One of the many policies and aspirations of the present government that lies in tatters is its wish to see many more houses built in Britain. With an impeccable sense of timing and no sense of irony, the government chose the top of the housebuilding cycle to announce that it intended the building industry to step up from around 180,000 new homes a year to 240,000. With all the certainty of the old Communist regimes announcing their tractor production targets, Ministers told us solemnly that another three million homes will be built by 2020. The policy was to be pushed through by the construction of numerous “eco” towns on greenfields, coupled with brownfield redevelopment, town cramming and back garden building.

All of this looks absurd when you see the reality of the Credit Crunch. The first thing the government did to “help” implement its policy was to nationalise the most aggressive of the mortgage banks, and then stop it undertaking new lending! With the Bank of England the government failed to keep markets liquid enough, so credit dried up at many of the smaller lenders, and the larger banks all had to rein in their lending and raise new capital. As a result in the first quarter of this year only 32,000 new homes were started – an annual rate of a mere 130,000 if the first quarter’s activity levels can be sustained, or little more than half the government’s ambition.

At the same time the government decided it needed to speed up the granting of planning permissions for major projects. It has chosen to do so by legislating to set up a new quango to become involved in these decisions. In our recent debate on the subject Ministers were unable to confirm it would be quicker to wait for the new quango if you want a major planning permission, whilst the Opposition pledged to abolish it and pointed out it was likely to delay matters with judicial review of decisions a distinct possibility.

Regional government - unelected, expensive and much disliked – is currently dividing up these top down government targets for more housebuilding. It is playing the part of a faithful retainer in this process of illusion – instructing councils to make land and planning permissions available on a huge scale, as if the industry wanted to build all these homes, or people could borrow the money to buy them. I look forward to a Conservative manifesto pledging to abolish both these hated regional governments and the silly housing targets they generate. Planning applications should be considered on their merits by the local authority involved. If a company or a landowner wish to gain a permission which greatly enhances the value of their land, they should make it worth while for the local community and the people who will be adversely affected by the development. They should not be able to rely on unelected regional officials, on chief executives of councils keen to do the government’s bidding to advance their own careers, and on the idiotically optimistic government view of how many houses people can afford to build and buy.

I was pleased to hear shadow spokesmen sharing my view that top down targets, regional control and over optimistic plans are a bad idea. The planning system at the moment suits no-one. Developers think that in better economic times they cannot get the planning permissions they want, whilst most people feel the system fails to take their views seriously and fails to protect communities against unwanted development or to provide the additional facilities needed to make a housing estate part of a thriving community.

So what should councils do about the pressures from the top to identify more greenfields to be bulldozed? They should argue, remonstrate and use every clause in the long manual to slow things down. There is no need to identify new sites at the moment. This system cannot last. There is no need for more planning permissions today, as the housebuilding industry is going through extremely difficult times. Land values are going to fall. There is too much land with planning permission around for current needs. Leading housebuilders need to sell land and finished houses to pay off some debt. The government is in a world of its own. The problem today is not a shortage of planning permissions, but a shortage of mortgages and people to buy the homes.

Today is a good day to review the progress of two leaders at modernising their institutions.

David Cameron’s Conservatives are in good shape on the back of election victories. There are many more women prospective candidates. Homosexual MPs and candidates are treated like any other, as their sexual orientation is not relevant to how they do their job. No-one thinks it wrong that there are women in the Shadow Cabinet, or that the party was once led by a woman. Indeed most Conservatives are united in thinking that the party’s most successful period until recently was under a woman leader. David’s strong support for liberty has persuaded most within the party – so much so that the one time leader of the traditionalists in the Shadow Cabinet has just resigned to fight the government more strongly in defence of more civil liberty and less authoritarianism. He did not have the leadership’s encouragement to make such a stand, but I am delighted they back him and want him to win, for his fight is our fight. It is in many ways the ultimate proof that the Conservative party has “got it” and has modernised under David. No-one I think could have written such a script four years ago of how the Conservative party would come together behind the cause of Magna Carta and Habeas Corpus, making them thoroughly modern causes, under threat from a punk modernising government with no sense of history or personal liberty. As someone who backed David Cameron for the leadership when others thought I should vote for the “traditional” candidates, I feel pleased with my choice, and pleased that so many in the party took the same view.

In contrast Rowan Williams’ Anglican Church stumbles over all these same issues. Where Conservatives appoint more women, the Anglican Church faces an internal revolt against allowing women to be bishops. They are miles away from having a woman leader. Homosexuality has rent the Church asunder, with much support in Africa for the alternative manifesto “The Way, the Truth and the Life”, and latent support from traditionalists elsewhere. The archbishop floats on the Church’s website the idea of having associated and constituent churches, where the associated ones will pursue a different approach to main issues, and look to bishops other than the archbishop for their leadership.The Anglican Church gives an uncertain message on the role of the family, their approach to sexual relationships and personal responsibility, often preferring to say nothing. Often they just demand some more British public spending for some other cause as the easy way out.

David Cameron knows that there is still much to do and that there is no reason for complacency. I guess Rowan Williams must have some sense of foreboding as the Anglican Church sets out to prove just like Brown’s Britain that devolution and alternative sources of authority and power do not bring unity back, but foment the forces that wish to pull an institution apart. The Archbishop has not found the words and the actions to unite his unhappy Church. His every word seems to widen the divide, encouraging the warring factions to push further and harder in the direction they wish to go. In contrast, on homosexuality, personal freedom, the role of women and the need to curb the excesses of the authoritarian state the Conservative party has found a new settlement under its Leader.

No sensible Conservative need doubt the Leader’s Conservative credentials. This is the man who led his party in its calls for a referendum on Lisbon and to oppose the whole Treaty. This is the man who led his party to advance cuts in Inheritance Tax for the many, as well as the man who has presided over most important work on how to mend Britain’s damaged society. Under Cameron Conservatives know what we believe in – we believe in opportunity for all, with reform of public sector housing and schooling to make that more of a reality for those currently excluded from home ownership and good education by Labour’s clumsy state. We believe in individual and family responsibility, with welfare reform to encourage and require people to work if they can and where work is available. We believe in looking to the security of our country, with appropriate measures to make the UK and its citizens safer. This includes action to reduce our dependence on imported oil and gas, to increase fuel efficiency, and to look after our green landscape.

There is unity around these central aims. There will be unity about the need to tackle the mess that Labour is creating with the economy, which is now the dominant concern of most voters. In contrast the Anglican Church can look forward to more disunity, as the rival archbishops and bishops set out their stalls. As an Anglican myself, am I to be offered a choice of styles locally? Will I be able to find a church which both values the fine traditional language of the Book of Common Prayer, the great anthems and choral works, yet be rooted in the modern world when it comes to personal freedoms? Watch this space.

Fiscal policy is too lax — the government is spending wasting and borrowing too much. Markets fear that the government is going to borrow far more than in the budget. Each day brings more evidence of a loss of financial discipline in the public sector.

Monetary policy is still too tight - the banks are still short of cash. The collapse of the mortgage market will mean further falls in house prices, a low level of construction activity, more losses of jobs in the building industry, more declines in commercial property prices and falls in land values.

The squeeze will primarily affect individuals and families. High energy prices, council taxes, the income tax rise and the impact of higher food prices are beginning to hit real incomes. This is going to get worse over the rest of this year, as relatively low wage increases meet rising bills.

Companies have so far been able to pass on quite a lot of their cost increases, with the pain mainly concentrated in financial and property companies. If volumes fall then the squeeze will affect a wider range of commercial businesses.

What could the government do? It could ease the squeeze by cutting out some of its own wasteful excess, and using the money freed partly to cut borrowing and partly to take fuel taxes down to offset some of the price rises. It could with the Bank of England provide more liquidity and lower interest rates to the money markets. Above all it could return what is left of Northern Rock to the private sector, so that once important mortgage bank could stop shrinking its loan book and the taxpayer could get more cash back.

What should the Opposition say? It should keep well ahead in the polls thanks to the economic worries and the gathering dissatisfaction with the squeeze. It could start saying in general terms what action needs to be taken to start to adjust the huge imbalances in the economy created by the wasted Labour years. Gordon has presided over his own version of boom and bust - today it is boom in public spending, and bust in many family budgets.We need some economic stability, which requires a different approach to running the public sector, to get us better service for less cost. We need a government which doesn’t just talk about making long term decisions, but gets on and takes them to provide more water, energy and transport capacity, and deals forcefully with an agricultural system which still does not encourage sufficient production.

