth in Asia.

Today as we remember Cook’s skill and the bravery of his crews, we should wish to ensure that in future we remember the importance of the Asian and Australasian links. They are an integral part of the English speaking world, and they are the future. We need to develop our common cause and common interests through the Commonwealth and World Trade Organisation, through the affinity of the English speaking peoples and the free flow of talent and ideas between our countries.

Euroenthusiasts in the UK have sought to highjack Sir Winston Churchill as an advocate of their cause of linking the UK so tightly to the EU that we cannot follow our natural links with the English speaking world in the same way. We should remember that whilst Churchill did indeed want a strong EU, he did not envisage the UK being part of a European political union.

Churchill wrote a History of the English Speaking Peoples, not a History of the European Peoples. He concluded that four volume work by saying:
“Here is set out the long story of the English speaking peoples….Another phase looms before us, in which the alliance will once more be tested and in which its formidable virtues may be to preserve Peace and Freedom. The future is unknowable, but the past should give us hope. Nor should we seek now to define precisely the exact terms of ultimate union”. Churchill saw the English speaking peoples coming closer together, first through a defence union and subsequently something more. This is the opposite of asserting that the UK should become a wholly owned subsidiary of the EU. In a world where US supremacy will in due course be challenged by China we need to think more about strengthening those ties and relationships.

The dynamism of Asia, and the success of the freedom loving model adopted by the USA, Australia and New Zealand, should make us welcome the spirit of Cook. Britain’s future still lies with the English speaking world. At its centre today rests mighty America. Tomorrow at its heart will be successful India. India, once the jewel in the British crown, will become the English speaking locomotive of Asia and in due course the economic leader of the English speaking peoples. British trade in services and her pattern of inward and outward investment is based on the English speaking world, for that is where we find most in common.Trade in goods, where the EU is the biggest area, is a less enduring relationship than mutual investment.

Mr Miliband today has allowed himself to be used. He has argued a contradiction. He both tells Labour to start seeing things the way electors do, and told Labour MPs to knuckle down and support the abolition of the 10p band. They cannot do both successfully! Electors are fed up with paying so much tax for so little in return, and most electors think taxing those on lower incomes more is wrong.

Mr Milliband is an intelligent man, but he has allowed his own intelligence to be replaced by Labour stupidity. He retails the endless Labour lie that divided parties do not get elected. The Conservative party under Thatcher was deeply split between dries and wets, yet it won three General Elections in a row. The NULab party under Blair was deeply split between PM and Chancellor, between modernisers and Old Labour, between Blairites and Brownies, yet it too won three election victories in a row. The electorate will accept some public debate within the ruling party, some signs of democratic life within. In some ways it is a sign of health and thought. What they will not accept is poor performance or weak leadership. The Major government plunged in the polls thanks to the ERM and the impact this had on house prices and jobs.It did not plunge because some of us wanted to rule out the Euro and said so in public. This government is going down thanks to its chronic inability to deliver good public services at an affordable price. The public do not want ever higher taxes, charges, and public borrowing. They realise that the endless IOUs will have to be paid by us, as well as realising how much they are being mugged by the government every time they fill up at a petrol station or pay a Council Tax bill.

Mr Miliband’s remarks sum up all that is wrong with this cynical politics of spin which still disfigures the UK under its latest Prime Minister. The government’s own polls tell it both that it is unpopular, and that electors want it to feel the public’s pain. That is why we are now hearing from Ministers that they understand why people are upset about price rises and the financial squeeze. What they still do not grasp is the public not only wants a government to understand how it feels, but to make things better where they need fixing. In Labour’s rambling and costly public sector that is a huge task which this government shows no signs of grasping.

