The only refrain most Labour people in power seem to know is the demand for higher taxes.
No sooner has the Income Tax hike unravelled, than the Vehicle Excise Duty increase comes under fire.
Learning nothing from this, today we hear from the Local Government Minister that Councils should put up Council Car Park charges, as another way to tax motorists off the road.
Using a cloak of green policy and a further urge to nanny us into walking more, the true aim of this Minister is to tell the municipal raiders seeking more cash that they should get it direct from motorists, rather than demanding it in grant requiring the government to get it from motorists.
Any Council which puts Car Park charges and Council taxes up by more than inflation in current conditions is asking to be unpopular. People have had enough and cannot afford any more.
The Chancellor has had to rule out windfall taxes on utilities, urged by many in the Labour movement, and is thinking what to do about further noisy calls to tax the rich who are still here after the last round of taxes on rich foreigners who come to do business in London.
The economic problem the government faces is not the shortage of tax revenue, but the failure to spend all the tax revenue they do raise to best effect. The problem is not that the public sector spends too little, but that it wastes too much for the productive potential of the economy. So often the spending achieves the opposite of what they intend.
I am sure the government intended the huge sums they spent on Northern Rock to protect jobs in that northern business and to shore up the mortgage market. Instead, thanks to EU Competition rules, it does neither. The workforce will be more than halved, and the mortgage book will suffer a similar fate. Huge sums are being wasted on running down the very asset they bought.
Similarly, the move of Railtrack to the public sector Network Rail led to a huge surge in costs to deliver the same amount of track, running up massive borrowings which the markets regard as public sector borrowing (with a Treasury Guarantee) even if the government doesn’t think of them like that.
We now see the public sector is some disarray. This week there will be tube strikes, thanks to Union unhappiness about the pay regime following the financial problems within one of the government’s most expensive and absurd Public/Private Partnerships. The taxpayer was predictably left picking up the bills when it went wrong.
There will be a long period working through this government’s creative borrowings and expensive projects. I expect them to sign up as many as possible in the next few months, to tie hands of an incoming government. If they do it will represent a further deterioration in the UK’s already very overstretched public finances, and mean more grief sorting it all out in due course.

It comes as no surprise today to see a poll telling us that David Miliband would be no more successful against David Cameron than Gordon Brown. The problem is primarily economic. Mr Miliband has not put forward an alternative, is not a critic of the PM’s over his poor handling of the economy, and offers no reassurance to the British public that a government under his leadership would change things for the better.

When John Major was in a similar position to Gordon Brown, with the two Michaels (Heseltine and Portillo) widely tipped for his crown and endless speculation about their possible leadership bids, John Major told all of us in Cabinet to put up or shut up. I felt obliged to resign and take the argument to the country that I had been waging for years against his economic stewardship – as a fierce opponent of the ERM, the higher taxes he imposed and the failure to curb public spending. I had been putting (in confidence within government) a consistent alternative and felt I could not “shut up”. Major’s device stopped the two Michaels from prosecuting their leadership ambitions at that stage, and sealed their fate never to lead the party. Unfortunately John Major did not listen to the need for an alternative economic strategy, so that also sealed his.

Gordon Brown would be less at risk of a challenge if he tried what John Major successfully executed as a personal survival strategy as Leader. David Milliband would not run. He would not be able to show he had consistently opposed the mistaken economic policy the government has pursued. I find myself in agreement with both the government spin machine and the official Conservative one that David Miliband is neither the answer to Labour’s problems nor to the country’s. It shows a complete lack of political judgement to allow the story to emerge that Alan Milburn would be his Chancellor. That is no way to win more hearts and minds for a Leadership bid in the left inclining Labour party. It shows a lack of political maturity for someone to be counting so many chickens so soon.

NICE has been in the firing line recently. This body which has the duty to decide which drugs the NHS can buy and which are unsuitable on grounds of efficacy and cost has been caught in the crossfire. On one side the pharmaceutical companies have been running effective campaigns to claim NICE was wrong to reject their new drug. On the other side patient groups have started to lobby in ever more media friendly ways for spending on the latest drug that they hope will alleviate or cure their symptoms.

It is what you should expect when you have a near monopoly health service provider controlled by this particular group of politicians who live by the media. Because the NHS has such colossal power in its buying decisions drug companies have to throw everything in to selling to the single purchaser in the English market. They are very disappointed if it does not work.