Last evening after a day pounding the streets of Henley I went to see a Beating the Retreat at the Officers’ Mess at REME in Arborfield in my constituency. It was such a pleasure to find a small corner of Labour’s great public sector where the people are professional, courteous and keeping high standards. Even more encouraging, I found when talking to the younger officers a varied range of backgrounds amongst people who were using the discipline, education and training that the army still offers to make their way in the world. They are proud of what they are doing. There was an ease of communications between the differing ranks and the differing ages. They organised their evening with precision, and were attentive to their guests in a way that is so often absent at other public sector events.

The latest survey shows that all too many people in our country do not think they are making headway, and think class still plays an important role in people’s futures and achievements. The worst feature of the NU Labour years is the way that having a rich Dad has become so important to getting a good education. The growing gap between what the best public schools achieve, and what is achieved elsewhere in many comprehensive schools is alarming. The best public schools turn out well mannered self confident people capable of reading and writing to a high standard. All too many comprehensives struggle to achieve the necessary levels of attainment in the basics, and struggle to remedy a lack of success at the primary level in equipping young people for life.

The Henley by-election result reminds us just how Labour has lost the plot. I found so few standing up for Labour during my canvassing. The general view was the government had failed, was in its long death throes, and needed to be told again just how badly it is doing. People feel stretched financially, and dislike the bossy incompetence that is the government’s main hall mark. If the government could find ways to raise standards in schools, and raise the sights of the many young people who feel they do not have a chance because of their background, they would earn more respect. If they could apply the lessons of the army to other parts of their rambling public sector that too would help.The cruel irony is that because the services retain a quality which does work, and still have that ability to bring leadership out of people from humble backgrounds, they have been starved of cash whilst other parts of the public sector have been showered with it. Labour is reaping what it has sown. They have seemed to dislike the emphasis on discipline, training and politeness which characterise the armed forces. Instead, they should have applied those values in parts of the government where they did spend so much money.

Legislation has become an extended press release to this government. As the government of the spinners by the spinners for the spinners detects movements in public opinion through its copious professional polling and focus group research, so it wishes to send out messages. “We feel your pain”, “We will do something about your problem”, “We will legislate to put it right”. Unfortunately for the government so often it requires administrative action – or cancelling incorrect administrative action – not legislation. They don’t seem to care, as they have given up on trying to make their huge public sector work properly. They prefer instead to retreat to their comfort zone of trying to manage some of the media some of the time to repeat their idiot soundbites. Passing laws helps to reinforce the message of the day.

The events of recent days are much easier to understand once you have grasped this cynical and futile approach to mass producing more law codes. We finished the Commons stages of the Planning Bill yesterday evening. I, along with several other MPs, wanted to speak on the Third Reading of the Bill. It makes much more sense to wait until Third Reading, as the government rewrites huge chunks of the original proposals during the course of proceedings, so it is only at Third Reading that you can have a proper Second Reading Debate on the overall structure and impact of the legislation. This government, of course, does not want that. Once again their anti democratic timetable meant we had less than thirty minutes for Second Reading, which allowed no time for a single Opposition backbencher to speak.

This Planning legislation was born of the correct perception that it takes too long to make decisions about major projects in the UK. Communities face years of blight from wanted and unwanted planning proposals before the state gets around to making up its mind on whether to allow them or not. Doubtless the business lobbies and the focus groups told the government this was a problem. Instead of improving the existing administrative framework, and setting meaningful deadlines for the different stages of a planning application, the government decided to legislate for a new system. Drawing on what they think of as their success with an “independent” Bank of England ,(see my blogs on why this is misleading) they decided to create an “independent” planning quango to take these decisions. It has been fun watching many MPs who have bought the nonsense of the so-called independent Bank of England lining up to say planning had to be subject to elected democratic control. We had the pleasure of watching as the government eventually buckled and put in a very complicated system of Ministerial statements of national planning policy on major projects to be followed by the so-called independent quango “taking” the decision! They did not seem to see the contradiction in their views.

I asked if someone wanted to build a new power station, how long would it take starting today to get a decision under the present system, and how long would it take under the new system. You would not have thought that a difficult question, as the main rationale for the new system is to speed things up. Indeed, I felt I was being kind to the Minister, John Healey, offering him a free hit to advertise his Bill. Mr Healey was unable to give any answer. He also failed to intervene or object when the Conservative front bench told me they think it would take longer under the new system than the old, and that there is a severe threat of judicial review of decisions under the new system!

It all goes to show that the purpose of the Bill is not to speed up planning applications, but to appear to be speeding up planning applications. In practise it will probably take the next couple of years to establish the Planning Quango, and to write the government statements of national policy. People and businesses planning major projects might well opt for the existing system to get their permission, or might decide to wait and see how it all settles down. I am pleased to report that the Opposition stated they will abolish the quango, as they see it as another spanner in the planning works,

Today we learn there will be new equality legislation. I am all in favour of trying to prevent discrimination on grounds of race, age and sex. I do see that having framework legislation in place can set the tone and avoid the more extreme examples of unpleasant discrimination. I am also aware that there are many subtle forms of discrimination which no legislation can ever prevent or ban. We have all been discriminated against for one reason or another at some points in our lives. One person’s unfair discrimination is another person’s criteria for choosing between candidates or deciding who to favour where choices have to be made. The government is perplexed by the fact that equal pay legislation for women has been on the statute books for years, yet the figures show men still earn more than women on average and there are doubts about the justice of pay between the sexes in certain walks of life. They have yet to show us the problem is the shape and nature of the legislation. If they cannot demonstrate that legislative change will fix this, their new Bill will be yet another in their sequence of posing Bills, well intentioned but ineffective.

Yesterday we heard one year after the floods the result of a government review into the floods. It is pathetic that it took so long to conclude the blindingly obvious – that our flood defences are inadequate and a lot of buck passing occurs between the different authorities and levels of government over who should do the work. Once again we are told there will be legislation to deal with the problem in the next Parliamentary year. Why on earth do we need legislation? We need women (or men) in JCBs to get out there and enlarge and cleanse the ditches and cut some new ones. We need schemes to build bunds and other means of retaining water in safer places, better conduits and cleaner pipes, with a few non return valves and bigger pipes to handle sewage in some places. We need these now, in case the rains come again as they did last summer. One school in my constituency has already been flooded again this year, as it was last. I doubt that a new law will make any difference. I showed the Environment Agency the other day what might solve the problem, and it wasn’t legislation.

There is a simple message for the government. Stop trying to pose as saviour by legislation, and start taking some practical action where action is needed. Stopping future floods would be a good thing to do. Getting your own recruitment and retention right in the public sector would go a long way to tackle inequality in the workplace. Let Parliament have longer to discuss fewer Bills, and you might also start to get some sensible legislation.

I just turned on the New Zealand versus England cricket in time to see the collision between bowler and batsman and the run out of the New Zealand player as a result.
In the spirit of cricket England should not have appealed for the run out.

John Redwood has welcomed the findings of the Pitt Review, published today. He is pleased to note that his urging for clarity of responsibility among the relevant authorities is a central tenet of the report’s recommendations. The report proposes a framework, overseen by the Environment Agency, in which all responsibilities are clearly mapped out on a local level. Mr Redwood very much hopes that this will, finally, translate into some action on the ground, ensuring the gully clearance and capacity increases that are needed to avoid risking a repeat of last July.

Having submitted concerns to the review regarding the planning process, John Redwood also welcomes the report’s emphasis on the need either to implement properly, or strengthen, existing planning legislation, in order to reduce the flood risks posed by new building developments.

He is concerned, however, that the lack of urgency in producing the final report will also characterise the implementation of its recommendations.

Speaking today, John Redwood said: “It has taken more than a year for the government to come up with a report, chronicling the obvious failures of the authorities’ responses to floods last year. Meanwhile some people are still not back in their homes one year on, and many still face the threat of floods if we have more heavy rainfall. It is vital that the government accept the main thrust of this report, and get on with accepting responsibility to carry out the works needed and to make the planning decisions that are required, to prevent so much flooding of people’s homes in the future.”

