Where has the Today programme been for the last year? This morning I awoke to hear them asking someone if the UK government was borrowing too much and if it could find it difficult to raise all the money, as if this were a new question. The interviewer then rushed to retail the government’s misleading figures, reassuring us that the UK is lightly borrowed. That was scarcely true even before the government bought one of the largest banks in the world. You needed to add PFI, PPP, Northern Rock and Network Rail into the figures for starters. Since buying RBS the opposite is true. The UK is now a large bank with a medium sized government attached. Did they not hear me warn in Parliament that RBS was too big for the state to handle easily? Do they not follow the arguments about how much of the £2 trillion we need to add to the stock of UK government borrowing annd liability?

When they started buying RBS shares I offered a cheaper and better way of keeping it going and forcing it to cut risk and slim down. I urged them to protect the taxpayer and not buy shares with taxpayers money. I pointed out that it could lose them a year’s defence budget quite easily. So far RBS has lost £24 billion since the government bought shares. We now learn that it could lose much of the next £19.5 billion taxpayers are being asked to tip in. In other words the official view is that RBS is now likely to lose us a year’s defence budget, and could go on to do worse than that.

It would not be not responsible of the BBC to raise the issue of national financial overstretch in a sensational way. They do, however, have a duty to report what people in the debt markets think, as they control our futures. They should do a better job balancing the voices from Parliament, where some of us have been warning for months that the government is taking too much financial risk and overcommitting the taxpayer. That was why I voted both against the VAT reduction, and against the banking support Money Resolution. We cannot afford either easily. Neither provide taxpayers with value for money.There are better and much cheaper ways of getting us out of this hole.

This is blind folly. No-one sensible predicts national bankruptcy, but any sensible analyst would conclude the UK is trying to borrow too much. You cannot cure a crisis of overborrwing by borrowing more. You cannot solve the bad debt problem by simply transferring it to the long suffering taxpayer.

Speaking during the debate on the Saving Gateway Accounts Bill in the House of Commons earlier this week, John Redwood strongly criticised the Government’s record on savings. In his speech, he questioned whether new measures to promote saving would have any effect, given that interest rates for savers are so low. He also highlighted the ridiculousness of the situation whereby the Government is borrowing money in order to fund measures that are supposed to encouraging people to save.

The full text of John’s speech, taken from Hansard, now follows:

Mr. John Redwood (Wokingham) (Con): The Bill is a mouse of a measure to handle an elephant of a problem. The Liberal Democrats say that this is the Oscars ceremony, but can anyone believe that the Bill deserves an Oscar when it is well below the standard of an amateur production, albeit by a group of professionals who should know better? Indeed, Ministers’ audacity in not realising how feeble the Bill is in relation to the savings problem that they confront takes one’s breath away.

We meet against the background of a huge economic crisis, in which savers are being wiped out daily. If they have risky assets, they are falling in value catastrophically. If their money is on deposit in the banks, the interest rate is now tiny. In the stages of the Bill in which I participated, one of my biggest disappointments was the unwillingness or inability of the Economic Secretary and the Government to tell us anything about how the money would be invested and what sort of return it might earn, yet they have had a decade to prepare the measure. They tell us that they have consulted the savings industry, which will help effect the Bill, but there the Economic Secretary sits, thinking of something else, because he knows that he will get his Bill and he has not a clue about what sort of offer or deal will be available when it is enacted and translated into action on the ground.

It is a disgrace that so many people in this country are so poor that they have no savings. It is a disgrace that a savings culture for such people has not been more actively promoted to give them a buffer and more options and choices in life. It is a common aim of all the parties represented in the House to do something about it. However, do the Government genuinely believe that such a measure will work if interest rates for savers are 0.5 per cent or 1 per cent.? Do they believe that it will work if all they do is borrow more and more, thus conveying the message that the way to get ahead and have a decent job is to borrow and borrow, not save and be prudent?

The Government are by far the most imprudent with which the country has ever been cursed. They add trillions to the public debt— [Interruption.] They think that that is funny, but they have the audacity to say to the very poor that they must never borrow, but save, and that the Government will give them a tiny increment from the money that they will borrow on behalf of us all. They cannot even tell the prospective savers what sort of an interest rate they might get on their money.
25 Feb 2009 : Column 327
It is typical of a Government who have lost the plot, who are wrecking the economy and driving us deeper and deeper into gross national debt that they introduce a pathetic, limp, delayed and inadequate Bill and feel proud of themselves.

