Yesterday was an Opposition day in the Commons, when the Conservative party was able to chose the topics of debate. We used the second half of the day to highlight the robbery at the petrol pumps, and to demand a reduction in fuel duty. The government responded by announcing it would not be going ahead with the 2p a litre increase scheduled for the autumn, though this was more likely to be response to the Glasgow by election than to our Parliamentary pressure.

During the course of the debate the Chief Secretary to the Treasury, Mrs Yvette Balls (nee Cooper) showed a marked reluctance to share any figures with us. The Government’s number cruncher in chief was apparently unable – or unwilling – to answer the following questions:

1. How much revenue will be lost by cancelling the forecast 2p tax rise this autumn?
2. What has been the increase in total revenue from oil and oil products since the budget over and above budget forecasts, resulting from higher oil prices?
3. By how much has the pump price of fuel risen since the Budget as a result of tax?

Mrs Balls is an intelligent woman. She would have expected us to ask these basic questions in a debate which majored on the issue of tax revenue from fuel duty, VAT on fuel and North Sea taxes. As the government’s chief number cruncher these should be a pretty elementary part of her brief. We must assume that when she announced the cancellation of the 2p tax rise she not only knew how much this would “cost” the Treasury, but would also know how much extra revenue they are gaining anyway. It is pathetic that she was unwilling to tell us these basic figures despite frequent probing, showing just how “political” these Ministers are. Don’t they realise that it merely makes them look shifty that they refuse to answer such basic questions or supply the rudimentary information Parliament needs for a proper debate on these topics? Far from protecting them from unhelpful comment or criticism, it intensifies the criticisms and the anger of the public. They have come to end of the Spin show, yet pretend it is still going down well with the taxpayers.

Our guesses of the answers did not get challenged in the debate. We ventured that the government had enjoyed a windfall of more than £500 million in the first six weeks of the new financial year from oil taxes, and suggested the revenue loss this year from taking away the extra 2p would be around £550 million. The government is clearly better off on oil tax account with the price rises and their impact on VAT and North Sea taxes, even after the 2p cancellation.

The Opposition was right to ask for a cut in Fuel Duty now. It would cut the inflation rate, show the government was getting the message of how people are suffering, and would help the lower paid especially. This government seems to take the Marie Antoinette approach to travellers. To all those who are finding it is now too dear to run a car thanks to higher VED and higher fuel duty, they say “Let them go by taxi”. It is their own erstwhile supporters they are hitting most by high petrol prices and ever higher VED. It is going to take another revolt or two by Labour backbenchers to get the message through to Mrs Balls.

It has taken years for this government to receive a blistering Report from the Ombudsman making it quite clear there was regulatory failure as well as business error at Equitable Life.

When I was the regulatory Minister for Insurance and much of the City in the days when that post was held in the DTI, I received reports on the failure of Barlow Clowes. As soon as I read them I saw how people had suffered, and did not hesitate to compensate once regulatory failure had been established.

I want this government to do the same in this case. Many MPs have been pressing this cause with the government on behalf of constituents. Now the Ombudsman is so strong and clear, what further excuse could there be for delay?

It also leads one to ask more about the nature and purpose of financial regulation. This government seems to see regulation as a good way of bashing private business. The government is very reluctant to conclude regulation has let people down when things like Equitable Life or Northern Rock happen, yet what is the point of it unless it can prevent such events? And if things do go wrong with regulators, as sometimes they will, why is there so much hesitation or denial, when people want an apology and compensation for the mistakes?

I went to a lunch meeting with the Engineering profession on the Lords terrace this week. They wanted to tell us about how to tackle climate change by cutting carbon output. It seemed a pity that on a very sunny day when the sunlight was streaming through the entire long wall of glass along the side of the Terrace marquee, all 96 light bulbs were burning away. I suggested they turned them off but to no avail.

It was the same yesterday at another government/industry meeting in Parliament where all the lights were on on a sunny day.

The private sector is cutting its fuel use because it has to cut its costs. When will Westminster and Whitehall learn?

Stock markets around the world remain in free fall. It’s not surprising to readers of this blog – there’s plenty to be pessimistic about.

There are two big changes underway. The long term change is the shift in economic power from west to east, from an Atlantic centred world to the economies of the Pacific Basin; from the EU and east coast USA to west coast USA, India and China. In the process 2,500 million poor people gradually come to the consumer party, creating huge extra demand for energy, food and raw materials of all kinds. This argues for long term investment in commodities and commodity producing economies, and in the fast growth economies of the East themselves, but only when the price is right.

The short term change is the collapse of some of the debt structures built up in the US and Europe in the heady days of easy money and rapid expansion between 2001 and 2006, as erratic Central banks shift uneasily from being too loose to be being too tight. Simultaneously the fast growth economies of Asia are catching the inflation bug. So they too are entering a phase of credit tightening and interest rate rises, which will slow them at the same time as the credit crunch slows or stops the western world. This should produce both lower growth and some respite to the vertical climb of commodity prices. It has already produced sharp falls in many Stock markets despite the good growth of many underlying economies.

There is only one major Central Bank clearly fighting recession rather than inflation – the Fed. The rudderless Bank of England lurches from mistake to mistake under the unsure Darling. It first created the inflation with interest rates that were too low, then it created the credit crunch in the UK by starving the money markets of liquidity, next it started to put interest rates down, then it panicked about inflation and decided it had to keep interest rates up. Its performance has been a bit like a drunk trying to walk in straight line along the money motorway, whilst trying to avoid the fast moving vehicles of inflation and recession. The European central bank allowed inflation to get out of hand by adopting too easy a policy. Ever since it found out its mistake it has stubbornly refused to change rates at all. Maybe it understands that Ireland and Iberia need very different rates from Germany, but there is nothing they can do about that.

We are in for more bad news over the summer, as the Asians tighten the screws to curb inflation, and as the West learns more of the damage from its own erratic monetary policies and the resulting credit crunch. It seems likely that the US will be the first major economy to experience any upturn in fortune, given the consistent policies to avoid slump. The tax cuts, liquidity injections, easier money policy and low interest rates all point in the same direction, and at some point will bring the economy round. The balance of payments is improving rapidly, consumers are saving and rebuilding their balance sheets, and the dollar is beginning to strengthen.

The UK remains in the weakest position of the major economies, along with Italy. The UK still has both an overborrowed government sector and overborrowed consumers, a weak currency and a fiscal position deteriorating all too rapidly. Several years of falling competitiveness, rising taxes and little investment in infrastructure has left it in a bad place, made worse by the erratic money and banking policies pursued by the regulators and the Central Bank. The RPI and the CPI soared again this month, and there is worse to come before the inflation subsides. There is plenty of deflation in the clothing and shoe shops, in the estate agents window and in the commercial property market, but plenty of inflation left at the petrol pump and in the food market. Redundancies in building, construction and finance are now coming all too rapidly, and will be followed by other sectors as the consumer squeeze runs its full course.

The falls in the Chinese and Indian Stock markets have already been large, but we are still in the early stages of the tightening in these countries and cannot be sure how far the authorities take it before they, like the US, turn their attention to reflation again.

(Regulatory notice- This blog is not offering investment advice)

Welcome to the real world! The government at last admits it cannot switch enough from road to rail because the railways are full, and accepts that congestion is both expensive and environmentally damaging.

As an emergency measure they are suggesting allowing people to use the hard shoulder of the motorways at busy times of day. It seems to help around the M42, so why not? It’s all you can do quickly after ten years of neglect of transport infrastructure expansion for both rail and road.