The full text of John Redwood’s speech and interventions in yesterday’s cost of living debate now follows:

(1) Mr. Redwood: The hon. Lady is making some good points about the impact of food prices on her constituents. Can she explain why no other Labour Members want to hear about that? Do they not understand it?

Mr. Graham Stuart: Where are they?

Ms Keeble: They probably decided to leave it to me, in the sure knowledge that I would make a good job of it. This issue of is of concern to me because it is of profound concern to my constituents, and I think it right for questions about it to be dealt with. There is also the impact on family households of the credit crunch, which, although it may not be immediately apparent to some of them, is felt through pressures on house prices and house building.

I have to say that I disagree with the detailed analysis presented by the right hon. Member for Wokingham. Having sat in the Select Committee and listened to explanations from the Governor of the Bank of England and others, I have not heard them blame the restructuring of the Bank in 1997 for the credit crunch, although there have been arguments about the tripartite arrangements. Most of my constituents probably realise that whatever mistakes were made in that regard, much more profound mistakes were made by the board of Northern Rock and much more substantial problems arose in the sub-prime market in the United States, which continue to affect our lives and those of our constituents.
What my constituents probably want to know, much more than they want to hear tit-for-tat arguments between the political parties, is what will happen in the years to come, and which party has the policies to take them through what everyone knows, and what the Governor of the Bank of England has said, will be a difficult time for quite a while. He said it would be difficult until next March or April, and I am sure he is right. This has to do not just with how much the cost of living goes up but with what happens to family incomes, and ours is the party that provided a safety net for family incomes through the minimum wage.
(2) Mr. John Redwood (Wokingham) (Con): The Chief Secretary to the Treasury and the Government make a pathetic case. They say that the rising inflation rate is entirely down to world events that they cannot control, although occasionally the Prime Minister, in his Canute-like mode, goes into embarrassing overseas meetings fatuously to lecture people who are not as guilty as he is over the price of petrol and diesel at the pump. The Government also seem to resent the fact that many millions of formerly very poor Asians—Indians, Chinese and others—are at last able to get some purchasing power in the world so that they can have a greater fraction of the standard of living that we take for granted, by buying more energy and better food products.

We are saying to the Government that it was eminently forecastable over the past 11 years that there would be a big increase in demand for food and energy from Asian sources. That is very welcome. We were all extremely grateful that the Asian economies did so well in supplying us with an ever-increasing volume of very competitively priced goods, which kept our inflation rate down despite the errors being made in inflation policy in this country. Now, however, the Government are saying that it is all the Asians’ fault for daring to buy all these other things with the money that they have earned buy selling us those cheaper goods, even though the Government did absolutely nothing for 10 years to increase our capacity in agriculture or energy, when they should have been making a contribution to the world situation.

Mr. Simon: The right hon. Gentleman is noted for being an intelligent and erudite Member of the House. If he has a case to make, surely he can do better than to use Aunt Sallies and say that the Government are blaming everything on the Indians and the Chinese. That is ridiculous. If he has a case, why does he not put forward a proper argument instead of all that sort of nonsense?

Mr. Redwood: If the hon. Gentleman had been here for the Chief Secretary’s speech, he would have heard her say that the increase in demand was all down to world circumstances, and that it had come not from Europe but from India and China and other much more successful, faster-growing economies in Asia. The hon. Gentleman has failed to make his case.

Over the past decade, the Government could have made the decision to allow the private sector to develop the marginal fields in the North sea instead of taxing it to the hilt and putting it off. They could also have made decisions on renewable energy, nuclear energy or other kinds of energy that do not require carbon. Instead of having to have the great debate now on new power, we could have had new power stations already up and running. We have had 10 wasted years under this Government, and we now have higher energy prices as a result.

On agriculture, instead of constantly agreeing with everything that comes from Brussels, the Government could have put some substance behind their rhetoric of reforming the common agricultural policy. Instead of having years and years of big subsidies for set-aside to prevent farmers from growing the grain that the world needs, we could have had a policy that actually promoted the growing of grain in order to make a contribution to the world scarcity of grain, both for direct eating by human beings and for eating via the animals that are increasingly in demand in the Asian countries.

That is where the Government have gone wrong, but they wish to take every credit for the cheap goods coming out of Asia, which they say is down to their economic management. Now, they wish to take no blame for the scarcity of basics that is driving prices up, and with which they have singularly failed to help.

John Hemming: The hon. Member for Edinburgh, South (Nigel Griffiths) did not seem concerned about the fact that families on lower incomes were more dependent on basics, or the fact that, while the consumer prices index shows a 10p in the pound spend on food and non-alcoholic beverages, and 12p in the pound on housing, water, gas, electricity and other fuels, it also shows a 14p in the pound spend on restaurants and hotels. Does the right hon. Gentleman share my view that we should examine how families on low incomes are affected by Government policy?

Mr. Redwood: That is what I and my party have been saying, and it is one of the reasons behind this debate. The hon. Member for Edinburgh, South (Nigel Griffiths) is as remote from the reality of modern Britain as those on his Front Bench clearly were during the Crewe by-election. They seemed to have no idea that the retail prices index basket—let alone the consumer prices index basket—does not reflect the reality of low-income households, which are spending a much bigger proportion of their income on food, energy, heating their homes and trying to get some transport. The Minister admitted that those costs had shot up, and those are the people whose incomes are being most tightly squeezed.

Nigel Griffiths: If the right hon. Gentleman is so sure of his case, why has he not persuaded those on his Front Bench to make a statement saying that they are going to cut duty on fuel?

Mr. Redwood: I am well known for believing that because there is such a rip-off at the pumps in this country and a rip-off on North sea production, we should be reducing the rates in order to keep the amount of tax coming in at the forecast level rather than over it. I suggest that the hon. Member for Edinburgh, South (Nigel Griffiths) contain himself; who knows, my Front Benchers may well come up with such a proposal in due course, but we are interested in the Government’s proposals. It is their problem; they created it. They have the power to say to the House today, “We are very sorry. We are collecting far more revenue at the pumps and from the North sea fields than we forecast we would in the Budget. This is a rip-off. We will give some of it back to the public.”

About £500 million of extra revenue came in from oil and petrol in the first six weeks of the financial year, but what are the Government doing with it? They have not told us how they are wasting that £500 million, but we know that they have wasted billions on computerisation, unneeded regional government in England, ID cards, too many officials and administrators and too many external consultants coming in to do the jobs that officials do not seem to be able to do so that we are paying twice for everything that goes on in the Government. That amounts to massive waste, which the Government’s own Gershon review admitted, as confirmed by Conservative party work.

At the core of the debate there should, I think, be a serious examination of one of the most misleading soundbites of the past 11 years—the soundbite that the Government created an independent Bank of England, which dealt with the inflation problem and gave us economic stability. The House should remember that the Government almost lost their Governor of the Bank of England when they shoved through their bodged reforms of the Bank in 1997-98. Far from making the Bank independent, they stripped it of its responsibility to manage public debt and its responsibility to have day-to-day supervision of the clearing banks.

When the credit crunch and the crisis hit, the Bank of England was blind and deaf to its own money markets and did not know minute by minute what the Government’s debt position was—crucial to the functioning of the money markets—and it did not know minute by minute what the clearing banks’ position was, when they were clearly extremely short of funds. That meant that at the crucial point where the Bank needed to be expert at running the money markets to enforce the rates laid down by the Monetary Policy Committee, it was not able to do so. There was a complete collapse of monetary control across the August through to October period as they lurched from boom to bust in their handling of the economy. It was a failure of the Treasury, as well as the Bank of England; it was the tripartite system, led by the Chancellor, that led to the run on the Bank—a disgrace in an advanced economy that makes its living primarily out of financial services through export markets. It was a disgrace that this Government presided over such an embarrassing situation when all previous Governments had been able to keep the banking system just about liquid enough, even in bad times, so that there was never a run on the banks for more than 100 years.

All that happened because of those bodged reforms. The Monetary Policy Committee is alleged to be independent. The Government’s best case is that the MPC was made a bit more independent; clearly, the Bank of England was very badly damaged by being made less independent, as it lost big functions. Even the MPC was not really made independent, however. Let us remember the record. Before the 2005 election, the Government clearly wanted lower interest rates, so they fiddled the target. They replaced the retail prices index target—the RPI is used in all the index contracts; the RPI is used for wages and indexed debt—and substituted the consumer prices index. Why did they do that? They did it because they knew it would go up less quickly, which would mean easier money and lower interest rates. I see the Economic Secretary shaking her head, but she is an intelligent woman and she knows that that is why they did it, and the adjustment to the target rate was not sufficient to take into account how big the gap was between the more truthful RPI and the less truthful CPI in respect of the prices that people were having to pay in our economy. We had that damage.