The BBC this morning heralded the “success” of keeping average Council Tax rises down to 3%, and gave a Labour Councillor a free ride to praise the government and local government, with no critic of the rises and no Conservative allowed anywhere near the item.

Shouldn’t someone have asked if good Councils can cut the Council Tax, as they have, why aren’t others doing the same? Shouldn’t someone have pointed out that with RPI inflation down at zero, this is a large 3% real increase in spending, at a time when the national economy is in real decline.

If local government takes 3% more real income, at a time when real national income is falling by say 2% (or more), then individuals and families have considerably less to spend on the things they think are important, and on the necessities of family life. Why is this good news? Why doesn’t the public sector have to rein in, to leave a bit more for everyone to spend, rather than a bit less? Why do we never have news items on the big cuts having to be made in private budgets to accommodate public sector excess, as they recruit more PR staff and send out more glossy brochures?

And can these “Keynsian” gurus of the BBC explain how cutting private incomes by higher taxes in “reflationary”?

The new deal for RBS is pure monetary madness.

Taxpayers already own most of the bank,and have lost a packet on their shares. Now taxpayers are being made to guarantee £325 billion of bad and doubtful debts as well!

Now the government has decided to underwrite the losses in the future. RBS has to accept the first £19.5 billion of any loss, and pay £6.5 billion for the insurance. Taxpayers guarantee to pay 90% of the losses above the threshold.

So does that provide an incentive for the management to sort things out in a way which might limit taxpayer losses? Wait til you hear the rest. Taxpayers have to put up £19.5 billion of new capital in the form of B shares, and make available an addfitonal £6 billiion of equity if needed.

In other words, the so called tough deal on insurance is almost completely underwritten by new taxpayer capital; Taxpayers are offering the full amount of the losses RBS is said to “bear” itself, and £6 billion to pay the insurance premium.

I wish I could get an insurance like that on the value of my house. I would willingly pay 2% of the value of my property to the government in these markets, if they would guarantee to pay any losses on its value above a threshold. It would be especially attractive if they would give me the money to pay the premium, and give me the money to pay the first part of the loss which they refused to insure! There don’t seem to be any private sector insurers around who will do that.

Once again the government has been taken to the cleaners by the bankers. They have been out negotiated at every stage.

If you ask, what would I do instead, the answer is easy. I would not give RBS another penny. I would make them sort their own mess out. There is no immediate need to put more money in and every need to make them raise cash and cut costs for themseleves. There is plenty of scope to do both. This deal is a dreadful waste of public money. It delays the necessary action to sort the bank out by taking some of the pressure off.

AN UPDATE FROM THE CEO OF UK PLC

I am pleased to confirm record losses from our RBS banking subsidiary, and to announce losses of almost £10 billion at HBOS, where we have a substantial minority stake through the shares we hold in the Lloyds Group.

Some of you may have been disappointed to read that RBS only lost £24 billion as reported, after we had promised you losses of £28 billion. You will be relieved to know that the gross figure revealed on page 6 of the RBS financial statement is I am delighted to say £40.7billion, another new record for such a figure.

In order to consolidate our investment in these excellent loss making businesses I have decided to put more capital into RBS, and to make available guarantees to the Lloyds Group which I hope they will accept.

Our policy of “Putting the losses back into British business and banking” is going so well, that it is a good idea to double up our position. I am therefore committing up to an additional £25.5 billion of new capital into RBS, and will be guaranteeing hundreds of billions of pounds of bad and doubtful debts and investments on your behalf. The opportunities to lose money are unparalleled and it would be a pity to miss out at such a time.

It is now clear that the merger which we urged on Lloyds with HBOS has been a brilliant manoeuvre as part of our strategy, giving us the chance to have a substantial stake in a larger group which now has great scope to record losses on a material part of its business.

The way Labour and the BBC framed the debate yesterday about financial regulation was typical of the skewed view of the what is going on that now passes for public debate in this country.

The Labour spokesman on Newsnight tried yet again to blame Margaret Thatcher for the crisis for “deregulating” the banks in 1986. If that policy was so wrong why did they not reverse it in 1997? If it was so bad, why weren”t the banks in financial trouble ten years later on the eve of Labour coming to power? Did they not notice that she kept in place strong regulation of capital and cash by the Bank of England, which worked? No bank over lent and overstretched in the way they have been doing this century because they were not allowed to. As Michael Fallon rightly pointed out, it was Gordon Brown who put in a new system of regulation in 1997. It was that system of regulation which failed to control the over expansion of bank activities with too little cash and capital in some cases to support them.