Similarly, patient groups have come to realise with this government that only media friendly prominent lobbying is likely to get Ministers attention and possibly lead to a change of policy. One of the newer features of an MP’s life is a stream of invitations to attend functions organised by groups whose sole aim is to change the drug purchases and the medical and clinical protocols of the NHS for treating a particular disease. Most diseases now have their action group. They feel forced to behave like this, competing for the attention and money of Ministers in this heavily centralised top down system Labour has devised. Too much rests on the decisions of just a few people at the top, in the Ministry, and in NICE.

The government has invited people to make the NHS the central concern of modern politics. They have shown them how to lobby and use the media, and they have so centralised the NHS that people conclude the only thing that matters is to get to the Minister. They have ended up fashioning a boomerang that is beginning to hurt the very government that designed it as their own political weapon.

Labour believed that if they spent lots more on the NHS most of the problems would go away. If they centralised decisions they could guarantee good standards across the country and claim the credit for all that was going on. Such a strategy means they must also be to blame for things that are not working well, for the hospital infections, the delays and shortages,and to blame when people cannot get access to the drugs they think they need or the treatment that would make them better.

I have been meeting GPs during the summer break from Westminster. They complain to me that too many top down targets are making it far more difficult to serve their patients well. They dislike features of the very expensive centralised computer technology being introduced into their lives. They too are unhappy about the endless fiats from the centre and from too many judgements being made by too few people.

Labour had better be careful. Its attempt to play politics with the health issue, showing itself as the beneficent provider of more cash from the centre, is becoming a cause of angst with patient groups, with drug companies and with GPs. That is a very powerful alliance of interests to turn against you. Never has so much money been spent by so few people with such negative effects.

I awoke this morning to be reminded by the Today programme that 100 years ago a British explorer first struck oil in Iran, and began the dash to the Gulf to set up an oil industry.

My sources tell me that the first oil was found at Masjid-i-Suleiman on May 26th 1908 by George Reynolds, working under William Darcy’s licence. This discovery led to the formation of the Anglo Persian Oil company, which proved a very popular investment in 1909, subsequently to become BP.

In an era when it is fashionable to decry oil for its environmental impact as well as for its impact on the politics of the Middle East and the great powers, it is perhaps timely to remember the huge leap forward in our living standards which a hundred years of relatively cheap oil has brought us.

Oil as a fuel has kept us warm and powered our transport. As a chemical feedstock it has enabled scientists and chemical companies to develop flexible plastics, bitumens and other crucial products that play such a role in modern lifestyles.

Doubtless if mankind had not had oil to go to war about the bellicose would have found other pretexts and causes of dispute.

This week-end was the week-end of transformation in the UK’s feelings about the Olympics. Scepticism bred of Chinese politics and spin, of government targets and the government elite piling out to Bejing at our expense has been banished by the sheer guts, determination, skill and talent of Uk competitors. Many of them have decided to live their dream. Many of them have made their dreams come true. It is wonderful to read of their exploits. Congratulations to them all. Best wishes to all those still to compete. They are a reminder to everyone that if you really really want something, you might be able to obtain it – after you have put in hours, days, years of effort and concentration.

I have enjoyed the season at the Globe this year. Their Merry Wives has received much deserved praise for its light hearted romp through the lives and loves of Windsor housewives, and their Midsummer Night’s Dream stresses the comic, with well played scenes from Bottom and the mechanics. The production which has made the biggest impression on me was the depth and tragedy of King Lear.

The tragedy seems so topical because it is on one level about a King who gives away his kingdom to the wrong people, splitting it physically to do so and causing civil discord through the gross lack of judgement. It has been a bad few years watching our present government giving away our powers of self government with a similar lack of judgement, stirring up disagreements where there need have been none, and splitting the country into European style regions. Gloucester also makes a rank misjudgement by choosing the advice and word of his illegitimate son over his legitimate son, setting himself up for loss of title, and loss of his eyes.

Both Lear and the Duke of Gloucester bring their misfortunes on themselves by making gross misjudgements about their children. Lear refuses his sweetest daughter a third of his kingdom when he dismembers it for his three daughters before his own death, because she does not express her love as flatterers do. Gloucester, who wishes to keep his inheritance whole and is not in the business of giving it away before his death, rashly decides to disinherit his heir, giving the promise of it to his bastard son who is falsely undermining his brother and then his own father. Neither old man can see clearly. Lear goes mad. Gloucester, in one of the most shocking scenes in theatre, has his eyes put out, to make the point that he has not been using them well. He is stripped of his title and powers thanks to the duplicity of his illegitimate son. Had Lear not made the error over Cordelia and given her her just third there would still have been trouble in the kingdom, for the whole idea of splitting it with daughters like Goneril and Regan was fundamentally ill conceived. Both old men lose their revenues and their authority through their stupidity.