There is also the problem that we were never told why some members of the independent MPC were reappointed and others were not. I tabled questions asking about the criteria for reappointment. I asked whether there was some external test for reappointment, whether the voting record was examined and whether only the dovish ones who would vote for lower rates before elections were reappointed. No answer was forthcoming from the Treasury. This Government, who introduced the Freedom of Information Act 2000, will not even tell a Member of this House of Commons why they reappointed some MPC members but not others. They will not even tell me what the criteria were for trying to create some independence for that committee.

When the crisis struck in August and September, the MPC was as much use as a bunch of people having a tea party but no control over the financial markets. There is no point in setting independent bank rates if we cannot enforce them in the market. The Bank needs to have enough control over the money markets and enough knowledge and skill within those markets that its rate is the crucial rate. It lost control and the damage was there for all to see.

We have a Government who mis-sold the proposition that they created an independent Bank. They have mis-sold the proposition that they created stability as they created instability. They have still not got a grip on this situation. We had the big lurch from too much liquidity and low interest rates between 2003 and 2006 to interest rates being too high and too little liquidity in 2007. We had the run on the Rock. We then had a welcome reduction in that illiquidity. Money was belatedly injected into the markets and interest rates were lowered a bit, because the Government suddenly realised that fighting slowdown or recession was more important than fighting the inflation that they had already created.

More recently, we have had a lurch the other way. The Bank and the Treasury seem to be worried again about the inflation, which they cannot control because it relates to their past mistakes. This lurch is happening at exactly the point where the housing market is in collapse, the property market is in collapse, there is a second phase to the credit crunch and there are problems with mortgage banks and others because of the extreme squeeze that the Government are putting through. The price of that lamentable failure of monetary policy, the botched reform of the Bank of England and the lurch from boom to bust and from boom to bust again in credit and money markets will be severe for people in this country to pay.

My hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond), the shadow Chief Secretary, valiantly tried to get the Chief Secretary to say something true from the Dispatch Box. He said to her that the adjustment to the credit crisis and the inflation crisis triggered by the Government must surely come through lower living standards. That is what the Chancellor’s policy is all about when he says that people cannot have RPI-matching pay awards. He has said that public sector pay should go up by considerably less than RPI and is now trying to talk the private sector into exactly the same position. Perhaps he has not realised that a lot of the private sector came to that conclusion a long time ago because it is struggling to remain competitive in an extremely competitive and difficult world.

I hope that the Economic Secretary will remedy the defect created by the Chief Secretary and admit to the House that, yes, it is now Government policy to squeeze individuals and families for at least a year to try to deal with the excesses that the Government have put into our economy. Looking at what the Government have been doing for the last couple of months, it is quite obvious that they have no intention whatever of the public sector making any contribution to reducing the excess spending and credit in our economy, which desperately needs to be sorted out after the boom years—the years of neglect, the years in which the Bank and the Treasury so singularly failed to stay married to prudence and to keep things under control.

I have often pointed it out in the House that I believe that the Government balance sheet—the nation’s balance sheet—has under this Administration seen a ballooning of debt, but not of £550 billion or £700 billion. If the unfunded pension liabilities, which would be on any company balance sheet, the private finance initiative, the public-private partnerships, Northern Rock and all the other promissory notes that they have issued, as well as all the debt that they are now adding to the balance sheet were all added in, the true figure would be about £1.5 trillion.

I am beginning to feel that I have underdone it, because on no occasion has a Minister rushed to the Dispatch Box to say, “The right hon. Gentleman is over the top. The actual figure is so and so.” The Government have never put out a press release countering my blog’s exposition of this. The Economic Secretary looks downwards, so I suspect she is saying, “Gosh, we’ve got away with it. He thinks it’s only £1.5 trillion.”

Let us say that the figure is about £1.5 trillion. That is colossal. It means that the IOU cupboard will be full to bursting by the time the new Conservative Government get in and try to sort things out. It means that we have no room for manoeuvre because the Government have been so wanton over the past few years, yet in the past few weeks they have found £2.7 billion of extra borrowing to try to impress the voters of Crewe. Didn’t they do well? They have found a lot of extra borrowing for transport systems in Manchester and the north-west, presumably because they are worried about their position in that region. They have found a lot of extra money to win the 42-day vote, and might have to find a lot more to win that vote all over again, assuming that their lordships disagree.

This Government are now on a rake’s progress—they have not merely divorced prudence but fallen in love with a much wilder lady who clearly believes that the public sector must have everything, however much has to be borrowed, putting more and more pressure on the individuals and families whom we all represent.

The charge against the Government today is that their reforms of the banks failed; their monetary policy failed desperately badly in ’07 and is still wobbly today; they do not have a grip on the money markets and the interest rate structure, let alone the inflationary consequences; they have absolutely no grip on public spending, which is why all the pressure will be on individuals and families; and they do not seem to care about the way in which our constituents are having to suffer.

If the Government want to solve the long-term problems, as they always say in their rhetoric, will they please make some decisions, even at this late stage, to get some transport capacity and energy capacity in, and to move away from such a strong dependence on inefficient carbon-burning machinery in both sectors? That is the way to do something about energy costs. Will they please go to Brussels and get some change to the common agricultural policy, because we need a policy that promotes and generates much more agricultural activity? We need to see the plough moving up the hillsides out of the valley beds. We need much more land brought back into use. The world needs food, and we need to make our contribution; it is no good blaming the Chinese and the Indians.

(3) Mr. Redwood: Was the hon. Gentleman asleep when the Conservatives produced endless proposals for getting better value for money and having fewer administrators, fewer targets, fewer quangos, fewer ID cards and all the other claptrap that has wasted billions?

Dr. Cable: I was not asleep: I was assiduously reading “The Cost of Living Under Labour” and I shall address the seven-point plan that the Conservatives propose to deal with the situation. It is possible plausibly, and perhaps wisely, to argue for fiscal austerity and for crowd-pleasing tax cuts and spending measures, but to advance them at the same time completely lacks credibility. I will proceed through the seven points, and I hope that my argument will begin to stack up.

(4) Mr. Redwood: If people could still get petrol at £1.15 a litre, 70p of that would be Government taxes, which have been going up this year when the Government claim to be worried about the plight of the motorist. Why do they not simply get their tax down, because that is the dominant part of the price at the pump?

Yvette Cooper: As the right hon. Gentleman knows, we have delayed the fuel duty increase, and fuel duty has fallen in real terms over many years as a result of the decisions that we have taken. The issue that faces people at the petrol pump is not fuel duty, but the fact that we have seen such substantial increases in the price of oil, which is affecting countries right across the world.

(5) Mr. John Redwood (Wokingham) (Con): Does my hon. Friend remember that, far from creating an independent Bank of England, the Chancellor gutted and filleted it, taking away debt management and nationalising it into the Treasury, and taking away day-to-day banking supervision, so that the Bank was blind and deaf in the money markets when the credit crunch hit? Is not that a major problem?

Mr. Hammond: My right hon. Friend is absolutely right. As he will know, we have been arguing for some time that the responsibility for rescuing a failed bank under the proposed new system must lie with the Bank of England, not the regulator. We are delighted that the Chancellor appears at last to have come round to accepting the logic of that position.

The former Chancellor’s reputation is unravelling before his eyes. The man who rode the Asian tiger of imported deflation bleats that what is happening in Britain today is all someone else’s fault—from the credit crunch, to the fuel price at the pumps, to the soaring cost of food and spiralling home heating bills. He was the lucky Chancellor whose good fortune was to preside over the greater part of what the Governor of the Bank of England has called the NICE—non-inflationary, consistently expansionary—years, and whose misfortune is now to have his legacy exposed as a sham, because when the wind blew the economic house that Gordon built turned out to be made of straw.

Yesterday’s debate on the rising cost of living reminded us just how driven by soundbites modern Labour politics is.