On Monday after my surgery it took me three hours to drive into London - even longer than walking and using the train - because the M4 east bound was closed at junction 5, the A 40 eastbound was closed at the Polish War Memorial, and the Cromwell Road was closed! I remember sitting on a Bill Committee to legislate so the highway authorities sought to keep the roads open and traffic flowing - clearly we were wasting our time.

Today I learn that the government is intending to stick to its plans to keep public sector wage increases below the current rate of inflation. This is a necessary if unpleasant task, given the massive over recrutiment into the public sector in the administrative, political, media related and management echelons. At least MPs got that one right, voting ourselves a well below inflation increase in pay.

Now Parliament has to sort out the expenses mess. I am glad David Cameron today is proposing no money to furnish a second home - the true end of the John Lewis list. Labour wants to move from John Lewis list to a National Audit Office judgement - will they need an MFI list or the equivalent? How different would that be from the current John Lewis items and prices?

Gordon Brown needs to put much more discipline into public sector costs. We are awash with too many MPs, MSPs, Assembly members, Regional assembly members, Councillors, spin doctors, private office staff, Ministers, senior officials, management consultants working for the public sector, qunago chiefs, CEOs and deputy CEOs in local government and the rest.

While he is about his pay squeeze, why doesn’t he at the same time introduce natural wastage to start getting the numebrs down. And how about just scrapping all that ghastly English regional government? I have just received another couple of picture brochures from the South east regional assembly which reminded me what a complete waste of money it is.

Swindon Councillors are right to look at how the £400,000 a year spent on speed cameras could be better used in order to make things safer. They could also ask whether they need to spend the whole £400,000.

Speed is a factor in well under 1 in 10 accidents, so a safety policy based on curbing speed is not going to stop most accidents. Bad junction design allied to poor driving causes many accidents. I trust the Swindon Conservatives will look at improving traffic flows and helping segregation at junctions to cut the risk of collisions.

The BBC this morning started to do the government’s bidding again by presenting the tax and spend position in the usual Labour government way. As we have been taught, the government’s spending totals are designed as a trap for the Conservatives. Indeed, that is probably their only purpose now, as they are works of fiction. If Conservatives say they will match the totals then we are told there is no scope for the tax cuts the public and the economy so clearly needs. If the front bench were to say it wanted to spend less than Labour, the government then chooses the most idiotic and inappropriate cuts in spending for the Opposition – ones which they would never adopt - and the BBC dutifully peddles these to the electorate.

The government wants us to believe that all the spending they are incurring is absolutely necessary. Indeed, listening to them you would think that practically all the money goes on the NHS and the schools. We rarely hear these days of the biggest block of spending, the massive benefits bills which Labour used to call the price of “economic failure” when it was in opposition. We are never told how much it costs to run the civil service and all the quangos, following a decade of huge increases in staff numbers to run even the lowliest government department. We will now be told that the current spending total is “eye wateringly” tight – it is after all a mere 2% over and above the rather lively inflation rate the government has generated. What would a housebuilder, an estate agent, a surveyor or a property business give for a guaranteed 2% real growth this year?

None of this guff from the government is true, and I trust most of the public has now seen through it. The only thing we can agree about is that there have been some very large increases in spending in the period 2001-2006, and the rate of increase in medium term plans is now lower. However, it is quite likely this year there will be large overruns, so we are not in practise keeping to the 2% growth targets. Northern Rock was an additional item which has still only partly gone through the central government books (Supplementary estimate £5.3 billion). The compensation package for the Income Tax increase needs to be added in (£2.7 billion so far) and anything from the 42 days and other packages that was not in the original figures. On honest accounting there must be an additional £10 billion or so this year to add on. I expect the governemnt to go on spending and borrowing like there’s no tomorrow, whatever the plans say.

The public is now far more sensible than their government. They know that all too much of the extra spending in the spendthrift years did not go to buy more teachers, nurses and doctors. It went on management consultants, spin doctors, administrators, pensions, pay awards, reorganisations and new quangos. It also went on keeping a large number of people out of work on benefit, whilst inviting in a lot of people from elsewhere to carry out the jobs existing residents were reluctant to do or did not have the skill to do. The public does not think in terms of medium term spending plans and guaranteed rates of growth in spending. They want better public services and lower taxes, and now know that the waste and unnecessary expenditure is so large that is possible.

The UK economy performs best when public spending grows more slowly than the economy as a whole. This method also gives the best long term rate of public spending growth, as it achieves better overall levels of growth. In the 1970s Labour tested to destruction the idea that the government could improve things by boosting public spending well above the growth rate generally. A trip to the IMF for a bail out, followed by a winter of discontent when the many public sector workers turned on the Trade Union government left us very weakened.

The first year and a half of Margaret Thatcher saw the spending growth continue, mainly owing to large public sector pay awards. The inherited inflation persisted, the private sector was squeezed, and the Conservatives plunged to third in the opinion polls, with many in the governing party wanting to change Leader. In 1981 the Prime Minister set a new course for public spending, keeping its growth below that of the economy as a whole. She ushered in a decade of good expansion with low inflation. Only the establishment’s stupid wish to join the Exchange rate Mechanism brought this to an end, when all three political parties united to get it comprehensively wrong. The ERM destroyed the growth path by forcing boom and bust money management on the authorities. When the pound was strong they were forced to print pounds to try to get its value down.When that caused an inflation they were forced to throttle the economy and to destroy pounds to try to get its value back up! The establishment was deaf to the few of us who pointed this out before we had to live through it.

After the ERM Conservative Chancellors again ushered in an era of low inflation and good growth by controlling public spending growth. Gordon Brown wisely took over these Conservative spending plans, and had a successful first three years on the back of them (apart from the tax grab on pension funds and his partial destruction of the Bank of England). Between them Lamont, Clarke and Brown Mark One built a strong position, with debt repayments and lower spending growth. It meant it took Brown five years to undo it all once he unleashed the forces of indiscriminate spending.

At the same time as he wasted too much public money, he started to reap the bitter harvest from his reforms of the Bank of England. They decided to follow boom/bust monetary growth as if we were still in the ERM. So we enjoyed a period of false prosperity based on too much credit, and are now experiencing a very nasty credit crunch.

The economic history of the last 30 years shows us that the main requirement from government to create the conditions for prosperity is to set a target for public spending growth lower than the forecast for economic growth overall, and to keep to it. I don’t mind how they sort out the politics of tax and spend to do so, but the need for such a change of policy is clear. Brown and Darling have said they are going to do that, but with falling growth and overspending, they are still a country mile away from achieving it.

The US authorities once again made the right decision to bail out Fannie and Freddie, their two crucial mortgage companies. They did need to offer more liquidity to prevent a further credit contraction and loss of confidence. In offering to put more money in by buying shares they also reassured investors that capital was available. If they have to do so they will reduce the proportion of the companies owned by existing shareholders, who will therefore be worse off when the markets and shares recover. Such an operation would make existing shareholders pay if the companies do need that extra equity, limiting the so called moral hazard of the bail out.

It is another contrast between the bodged, late and far more expensive bail out of Northern Rock conducted here, with the speedy and more effective reply of the US authorities. The purpose of this bail out is very simply to keep some new mortgage finance flowing to a hard pressed and illiquid housing market. In the UK the much dearer rescue of the Rock has led to a further substantial contraction in mortgage finance as the government runs down the mortgage portfolio of its own bank! The US housing market is already in very bad shape thanks to the general reduction in new credit, as US banks rein back in response to the squeeze following past excesses. The US authorities understand this and have come up with a package which makes more money available for people to buy homes.