On Friday evening I attended a Thames Valley drinks party where I met a number of Chief Executives of parts of the public sector. They effectively implement Labour’s policies and retail the government’s opinions (guidance and advice) in our more Conservative area. It reminded me of what a dreadful system it is. CEOs from all round the country in Labour’s Britain usually display a “want more” rather than a “can do attitude”. I have written recently on the big differences between CEOs in successful private sector companies, and CEOs in the British public sector. The typical UK public sector CEO now thinks their job is to demand more resources from government to carry out any given task, and to protect their organisation from criticism by saying they do not have enough resource. Labour is reaping what it sowed. Throughout its long years in Opposition it had only one song – give us more money. It backed most lobby groups and public sector organisations who wanted more public cash, inventing the strange notion of “new money” (not money that has yet to be spent, but extra money that has not yet been announced for the future), and saying in most cases that the service was “underfunded”. They not only said that all would be well if more money was forthcoming, but actually believed it. It was just a question of turning on the money tap until enough cash had been flooded into any given area. Then everything would miraculously work well.

Gordon Brown continued this idea in government. Once he had divorced Prudence and cast off Conservative spending plans (borrowed to get them through the first election without frightening the voters) he went on an unparalleled spending binge. They had rows over whether to reform as well as spend, which Brown won in favour of little reform and maximum spend. They decided to push the spending well beyond what the country could afford, by massive off balance and on balance sheet borrowings. That is just deferred taxation which we will all have to pay. After all the spending there were still obvious problems with hospital infections, with access to care, with access to good state schools, with proper policing of our borders and much else. They had failed to concentrate on raising quality and efficiency, the two main drivers of success in business. The private sector has to do things better, faster, cheaper to survive. The public sector can do things slower, worse and dearer, and demands more money.

Now the money has run out. They are hoist by their own rhetorical petard. Their public sector will keep repeating the mantra that it can only get better and do more if they find massive extra amounts of cash. The so-called CEOs are already sharpening their biros to write the memos demanding more. They will be bombarding Opposition MPs to play the game, demanding more cash for good causes, just as Labour did in Opposition. They will dig in and claim they cannot do things better, faster, cheaper without more government cash, because Labour has created the CEO world in its own image.

Worse still for Labour, they have taught many of these quango boards and CEOs from local government how to play the media game. Some members of quangos and some Councillors have been told it is vital that CEOs themselves handle the media with their highly paid official PR staff. This gives these CEOs the opportunity to brief and lobby. The unscrupulous ones will use off the record briefings to report on the imperfections of their own services with a view to demanding more cash to put right the deficiencies. You do not hear the CEOs of major companies telling journalists off the record that their products are poor or their service needs substantial improvement.

So it’s back to the drawing board, Mr Miliband. Mr Brown has played a blinder getting Mr Mililband to do his dirty work for him by arguing for the 10p band removal. It is good internal politics, associating one of his alleged rivals with one of his most unpopular policies. What Mr Miliband and Mr Brown ought to be doing is spending some time together to discuss the crisis of tax, spend and waste that now engulfs the government. Both their futures are at stake, because the public now knows they are getting a rotten deal for all the tax they have to pay.

THE £50 BILLION PACKAGE FOR THE BANKS WOULD HAVE SAVED NORTHERN ROCK IF INTRODUCED LAST AUTUMN.

If the government and Bank of England can make £50 billion available to the banks today to get the mortgage market going again, why couldn’t they have done that last September to prevent the Northern Rock crisis?

This latest move completes their extraordinary U turn from wrongly saying there would be no bail-outs or help for the banks last September, to now adding a £50billion money market package to the £100 billion nationalisation of Northern Rock. British taxpayers uniquely in the world have double trouble – we are paying for the credit crunch twice, just as we seem to pay twice for everything else this government attempts. We are likely to lose money on the nationalisation, and have very overstretched public accounts thanks to this double borrowing whammy. The irony of the UK position is the government is seeking to sort out overlending by the mortgage banks by overborrowing itself!

If £50 billion had been made available last September there would have been no run on Northern Rock. That unhappy institution would not now be owned by taxpayers, responsible for shedding at least one third of the staff and fighting a legal argument over competition law with the EU. It would not now be running its business down and struggling to repay a massive £25billion loan from the taxpayer. Instead confidence could have been restored with this kind of package last autumn.