Ministers stuck doggedly to their task – to put the word “world” or “global” in front of anything unpleasant that is happening to the economy, and to claim endlessly that everything being done in the UK meant we could ride out the “world” storm better than most. They failed to engage with any of the points and questions raised.

I asked them what the true UK borrowing and unfunded pension liability total now is. I suggested it is a massive £1500 billion. There was no denial from the Treasury bench.

I asserted that the Bank of England had been gravely damaged by taking away its responsibilities for banking supervision and debt management, leaving it unable to control or understand the money markets. There was no reply.

I argued that the Monetary Policy Committee was far from independent, as the government overruled it with a change of target and refused to explain why some members were reappointed and others were not. Again there was silence.

I pointed out that they had raised taxes on North Sea oil fields, yet now had the temerity to go and tell other oil producers to raise output, when their actions had reduced potential output from the North Sea. There was no response.

I questioned why they had spent 11 years dithering over whether to have more nuclear power stations and other non carbon power generation. Wouldn’t we be in a better position if we had more non carbon capacity now? The comments went unanswered.

I asked why they had failed to reform the Common Agricultural Policy so farmers grew more corn and has less set aside, to help with food prices. There was no substance to the response.

The Minister responding to the debate was one of the more intelligent ones. She must have been told to keep her head down and not be drawn on anything different, so she did just that and spoke like someone reading from the whips pager. The only Labour backbencher to stay during the middle section of the debate expressed surprise that I had produced an interpretation of the UK Credit Crunch and the poor conduct of the authorities that was entirely new to her. Some of her colleagues who had heard my case looked as if it were not permitted to use arguments outside the prescribed spin doctor approved list. The arguments are those I published in the Conservative Economic Policy Review and have frequently voiced on this blog and occasionally in the media. Analysis so often gets crowded out by the fatuous soundbites of the spin doctor clash.

The Conservative front bench stuck to the line that the government had failed to mend the roof when the sun was shining, to which the government had no economic answer. It confined itself to pointing out that it had mended some school and hospital roofs, deliberately evading the point of the metaphor that they had debauched the public accounts in a time of plenty. The Lib Dems (Vince Cable) promised a demolition job on the seven Conservative proposals to improve the situation. I only counted Mr Cable dealing with five, and agreeing with at least two of the five, so it was a bit like being savaged by a hamster. There were no Lib Dem proposals on offer yesterday to get out of the stagflation that is now upon us.

Today we debate how to get more planning permission through our aged, creaking and unpopular system of planning. The government wrongly thinks that injecting yet another quango into the process, stuffed full of so-called independent experts carefully chosen by Labour Ministers, will do the job. The more their backbenchers disagree, the more the government makes their proposals more complicated, substituting Ministerial decision for quango decision to an increasing extent.

What we need is a rethink. We have to ask ourselves why is housebuilding and the construction of major facilities are so unpopular, and if we can do anything about it.

The main reason most people are NIMBYs – and why many MPs have to be the Chief Nimby in their area – is simple. Large projects and new housing estates do not bring the individuals most affected by them any benefits, but they bring them more traffic congestion, more noise, less amenity and a worse view. No amount of Section 106 money – the bribe to the council to give permission by the developer – can offset this, as it is not money passing to the person who is inconvenienced or loses house value. Indeed, councils often make it an even more unpopular development by spending some of the Section 106 money on a Children’s playground which is captured by feral youths in the evening and plonks that down by the houses affected by the new development!

Any system which wishes to make people more enthusiastic about new development has to transfer some of the planning gain windfall to the householders affected by way of compensation. We need to develop systems to reward long suffering householders, who otherwise will carry on opposing everything because there is nothing in it for them. On the odd occasion when a developer has offered neighbours compensation in my area there has been much less opposition to the planning application.

The hedge fund manager who told the US authorities that the current oil price is twice as high as it need be thanks to speculators, told them what they wanted to hear and made international news. Readers of this blog will know that I think there is speculative money behind the latest rapid rise of the oil price: at some point the speculators will try to take their profits and the price will fall. Readers will also know that here in the UK the government and its taxes accounts for a far bigger part of the petrol and diesel price at the pumps than the oil producers and the speculators put together, which makes Mr Brown’s preaching on this subject rather difficult to accept. As the BBC pointed out today, a barrel of mineral water or a barrel of Coca Cola would still be dearer than a barrel of oil at current prices.

The problem with telling legislators there are speculators in sensitive markets like oil is that they will want to do something about it. They will want to look for ways of banning speculation. This is unwise, because it is technically very difficult to distinguish a pure speculator from anyone else.

People like to think that speculators are a breed apart - often seen as rich foreign traders capable of running a market ever higher, with impeccable senses of timing and access to vast funds so they can get in and out at huge profits to the detriment of everyone else. As a legislator I can see the attraction of trying to identify such people, and trying to stop them or tax them - it would be popular.

In practice, there are two major difficulties. The first is, if we stopped or taxed them more heavily here in London the business would just transfer somewhere else where there were not the same constraints. The second is that in a rapidly rising market as oil has been many people become speculators.

If people fear a price rise they fill their home oil tanks and keep them full. They are speculating on the future price by buying forward more than they would usually do. If people fear a petrol price hike they go out and fill their car and any reserve tank they hold. Businesses relying on road or aviation fuel buy more forward. When you get the annual report of your pension fund you may find it has bought into oil and commodity investments, trying to exploit the speculative trend. Charities, widows and orphans are as likely to be part of this speculative pressure on the oil price as our fabled rich slick foreign trader.

It is best to leave well alone when so many people have directly or indirectly, knowingly or unwittingly become oil speculators. You may be one yourself in a modest way. All such bubbles come to an end. If you want to help the oil price go down, buy less oil based products and find something else to invest in if you have some savings. (Please take appropriate advice - this is not investment advice!)

Today’s front page of the Independent shows this government’s list of major projects that it would now like to push through. The paper are right that some of these will prove highly controversial, and some may be misjudged. The overall impression, however, is how few there are after a long decade of practically no expansions of capacity for rail, road, power generation or water supply. This government has invited in millions of new people, demanded major housebuilding and shop and factory building programmes from the private sector, yet has done nothing to expand the capacity of the main networks where it is the owner or the main instigator and regulator. The Independent’s map shows that the South east will still be very short of road and rail capacity, with nothing major planned.

Having wasted eleven years the government now claims to be in a hurry. That is why we face its horrible Planning Bill again this week, seeking to transfer the responsibility for major planning decisions to an unelected quango away from elected Ministers and Councillors. What we need is a government with foresight and powers of persuasion to allow the development of the new capacity we need on all our major networks - a government prepared to spend on compensation to homeowners where their amenity is adversely affected by new developments. Instead we have a government which wants to fight another battle against our right to a hearing and representation, as they seek to make the planning process even more remote from individuals affected by major projects. Far from speeding up planning decisions on these major projects, this Planning Bill is slowing them down, by taking yet another year out to have a constitutional battle over how to do it instead. Why can’t they just get on with it under the existing system? Why have they left it all so late? Why do we need yet another quango when we are already groaning under the number of planners and the complexity of the system? Why don’t they at least get rid of English regional planning at the same time, so we have a few major national projects decided nationally, and the rest settled by local government?

Gordon Brown today launches another fightback. This time he combines concern about the broken society the Conservatives have highlighted with the new wish to shower taxpayers’ money on groups who might then become better inclined towards the Government. The new big idea is to offer money to encourage those on a low income or on benefits to change their lifestyles. There will be money to buy food of the right kind, money to seek advice and help with children, and money to live life according to the Gordon Brown rulebook.

It is a typically political package designed to spend cash the Government does not have in a bid to show the Government cares and is looking after its heartlands. The prosperous and enterprising people and areas will have to pay more in stealth taxes and deferred taxes when the borrowing has to be repaid. Many Labour MPs will be praying they get a higher political dividend for this new largesse than they received from the £2.7 billion emergency package of benefit increases at the time of the Crewe by-election to offset the increase in income tax.

The sad fact is that Gordon just does not get it. In the current climate he cannot buy enough votes by spending more of people’s money. He can lose more votes by debauching the public accounts further. He should grasp that ever since he divorced Prudence the economy has performed poorly. Years of spending too much and managing the public sector badly are now catching up with him. He needs to cut public spending and seek much better value for money. He needs to tackle the broken society by spending the huge sums of money they are already committed to spending in a more efficient way.