The UK new housing market is also now shot to pieces by the squeeze, also following past excesses. So what do the UK authorities do? They spend far too much taxpayers money – and put too much at risk – by nationalising the most aggressive mortgage lender in the market, and then have to prevent it lending, achieving the opposite of what is needed. For this they are praised to the skies by Vince Cable and the Lib Dems. The power of their spin is such that usually sensible commentators think they “had to do it”. All other better options, put forward before the event, are ignored.

When the US economy recovers before the UK I do hope all the gulled will revisit this question of whether the Northern Rock model or the Fanny and Freddie/Bear Stearns model worked better when rescuing distressed institutions. I hope some will come to see that the Rock disaster combined all the worst features of regulatory mismanagement and government bungling - the inability to see the disaster coming, a failure to regulate excess credit beforehand, the wrong strategy before the run began when the authorities switched from too easy to too tough, the U turn on moral hazard and the offer of bail out, the dithering over a private sector solution, and then the final idiocy of nationalisation, business reduction and sackings.

The main result of the mismanagement of the UK mortgage market – where the handling of Northern Rock was the most important manifestation of a general incompetence – is the destruction of the new housebuilding industry. The run of lay offs, the cessation of work on many sites, and the plunging figures for new starts can be directly traced back to the way the authorities presided over boom to bust credit in the mortgage market. This was a problem made in Britain, not in the USA where they had their own version. The UK problems are more poignant for a government that was so out of touch it was urging the new homes industry to increase its build rate, unable to understand its own actions meant the build rate would halve or worse!

Some have blogged in to past pieces on my site urging some expansion of mortgage credit on both sides of the Atlantic to argue that the correction is what is needed, the losses serve the bankers and property people right, and a good recession in these areas will purge the excesses. My answer is simple – you are getting that anyway. The authorities have done quite enough on both sides of the Atlantic to so tighten credit that property prices are falling and will fall further. Mortgages are much scarcer than before, builders are losing their jobs – for the masochists among you who want more pain you will see plenty of it.

My advice to loosen conditions is based on wanting to limit the time of the downturn and to give people some hope of improvement in due course. For every “greedy” financier my critics may be cheering to see under pressure there will be several builders out of work. This sharp correction of prices and sharp reduction in the availability of new credit will not just hurt a few well paid people in the City that always have their critics. It is hurting many others, and will hurt many more, as the effects ripple out through estate agency, surveying, building, DIY, home furnishing and all the other trades dependent on a strong housing market.

Even the puritans thought there came a point where the punishment had purged the sin. Those who want the authorities to let more mortgage businesses go to wall are the advocates of deep recession. I want to start looking forward to recovery. There will be job losses and price falls enough for all save those who think all lending is an original sin that requires perpetual suffering.

The Church of England is making heavy weather of women bishops. Of course they had to approve women bishops. They made the crucial decision when they voted for women priests. It makes no sense to say that women can hold any pastoral position up to bishop, but to prevent them from being bishops.

Those who disagree with women bishops do so for two main reasons . They claim the Bible shows the apostolic succession was an all male affair, based on the fact that all twelve apostles were men. They go on to argue that it is reasonable that some male priests insist on not working for women bosses in view of this.

It is true all 12 apostles were men, at a time when most of the jobs outside the house were handled by men as part of the then social practise. To many earlier societies a more active role for women outside the home would have seemed strange. The world for women has changed dramatically in recent decades in a way which makes this all seem very dated. It is also true that in the Bible women were very involved in the creation of the new movement and in the formation of the early Church. Mary the mother of Jesus plays a central role, as do the women followers who are a feature of the gospels. Jesus never taught that women had to be left out of the great movement he initiated.

It is strange for Anglican clergymen to say they will not work for women bishops, when the Church voted for women priests, and when already many male clergy do work for female bosses in senior roles below the rank of bishop. In practise all current Anglican priests have accepted the presence of women in the priesthood – preventing them from getting the top jobs is a backward looking hangover from their defeat on the central issue.

In my view it would be quite wrong for the Church to carry on living in the nineteenth century as if the emancipation of women from the home had not taken place. The Anglican Church needs all the support and talent it can muster. Cutting itself off from half the human race in its search for suitable people for its ministry would be odd indeed.

Will this split the Church? It’s one of many issues which could lead to further rows and some departing. The Reformation is not yet over - there are still important differences between the Anglican settlement and the Roman one. A minority of the dissenters may prefer the authority of the “Bishop of Rome”. Catholics will I am sure will welcome them.

The English Democrats almost lost lost their deposit in a b y election with the two main federalist parties not fielding candidates.You would have thought if their campaign was popular they would have done better here in these unusual conditions than they did.The argument remains true, that trying to make Eurosceptic points by splitting the Eurosceptic vote in other situations is self defeating.
It is also interesting that in a by election where the outcome would not change the government and where two of the three main parties withdrew, the cause of an English Parliament was so unpopular.
It illustrates that people do not have an appetite for more politicians and more bureaucrats at their expense, when taxes are so high and when English votes for English issues, the Conservative position, can deal with the worst of injustices in the current lop sided devolution.
I suggest to the English Democrats that they learn from this bad rejection in a by election they could have done well in if their cause did resonate more, and decide not to run candidates against Conservatives likely to win in a General Election, especially in very marginal seats. Other wise they just help Labour more, the architects of unfair devolution and the betrayers of the UK through Nice, Amsterdam, Lisbon, and the cancelled referendum.
It is silly when we want so many of the same things there are so many scraps. The Eurosceptics will win when enough of us are united behind a strategy for getting powers back from Brussels, and having a different relationship with the EU that allows us to trade, be friends and have shared rules where it suits the UK and the other members.

The blog will be down for most of the day tomorrow (Saturday) the 12th July due to essential maintenance. Regular service should be back to normal by the beginning of the week.

Today’s comments will be moderated shortly.

What is it about the English Democrats that they revel in almost losing their deposit(amended text) in a by election where the two main federalist parties withdrew? Why on earth did they stand against a Eurosceptic Conservative, David Davis, in the by-election, only to be hammered again?

Don’t they see that it gives our joint enemies, the Eurofederalists, more ammunition when the English Democrats stand on a staunchly Eurosceptic ticket and get so little support? The BBC were predictably gleeful about telling us of their defeat, singled out from all the other losers in the by election.

Maybe they want to damage the Eurosceptic cause. They cannot seriously believe that David Davis is a fan of overweaning Brussels government, any more than of overweaning Whitehall government. He, like the Conservative Party, voted No to Nice, No to Amsterdam and No to Lisbon. Assuming they are intelligent people one has to conclude they like losing and harming the cause they claim to support. It’s just a good job the by election was not a close race, where diverting votes from a Euroscpetic Conservative could once again have given a seat to the Federalists.

I went to visit the University of Reading yesterday to see and hear their presentation on the development plans for new student facilities for the years ahead. It made me ask myself: what is a university for? How can we improve the student experience, to broaden it into a deeper educational experience?

In 1994 I asked these questions of the universities in Wales when meeting their Vice Chancellors. I concluded my speech by saying:

“I want the university to coruscate enlightenment, to put into the intellectual firmament a constellation of talents, ideas and educated people. I do not want the universities to be the supplicants, the tatterdemalions of the educational world, wearing themselves out by arguments over money and purpose. Universities are not just part of the process of modernising (the UK) and raising the standards of the workforce. They are not just cogs in a productive machine, required to turn a little faster and for more people. They should keep many flames alive to the spirit of enquiry, the tradition of tolerance and the pursuit of excellence.