Shakespeare is not suggesting there are easy answers to the war between the generations.His play reminds us how fragile a thing peace and good government is. A single rash misjudgement on the scale of Lear’s or Gloucester’s can set in train a series of events that leads to the destruction of a person’s health, wealth and status. There are always people in the world of politics – or most other worlds – who will lie and cheat to gain office. Once in office they will abuse or even destroy it. Others will have to obey them for they have “authority”, and some will willingly obey them because they have patronage.

Like Lear, this government’s tragedy is they cannot see clearly. They are unwilling to admit the magnitude of the economic errors they have made. They refuse to accept that their mismanagement of the public sector is a big part of the problem the UK now faces in adjusting to the credit crunch. Indeed they wish to make it worse by their extreme policies of public spending and borrowing. They too have set in train a series of tragic events that will do harm to the United Kingdom. Just as Lear’s splitting of the country caused grief, so Labour’s lop sided devolution is now destroying them through the pressure of the SNP and the strength of English resentment at its unfairness.

Shakespeare’s masterly use of the theatrical – Lear’s madness in the storm and Gloucester’s pathetic attempts to kill himself – are extreme to illustrate wider truths about the human condition. Seeing Lear again in such a good production was a poignant experience. Our country is beign dismembered by politicians who cannot see clearly. Once again powers to govern ourselves are being given away. Once again those in power are making rash judgements, and cannot distinguish good advice from false.

No wonder this too is a time of troubles. Bad economic misjudgement and a bungled constitutional settlement with Brussels and the regions will bring the government down eventually . The tragedy is we are still so far away from a possible change of government, and this government is so far away from understanding what is wrong, let alone wanting to do anything to put it right.

Readers of this site will know that I expect the squeeze on people’s incomes to intensify this autumn and winter. The government has decided that it is not going to make any of the adjustment in the public sector by reducing its spending – on the contrary it is boosting it in the most irresponsible way, to pay for its state pensioners like Northern Rock. As the country has borrowed too much on a grand scale that means individuals and families have to tighten their belts even more.

We all know that part of the belt tightening is forced on us by higher Council taxes, higher tax from petrol and diesel, threatened higher Vehicle Excise Duty and the abolition of the 10p band. We all know another part of it comes from rip off government, with endless increases in fees and charges for government “services”.

This week we are witnessing a third part of the squeeze – devaluation of our currency. In recent months we have got used to devaluation against the Euro. We have had a 10% devaluation compared with its starting rate, meaning that if anyone does want to buy a German car or a bottle of French wine it costs 10% more. Now we are having to get used to devaluation against the dollar. The government has presided over a 7% devaluation in just the last couple of weeks.

Labour governments have a habit of devaluing. In the days of fixed exchange rates there was drama, with a government trying to “save” the pound, only to give in in the end. Labour took us down from the $4.03 rate to $2.80 on 14th September 1949, and devalued again on 18th November 1967 from $2.80 to $2.40. Now they are in the process of taking the pound down from over $2 where it had reached in the early 1990s and again last year, under a regime of floating rates. There will be less drama, but the effects on our living standards will be the same.

I prefer floating rates to fixed rates, and recognise just how much damage was done to the UK economy in the past by trying to defend silly rates. The devaluation we have had recently against the Euro will help our exporters. However, if a government uses floating rates to remove discipline over its own budgets and finances, it will end in tears. If a government spends, borrows and inflates the public sector too much the currency will give too much, helping fuel the inflation. This government had better be more careful, now it is embarked on this slippery path. Currency falls can run further than the authorities might like if they remain careless about them and their causes.

What we can be sure about is that people are getting poorer because the government is determined to stay richer. The devaluation of recent days against the dollar, and the devaluation of recent months against the Euro has cut the value of the “pound in your pocket”. Many commodities and products are priced in dollars on world markets. They are suddenly dearer thanks to the fall in the pound. That means we can buy less of them.

So pull in that belt a bit more. Living standards are falling and have further to fall. An overborrowed government has no intention of tightening its belt, so that means the rest of us have to do so even more.

If you want to know what the new President of the USA is going to do (whichever one wins), just look around you. Under the pressure of low opinion poll ratings, the logic of events and change of mood generated by Democrat successes in elections, the Bush Presidency has changed substantially.