Central to this crucial task is education. Too many young people in deprived areas pass through the school system without learning how to read, write and add up to an acceptable standard. Too many are left without enthusiasm, special knowledge and a confident sense of purpose. Tampering with A-levels, dumbing down standards, or showing pupils more films is not going to solve this. Freeing the schools, offering parents and pupils more choice, encouraging the pursuit of excellence in many fields would help.

Mending our broken society requires many changes. Many of these are chronicled in Iain Duncan Smith’s report on this subject. Simply showering more public money on deprived areas, as we have been doing, will not work. Today’s speech is more spin about a broken strategy of spend, spend, spend, than about the problems of a broken society.

The Poll in the Observer shows how much more sensible the public are about climate change than many of the governments. On a weekend when our Prime Minister jets off to the Middle East to ask them to pump more oil out of the ground to lower the price the public are right to be cynical about their government’s commitment to curbing their own emissions. When the UK government imposes far more tax on petrol than the oil companies and producing countries charge for their product the public understand that the government is using green taxes as a convenient way of raising revenue. It is merely posturing about the price because people are now finding it hard to pay for life’s necessities.

Whilst some people think the pro climate change scientists have had too large an impact on the debate and are not the whole story, the majority still think there is a problem. They are right, however, to be sceptical of the government’s intention to do something about its own insatiable appetite for travel, heating, air-conditioning and other energy uses. I have been tabling questions to try to find out just how much progress is being made in each Whitehall department. The information does not come out readily or in similar format department by department, as their experiences are very varied. It is most important that the government leads by example and shows the rest of us how to curb our energy bills, at a time when the price of energy is causing public-spending stresses, let alone the carbon argument.

Gordon Brown has not explained why he wants to drive energy prices up through taxation and regulation, and at the same time try to bring them back down a little by persuading oil producers elsewhere to produce more. There is a contradiction at the heart of government policy which can only be explained by understanding that this is a Spend Spend government crazy to get your money, which needs ever more green taxes to take the cash from you. Horrified at the polls showing how people are hurting thanks to high energy prices and taxes, the government then poses for the cameras saying it wants others to take the price pressure off.

I support practical greenery. To me it makes sense to waste less, insulate more, reuse where possible, develop carbon and fuel reducing technologies for space heating and personal travel, and invest in alternatives to carbon based energy because of the rising price and growing scarcity. What we want from our government are commonsense proposals and action in all these fields, rather than more carbon burning stunts travelling the world in search of a foreigner to blame for our woes.

Today is great red herring day. The Energy Minister tells us the PM feels our pain when we face daylight robbery at the petrol pumps. The PM is valiantly battling for us and for lower prices in Saudi Arabia.

Is this, I ask myself, the same Prime Minister who governs one of the world’s oil-producing countries, who has put up taxes on North Sea production instead of offering tax reductions to encourage new exploration and development? Is this the same PM who as Chancellor presided over large rises in petrol tax, and who as Prime Minister is delighted to haul in so much more revenue from the extra VAT on the higher prices? Does this Prime Minister understand that UK tax is one a half times the amount of the underlying price of the product?

If the PM really felt our pain and wanted to do something about it he could stay at home and save the cost of air travel. He could announce a cut in the duty on petrol to offset the increases in oil taxes he is now enjoying. He could offer tax incentives to North Sea producers to produce and develop more oil production at home. He could make decisions on nuclear and renewables to increase our output of non carbon based electricity.

Instead we are treated to more expensive spin. Let’s hope the Saudis do decide to pump a bit more oil, and let’s hope that shakes some speculators out of the market. It will not, however, change the rip-off at the pumps that comes not from foreign oil producers but from our own UK government. Why won’t he meet the North Sea producers again and say this time that he is sorry for the extra taxes he has landed us with, and will do what it takes to speed extraction in our own oil and gas fields? Instead of blaming foreigners he should see that the UK energy crisis has been made at home. This government has failed to make the capacity decisions needed over the last ten years, and has seen the green argument as a good excuse to put taxes up on many kinds of energy.

There has been some excellent journalism on the back of Tom Harris’ rose-tinted blog about the economic joys of modern Britain. I marvel at how much he does not understand – his political sense was as lacking as his economic knowledge.

The trouble is, we have a generation of politicians brought up in the soundbite-ridden, spin-doctor-controlled, pager-message-driven world of Blairite vacuity. It says on the Labour pager we’ve never had it so good, so he writes it on his blog. Does he not read the emails and letters from his constituents, telling him how the shoe is pinching? Doesn’t he go out knocking on doors and hear how frightened people are of the Council Tax Bill, the home energy bill and the visit to the filling station? Has he no idea how difficult it is to manage, when the prices of basics are shooting up 1970s-style, whilst most people’s incomes are heavily constrained and even more heavily taxed?

Worse still, the spin doctors and allied message makers clearly know little economics. They ignore the way the UK has been falling further and further behind the fast growing lower tax countries. They forget the 5.5million people of working age without a job. They watch helplessly as the twin deficits, government and balance of payments, balloon. They assume the UK government can carry on living on credit at exactly the same time as the private sector is being strongly squeezed to curb excess borrowing.

It’s not just a minor figure like hapless Tom – he speaks for the whole government. They all talk in sound-bites, crafted by marketing people and based on extensive polling. Tom’s mistake was to flesh out the approved sound-bite that the “government has presided over continuous growth and created economic stability” a little too much so the gulf between what the government wants us to believe and the reality of daily life in modern Britain becomes so huge.

It’s a rum kind of stability, if you saw the way the authorities lurched from feast to famine in the money markets last year. It’s not that stable out there if you are an estate agent, in commercial property, or a housebuilder. It doesn’t feel like growth if you are running a small shop or other service business at a time when people’s disposable incomes are being squeezed. The soundbite rolls on. The more they say it, the more people disbelieve them. When one of them tries to unpack it and give it some more life, you see how ridiculous the whole thing is.

Labour have created an edifice of warm words which have grown further and further away from the reality of the country they are governing. That has increased people’s impatience and cynicism about politics. Now we learn that the Prime Minister does not want a full Parliament next time in the unlikely event that he wins. Has he learnt nothing from the Blair resignation debacle? Does the UK really deserve another PM who invites challengers for his crown because he says he wants to quit but wont name the day? Is there anyone in Labour capable of responding to the challenge?

What a surprise – the EU has no immediate answer to the “Irish problem”. They should begin by realising they do not have an Irish problem – they have an EU problem. When we cross examined Mr Miliband this week on the subject he both told us they respect the verdict of the Irish people, and that they intend to carry on ratifying as if nothing had happened. As far as he is concerned, it is Ireland’s government that has to get itself out of the “slow lane” and rejoin the main Euro convoy.

I asked Mr Miliband what things the UK wished to get through the EU that they could not do under the existing arrangements. He is for ever telling us we could make more progress on the things that matter if we signed up for the further transfer of powers under the Constitution. He could not name a single item where the Constitutional treaty would make a positive difference. He is eloquent in telling us voters are not interested in institutional change, yet at the very same time insists he must press on with these institutional changes that have bitten the dust at the hands of voters in France, Holland and Ireland. He tell us there will be ten years of no further institutional change if we sign up to these proposals – why can’t the ten years begin without signing up to these? Whose leg does he think he’s pulling in asserting there will be no more changes? We know the EU is always busy thinking up new powers it can transfer, and ways it can advance its ever more ambitious federalist and centralising agenda.

The Miliband formula simply does not wash. We do not believe this will be the end of the power grab. We do not believe this power grab is needed to make common progress with our European neighbours in items that matter to us. We do not think there is a prayer of CAP reform with or without the new Constitution. There is no chance of getting our fish back, with or without this Treaty. There is no chance of cutting costs and cutting the amount of tax we have to send to Brussels, with or without the Constitution. There is no chance of Brussels calming down, and stopping interfering in our daily lives on the scale it now does.

The truth is the people do not want all the Brussels government they are currently getting, do not want to have to pay so much for it, an certainly do not want more of it. Until Brussels realises this and starts cutting back on its demands, it will go on losing referenda when people are allowed one.

It is pathetic to receive confirmation from today’s government spin that this government is more afraid of appearing to be the awkward member of the EU Council of Ministers than it is afraid of being out of sympathy with British electors.