” Let serendipity thrive. Let the universities turn their minds to the big issues of our generation. Let them rebuild their doors and widen their horizons. It would be good to welcome them back to a central place in our nation’s story”.

Today I still hold such a view. A university should, as Disraeli said, be a place of light, of liberty, of learning.

At Reading I was confronted by the mundane but central issue of how do and how should students live? Should they be offered campus residences rather than having to go out to rented accommodation in the town? If they stay on campus, could there be lively debate and cultural enterprise in the evenings, so the university stays alive long after the classes have ended and the lecturers have returned to their suburban villas? Does a modern student really want to be spending time slaving in a kitchen over a hot microwave with a tin opener? Is the limit of the student horizon a few pints of beer or an evening watching soaps on the TV?

I strongly support the Reading wish to have more students living on campus. The University is also going to provide more restaurants, cafes and “grazing places” so students can take advantage of prepared food and meals, and enjoy each other’s company. Part of the “university experience” should be the exposure to the different views and approaches of fellow students - something which an approximation to dining in hall with random seating based on the time you turn up achieves naturally.

A big part of student life is what young people do when they are not studying, when away from home for the first time in their lives. In good universities there is a student hunger to try out the worlds of drama, music, debate, learning, sport and so many others through the work of clubs, societies and evening events. In a dull university students return to digs or flats away from the actron after compulsory classes have ended in the afternoon, to be locked into conventional domesticity alone or with contact with just a few student friends.

I welcome Reading’s wish to enrich and enlarge the student experience by providing the architectural backdrop to a particpating campus that can extend and stretch students in the evenings, as well as during the day.

My specific local comments in response to the consultation are twofold. Firstly, there must be a rule that there should be enough car parking places on campus for all students and faculty allowed to bring cars, as the local roads cannot take displaced university vehicles for long term parking.

Secondly, the “work in progress” of the architects has left the new outlines of the accomodation blocks with too great a mass and the wrong surface treatments. The proposals are halfway between modern building and traditional facades to match the local vernacular. The half way house will suit few. As the campus buildings look inwards and are well screened from the local housing by tree belts. The architect could use modern finishes. If the aim is to mirror the brick and tile local surroundings, then it has to look as if they are brick and tile structures. Do they need to be concrete pile driven, with all the extra weight that entails?

I was pleased to hear the new buildings will be more eco friendly, capturing energy from the sun. It is a good opportunity to be innovative in water handling, waste management, insulation and power generation.

The university’s plans are to allow every first year student a residential place on campus. That seems to me to be a good first step. The campus would include a number of different cafes and restaurants, so the student could be spared the visit to the communal kitchen close to his or her room.

I wish the university well, and was delighted to hear it can raise the necessary mortgage even in current conditions.

The Housing Minister struggled on the radio this morning. Asked if it had been wrong to insist on high density development of flats in City centres, now so many are empty or experiencing large price falls, she ducked. Asked if she wanted house prices to fall further to make them more affordable, she said she wanted stability but had no idea on how to achieve it. Asked if she would revise the 3 million new homes target and the 240,000 annual build rate in the light of a halving in housing activity, she implied she would not. There is an air of unreality about a government setting a target double the likely rate and repeating they would like to live in a world where such a large number was produced!

She remained wedded to the first foolish version of the Barker’s analysis, that house prices are the result of supply and demand for accommodation based on a crude analysis of the number of new households formed versus the number of new houses built. On this basis she should now be saying we are producing far too many homes, which is why the price is falling. She should be welcoming the massive cutbacks in the housebuilding industry to get it into balance. It wasn’t true on the way up that prices were rising primarily because too few homes were being built, and it’s not true on the way down that prices are falling mainly because too many houses are being built.

The government’s failure to understand the role of mortgage finance and the importance of the market in second hand homes in the overall housing market has led to a list of idiotic policies which are trashing the housing market in the UK. They need to revisit their analysis and understand that when credit dries up property values fall. People are unable to form as many new households as they would like, children stay living at home for longer. Relatives find temporary accommodation with relatives. More people live in rented accommodation awaiting better financial times. The policy mistakes include:

1. Ordering high density flats to be built when these are not popular with many buyers, and are the first type of property for mortgage companies to drop when times get tougher.
2. Believing that a modest increase in the supply of homes will counteract a raging credit bubble, brought about by following a lax monetary policy and through misdirected banking regulation.
3. Allowing a run to develop on the most aggressive mortgage lender, and then nationalising it in a way which prevents it making new advances.
4. Continuing during the building slump to demand more high density developments.
5. Presiding over a Bank of England policy which thinks it needs to fight an inflation which is historic and will subside, when they should be fighting the slowdown and recession now hitting lead sectors.
6. Failing to keep money markets liquid enough to allow a sensible supply of mortgage credit.
7. Persevering with ludicrous targets for the next couple of years instead of admitting there will be far fewer homes produced.
8. Continuing to press more planning approvals through on appeal, further depressing the price of building land at a time when building companies are in difficult negotiations with bank managers and shareholders over the state of their balance sheets and the extent of the damage to value of the land they bought at higher prices in different times.

In sum, Ms Flint showed an ignorance of how the housing market works, reiterating a failed interpretation of how house prices are formed. She failed to offer any meaningful reassurance to builders, had nothing to say to the thousands now being laid off in the building industry, and implied that persevering with targets miles above reality was the most comfortable position she could think of adopting.

Today the Monetary Policy Committee of the Bank of England meets. It is widely predicted they will do nothing – other than draw their salaries and have an interesting discussion. Aren’t they aware that the building industry is in meltdown? Do they realise housebuilders are having to discuss with their banks how to finance and refinance their land banks in the new circumstances they find themselves against a very gloomy background for cashflow and profit. How much more damage does the Bank want to do to the economy before it offers some relief in the form of lower rates? And how much longer before the monetary authorities led by the Chancellor put enough money into markets to provide some hope of a more sensible level of business, before major capacity is lost from the building industry and many more are on the dole?

Yesterday the Chairman of the BBC Trust and the Director General came to the Commons to talk about their service. I went along to ask them why BBC political journalism confines itself to the agenda of the spin doctors, and to repeating the half truths and misleading comments encapsulated in the soundbites.

The BBC took this as a request for a few more academic type programmes to go wider than the news. It was instead a complaint that the BBC is too influenced by spin, to the exclusion of the audience understanding what is really going on.

Let’s take three examples. Readers of this site will know I have been a long standing critic of the government soundbite “We made the Bank of England independent and that guarantees economic stability”. The first half of this was never true, as any well informed Whitehall watcher should know. They did not make the Bank independent – they took away crucial responsibilities from it and interfered at crucial moments with the MPC. The second part is now unravelling – can you claim it is stable to have a run on a bank, a halving of mortgage activity, a halving of house sales and a collapse in property and housebuilding?

The second is the current soundbite “We must not talk ourselves into recession”. The sharp slowdown we are experiencing is not the result of idle talk, but the result of a shortage of money. It is the direct consequence of a boom-bust credit and money policy pursued by the authorities, who created easy credit in the period 2004-6 and tight credit 2007-8 through their handling of banking regulation, money markets and interest rates. Ministers will not be able to talk their way out of this one. They need to take action in markets to sort it out.