Even more ridiculous was John Mc Fall’s further attempt to blame the Conservative’s Economic Policy Review for recommending “the deregulation of mortgages”. If he could be bothered to read the Report and be accurate he would have stressed how right we were to tell the government they needed to regulate the capital and cash of the mortgage banks, not the process of granting the mortgages through a useless box ticking procedure which demonstrably did not prevent the disaster which hit the mortgage market. The government designed expensive and complex new mortgage regulation which did not stop a single excessive mortgage being lent to someone who now cannot repay, and did nothing to keep Northern Rock solvent. They destroyed a regualtory system which had kept all main banks solvent for more than 100 years.

The argument should not be about light touch or heavy handed regulation.Lurching from so called light touch to heavy handed will not help. There is no susbtitute for having just a few good regulators who know how to control cash and capital for banks and near banks. The Bank of England used to do that. It is a pity it was stopped from doing so during the period of irresponsibility , 2003-6. This disaster happened in a heavily regulated industry, regulated to Labour’s standards under a new and expensive system designed by Labour in 1997.

The government’s disastrous bank share buying policy has landed them with payment of a pension of £650,000 a year to the former CEO of RBS for the rest of his life. I doubt they can do anything about it, other than pay up,. It leaves them defending the indefensible. There is no way public money should be abused like this. They should not have bought the shares and lost so much on them.

Now they wish to compound their errors by putting the taxpayer on risk for up to £600 billion of bad and doubtful debts. Why? Can we afford it? Why should we have to fork out for other people’s mistakes? What’s in it for taxpayers?

None of the banks concerned is currently at risk. The Regulator is happy for all of them to carry on trading. They all have enough capital, we are told. There is no run on the deposits.

The government says it needs to take these risks on in order to get the banks to lend more money to people. Why do they want to do that? People and businesses are short of income, short of turnover, worried about their jobs, short of profit, short of cash. They are not short of loans. The whole point of this crisis is people are too much in debt, not too little. Companies near bankruptcy for want of orders will not be kept going by burdening them with more debt. They need revenue.

So why does the government want to force the banks to lend more? And why do it by offeirng to underwrite £600 billion of debts, when they could lend money directly to people and companies if they must at less risk and much less potential expense?

They are seeing nothing clearly. They are gripped by a collective governmental madness. They are ignoring all the warnings about excessive public sector debt. They are trying to cure a problem of overlending by more borrowing, and cannot see how foolish that is. They blundered into buying bank shares “to save the banks”, simply to lose most of the money. Now they are blundering in to buying or guaranteeing bad loans and debts to “get lending going again”. The poor old taxpayer is being wiped out, and the savers mugged.

Think again, government. Do not sign this rotten deal.

On Monday we debated the “Apprenticeships, Skills, Children and learning Bill”. We were graced with a speech by the Secretary of State for Children himself, introducing this 225 page blockbuster.

It summed up all that is so wrong about the way our country is governed. The Minister inhabits a strange quango laden world. “Pupils, parents, schools, teachers” and “education” were words that rarely or never passed his lips. Instead we sat through a debate riddled with “Childrens trusts”, “Pupil Referral Units”, “The Office of Qualifications and Exams Regulation” ( a catchy one that, abbreviated to Ofqual which when spoken by some sounds like a branch of the KGB),”The Young People’s Learning Agency”, “The Chief Executive of Skills funding”, “The Qualifications and Curriculum Development Agency”, “learning on a young apprenticeship”,”the School Support Staff Negotiating body”, “sampling cohorts” nine regional “Learning and Skills Councils”, “behavioural partnerships”, “the Childrens Plan”, “work based programme led apprenticeships”, with lashings of “piloting” and co-ordinating” to get these quangos and programmes to stick together.

No wonder nothing works very well. No wonder there is such a huge gap between the governing and the governed. No wonder the money does not go very far. Just look at the huge number of these bodies that all need highly paid so called Chief Executives, PR departments to wave their own flags, campaigners to demand more public money, logo designers and slogan makers, glossy brochure authors and media script writers, training and visit programmes, grand dinners, foreign travel to see how overseas quangos claim more money and even a few people to do what Parliament has charged these bodies with doing.