Bush, you may member, came in like a lamb. This was a new Republican, a caring Republican, who could reach out to some Democrats. 9/11 changed all that. The Pentagon moved into a position of great influence over the Administration, which decided it had to pursue wars in countries associated with the terrorists. We moved from lamb to warrior. This year we see the US government shifting back to the arts of diplomacy. Just as Obama says he wants, the US is talking to its allies and working with them. The US is working through the French President over the vexed issue of Georgia, and stresses in every move and statement the need to work together with the Europeans. Just as Obama wants, the US is talking tough but not threatening military intervention. It has not ordered the carrier and surface fleet to concentrate near the Russian coast. The State department seems to be in charge and the Pentagon is taking a back seat. Similarly in the Middle East the talk is all of transferring power to locals in Iraq and Afghanistan, whilst warlike threats to Iran have been played down. The new mood is collaboration and diplomacy rather than leadership and military activity.

In other spheres too the Administration has moved in the direction of its critics. The President now says he thinks climate change is serious and needs multilateral action to tackle it. Maybe a new President would go further unilaterally than Bush will ever do, but if he tries to he will discover the adverse impact it will have on domestic politics. Americans like people the world over will resent having to pay higher taxes or follow more stringent regulations than their friends and competitors overseas, making it improbable a canny politician like Obama or Mc Cain will do much more than continue the shift in rhetoric that Bush has begun on this topic.

It is rare for a new government or even President to make a decisive shift which the wider governing establishment is not already making. I suspect that both Mc Cain and Obama, campaigning on change, will represent little shift from Bush Mark 3 in either foreign affairs or in domestic. Obama might be a higher tax and even higher spending President, though Bush the big spender will take some beating in that department. Mc Cain represents continuity in Iraq and Afghanistan, but in the end both Obama and Mc Cain would cut their commitments there, Obama more slowly than he says he would like and Mc Cain more quickly than he currently says is necessary.

Meanwhile, neither candidate has anything original or important to say on handling the Credit Crunch and the state of the world economy. The Fed will do what is has to do, with little change to current policy whoever becomes Treasury Secretary.

The more US politicians talk about change, the more you should expect continuity. The shift in policy has occurred already. Bush is now a multilateralist believing in diplomacy, after the difficulties he placed himself in through his two big Middle Eastern wars. We will now discover that diplomacy does not work well either, as the Russians continue their military presence in Georgia, destroying the Georgian military’s hardware whilst the West watches and condemns from a safe distance.

A sensible President would immediately set about remedying one great source of US weakness – its dependence on foreign oil.

Today we will learn whether the Euroland economy is already in decline, or whether its growth has merely slowed to a standstill. The briefing in advance of the figures implies we are being readied for bad news.

Over the last year we have heard a great deal from the Uk government and from the supine parts of the media about a US recession, and how the world problems emanate from across the Atlantic. We often have to hear lectures about the importance of the EU to our economy, and even about the superiority of the EU model. If any of this were true we should by now be saying “Thank heavens we are so dependent on the EU and not on the US, for we can ignore recessionary winds from across the Atlantic”. Instead the Bank of England Governor had to warn yesterday that the UK authorities have been misleading us for some time about the likely growth rate in the UK this year and next. He himself did not even rule out a recession here in the UK. Today we will learn that the motor some want us to hitch to more completely, the Euroland economy, is once again performing less well than the US.

The truth about our economic relationships with the US and the EU is more complex than the idiot soundbite that we depend for 3 million jobs on the EU owing to more than half our trade being with the EU. It always left open the question of what about the 90% of our jobs that on their own admission do not rely on the EU, wrongly implied jobs in exports to the EU would not exist if more people had voted No in 1975, and ignored the trade in services and flows of investment and interest where the EU proportion is much lower than the 50% ish share they have of our trade in physical goods. The relationships you need to trade in services are often deeper and longer term than the relationship to buy manufactures, and tend to be with fellow English speaking countries with common law systems for obvious reasons. A British legal or accountancy firm is more likely to do work in the US or Australia than in Austria or Germany.

The current situation also shows how wrong the spin has been about the sources of our present discontent. The so called US made Credit Crunch is a credit crunch in many parts of the world where Central Banks and Regulators have made similar mistakes to the US, but where they made their own. Northern Rock did not go down because it had US sub prime mortgages, or because the US banking regulators fell down on the job. It went down with North eastern UK mortgages, under the supervision of the UK authorities. Similarly, the Euroland economy is slowing owing to stupid policies of high tax, high spend, high regulation and poor Central banking in Europe, not because of the mistakes made by the Fed.