The latest scheme – £50 billion of government debt to swap for mortgages – is a better way of helping than clumsy and expensive nationalisation. The reported timings are clever – one year bonds to avoid proper balance sheet accounting for the government, three year duration for the mortgage banks to get the government through the next election before the reckoning. The £50 billion scheme, if properly designed, will be better value for taxpayers than the nationalisation, and will help all banks in the UK, not just one. It is not without its dangers, but at least it does not make the taxpayer responsible for all the staff, loans and liabilities of all the other banks in the way we are for Northern Rock.

The history of the Northern Rock crisis can be followed on www.johnredwod.com, under the Northern Rock tab. Items are in chronological order.

It beggars belief that an intelligent man should lash out against the media for daring to run the story that many people are against the abolition of the 10p tax band. Why on earth in a free society should the media ignore such a story? It makes Gordon Brown, like his post Thatcher predecessors, appear to be the poodle of the headlines rather than in charge of the government.

Let me explain to the PM why this 10p issue is a story. It is story because a large number of Labour MPs are saying they disagree with the policy and might vote with the Opposition parties, who also disagree with the policy. If enough of these Labour MPs keep their word, the government could be defeated on a central plank of Gordon Brown’s last budget. That would be big political news.

It is a story because prices of food, heating and travel are shooting up, in a way which hits the budgets of those on low incomes especially hard. Gordon Brown’s decision to remove the 10p band hits several million people on low incomes, taking more tax off them, at exactly the same time as they face these surges in their bills. The political world has to understand that it cannot fix such a real problem for the voters, by better spinning or media control. Real problems need real solutions, not more expenditure on better spin doctors.

It is a story because removing the 10p tax band puts up the taxes of all of us at a time when most feel under pressure in our daily budgets thanks to rising taxes and rising prices.

If Gordon Brown cannot understand why this is a story he does not have much of a future as PM. What he should do is respond. He can do things to make it better for people – the rest of us can merely complain about what he is or is not doing.

There are two ways out. My preferred way would be for him to admit it was wrong, announce the restoration of the 10p band, and make proportionate reductions in government waste and overheads to pay for the change.

The other way is to explain to his hapless backbenchers why it is right to increase taxes in this way, so he can be sure he can win his vote. Then between them, they have the other task of persuading the rest of us that a tax increase is good for us!

It is good news that our prevailing wind comes from the south west, bringing us fresh air from the Atlantic and the USA. It is bad news that we are currently stuck with a biting north easterly wind, that is bringing us smells from Europe.
It remainds me of just how much grief over the centuries we have experienced by being too entangled with the affairs of that unhappy continent. Good things for the UK have come from our maritime global presence – including the fresh air brought in on stiff winds from the warmer and cleaner south-west. We should have no wish to be part of a European pong contest.

Mugabe and his cronies are moving quickly now to undermine the legitimacy and possible authority of the recently elected Zimbabwean Parliament. If they persuade the Electoral Commission to overturn just nine of the “Opposition” – now the majority – MDC seats then Mugabe’s people are back in charge. The Parliament should meet before this happens, assert their legitimacy and provide an alternative to the President who refuses to resign. They may have to do this from outside the country – it would be a good test of South Afirca, who should be willing to lend them a place near the border to do so if they have any belief in democracy.

Last week the Prime Minister at last grasped that the credit crunch and the banking crisis is serious. I have met people on the doorsteps and in the streets who have told me how it is already affecting their lives. When the banks catch a cold we all suffer. Those working for the banks themselves, those involved with creating and issuing mortgages, those earning a living from selling and buy properties are all immediately affected. As other companies find it more difficult to borrow, so more businesses will be unable to create new jobs or even hold on to all the employees they currently have.

A number of my correspondents and website respondents have said they feel no sympathy for the banks. The banks did well in the good times, and did not take enough care to prepare for the bad times. Some of the bosses walked off with huge paypackets and bonuses when they were failing to sort things out as they should. Many think the banks should be made to pay for their own mistakes, with the Treasury and Bank of England watching from the sidelines.