The third is the soundbite “The UK is well placed to ride out this international storm”. The BBC dutifully puts into bulletins that the Credit Crunch was made in the USA, and this is an international problem. They should instead ask some of the following questions:

1. Wasn’t Northern Rock a British collapse, based on the UK mortgage market?
2. Didn’t nationalisation of the Rock remove the most aggressive large mortgage lender from the market, intensifying the mortgage squeeze?
3. Isn’t the boom-bust in UK property prices and housebuilding a UK phenomenon brought about by British monetary policy?
4. Isn’t the UK government in a bad position, having borrowed and spent too much in the good years and now unable to reflate the economy with tax cuts?
5. Didn’t the UK government use off balance sheet vehicles and creative credit devices itself on a large scale, fuelling the credit boom of recent years?
6. Hasn’t UK competitiveness declined significantly in recent years, making UK adjustment more painful?
7. Why did the UK fail to add more to non fossil fuel electricity capacity during the good times, to ease shortages now?
8. Why does the UK impose some of the highest taxes on oil products, and increase them during a period of sharp upward movements in oil prices, exacerbating the squeeze?
9. Why did the government increase North Sea oil taxes, putting companies off from more exploration and enhanced recovery?

If they asked some of these, they might see that repeating uncritically the notion that this is entirely a US or international problem is just not the case. The UK dimension to this crisis reveals serious flaws in the conduct of policy in recent years.

The price of oil fell sharply yesterday. The mood has changed in energy markets in recent days – at least for the short term. It is a reminder to all those who think the price of oil and related commodities can only go one way that there could be a price retreat in a market where everyone who needs oil has probably bought lots forward just to be on the safe side. Readers of this blog will know I have felt for some time that there is speculative as well as business money behind the oil rise, and this could unwind at any time.

I do not deny the long term case for higher oil and other commodity prices. Of course the arrival of 2,500 million Indians and Chinese at the western party will make a long term difference to the prices of commodities relative to other things – they will get dearer as these large countries get richer. Such changes rarely occur in a steady straight line, and we should expect interruptions to the upwards march when there is too much speculation in the market, or when there are pauses to demand growth owing to the trade cycle. We are likely to experience some reduction in demand from the west over the next year, as the economic slowdown has an impact. This would be reinforced by mild weather, and offset to some extent if there is a really cold winter.

The volatility of the oil price should act as a warning to the incompetent UK authorities that they should concentrate on fighting downturn more than on fighting inflation. No-one looking at the UK economy today can plausibly think its main problem is accelerating inflation. Its main problem is clearly collapsing demand and a weak banking sector which will keep growth well below trend for the foreseeable future. In such circumstances upwards movements in commodity prices are unlikely to lead to second round inflation in the UK – the higher prices do show up in the price indices, but just mean people have to buy less of something else, as consumers have no way of passing the price increases on. They are not going to get an inflationary wage increase.

If commodity prices do decline and stay lower the rises in the RPI will subside quite quickly. The downturn will not suddenly come to an end. Maybe if and when this happens even the ponderous and foolish UK authorities will see they have set interest rates too high for current conditions, just as surely as they set them too low for conditions a couple of years ago thanks in part to the UK government’s meddling with the targets, and in part thanks to the government’s passion shared with some in the banking sector for off balance sheet finance. Maybe the Treasury will speed up its review into the functioning of the money markets, and conclude what is obvious to most sensible commentators that the money markets are still short of cash and helping to throttle the economy. What do we pay all those salaries of Ministers, senior Treasury officials and Bank of England officials for, if they cannot see these blindingly obvious truths and need outside experts to come in a write reports as if next year would do for fixing this problem?

All the PM is able to do is to tell us the UK is well placed to ride out the international storm. Both parts of this idiot soundbite are wrong. This is not just an international problem. A large part of the UK housing and mortgage collapse was made in the UK. Northern Rock was not big in US sub prime, but big in UK mortgages. It was the Bank of England and Treasury that mishandled money markets last summer and led to the run on the Rock. The UK is not well placed. Thanks to its profligate government and hapless monetary authorities it is one of the worst placed economies to handle the downturn. If you want to cure a problem you first need some honest analysis of what is wrong. Until the UK government admits its past mistakes I do not hold out a lot of hope of it getting the next moves right.

Business Post
Rt Hon John Redwood MP

There is a nasty squeeze underway on people’s incomes. Most wages and salaries are going up by less than inflation. The prices of food and energy have soared, putting the most intense squeeze on those on the lowest incomes, who spend more of their money on the basics.
The government says it feels our pain. It is doing nothing to alleviate it. Indeed, in many respects it is making it worse. Every time the price of oil goes up, the government increases its tax take on petrol and diesel because the VAT it charges automatically goes up with the price. I am glad the Opposition has suggested a sliding scale of tax rates on petrol, which would go down when the price goes up to help stabilise pump prices, and go up when the price goes down to maintain the revenue. We need a cut now in petrol and diesel tax to reduce the rip off at the pumps.
Electricity to heat our water, and light and heat our homes is also soaring in price. The last ten years have seen no major decisions taken to licence new power stations, so we are facing shortages as the older nuclear and coal stations are retired. We need an urgent programme of new works, to produce more and cheaper power, with less waste and fewer harmful emissions than the present.
The Prime Minister’s line at the recent G8 summit was to blame someone else and pretend he could nothing. He told us the slow down or recession was made overseas, refusing to see the policy errors made here at home that have given us first an inflation and now a slow down. He told us we should waste less food to solve the food price problem, and blamed OPEC for producing too little oil. What we need is a government which not only says it shares our pain, but does something to ease it.
If only Gordon Brown had said at the Summit:
“Today we face the twin problems of energy and food shortage, driving the world prices of both higher. This is damaging the prospects of recovery for the rich western economies trying to overcome the Credit Crunch. It is far worse for the poorer countries, where more will be forced into undernourishment and greater poverty by the surge in prices of these basics. We had planned at this summit to concentrate on the response to global warming and African poverty. We need to concentrate on African poverty, and to see that any attempt to ease this requires us to grapple more successfully with the world shortages of energy and food than we have managed over the last few years. We cannot solve the African problem unless we can resume faster growth in the West and supply them with better market opportunities for their goods. We cannot resume faster growth in the West unless we can get on top of scarcity and inflation in the prices of the basics. We cannot help Africa by expanding ourselves if we drive the relative prices of the basics so high they cut Africa’s effective income further whilst raising our own overall.
The cases of food and energy are different. The West needs to change its approach to food production and trading dramatically to be fair to the rest of the world. I will be pressing to dismantle the Common Agricultural Policy, which prevents poorer countries selling us as much as they would like at the same time as restricting our domestic output by encouraging set aside and non productive use of land. At current world market prices – and at lower ones than now – we should abandon managed prices and assume world prices, allowing free trade in food. The US should also dismantle its protectionism. The European system needs to be changed, to allow idle land to be brought under the plough where farmers have been subsidised to do nothing with it.
To ease energy shortages I will be bringing forward the permits and licences necessary for the UK to construct a new set of power stations that do not need fossil fuel, and I will be encouraging the development of clean coal technology and carbon storage as the UK has plenty of coal. I am also today reversing the tax increases I have imposed on North Sea oil in a way designed to encourage more exploration, development and recovery from existing fields. I am sorry I have wasted the last ten years in doing none of these things, and now wish us to catch up on the missing years of underinvestment in new energy”

The British Chambers of Commerce latest survey makes bleak reading. Small businesses, which were very chirpy about the outlook only a month ago, are suddenly full of fear, reporting falling orders. The BCC itself has become the latest to signal recession.