So today we will learn if the spin is right that whilst the US economy continues to grow despite the endless declarations of a US recession by all those US haters out there, Euroland either is now going backwards or is on the edge of declines in output. In which case the UK strategy under this government of hitching us more firmly to the EU governmental bandwagon is doubly foolish, being bad economics as well as bad politics.

Not that this gap in performance between the US and EU economies is anything new or a surprise. The EU is a consistent underperformer. As far as I am concerned – and as far as many Labour MPs claim – the prime aim of our economic policies in the UK should be to give as many people as possible an opportunity to earn and enjoy more income. In the decade 1987 to 1996 the US economy grew by 32.9%, compared with the EU economies growing 11%. In the 20 years to 2006 the US grew by an impressive 82.5%, despite being richer than the EU to start with, whilst the EU limped to just 41.6% growth.

Over the long term, as well as over the short term, the US economy has outperformed the EU one by a wide margin, growing twice as quickly for 20 years! Looking at individual years the US outperformed in 16 of the last 20, and even in the two years of the hi tec collapse which pro Europeans enjoyed as an opportunity to condemn the US model, the US economy still did not have a down year.

The government needs to amend its rhetoric. This is not a downturn made in the USA or a Credit Crunch unique to Wall Street. A series of problems have emerged in the way central Banks, governments and banking regulators have done their job in most major markets. The UK has a bad version of the problem, with its own mistakes at home adding to the gloom. The Governor yesterday was right to warn the government not to relax its controls over public borrowing, but he will not be heeded. The UK government is determined to make it worse by borrowing even more. Meanwhile, the cavalry that are meant to arrive from the EU to help us in time of need have lost their horses and will not be riding to our aid. Their economies are already deeper in the mire than the American.

The Bank’s dose of realism today implies the authorities have at last got to where many of us have been for months. At last they admit that there will be very slow growth, no growth or even a recession over the next four quarters, and at last they recognise that inflation will soon peak.They acknowledge that the Credit Crunch remains a big problem. Why then do they take no action on interest rates or Money market liquidity to sort it out?

When the history of the last few years comes to be written it will be likely that historians see the last decade as a decade of wars about oil. The US and UK interventions in Iraq and Afghanistan were not just a response to terrorism. They were also about creating democratic regimes governing or close to the oil fields that would be sympathetic to western needs. The West has been less keen to undertake military adventures for regime change in tyrannies without proximity to oil. The US sees the Middle East as a crucial area to influence because it is now a heavy importer of energy.

Putin’s latest assertions of Russian power has only been possible thanks to oil and gas. The giddy rises in the oil price in recent years has filled the Russian coffers and helped pay for the renewed military machine he used in Georgia. His whole political strategy geared to increasing Russian influence and exerting control over territories of the former Soviet Union clustered around Russia is based on the control and exploitation of oil and gas reserves. One of Georgia’s offences is the pipeline that runs across its soil which Russia does not directly control.

The Western response to Putin’s rise has been slow and contradictory. On the one hand the West has decided to continue to treat Russia as a normal democratic state, trying to keep it in the framework of diplomacy through the UN, the G8 and other international fora. On the other hand the West understandably excludes it from NATO, occasionally uses tougher language to condemn Russian actions and speeches, and offers friendship and military support to several of the countries Russia would like within its sphere of influence.

This ambiguity is all too clear once faced with the challenge of the Russian military action within the independent state of Georgia. Russia used the argument familiar to students of 1930s Germany that it needed to intervene to assist the Russian minority within another state. The West rejects this argument on the grounds that one state should not violate the territory and kill the citizens of another state. This case would be stronger if the West had not invaded Iraq and used as one of its arguments to need to help the oppressed minorities under Sadam’s regime. This is not an issue which is going to be resolved by the current welcome truce, nor by further debate about the rights of minorities within states and the basis on which international forces can intervene if ever. This is about the raw balance of power between Russia and the West.

The West needs to play this long as Russia is playing it long. The adventure in Georgia was just to test how far the strengthened Russia can now go. It is not the end of the process of Russia building her strength and expanding her influence and territory. The West needs to take much more action to tackle the cause of its own weakness, its dependence on oil and gas imported from volatile parts of the world or from Russia herself.