I do not agree. Of course bonuses for the bosses should be removed when results are bad, dividends for shareholders should be restrained or reduced to husband bank cash, and shareholders should be asked to put some more capital. That on its own will not be enough. We need more cash in the markets to allow banks to go about their normal business. It is one of the duties of the Bank of England to manage the money markets. They failed to take enough cash out and put interest rates high enough during the credit binge. It is important they do not now make the opposite mistake, and put too little money in and leave interest rates too high during the credit crunch.

Many of you are finding it difficult to balance the family budget each month. The government tells us inflation is under good control because they use the CPI which seems to include too many things where prices are not rising, and distort the normal shopping basket the rest of us have to buy. We all know just how much fuel, food and taxes have soared in recent months. The petrol and diesel price is a shocker, and most of that is tax. (More than 70p a litre now goes to the Treasury). We need some respite from all of this. Lower mortgage rates would help. A more restrained and efficient government would also help, by stopping the upward drive on taxes.

One of the changes I would like to see is a greater sense of urgency in Whitehall about the need to increase central government efficiency and reduce its administrative costs, as the burdens on taxpayers are so large. If only more of the money we paid went on teachers, nurses, doctors and police we might then have better public services, but more than three quarters of it does not go on these essential public servants. It is high time the government stopped saying it was going to deliver value for money, and got on with trying to do so. The government is spending too much, taxing too much and borrowing too much. It is the pot calling the kettle black when the government says the banks lent and borrowed too much. The biggest borrower and the biggest user of off balance sheet vehicles to buy things on the never never was the government itself. We will all be paying back those debts for many years to come.

Today is the 28th birthday of Zimbabwe. Mr Mugabe thinks that is cause for celebration, as he seeks to take people’s minds off the runaway inflation, the barbaric acts of violence, the suffering of families with little to eat or buy, and the failure to publish the results of the Presidential ballot.
The best possible present Zimbabwe could have is a change of leadership. The country is in desperate need of a government that could get to grips with the economic dislocation, and could seek help from around the world in re-establishing a system which could deliver jobs, food and prosperity.
I understand the terrible pressures on Mr Tsvangirai and the difficulty for an Opposition leader in a situation where the armed forces and police are politicised. He is trying to get South Africa to put pressure on the Mugabe regime to force publication of the election result and demand a change of President.
The regime did publish election results for Parliament which produced a Parliament where the MDC has a majority over Mugabe’s Zanu. One way forward would be for brave Parliamentarians of the majority MDC to meet and establish an alternative centre of authority, to seek to win over the public and even some of the security forces by showing them their jobs and interests would be safe with a new government if they behave sensibly. They may need to meet over the border if the security forces are instructed to stop the Parliament meeting, or to disrupt it.
Mugabe’s constant reminder of the independence struggle now looks very dated. It also gets forgotten that that struggle was not against the UK, but against an illegal state created by some Rhodesians who cut themselves loose from the UK in the 1960s when Harold Wilson was Prime Minister. It is high time Zimbabwe had a government which could live in the present and plan for the future, rather than wallowing in misrepresentations of what happened 30-40 years ago.