Throughout this government’s time in office they have been humiliatingly compliant with Brussels wishes. They have failed to develop and promote a distinctive UK agenda for a freer more open less intrusive and less expensive Europe. They have waited to see what measures Brussels wants, and have then said that is what they want so they can appear to be in mainstream. They have the audacity then to argue they have influence, when most of the time they accept what they are given. They have, it is true, occasionally said they want CAP reform, only to fail to deliver.

Today we are told they are pleased to go as the latest country to ratify the much hated Constitutional Treaty. They will use the fact that the Lords wrongly voted for it so soon after the Irish people vetoed it, to show they are “good Europeans”. It is all part of the unsubtle pressure being placed on the hapless Irish government, who stay drifting in office after their main policy proposal to the Irish electors has been soundly rejected! People of honour in such a government would have resigned, as they clearly do not agree with the people they claim to represent.

Britain should be ashamed of its government for behaving in this way. Surely now is the time for at least one major government in the EU to seize the agenda, and explain in simple terms to this collection of politicians and grand officials just why their centralising out of date power grabbing project is so unpopular with so many people across the Union? Instead of trying to cobble together new ways to steal the Constitution through against so many people’s wishes, they should announce its death. They should say they will work instead at restoring democratic powers to member states in more areas of life, hold a bonfire of EU regulations, and usher in the winds of freedom to the musty and secretive corridors of the Charlemagne building.

Why is there no Pitt or Wellington or Nelson building? They did much in their day to save the freedoms of many peoples and nations. Why are all the heroes and models ones of people who tried to unify a Europe which is happier as a series of individual nations with their own governments? Will no government speak for the peoples of Europe rather than for themselves? Why isn’t Mr Brown more afraid of the British people, and less afraid of EU bureaucrats who are meant to be there to serve us?

Does he really believe his own spin that the Tories were brought down by being too Eurosceptic in 1997? I seem to remember it was being too pro European which brought the Tories down, thanks to the common agreement with Labour that joining the ERM would be good for our economy!

The Governor’s speech at the Mansion House last night showed more realism about the situation, stressing the way individuals and families were going to be squeezed by the current economic policy. He did not, of course, venture a criticism of the government for refusing to squeeze the waste in the public sector to take some of the strain, did not make a case for a stronger Bank, and decided to threaten higher interest rates if people did not behave as if the Credit Crunch had never occurred. Apparently the government has now realised it got the changes to the Bank fo England wrong and wants to strengthen the Bank’s role in money markets and bank supervision.

I know many of my readers think UK inflation is a much more serious problem than I do, and think the Governor is right to menace us with further tightening if necessary. My case has been throughout that we will have a difficult time with inflation for much of this year, as the high commodity prices work their way through the system. That will simply cut real incomes by more, and lead to further reductions in output and a greater slowdown in the economy as a whole. Inflation will then subside, as it will not follow through into higher wages. There will be no 1970s style inflationary spiral. The collapse of inflation could even happen more quickly if it turns out there is a lot of speculative money in commodities which suddenly departs – as we saw when the gold price hit $1000 an ounce.

Readers could point out this morning that the tanker driver wage settlement, at 15% over two years, has broken out from the low single figure settlements we are used to. If this were to become a new benchmark for aggressive negotiators, and if other employers are about to concede such settlements, you would be right, and inflation will be out of control. Clearly Chancellor and Governor are worried sick about the prospect of wages taking off, as it would cause that foolish chase of differentials and money around the system which simply undermines the spending power of the pounds you seek to earn.

I am sticking with my original view despite the tanker drivers, as I think for the moment they are a special case. Any group of workers tied into the bonanza of energy and commodity prices have a chance to raise their relative position in the wages pecking order thanks to the boom conditions in their markets. Conversely, if you are in property, finance, building and construction you will be relieved merely to keep a job and will not have similar power to raise your wages. My theory can accommodate a few outrider settlements in hot areas of a rapidly cooling economy, but would be wrong if this turns out to be a more general problem. So far there is every sign the government is holding the line on public sector pay, where cost overruns in previous years have been so large. There is still discipline in most of the internationally traded activities despite the take off in Asian inflation.

Today we commemorate the victory of Waterloo, when allied forces led by Wellington and Blucher defeated Napoleon. They put an end to his ambitions to unite Europe under French domination through his military prowess and the strength of his armies.

It was not an easy victory. For much of that fateful Sunday the British led allied army of some 67,000 men withstood repeated attacks from the stronger French force. The French assembled 74,000 veterans including 14,000 cavalry, compared with Wellington’s 11,000 cavalry and 56,000 footsoldiers. Only 7000 of Wellington’s army were veterans of his successful Peninsula campaign, and only 24,000 British troops familiar with the great general’s methods and training routines.

At the end of the battle, after the arrival of Blucher with 48,000 Prussians secured the victory, 25,000 French soldiers were dead or injured and 8000 were prisoners. 15000 from Wellington’s army were dead or injured, and 7000 of Blucher’s men. It was heavy price to pay, but it bought a final victory against the most dangerous dictator and the most successful continental General Europe had know for a long time.

What should we make of these sacrifices, almost 200 years later? We can mourn the dead, for they all had loved ones and left behind grieving relatives. We can be grateful the right side won, and Europe was spared more misery at the point of a French bayonet.

We can also take away from the story a reminder of just how much blood and treasure Britain has had to shed in the past to prevent any one power dominating the continent. We have always been the country that has stood up for the rights of smaller countries to self determination. We have favoured democratic and national governments that make sense to people, and resisted strongly over centralised, aggressive and acquisitive powers that wished to unite the continent by force.

Today, fortunately, France and Germany no longer seek to rule the rest of Europe by annexation through force of arms. Our brave Waterloo soldiers, and their successors who fought German tyranny, did put an end to that. But on this Waterloo day, can we not ask our government again to rise to the spirit of what our forbears have done? Should they not abandon the EU centralising constitution, and stand up for the rights and verdict of the Irish people? What better epitaph, what more fitting recognition could we give our long dead Waterloo veterans, than today to say the EU Constitution is dead, long live diversity, long live the independence of smaller countries, long live the right of everyman to have his say and see his vote respected. The new unifiers of Europe are not using force of arms, but they are using the bludgeon of international law codes, the secrecy of international government and bureaucracy to thwart the popular will.

At the Mansion House tonight the government will doubtless tell us the economic problems of Britain come from a global crisis – they are more the result of sub prime USA, not a sub Prime Minister. Our attention will be turned by attentive spin doctors and gullible media to wicked oil producers overcharging for petrol and diesel, and to greedy speculators chasing up the price of food and other commodities. We will doubtless be given huge reassurances that the UK is being managed well in the circumstances, that the UK economy will keep on growing despite it all, and the inflation will be temporary.

If that is the message, it won’t wash. It will reinforce most people’s impressions that the government either does not know what is going on, or is so steeped in the business of disinformation that they cannot help themselves. It is probably a combination of the two. They have spun their line so many times, many of them now do probably believe it. They may once have understood the need for Prudence, for proper management of the public sector, for avoiding nationalisation and going with the grain of markets, but they have forgotten much of that in their crude political rush to spend money wherever they wrongly think it might buy them votes.

What the government should say tonight if it wished to re-establish some economic authority would be very different. They could of course point out that the Credit Crunch is an international phenomenon, but they should tell people part of it is made in Britain. They should admit that the handling of Northern Rock was unique British bungling, and set about repairing the Bank of England before the crisis gets much older. They need to restart the sale process for Northern Rock and get it back into the private sector as quickly as possible, to limit the amount of damage they have to do to the business by running it down, exacerbating the shortage of housing finance.

They should accept that past errors of monetary control have helped fire the inflation we are now experiencing. They should say that now there is a cruel dilemma – should they mainly fight inflation with high interest rates, or fight slowdown and possible recession with lower rates? If they would take some of the pressure off the economy by moving to reduce wasteful public spending and lower the government’s borrowing requirement, they could then risk lower interest rates, and start to give a little hope to the collapsing housing market.

Proposing some self discipline on public spending, instead of the sorry rake’s progress which passes for a public spending policy, could make a lot of difference. The large transport schemes they favour should be privately financed. Regional government, ID cards, central computerisation schemes, extra civil servants, more laws and regulations – these are all luxuries we cannot afford and many of us think we do not need. Let’s have a few billion off public spending by axing these and similar costs. Let’s have a staff freeze on the public sector, exempting teachers, medical staff, police, armed services personnel and other key front line professionals.