There were Wall Street analysts telling us the US was in recession at the beginning of the year. Instead, so far we have just had a sharp slowdown. There have been doomsters calling recession for the UK this year, but so far we have had two quarters of painfully slow growth. I am holding to my forecast that we might get by without a full recession in the US, where they have taken action with low interest rates and tax rebates to try to turn the economy round. The UK is now wallowing from a monetary authority that is getting it wrong both ways - too loose on the way up, and now too tight on the way down, so it is a closer call here.

Within the overall pattern of no growth or slow growth, certain sectors will experience a very painful recession. In both economies property, building and construction are in freefall, and banking is going through a nasty squeeze. With a low dollar and falling pound both economies should see better export performance, as their manufacturers are priced back into world markets during an inflationary period.

The situation in the UK is both ameliorated short term by excessive public spending, and made worse in the medium term (two years) by the over borrowing of the public sector to pay the ballooning bills. Yesterday in the Commons it was Supplementary estimates day, when the government seeks Parliament’s approval for some of the overruns so far this year. We were only allowed to debate concessionary fares and the science budget. The more interesting estimate before us was the stonking £5,300 million extra cash estimate for Northern Rock resulting from the transfer of a Bank of England loan that previously had not appeared in the figures. No Treasury Minister was on hand to give us an update on how big the trading losses and redundancy costs are likely to be, and how long it will take to get the loans back that the Treasury and Bank have extended. You don’t get much explanation for £5.3 billion from this government! It is typical of a regime that spends other people’s money as if there were no tomorrow, and now thinks borrowing any amount it likes is fair game. They may discover the day of reckoning for their excess comes before the General Election.

In today’s Independent there are rumours of £7.5 billion of overrun on the public accounts. The way this government is spending, I think the final total above budget this financial year will be higher than that. The short term impact on activity will be far less than the medium term adverse impact from the higher interest rates and lost confidence as the government’s financial plans unravel. If only the PM would bring back Prudence, we would have some better options.

In the meantime there is action the government should take to fight recession. It should press ahead with the permits, licences and competitions necessary to organise large scale programmes to increase transport, energy and water capacity. It is an ideal time to do it, when the construction industry is facing large cuts in workload and workforce. That is something we could all agree about, and something which would help UK competitiveness in the next upswing.

This government’s answer to every problem is to make it dearer and blame someone else. Only the rich can afford to live under Labour.

Today we have the ultimate irony, that they now think the way to deal with food price inflation is to make it dearer, by appealing to the supermarkets to remove the two for three and the one for two offers! You could not write parody better than they write it themselves. It’s the Bogof answer to the struggles of the family budget.

Just look at the list of things that they want to sort out by making them dearer and by interfering with the supermarkets, dedicated to making things cheaper:

1. Some people binge drinking – government answer: cancel cheap drink for everyone at the supermarket, remove promotional offers, and abandon happy hours in the pubs and clubs. Only the rich can then afford lots of drink.
2. Too few roads for too many cars – government answer: congestion charges, so only the rich can drive in central London during the week. This answer will be rolled out elsewhere given half a chance.
3. Too much CO2 from vehicles – government answer: ever higher fuel duties, Vehicle Excise Duty and VAT – so only the rich can drive a car regularly
4. Rising food prices – government answer: get rid of the supermarket cheap offers to reduce consumption! Only the rich can eat well.
5. Too much packaging – government answer: get the supermarkets to charge for bags

Whilst I agree with the general point that governments cannot alone solve all the problems, and what each one of us does is in aggregate important, I do get fed up with a government which never wants to tackle its own contribution to problems, and which sees dearer prices and higher taxes as the way ahead in every case. Part of the reason we are adopting a more inflationary psychology in this country today is because the government is generating so much inflation of its own.

What I would like Gordon Brown to say and do at the Summit goes something like this:

“Today we face the twin problems of energy and food shortage, driving the world prices of both higher. This is damaging the prospects of recovery for the rich western economies trying to overcome the Credit Crunch. It is far worse for the poorer countries, where more will be forced into undernourishment and greater poverty by the surge in prices of these basics. We had planned at this summit to concentrate on the response to global warming and African poverty. We need today to concentrate on African poverty, and to see that any attempt to ease this requires us to grapple more successfully with the world shortages of energy and food than we have managed over the last few years. We cannot solve the African problem unless we can resume faster growth in the West and supply them with better market opportunities for their goods. We cannot resume faster growth in the West unless we can get on top of scarcity and inflation in the prices of the basics. We cannot help Africa by expanding ourselves if we drive the relative prices of the basics so high they cut Africa’s effective income further whilst raising our own overall.

The cases of food and energy are different. The West needs to change its approach to food production and trading dramatically to be fair to the rest of the world. I will be pressing to dismantle the Common Agricultural Policy, which prevents poorer countries selling us as much as they would like at the same time as restricting our domestic output by encouraging set aside and non productive use of land. At current world market prices – and at lower ones than now – we should abandon managed prices and assume world prices within the EU, allow the free movement of overseas produce into our market (subject to health and safety checks) and remove incentives to keep land idle. The USA too needs to tackle its agricultural protection. I will also encourage entrepreneurs and financiers in the UK to look at possible commercial and investment ventures in lower income countries in the agricultural sector.

The West has chosen to levy very high taxes on certain forms of energy, especially penalising its use for road transport whilst favouring it for other kinds of transport and some forms of space heating. When I pressed the Arabs to produce more oil they not unreasonably said I should also look at the UK government’s contribution to high fuel prices. I now do so, and accept that levying more than 60% of the retail price of petrol as tax is too high in current circumstances. I will cut the duty and VAT so I am only collecting this year the budgeted amount. I trust Middle Eastern producers and governments will as a result look favourably on further short term increases in production.

In the medium term many governments of oil producing areas need to encourage more production. I appreciate I have taxed the UK North Sea too highly at the margin, putting off the new exploration and investment we need. I am announcing today cuts in North Sea taxation geared to encourage money into exploration and into increasing production from enhanced recovery in existing fields. I urge governments in other oil provinces from the USA to Russia via the Middle East to do something similar.

Finally, I am conscious that we need to do more to find alternatives to oil based energy for the longer term. I will be going ahead with a much larger programme of permits for renewable and nuclear power in the UK, and will be exploring with industry how we could speed up carbon capture, oil from coal and clean coal technology. The UK has large coal deposits, and we need to find a way of bringing them back into use, meeting modern expectations of cleanliness and working conditions.”

David Hodgson writes that social breakdown and inequality are the result of “neo liberal social and economic policies”. They are the result of re-creating our” social and economics institutions in the image of America, having turned our backs on Europe.”

Arguing that Breakdown Britain, or the poverty and drug-taking in some US cities, is the result of economic liberalism is as likely as arguing these phenomena are the result of living in a Christian culture in the UK and the US, a proposition I know David would reject. It is true that there is some poverty and unemployment in the USA, but less of the latter than in the EU. Relative US poverty is in relation to a much higher standard of living in the USA than in Europe. Both the US and the UK are Christian countries, so how can we be sure that the features of society we do not like result from the alleged economic policies rather than from a Christian framework marked by tolerance of other ways of life? I do not see causal connection in either case, but could make a better argument for the latter than for the former. You could argue that the lack of an agreed moral framework, and the lack of moral authority by the Christian Churches over many people in the society are, in part, the reason for different social mores and the presence of more anti-social behaviour than in say, Islamic societies where the moral grip of religion is greater. We value freedom more, and the Churches give a hesitant message if any on how we should live.