The US. the UK and the other major European states need to be more energetic in encouraging the exploitation of more gas, oil and coal from within their own boundaries. They need to be install more hydro power, sensible renewables, nuclear – whatever it takes – to cut dependence on imported oil and gas. World markets may give us a breathing space from ever upwardsprpice movements, and may dent Russian revenues for a bit, but price rises can and will resume after the slowdown unless the West does something much more positive to cut its needs for imports. I have set out before what the UK government could do – why the delay, when Georgia has made the point again that there is a strategic need to do this as well as an economic one.

Yesterday’s inflation figures make grim reading – even grimmer than many forecasters were expecting. We may have a few months more of dreadful inflation figures.

Readers of this blog will not be surprised. They will also know that I want the Bank and the government to start tackling slowdown and property crash, recognising that next year inflation will tumble anyway. They need to accept that they lost the battle against inflation for this year during the heayd days of their mistakes in 2005-6, apologise and try and get the next move right.

Fortunately, as predicted, commodity prices and energy prices have started to fall. We are already seeing sharp declines from the unacceptably high peaks on the forecourts for petrol and diesel. Price competition is intense, as supermarkets and large petrol retailers compete for the diminishing spending power of the customers. There could be further declines as the world economy slows and weakens under the impact of the Credit Crunch.

The masochists at the Bank of England want to make the crash worse by keeping rates high and even threatening higher rates. The government is making the crunch worse by its own profilgacy, pre-empting cash needed elsewhere and spending some of it on propping up a nationalised mortgage bank that is then not allowed to make new advances! Maybe the Bank does need to threaten higher interest artes to try to discipline the government. After all, the government has powered some of the borrowing excess with its off balance sheet adventures, its PFIs, PPPs and nationalised companies.

The dollar is now strengthening as the US current account improves and as US companies become more competitive. The European Central Bank will continue to keep rates too high for too long because it also made inflation mistakes in the miiddle of this decade and is sore about the current consequences.At some point they will have to cut rates to ease the pressures, and the Euro will cease to be so strong.

Governments and Central Banks have made a right mess of the last few years. They were too relaxed in the good times, misunderstanding just how much credit they had released and how long it took for that to cause inflaiton. Now they are too relaxed abnout the bad times, and seem unable to understand how deflationary the Credit Crunch will prove to be.

In June I wrote about inflation. Today the same is true, but we now know that commodity prices are falling as suggested in the draft letter below:

“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”

Many of my constituents have written to me expressing their opposition to the inclusion of Kennet Valley Park as a Strategic Development Area in the Government’s South East Plan. I have today written to the Government Office of the South East setting out my opposition to any proposals to build an estimated 7,500 homes in this area, and have highlighted my unease over the potential flood risk from building on a functional floodplain based on the Environment Agency’s interpretation of Planning Policy 25. I have also outlined my concerns about the serious problems such development would create for the road and rail network, along with other types of infrastructure. I have told them that this Wildlife Heritage Site, which contains designated wildlife areas of locally and internationally recognised importance, should be protected and an investigation carried out to determine whether there has been any contamination of the land, as was recently reported in the Newbury Weekly News.

I would urge all constituents concerned about the inclusion of Kennet Valley in the South East Plan to lobby the Government Office of the South East by writing to: The R. S. S. Team, GOSE, 1 Wilnut Tree Close, Guildford, Surrey GU1 4GA. The reference numbers H1B Greater Reading and H1B West Berkshire should be included in any correspondence.

It seems a tragedy that after all the hard work and effort many athletes have put in around the world we receive reports today that a country of 1200 million people cannot fill the seats for the opening rounds of competition between elite performers who are established as the best in the world. The authorities are bussing in staff from the games to make it look better, but it does lead one to ask what has gone wrong if there are insufficient people to attend on a normal basis. You would have thought that if it were your country hosting the event, and you had the chance to see the greatest and fastest in person at a stadium near you, you would clamouring for tickets.

I must confess in the last few days I have wanted to watch a bit of the Test Match with England’s new Captain, had to get another couple of blog pieces written, needed to pursue a difficult planning matter in the constituency including site visits, decided to catch up on some doorstep conversations, and felt a pressing need to start cleaning my garage out. I ask myself why haven’t I been glued to the TV screen to watch for the latest from Beijing? As I have talked to friends and constituents I have been surprised to find that some of them too have found other pressing engagements, even in this bleak cold and wet summer. I think our reservations at such a distance from Beijing are subliminal and more understandable. I do not think we are getting a fair picture of China from the huge team of BBCcheer leaders for the country, and many of us remain wary of the political use of the games to promote the host nation.