I am a moderniser and a traditionalist when it comes to cricket. As a traditionalist, I love the long five day Test Match, played in white kit with the red ball. It is the ultimate test of the enduring skills of great batsmen, and of the persistence and aggression of a great bowlers.
I also think the 20/20 game is the most exciting and action packed team game on the planet. It is a wonderful invention, a very different game from the long game, which can bring large new audiences to cricket.
It is foolish of the Times to bemoan the end of the baggy jumper. Many cricketers will continue to wear their jumpers in club colours with club insignia with pride, and some with a distinct lack of style. Others will rush to adopt the new fleeces, and want something that cuts a fashion dash to enhance their performances, good or bad.
This April during the English cricket season we need a new artic jacket as well, for in this age of global warming fears the North east wind does blow, and the game can be punctuated by hail and snow.
Nor is the launch of the Bollywood style 20/20 competition in India something to fear. The English cricket authorities should grasp the opportunity, and schedule our cricket in a way which allow great English players to join in the Indian competition. We have to get used to the idea that India now is an important centre for innovation, money and excitement. Cricket, like anything else, needs its fill of all three. We should take pride in the enthusiasm India is showing for a British invention, and pleasure in the way they are taking it on to new heights.
I like soccer and rugby, and enjoy watching them, but they cannot match the sheer pace and action of a 20/20 game. In a 20/20 match during three hours you can see 400 runs and 15 wickets. Every ball provides thrills, with bowler and batsman pitched against each other in a dramatic contest. It makes 1-0 after 90 minutes in a soccer game, or a rugby game determined by the kicking of half a dozen penalties seem tame in comparison. A good day at the Test might offer you 300 runs and 8-10 wickets, and that takes six hours.
So bring on the fleeces – and the global warming long johns and artic vests – and bring on more 20/20. We traditionalists can still enjoy our test matches and deal with the critics who will never understand the fascination of a series of dot balls when the contest is at its most chess like. Many more will enjoy the 20/20 game, with all the razz and glamour that goes with it. So wake up English Test Board, and let English players join in. The world is shifting to Asia. You wont beat that, so join it.

I managed a couple of one day trips to the continent during the long two week break from Parliament, to meet people in industry and commerce in Germany and Sweden. (No, they were not paid for by the taxpayer.)
It has made me want to be more European in one very important respect – to have adequate transport capacity here at home, just as they do abroad.

Wanting to get there and back as quickly as possible without wasting too much travel time, I discovered the train was impossible. Day trips were impossible by train as the distances were too great. I did not want the extra cost of hotels and the extra time away from my responsibilities here, so I had to fly. My visit to Germany took me in a couple of hours to Munich, and from there I was able to take a car to my meetings. The terminal capacity at Munich airport was large, with plenty of room and plenty of staff to deal with incoming flights. It has received huge investment as Lufthansa’s second hub airport after Frankfort. The roads to my destination were immaculate, with plenty of lanes and good junctions. The taxi driver was able to travel legally and safely at speeds of up to 160km (100 mph) with little difficulty. On my return to Heathrow there were long queues at Passport control owing to a lack of staff and positions, long queues to get out of the car park, and traffic jams, even on a motorway where the theoretical top speed is only 70 mph. There is a notable shortage of terminal and road capacity.

My trip to Sweden was even easier. I flew to Copenhagen, where I found another huge airport with plenty of terminal capacity and plenty of staff. The only thing that slows you down is the long walk from your entry gate to the exit. There is a magnificent fairly new bridge to Sweden with plenty of capacity for the limited volumes of traffic wanting to use it, financed by a toll. In Sweden the roads were capacious and relatively clear of traffic, although speeds are limited. I got to my destination half an hour early. I can’t remember when that last happened to me in the UK. On my return I faced even longer queues at Heathrow for daring to have a British (so-called EU) passport, more jams to get out of the car park, and more jams on the inadequate roads around the airport.

France and Germany have 50% more motorway style road relative to their geographical size and populations than we do; Sweden probably even more. Most continental countries have large airport facilities where they are trying to attract more business, not seeking to limit it as at Heathrow. If this government wishes to help competitiveness – and limit unnecessary emissions by allowing more efficient use of vehicles – it must get on with allowing more private investment in roads and airport capacity. The present policy is not stopping people travelling, but it is making them very grumpy when they have to, and is creating more waste of energy than is desirable. The plane that brought me back to London had to circle London for some time before landing and then had wait around 15 minutes on the ground with the engines on before a stand became available. In Munich and Copenhagen the planes landed immediately on arrival and went straight to the stand and switched off. We should stop wasting fuel by having enough capacity, and by asking airlines to move their planes on the ground using smaller vehicles to tow or tug them.