The UK, far from turning its back on Europe in the last couple of hundred years, has remained engaged so much that it has fought great wars to try to keep Europe free, and in recent decades has accepted practically every law code and power shift recommended by the EU. Over the last decade the government has taken public spending and borrowing up to EU levels, and has equated NHS spending to health spending levels on the continent. At the same time, France, deeply embedded in European politics and values has seen her suburbs disfigured by high unemployment, racial tensions, poverty and drug taking on a worrying scale. How on earth can you believe that if we were more “European” we would have fewer social problems?

There is a great misunderstanding by many on the left of the nature of free enterprise capitalism. It is not wholly individualistic, and it does not rely on competition to the exclusion of co-operation and community. I believe in free enterprise as part of my wider belief in a free society. I am against big government, but that does not make me a critic or opponent of collective actions, community values, or team work. I prefer team games to individual effort sports, where the individual has to co-operate with others and work for the benefit of all team members. I like enterprise capitalism, because like minded and like motivated people discover they are stronger working together than apart, and are able to serve their fellow human beings better by co-operating through companies.

I dislike big government, because it is so often clumsy and insensitive, damaging civil liberties in the name of security, and damaging free enterprise in the name of equality. It makes us collectively poorer. Taken to the extremes of communism it makes the society so much poorer that the poor are poorer as well as the rich are poorer than people in freer societies. Big governments under communism always favoured more spending on weapons than on improving the lifestyles of their publics.

Free enterprise societies have higher average incomes than other states organised along different lines. They enjoy more personal freedom than socialist states where government may command where you work, determine your income, decide your housing and control your thoughts. The freer the state the better the economy – the European model of limited free enterprise has been consistently outperformed by the freer USA, which has kept its unemployment lower and its growth rate higher than the EU.

A free enterprise society gets the best out of the individual and the family by allowing them to co-operate and work with others as they choose, by allowing thousands of flowers to bloom in the meadow of our plenty. It honours charities, welcomes Churches, encourages diversity in tackling social problems as well as in producing more and better goods. The main developments that have made life so much easier – the phone and mobile phone, the TV, the washing machine and the car have all been developed in free enterprise societies. Free enterprise works because it creates that natural balance between competition and collaboration, between team effort and individual initiative. Other societies are not so good at that, so they either have to copy the free enterprise ones and allow in their companies to do it for them, or accept lower living standards and greater poverty.

I learn today that my colleague Philip Hammond has obtained some figures from the government showing just what huge sums have been paid out in performance pay, including to the accident prone Inland Revenue and others who have lost data.

I had tabled separately a series of questions to find out if these performance awards are easily come by, and if there is any attempt to manage performance well. Looking at the results - the lost data, the falling or slow moving productivity, the error rates, the accounts that have to be qualified and the general delay throughout the public sector in answering letters and queries, management under this government is very lax.

I have asked how many people have lost their jobs for incompetence and worse; how many staff have been disciplined, and how many staff have been awarded no bonus or low bonuses under bonus schemes. If I get an answer - and full answers are rare to Parliamentary questions under this regime, I am expecting it to reveal that bonuses are not used as part of a tight management system, and are too easily granted and payments awarded at the end of the year.

The rows over MPs pay demonstrate the understandable anger of people in private sector jobs where bonuses vanish when performance declines, even if that happens through no fault of the employees and the company thanks to market circumstances, when they see the public sector casualness in its approach to reward and remuneration.

We need to revisit the whole question of public sector reward and its poor linkage to productivity and performance. Bonuses are used effectively in many parts of the private sector to drive ever better personal and company performance. There is no evidence they are well used or properly disciplined in the public sector.

If I get no answers to my questions it will be typical of the malfunctioning government. If I get honest answers I expect it will show one sided bonus schemes which do not deliver as much as they should by way of better performance.

Social breakdown and economic breakdown- what to do about Breakdown Britain

I was invited to a meeting to discuss anti social behaviour in my constituency yesterday, sharing a platform with a local GP, an Inspector of Police and a charity worker specialising in tackling the problems of disaffected youth. I said something along the following lines:

“ Most of you in this hall today are used to getting up at a reasonable hour in the morning, washing and dressing, shaving or putting on the make up, and going out to make your contribution to our community life. Some go to work, as teachers or police, some to sell us goods in the shops or to make us things in the factories. Some retired people go out to lead local community clubs and activities, to run our charities and voluntary organisations. You have a sense of purpose and wish to live within the law.

“I was asked by David Cameron to produce an analysis of how we could make things better for all who wish to make their own way in the world, and want to contribute to our economy or voluntary activities. That work is now being adapted to manage the crisis in our economy that the Credit Crunch and its aftermath represents.

“My colleague, Iain Duncan Smith was asked to produce a report into Breakdown Britain. His task was the more difficult one of recommending how we tackle the problems of that other Britain. It is peopled by those who have no reason to get up in the morning and smarten themselves up, by people who are depressed, angry, lonely or out of sorts with the world around them. That other Britain throngs with drug peddlers and drug users, with the unemployed and the mentally ill, with those who failed at school and fear they will fail at most other things. It is full of people who cannot accept the rules of how the rest of us live, who see them as at best an irrelevance and at worst a tyranny they must break. Our prisons are full of the sad and the mad as well as the bad.

“Iain not only harnessed the talents and ideas of the many to write his analysis and proscription. He also plunged himself into the world of social entrepreneurship to gain first hand experience of ways of stretching out a helping hand to those down on their luck and to those who think the best thing in life is to look for trouble in gangs or idle time away on street corners. If there is one overriding conclusion from Iain’s patient work, it is that there is no top down answer government can impose or buy. He concluded that in the broken communities of Britain many of the dispossessed young need adults who will take time to cross the street to help, inspire or comfort before it is too late and they need the penitentiary. He recommended relying more on a renaissance of social entrepreneurship, letting a thousand flowers bloom in the unpromising concrete fields of our inner cities.

“Here in Wokingham we are blessed with fewer of these problems than you would encounter thirty five miles down the road in parts of inner London. But no community is free from drug abuse, drop-outs, mental illness, violent crime and casual damage to property. Here we have seen violent and casual knife crime, and syringes in children’s play areas. My message today is that all of us adults have a part to play – some small, some larger – in putting more of this right. Families can inspire and discipline, motivate and reprove. Where they can they should be encouraged to do so. Where parents are too busy to offer the love and time it takes, or where the families have been ruptured and the adults are themselves prisoners of emotional poverty, other adults from the local community need to be around to help. It is not financial poverty that does most damage. Some poor families make up in love and concern what they lack in cash, and some rich families may shower goods on their children for lack of time to do what matters more, to take an interest.Some will help by running voluntary organisations, organising sports, and by setting up social enterprise companies and not for profit bodies. Others will make their contribution through their excellence as school teachers, vicars, policemen and women and care workers. There has been tension and difficulty in talking between the generations from time immemorial. That should not stop us seeking to improve the dialogue of the generations. We, the generation in power, need to tell those who follow us what we are trying to do and how we are seeking to do it. The generation that follows will judge us, write our epitaphs and decide what to keep and what to ditch. The coming generation needs to tell us what they want from their future and how they see what we are striving to do whilst there is still time to modify or complete it.