The other day when I was driving to an appointment I heard a BBC journalist offer us a radio essay on what restrictions the media are encountering in modern China. He told us he had been there – at our expense – for 23 days prior to the games. His radio portrait was littered with happy children in the streets, tree lined avenues adffording shade from the sun, the safety of their local communities, and the freer atmosphere toward criticism and alternative views. There was a not a line of criticism, no penetrating comment on the ostensible subject matter of the talk, no detail of what he could and could not say and do as a journalist from the West, and no comment on the censorship and human rights issues that are still so important. It makes me feel uneasy.

The UK government and the BBC have made the games an entertainment for the army of the elite that we are paying to send there. They are in danger of driving a wedge between China, the games and the rest of us. Let us hope some British stars emerge that we all support and want to watch. Well done to our competitors so far. I admire what they are doing, and wish them every success. I would like to see them succeed, but found the opening ceremony with its symbolism of powerful China too much to take. It is just such a pity that so much politics intrudes into the modern Olympics.

As damaging uncertainty continues over whether or not the Government will introduce a stamp duty suspension or deferment scheme, John Redwood today called on Gordon Brown to use government powers to suspend Home Information Packs (HIPs) to help boost the beleaguered housing market.

Twelve months on from their introduction, there is growing evidence that HIPs deter speculative sellers, increase transaction costs, discourage sellers from changing estate agent and reduce the number of housing transactions – all compounding the economic downturn.

Ministers have powers to introduce a HIPs holiday now. When the Government pushed the Home Information Pack laws through Parliament in 2004, it slipped in a last minute concession to allow a government to suspend any or all of the HIP laws. Parliament does not need to be sitting for such a power to be used.

Five ways HIPs are harming the housing market:

1. HIPs discourage speculative sellers from putting their homes on the market and act as a barrier to entry; this restricts housing supply and so reduces the number of net housing transactions.

2. By duplicating the need for searches and not providing reliable information, HIPs increase transaction costs, increasing the net cost of moving home.

3. HIPs reduce market responsiveness, by discouraging people from changing estate agent if their house does not sell – as they may be asked to buy a new HIP.

4. The searches in HIPs go ‘stale’ if a house is left unsold for too long, increasing transaction costs in a slow market, and acting as a further deterrent to would-be sellers.

5. If the seller has opted for a so-called ‘free HIP’ – a deferred payment option – they will be hit with a fee if they want to change estate agent, on top of the cost of any new HIP with their new agent.

The Government has ignored warnings of harm to the economy from HIPS. Research by independent experts, Oxford Economic Forecasting, warned back in 2006 that HIPs would deter sellers and curtail the number of housing transactions by between 10% – 25%. In turn, this would cut consumer spending, reduce labour mobility and increase the medium term level of unemployment. Ministers ignored these warnings.

The Government claims that HIPs are necessary to meet an EU Directive which requires Energy Performance Certificates (EPCs). Yet in Northern Ireland since the start of July 2008, such Certificates have quietly been introduced for home sales without HIPs. Whitehall’s own Better Regulation Commission has slammed the UK Government for “gold plating” the EU Directive on EPCs, and imposing “additional administrative burdens [of HIPs] without adequate justification”.

Speaking about the need for a HIPs holiday, John Redwood said: “I believe that urgent action is needed to kick start the housing market in Wokingham. The Labour Government is dithering – and their spin and speculation over stamp duty is further undermining the market by making buyers wait and see.

“Before Home Information Packs were introduced, Labour Ministers ignored warnings from experts and industry that this new red tape would harm the housing market and the economy. These warnings are coming true, but Ministers are more interesting in saving face than saving homebuyers money.

“Gordon Brown only wants to talk about housing to create a distraction from Labour leadership speculation. If he genuinely wanted to help, he would use his powers to suspend Home Information Packs straight away. A future Conservative Government will scrap this unnecessary red tape completely, but a suspension now will deliver those benefits sooner rather than later.”

All the main EU economies are slowing down, and some are already well into property collapses and Credit crunch. Whilst the UK is the worst placed of the majors thanks to heavy government indebtedness as well as private sector borrowing levels, they all need some relief from rising costs and falling demand.

The EU could help. I offer this challenge to it. It should, for the next two years, agree to no more legislation of any kind which imposes more costs and burdens on us. It should give the committees and officials drafting it all a couple of years off, and not replace them as and when they retire or leave for other reasons.