I find it interesting that greens seem to like continental countries more than the USA or the UK because they talk the talk on greenery and are keen on targets. If you examine the record you find that in recent years leading continental countires have often increased CO2 emissions more than the US and some have failed to hit their targets. They have certainly tried to expand transport facilities more than the UK, but this may not be the cause of the excess emissions, given the way they are calculated and the impact congestion and delay has on the figures.

Today is the day of the battle of Culloden, the last serious battle fought on British soil, fought in 1746.
On that day the claims of the House of Stuart to the throne of the two kingdoms of Scotland and England died. Bonnie Prince Charlie’s army was badly defeated, losing 1250 dead and 550 prisoners to Cumberland’s loss of only 52 men dead in the British government army.
After the victory many more Jacobites were killed and other acts of violence committed against the rebel higlanders, leaving Cumberland, the victorious commander, with the name of “Butcher” in parts of Scotland. Elsewhere he was heralded as Sweet William, the man who had ended the Jacobite/French threat through the back door to England. He received an honorary degree from Glasgow University.
How do you see him today? Do the actions of the commanders at Culloden still make the pulse race or the blood boil?

The criticism this morning of our hapless Prime Minister is a typical media one. He is condemned for arriving in New York on the day the Pope arrives in Washington, for the Pope will take the headlines. It is all part of a world where presentation triumphs over substance, where the media can mistake the image in their distorting mirror for what is going on. What matters is how well the Prime Minister’s meetings go with Wall Street bankers over the credit crunch and with the UN over a range of international issues. Tomorrow he moves on to Washington to meet both the President and the next President, where he has an opportunity to shape the foreign policy views of all three serious candidates for the Presidency.

In the early days of the Prime Minister’s tenure the media gave him rave reviews for no good reason. As a long standing critic of his changes to the Bank of England in 1997, I was expecting financial problems. As a critic of his high spend policy, recklessly expanding the public sector without getting value for money for the spending, I anticipated economic problems ahead. The media told me when he had to handle the flooding and farming problems of 2007 that he did so well. They meant he looked serious on TV and seemed to be taking a proper interest in the difficulties. I wrote that the government had to take a lot of the blame for the crises – it was their laboratory complex which let out the disease, and their lack of preparation which left people vulnerable to floods. Worse still, there was no evidence that after the floods the government put in place the necessary measures – cleaner and bigger ditches and drains – to protect many people. None of this mattered to the BBC. The new PM was just fine, and the polls were holding up.

How different it looks nine months on. Now the fact that the Pope today meeting the President will get more US publicity than the PM arriving in New York is levelled against Gordon. The media should understand that this is a clever set of meetings by the PM. He will get plenty of publicity here in the UK for his trip, where he needs to get some messages across. The reason for the meeting with Wall Street bankers is to try to persuade us that the financial and economic problems in the UK have their origins in the US, and he is boldly trying to help sort them out. The reality is somewhat different. The UK has its own version of the western world’s credit crunch difficulties, and has so far been much less bold and positive in trying to combat them. Gordon’s stewardship as Chancellor has left the UK too heavily borrowed to cut taxes, and left UK consumers too heavily borrowed to maintain their living standards. The present squeeze in the UK owes a lot to the “substance” of Gordon, based as it has been on excessive public waste, excessive public borrowing, and a raft of unpleasant stealth taxes.It was during Mr Brown’s tenure at Number 11 that Northern Rock overstretched itself, and it is Gordon Brown who has foolishly decided to nationalise the Rock with all the adverse consequences readers of this site will know about.

I hear said that yesterday bankers in the UK think they at last got through to the PM the seriousness of the situation we are in. If they did, then maybe some of the ideas I and others have put around for tackling the banking crisis can now go onto the government and Bank of England agenda. The government this week has started talking more like the public – doubtless they have spent another fortune on polling and focus groups to find out the blindingly obvious and are now putting the language of the public back to the public. One cheer for the fact they now share our pain. They now recognise just how intense the squeeze is, and how serious the difficulties in the housing and mortgage markets are. If they had listened when Barker first reported to those of us who warned them that the UK housing market was driven mainly by mortgage finance, not by the supply of new houses, they would be in a better position today. If they had paused to try to answer the obvious question to their account of a shortage of homes, by how much do you want house prices to fall, they might have avoided the worst of the present crisis.