That would send a message to markets that the government would take some of the pain of adjustment, as excess demand is removed and borrowing reduced. At the moment an honest Chancellor would have to say that all the adjustment is planned for individuals and families, which means a year or more of greatly reduced mortgage finance, of rising prices going up faster than wages, falling house prices and a cut in real incomes. This will be especially savage on the lower paid.

I would like to thank the Wokingham Choral Society for a great evening on Saturday. They performed a number of sacred and profane pieces around the theme of love, interspersed by readings.

It was a pleasure to be able to read Shakepeare’s Sonnet, “True Love”. It made a welcome break from credit crunch and the trench warfare over the EU. Well done to all the singers.

Let me not to the marriage of true minds
Admit impediments. Love is not love
Which alters when it alteration finds,
Or bends with the remover to remove:
O, no! it is an ever-fixed mark,
That looks on tempests and is never shaken;
It is the star to every wandering bark,
Whose worth’s unknown, although his height be taken.
Love’s not Time’s fool, though rosy lips and cheeks
Within his bending sickle’s compass come;
Love alters not with his brief hours and weeks,
But bears it out even to the edge of doom.
If this be error and upon me proved,
I never writ, nor no man ever loved.

The Governor may soon have to write a letter to the Chancellor apologising for the high rate of inflation and saying what if anything he needs to do about it. In a way it should be the Chancellor writing to the Governor, as the Treasury has been at the bottom of the economic mistakes that have led us to higher inflation, and the Treasury has had more power than the Bank in many of the important matters which guide our economy.

The Governor, in an honest letter, would say:

“Dear Chancellor,

I am writing to report that inflation is now above 3%. This has come about because we held interest rates too low in the period 2004-6, allowing a credit bubble to emerge. The government’s decision to switch target from RPI to CPI made our task more difficult, as the CPI at the time was lower than the RPI, and has since proved to be a very poor indicator of the overall inflation people are experiencing in their daily budgets. Indeed the gap between RPI and CPI has got larger, meaning our failure on inflation as measured by the old target is worse. We felt we had to respond to a lower, easier target once set.

The government’s love of PFI/PPP off balance sheet liabilities and its rapid expansion of public spending and borrowing made conditions far looser in credit markets than was desirable, but we did not feel we could take full action to offset the government’s own wish to expand borrowing so rapidly. We felt the Treasury clearly had good policy reasons for wanting to increase public sector costs and the size of the public sector as much as it did. It was not for us to try to throttle the economy with very high interest rates to offset this huge public sector expansion. I accept that this was wrong in retrospect.

We were also wrong to keep the markets so illiquid in August and September last year leading to the run on Northern Rock. Our options have now been narrowed by the decision to nationalise Northern Rock. This has proved expensive to the taxpayer, boosting public spending still more, and has meant thanks to EU competition law that we are having to run down a leading mortgage bank at a time of mortgage famine and credit squeeze.

What should we now do? The Bank’s options are very limited. If we chase the historic inflation with higher interest rates we will make the credit crunch worse, and cause a sharper slowdown or a recession which seems a bad idea. If we take no action commentators may well say we are neglecting the high and persistent inflationary problem. This is mainly the result now of excess liquidity elsewhere in the world creating strong upward pressure on commodity prices. There is little sign of this spilling over into wage increases at home which would give another twist to the inflationary spiral. In due course it is quite possible the speculative froth in commodities will be corrected and ease the inflationary impact.

However, it is unfair that all the pressure of adjustment to harder times is currently falling on the private sector, with housing and property at the eye of the storm. I am very conscious of the government’s ambitions and high targets for new housebuilding, which are currently unrealistic. If the government wishes to rebalance the economy and ease some of the unreasonable pressure on property and finance it needs to reduce its own claims on the economy. I suggest the government redoubles its efforts, begun with the Gershon Report, to eliminate waste and less desirable spending from the large public sector, to help the adjustment . I would be happy to assist with this process, and can see many easy targets.

Yours etc”

An honest Chancellor would write back:

“Dear Governor,

Thank you for your letter. I agree we have made mistakes together, and we need to reform our system for inflation control. I wish to discuss with you strengthening the role of the Bank in managing the money markets by restoring powers to you to monitor the clearing banks day by day and to run the government debt. Like you, I now realise the Northern Rock decisions were not well made, and we need to be careful how quickly we run the business off.

The government is concerned about the state of the housing market. We see now that getting prices down to make housing more affordable does not allow more people to buy if the mortgage market has dried up. Nor does it help if people generally decide to sit tight rather than change their houses, as it limits choice and increases the number of families living in less suitable accommodation.

It will not be easy with colleagues, but I do see the force of your argument that too much of the adjustment is being taken by the private sector in general, and by the property and mortgage sector in particular. I think there is scope to reduce public spending without in any way damaging services. You are right in hinting that public sector efficiency and productivity can and should be raised. I will take your letter to Cabinet along with spending suggestions the Chief Secretary has been preparing on a contingent basis and see what we can achieve.

I agree with you that putting up interest rates now would be an inappropriate knee jerk response. I just hope you are right and that commodity prices start to subside. It will be uncomfortable to live through much more of this commodity boom, but I see no alternative that is less damaging to UK jobs and output.

Yours etc”

It is not surprising that when China and India come to the party they need a lot more oil and the price goes up. Striking delivery drivers here do not help the situation either.

I can still buy a litre of petrol for around 45 pence, pre tax. That is good value compared with bottled water or soft drinks sold by the same measure. What I can’t afford so easily is the 70 pence of tax the UK authorities stick on top. (Based on the last price I checked out of 115p a litre - and I know it’s still going up at the pumps)

The Saudis have shown some political wisdom by offering to produce some more oil, as western politicians demand, if the West will, at the same time, cut its heavy consumption taxes on the products. As the UK government takes more than 60 pence in every pound charged for petrol, they should provide more than 60% of the price cut they are now claiming to want.

If Mr Brown really feels my pain at the pumps, he can ease it more quickly than the Saudis. I am ready to vote Yes to a government proposal to cut petrol duty any time he likes to make one.

Mr Miliband is presiding over a dreadful period for the UK’s reputation abroad. Our foreign policy bears the imprint of the last foreign visitor or international institution we have dealings with. We retreat and change positions as overseas visitors and meetings demand. The US delivered the insult to the French at the time of the Iraq war that they were “surrender monkeys”. Who are the surrender monkeys now?

In the last few days we have seen the humiliating spectacle of the UK government rushing to reassure France and Germany that the UK will speedily complete its ratification of the Constitutional treaty without asking the people, as if Ireland had not voted against. The UK government surrendered to the common Franco-German position. Simultaneously we have seen the government plant a story on the front page of the Sunday Times that the same Treaty is dead, just before inviting sensibly Eurosceptic Mr Murdoch to dinner at Number 10 with the US President. Clearly the government was unwilling to stand up to Mr Murdoch in defence of its view that the Constitutional treaty has to be railroaded through the UK Parliament, ignoring the wishes of the British people. The President announced in advance of his visit that he wished to stiffen the UK’s resolve not to pull out of Iraq to any prearranged timetable. The government went on radio and TV and dutifully said they had no pre-arranged timetable to leave, yet we have seen suggestions in the media that they do intend to get our troops out within the next year.

No wonder people hold our government in low esteem, and no wonder people do not believe much of what they say. Mr Miliband should have stood proud for the UK. He should have said to France and Germany:

“The Irish vote changes everything. The Treaty cannot now be ratified by all 27 states. If we held a referendum in the UK as we should it would be voted down here as well. Let us use the next summit to discuss ways of reducing the unpopularity of the Union with many of the people who live within it. By all means cut the numbers of senior officials and streamline its procedures, but with a view to it doing less and better, not with a view to it grabbing more power away from elected governments. We could cut officials, reduce regulation and do less without the need for a big new Treaty. The EU has to say to the people of Ireland that their views are respected, and mean it. It is quite unacceptable for the Union to be threatening or sidelining any member because they have the wrong views or are a small country.”

He should have said to Mr Bush:

“The UK Parliament and people are unhappy at the way our joint military interventions in Iraq and Afghanistan have worked out. We admire all that our troops have done, and are concerned by the continuing high casualty level