“If there were a few silver bullets that government could fire to solve the problem this government or its predecessor would have done so. There is no party dispute over the need to mend our fractured society, and what disputes there are over means amount to very little. The truth is political parties have come to recognise it is not primarily a problem for new legislation or better benefit rules. It is a problem for all of us, to offer some leadership and to offer some inspiration to young people before it is too late and they have settled into a life of crime and futility.”

Yesterday at a Prize Giving at a local Comprehensive School I asked the children, students and parents if they thought the prize winners had mainly won prizes because of their genes, and who their parents were, or because of the effort and the enthusiasm they had put into their studies. By a wide margin the audience told me the prize winners had done so through their own hard work. It had been a long hot evening of speeches, with many prizes. I kept my remarks short, conscious that people had homes they wanted to return to, seeing the audience had reached the point where the chairs seemed hard and the air too warm.

I said something along the following lines:

“You too can live your dreams. In this age of watching celebrity on TV, when the best performers in the world of sport, drama and song can be in our living rooms and bedrooms at the touch of a button, it is all too easy to think the successful are born with different genes. People think Johnny Wilkinson was such a good kicker of the rugby ball because he was born with that skill, or they believe Ronaldo can show poetry with a soccer ball because his parents so endowed him. They ignore the hours of practise both put in as youngsters before fame beckoned, when their friends were spending more time watching TV or engaging in a more active social life.

Somewhere in a hall like this is sitting a 15 or 16 year old who will lift a gold medal at the London Olympics. It is unlikely to be someone here tonight, because the best in the world today are so good, and make such a sacrifice. But it could be someone here tonight, if one of you really really wanted to be the best in the world at something which requires youthful muscles and hunger to be the fastest.

There may be many parents here tonight who have long given up on their dream. They may not be able to see their way past the mortgage payments and the school run. My message to you is the same. In a few years you will have no more school run. Eventually the mortgage will be repaid. Sometimes it pays to be brave, to say I am not going to just dream my dream, or let my dream fade into the cynicism of middle age – I am going to seize the moment and advance my dream. You might surprise yourself at what you can do, if you really really want to . Tomorrow you could make that first step to what you have always wanted to do - so why delay, why not start today?

If you do start to live your dream you will find in some ways it is so much better than the dream itself. Yes, there will be the rebuffs and the rejections, the days, weeks or months when it does not work. There will be times when you are not good enough, and other times when you may be good enough but others do not recognise it. There will be times when you are living your dream when it becomes a nightmare and you will wonder why you ever dreamt it. You will need to be your own best critic, constantly striving to do better and to learn more each day. If you want to be good, strive to be the best.

I always dreamt of one day representing people in Parliament. It took me 14 years to get there from the time I first became a Councillor, with many rebuffs on the way. Each time I wondered if it would be worth it. It was. Every day I walk into the magnificent Victorian building at Westminster and see our history in the murals, paintings and statues, I know it was worth it. Every time I make a speech, I am humbled by the thought of some of the great speeches that changed the nation, and inspired by the thought I too can make my contribution to our democratic traditions. Even though I am a well known critic of how Parliament is run and handled by the present government, I never doubt its importance to our liberties, and the need for those who believe to make it better. In a way the defects of the present mount a greater challenge to my generation to do something to sort it, so we can pass it on with greater lustre.

And when I manage to fit in a game of cricket and play well below the standard I would like to, I remember the great saying – my luck at sport always improves, the more I practise. You will find it difficult to live more than one dream!”

Oil prices rose and house prices fell again yesterday. It is the government’s nightmare scenario. They have left the UK short of energy by failure to make early enough decisions on replacement power stations using non imported fuel, and through their wish to tax the North Sea oil province too heavily, discouraging more production. They well know how important house prices are to consumer confidence and jobs in the UK economy, let alone to voter attitudes.

Both subjects were on my agenda in Parliament yesterday. At lunch time HBOS came in to tell any MPs interested what they thought was likely to happen in the UK housing market. Last time they had dropped by I had found them wildly optimistic, anticipating little change in house prices. This time they were gloomier, forecasting a 9% fall in the average price of a home in 2008. I still think that is looking on the bright side. HBOS argued that the supply of houses would remain tight, thanks to a collapse in housebuilding, against a continuing lively pace of immigration and divorce generating more demand for households. I reminded them that fewer migrants will come if the economy gets grimmer, whilst divorce and migration only translates into demand to buy homes if the mortgages are available so people can afford them.

Anecdotage tells me that some sellers of houses are now beginning to cut their prices by rather more in a desperate attempt to find a buyer. For several months the market has held its values better than might have been expected, because there have been precious few transactions. Sellers have held out for the original price, and buyers have simply stayed away. Gradually some sellers will decide they have to take whatever price is available, and a few more buyers will be tempted by significant price cuts. One friend of mine has cut the price by more than 20% and still has no takers. Another cut by almost 15% and found a buyer. Meanwhile mortgage offers have more than halved. Banks are understandably cautious, lending a smaller proportion of the price, expecting a more cautious valuation and seeking a higher margin through a higher interest rate. That’s what a Credit Crunch is all about, and that’s what the government and Bank of England said they wanted when they warned banks to be more careful last summer. Sometimes governments should be careful about what they ask for, in case their wish comes true. This blog said at the time the authorities would reap a bitter harvest from their approach to money markets last autumn. It is not going to make the banks more popular, but it will strengthen their solvency and repair some of the damage to their profitability.

Back in the Commons Chamber in the afternoon we had the opportunity to debate the government’s wish to charge people more for owning a car. The absence of most Labour members, and the fears of some of the few who came spoke volumes about their underlying concern. They must know that the plan to increase Vehicle Excise Duty substantially on older cars that emit too much CO2 is seen as unfair, and on their own figures is not a green policy as it achieves practically no reduction in CO2. Most people are stuck with their older vehicles, especially now the price of them is falling to reflect the higher running costs form the higher tax in prospect. The Conservative Opposition offered them a way out, seeking to stop the government from going ahead, but the Labour MPs declined the life line.

For most MPs it’s not easy being a rebel. You are pulled between remembering that your party allegiance accounted for a large part of your vote at the election, and the strong view that your party is making a big mistake which is letting down the voters. On 42 day detention more Labour MPs felt that the principle of the issue mattered and they should vote with their consciences. They had not signed up to eclipsing important civil liberties. On higher taxes they are uneasy because they can see how unpopular they are, yet individually they are drawn to support their party out of their instinct that higher taxes are good. On Tuesday the rebels over the abolition of the 10p band accepted a weak formula to look again at compensation for losers from the Minister and backed off their tabled amendment. On Wednesday the possible rebels on VED did not even table an amendment and returned to tribal loyalties as they queued up to distance themselves from the amendment the Conservatives had tabled.

In each case the rebels felt better for rejoining their party in the Commons – it makes for easier relationships with colleagues. A long summer back in the constituency may serve to remind them just how toxic these higher tax policies have become, bearing down especially heavily on those on lower incomes. Then they may remember why they felt they should rebel – the government is destroying their chances of re-election if they have marginal seats, and hastening the day they will be out of government if they have safe seats. It is now the economy, stupid, which will determine the government’s chances of re-election. If they do not do something soon to lower inflation and ease the squeeze on incomes, they are doomed.
So far the government seems set on intensifying the squeeze on all of us by increasing taxes, whilst spending yet more and more money they do not have in the public sector. Today sees at last the signatures on the contracts for two large aircraft carriers. It is doubtless a coincidence that this brings work for Glasgow ship yards at a time when we are fighting a Glasgow by-election.