If they are now going to do anything more than just empathise with our pain they need to take strong action. The Conservatives official criticism of the government, that it did not mend the economic roof when the sun was shining is correct. We now need crash repairs on the roof, which include:

1. The Bank of England to make more cash available in money markets, and to accept a wider range of instruments as collateral for loans (with a suitable margin to protect the taxpayer)
2. Further cuts in the Bank lending rate
3. Reductions in stamp duty on buying homes.
4. Reduction in the rate of petrol and diesel tax, to get the forecast revenue back down to the original budget forecasts following the price increases
5. Reductions in wasteful public spending, and a general efficiency drive throughout the public sector
6. Early repayment of the Northern Rock money to the Bank and Treasury through encouraging refinancing of Rock mortgages
7. Abandoning ID cards and regional government, and imposing an administrative staff freeze throughout the public sector .

Governments are changing their position over banking regulation. When the credit crunch first struck, they were cautious and said there was no point in seeking to bolt the stable door after the horse had gone. As banks were now trying to recover from a weak position and were risk averse there was no need to strengthen controls over risk taking.

As the credit crunch has carried on its weary way there is a growing impatience as regulators feel they ought to be saying something as a prelude to doing something. We are now in to “This must never happen again” territory, allied to a view that there must be seen to be a toughening of regulation after the problems of sub prime and beyond.

There is the usual regulatory syllogism. Banking is a well regulated industry. Banking has just got into a mess. Therefore we need more regulation.

It does not flow. The truth is that the detailed regulation of banking under Basel 1 encouraged banks to put risks off balance sheet and to securitise. It was their enthusiasm for doing this that led to the well publicised problems at certain institutions. Left to their own devices to assess capital adequacy, they might not have gone so far in those directions – the regulatory sums allowed them more leeway and gave a sense of false security. No self respecting banker would be seen to have substantially more capital than the regulator thought was necessary. Northern Rock was discussing how to reduce its capital surplus under current rules before the run began.

There are currently three preferred options on offer for re-regulation of the banks. Each one has a role to play when we are coming out of the credit crunch, but each one if imposed too strictly and too soon could make getting out of the crunch more difficult.

1. More transparency. Usually more transparency, more published information about the state of a company, is a good thing. It acts as discipline on the company, and allows others to assess how much business to do with that company. However, when there are fears about bank weaknesses, a sudden rush to publish more may fuel the fears rather than reassure. Different banks will have taken a different line on how to value assets, how to assess liabilities, and how much capital cover they need. Changing the numbers or flooding out new numbers at or near the low point of the cycle could damage.

2. Mark to market. Some say the way to ensure clarity and comparability over banking numbers is to require all banks to mark the values of their assets and liabilities to market. That means that if they hold bonds, shares and bonds in securitised vehicles, packages of mortgages or the like, these should have a market value and that should be used in declaring the bank’s position. Again, this is a good idea in normal times, but in these conditions it could lead to a rush to the bottom. If bank A has to mark its holdings down a lot by marking to the new lower market prices, then it may have to start selling some of the assets to buttress its position. This could drive the market price down further, leading to more weakening in its balance sheet position. If the bank intends to hold the assets until maturity or for a reasonable length of time, making them mark them to market now could be disruptive. They need to be examined in private on a case by case basis where they wish to deviate from marking to market, if necessary in conjunction with the regulator to see fair play. There is no necessity to value a bond or mortgage at a low market price if the bank can and will hold it to maturity and get full repayment.

3. Require more regulatory capital to allow for the risks of a future credit crunch and difficulty in raising money market funds. Again this would be a prudent decision, but at the moment when banks are working hard to ensure proper balance sheet rations and liquidity for current tough conditions, an added requirement would be far from helpful and would delay recovery.