The businesses of Europe would be mightily relieved if they no longer had to keep up with the torrent of legislation coming from Brussels, and could concentrate on more important things to combat the Credit Crunch.

Listening to the water industry proposals for 3% price increases each year above inflation (that would mean a 7% water price increase this year) made me think we were living in the Soviet Union circa 1960 under a system of state planning.

The rate of price increase is unacceptable and not necessary. Water is a very abundant resource, especially in a summer like the present cold wet one.If we introduced full competition, including the right to use the existing pipes as a common carriage system, the alleged shortage of supply and the ever rising prices would vanish.

What has the government to lose? Why doesn’t it do this? To those who say it is a natural monopoly I say then remvoing the legal and regulatory parts of the monopoly will make no difference and could not possibly do any damage. I also say they are wrong. Water is no more a monopoly than the supply of oil, and has the advantage that you find it everywhere, unlike hydrocarbons.

If we allowed others to help collect it and clean it we would have lower prices and more of it. Let’s just do it.

Today we learn from Open Europe of the 175,000 people involved in forming and enforcing EU legislation – far more than the EU normally puts out in its propoganda. The BBC did its best to discredit this low figure on the Today programme by refusing to understand how it was arrived at and trying to sugest wrongly it includes all the private sector lobbyists and business people who have to waste their time responding. BBC Journalists should try reading the document and not have to spend the whole interview establishing simple facts. They should have debated the wisdom and suitability of so many people involved in all this rule making.

The facts are that 175,000 people are wholly or partially empoyed on EU bodies involved in developing and enforcing EU rules. We pay as taxpayers for their salaries and expenses. To give the full picture of the costs of this huge bureaucracy we should add to that

a) The costs of all the officials in Member States governments working in their own countries on forming positons, negotiaiting and enforcing – that would be a mutliple of the 175,000 and is yet another direct cost to the taxpayer

b) the costs on all the businesses who then have to respond to and conform with the rules – a further multiple of the 175,000 which we pay for in the prices of goods and services

c) the private sectors costs of lobbyists, lawyers, consultants to try to see off inappropriate rules and to respond to the ones that are passed.

Today the BBC kite flies a new “Bill of Rights” to reassure us that we are still a free country. The government’s spin masters must be desperate if this idea comes from them. Maybe at last they have realised that people are fed up with the myriad petty ways our liberty has been eroded by this government in the name of fighting terrorism or reinforcing the forces of law and order.

There is a much easier way to reassert our liberties than drafting a new “Bill of Rights”. Enforcing the old one would be a good start. Getting powers back from Brussels would help, as so many of the unhelpful interventions in our life from Home Information Packs to rubbish bin surveillance have a strong European component which this government has allowed to creep up on us. Abolishing unelected and unloved English regional government would get a lot of meddlers off our backs. Giving us back habeas corpus and more jury trials would be good. Reversing some of the idiocy perpetrated in the name of health and safety would make life easier and no less safe.

I flew into Southampton airport on Friday from a distant part of our lovely country. There were 14 of us on the small plane. We had to sit and wait on the tarmac whilst one young man came out to place a couple of desultory cones near the wing of the aircraft, and for a young woman to bring a chain on a cart and solemnly extend some of this chain underneath the trailing edge of the wing before we could leave the plane. The pilot told me this safety precaution was not needed at any of the other airports where he landed. None of us were likely to want to walk into the propeller which was clearly visible above us, and the pilot could have mentioned it if the authorities thought planes these days are full of people absent minded or perverse enough to walk into hard metal parts of an aircraft they have just flown on.

This is one tiny example of how over the top some of the things have become. People in many jobs are scared of the system. It makes them behave collectively in a way they would not dream of behaving at home. I doubt the person who demanded the chain near the aircraft insists in extending a chain around his car when parking at home to make sure people do not walk into the wing mirrors, which would be a more likely occurrence than someone hitting the propellers.

I am all for high standards of health and safety at work. I do think a safety culture, especially in companies handling dangerous equipment, chemicals and materials, is crucial. Going over the top and inventing too many petty rules and requirements can annoy people, and it can also distract people from more serious safety threats that may not have been captured by the Safety boffins.

I think we need a Statute of repeals more than a new Bill of Rights. We need to repeal many of the silly rules and regulations that do not make us safe but make us cross. I would welcome your suggestions for the silliest rules we need to abolish in the first Statute of Repeals. We need to make them an annual event to get to grips with the stultifying bureaucracy we now experience daily.