If a Conservative suggests this a tad overdone, that maybe we could provide more young people with a good education if we spent less on this quangocracy, the Minister replies with menaces about “Tory cuts”. If Mr Brown talks to Mr Salmond, he hears from Scotland that even the modest efficiency gains Mr Brown knows are there for the taking are a major assault on the perfections of the public sector. Listening to his School Secretary reminded me just what a rambling and incoherent mess so much of the public sector now is, with schools, Colleges and others suffering under a huge weight of regional and national quangos, regulators and monitors. So Mr Brown, now you accept there are efficiency gains and sensible cuts to be made, have a look at this bizarre world of acronyms, initialese and obfuscations.

He spoke well, as he usually does. The main thrust of the speeech was partisan, announcing the twin spending packages for the banks and the rest of the economy again, telling us he will spend even more than he has so far told us, and reminding us why he thought they are needed. This was all wildly acclaimed by high spending Democrats, enjoying having their hands on other people’s money.

Woven into the speech was some Republican rhetoric on value for money, and the extraordinary pledge that he will halve the deficit by the end of his first term. He told us that his team have already identified $1,000,000,000,000 of cuts in the federal budget for the next ten years, or an average of $100 billion a year. That part of the speech was a little light on detail. It emerged that some tax increases on high earners and companies will also be part of that deficit reduction package.

It would be good to believe his ability to tame the deficit. The markets surely want to know that sometime the USA will come off its debt fix and earn enough to pay all the bills.. That confidence can be built by the Administration announcing cuts in programmes that do not work or are badly run or are no longer needed. For the moment it sounded a bit like the overweight person who tells us they are definitely going on a strict diet to curb their excess, but only after one more blow out on the cream cakes, as they need to stave off hunger in the short term.

The dangers of too much spin can be seen in the gyrations of Wall Street this week. On Monday the market plunged around 250 points when the authorites implied they were about to nationalise some banks, only to recover most of the lost ground on Tuesady when the authorities confirmed they would not do that. Errors like that do not build confidence or help the stability
Mr Obama tells us he wishes to create from his huge spending packages.

I am pleased to announce losses of £28 billion from our recently acquired RBS subsidiary and £1.4 billion for Northern Rock, acquired over a year ago. These losses are a pleasant surprise, as we did no due diligence before the acquisitions and were therefore unsure of just how big the loss making potential of these talented concerns might be.

We will be announcing these results to the markets at some point in the future, but our 7 by 24 news mangement requires me to write to all of you about them now they are generally known in the media, with added explanation to give them some news traction. I have decided they do not need to be the subject of an oral statement in Parliament, as our investments in subsidiaries are held at arms length.

One of the most pleasing features is the consistency of the results. UK shareholders may recall that RBS is twenty times the size of Northern Rock, and has come in with exactly twenty times the size of Northern Rock’s losses. This shows the skill of all involved in crafting these losses, despite the two banks running on very different strategies over the time period in question. I am sure you will agree we should pay bonuses to those involved. Northern was in run off, under orders to reduce its activities, whilst RBS was asked to increase lending to 2007 levels. For the coming year we are recommending both banks run on the same strategy, lending more money, which should make it easier for them to continue their welcome consistency.

The management of RBS has proposed splitting the assets they currently own into good and bad assets. The idea would then be to commit the taxpayers fully to the bad assets, and leave our experienced subsidiary to trade through the good assets that remain. I was at first concerned about this suggestion, given our corporate aim is “Nationalisation puts the losses back into British business”. However, I have been reassured by the thought that we could always change the accounting procedures to make sure we do record the losses people expect of a nationalised activity. I should also point out it is not that easy distinguishing a loss making from a profit making asset in these conditions, so even a “good bank” can end up losing money.

As we have now written off substantial sums there is always the danger of a profit appearing. We will seek to expand our lending to try to avoid this happening.

You cannot solve a crisis brought on by borrowing too much, by borrowing even more. You have to work your way through the debts, repaying some, and increasing your income relative to the interest costs.

You cannot magic away a load of bad debts and poor investments by transferring them all from the private sector to the public sector. That just undermines the credit standing of the government, and leaves the taxpayer lumbered with loads of losses they do not deserve. Most of the so called recovery plans the UK and US governments are looking at are just different ways to land the poor investments on the taxpayer.

I am amused to hear President Obama saying he is going to announce a halving of the running government deficit over his first term. How can he do that, when his government is busily taking on more and more obligations from banks and insurance companies, and when he is just beginning a big expansion of public spending financed by borrowing?