Stephen Lewis (Insinger de Beaufort)has recently written a good piece examining the IMF’s claim to be the obvious choice for a new world super regulator role over the banks. He shows how the IMF in the run up to the recent credit crunch was reporting that systemic risk was low, and was not warning people that we were about to enter the worst conditions in money markets for at least 35 years. He too is concerned, as an experienced analyst of money markets and a City expert, that overdoing the extra regulation at this point could impede recovery. This is becoming a serious and long running credit crunch. The work of the authorities around the world should concentrate on rebuilding confidence and liquidity. That should not include subsidising banks or taking on unreasonable risks from the banking sector, and it should certainly not include nationalising banks. It should include taking action to make markets more liquid and buying assets from banks at prices that mean the taxpayer does not lose.

The originate and distribute model, where banks arrange loans and mrotgages and then sell on packages of these loans to others, was a way designed to reduce the risk to the banks, and a method to allow them to extend more credit. As Mr Lewis argues, this was not such a bad idea when done sensibly. It would be a pity if such practises were made impossible in future, as it could limit credit growth more than is desiarable.

This morning it is time to look at the Olympic ideals, and the sorry progress of the torch around the world. It is a story of two cultures who seem unable to comprehend each other, of mistaken spinners for China, the Olympic movement and some torch host governments who think they can spin away the scenes on our televisions. It is a story of muddled authority and little sensible thought about what was likely to happen.

Reading the words of the Chinese Ambassador in the UK in this Sunday’s press reinforced the message that an authoritarian single party state like China looks at human rights and freedom of expression in a very different way to a democratic country. There was seeming incomprehension that protesters could be so unfair to the noble torch bearers in the cause of Tibet, as if the torch supporters from China were in some way noble and the torch carriers exempt from any unfortunate associations. There was patient explanation that if only they understood just how well Tibet was doing under China, and how many people wanted Tibet to be part of China, the protest would wither away. There was just a hint of a warning, when the Ambassador told us that it was doing grave damage to the image of the West in China.

Listening to the UK government explaining that those on the streets supporting China and the Olympic movement were different and should be treated differently from those peacefully protesting against one or both created another sense of unreality. I asked the Foreign Secretary before the torch flew into London what instructions the government was issuing to the police, as I was worried the police were going to be placed in a very difficult position between two strong groups, pro and anti China. I received a bland and tortured reply, trying to run with the fox and ride with the hounds at the same time.

What I had hoped for was a more considered answer. It should have gone something like this:

“I am grateful to the Rt Hon gentleman, who has given me this opportunity to set out the government’s view on this important matter. We have decided that the people of London who wish to should have an opportunity to see the torch being carried by leading athletes, unimpeded by violent or intrusive protest. We also believe that those who wish to protest about the matter of Tibet and human rights should be allowed to do so peacefully. We therefore have asked the Organising Committee to agree to a shortened route for the torch around Hyde Park, where the barriers used for royal processions will be used to keep back the crowd so they can view but cannot interfere with the torch and its carriers. The police will be asked to station themselves along the line of route in sufficient numbers to ensure no-one seeks to rush or leap the barrier, allowing people to view the torch. We have informed the Chinese authorities that we do not need the help of their security people to ensure the safe passage of the torch – we have a long tradition of royal processions in London without incident. People may display banners and T shirt logos along the line of route, but not in a way which stops others seeing the torch.”

It would also have helped if government Ministers had kept out of the limelight and left it to the Olympic movement and its chosen representatives in London.

I would give the same advice to any country that has not yet received the torch but is going to. If they wish to continue with it it would be best to chose a route which can be protected sensibly without intrusive security, and the authorities should allow peaceful protest.

The Olympic movement has some difficult decisions to make from here. It seems to want to continue with the progress of the torch despite the volume of criticism it has engendered. If that is so it must make better arrangements. The problems will get more formidable in Tibet, where the world’s media will want to congregate to follow – or make- a story. It will not be the kind of story the Olympic movement wants. Stopping the media or controlling the media in Tibet will reinforce the human rights protest elsewhere. Allowing the media will give greater prominence to the Tibet issue. Is that what China herself really wants?