Controlling debt and cutting deficits has to start today if he wants to do that, not at some unspecified date in the future. Curing the banks entails working through all the investments and debts and saving as many as possible through intelligent banking – not shoving them off to someone else to pay the losses.

Report to Shareholders in UK PLC by the Chief Executive

This year will be difficult for your country. Our turnover (output) will continue to fall, as it has been doing for the last half year.

I have decided to use this opportunity to expand the cost base substantially. I intend to increase the numbers on the payroll and to raise their pay. I intend to pay bonuses to all employees who helped us make such large losses in the banking subsidiaries. I do feel we need to build up their morale when they have had such a setback. I rule out the conventional approach of our competitors who seek to husband cash and cut their costs at times like this.

I have also decided we need to borrow more. We will have to increase our borrowings by around 10% of our turnover in both 2008-9 and 2009-10 anyway, given my commitments to increasing our costs.

I think we need to go much further. This is a good time to take on more debt. I have decided we need to at least treble the debt. I intend to do this through two major acquisition programmes.

In the first I have been buying up banks and bank shares. This sector of the economy has been performing very badly. I do not wish to exploit their bad luck, so I will pay above the market value for some of the shares we buy. We have already bought all of Northern Rock, and the assets of Bradford and Bingley. We have a majority share in RBS and a substantial minority in Lloyds. Our own accountants think this will treble the country’s debt. Outside auditors suggest this is an understatement.

Just in case these acquisition programmes do not expand the debt enough, I have decided to accelerate the borrowing programme further by buying the worst assets off the remaining banks. I could probably expand our borrowing and liabilities by as much as an additional £400 billion by doing this. It could also be done quite quickly.

Some shareholders question the wisdom of this, pointing out that many banks got into trouble by borrowing too much in the first place. They ask how can we borrow all this money? I have taken the precaution of seeing that our interest rate setting subsidiary, the Bank of England, has taken the price of borrowing down to 400 year lows in preparation for this. Just in case there are problems I am about to sanction printing the money we need for the takeovers, to ensure we can get all the cash we may need for this ambitious programme.

It took my predecessors in this job 500 years to reach borrowings of just half a trillion pounds (£500 billion). I am proud to tell you I expect to be well above £2trillion quite soon. Our own Central bank subsidiary is showing the way by now having a balance sheet 120 times its share capital. Meanwhile I will continue to lecture everyone else on the importance of prudence.

Both American and EU capitalism are heavily regulated. Both have concentrated on a lot of detailed regulation of financial services, and both have done it badly.

The EU dreams that there is a free wheeling US system and a cleverly regulated EU system. In times of trouble when US output wobbles, they come out and assert the answer is to move from American to EU capitalism. This is all absurd.

Over recent months despite all the rhetoric the US economy has fallen less than Germany or the UK. The EU, the UK and the US economies have all messed up their banking regulations, failing to demand enough capital in the good times, and then temporarily demanding too much cpaital in the bad times. Both the UK and the US have set interest rates that were too low in the good times and too high in the run up to the bad times.

How can anyone believe Mrs Merkel regulating the detail of hedge funds or Mr Brown running the investment banks would suddenly put the world to rights? The hedge funds and the investment banks that did overdo it could have been controlled properly if only the US, UK and EU regulators had behaved sensibly over the volume of credit and capital requirements in the heady days.

The fact that they did not is no argument for more regulation of a different kind. it is an argument to try and find a few regulators who know what they are doing, to set sensible limits to credit. If hedge funds and investment banks had been able to borrow less we would not be in the current mess.

Mr Hester, the CEO of RBS, figures prominently in today’s papers with a plan to sort out the mess at RBS.

Some of what is reported makes sense and is welcome. There appears to be a realisation that the investment bank is undertaking too much risky business, and using too much capital This needs to be slimmed down drastically, with bits closed and other bits sold off. There is the outline of a cost reduction plan, which will need to go further than currently indicated.

There is some wish to sell off some overseas subsidiaries and assets . The more the merrier, given the stretch the whole bank imposes on public finances. One version of the story has a substantial programme with some urgency – the course I would recommend. Another version has a lesser programme with less urgency.

There is some suggestion the bank might need to make a further provision or write off of £2000 million to cover the costs of restructuring, on top of the £28 billion of losses and write offs. Let’s hope someone who understands figures is giving and independent view of whether this is fair and reasonable or not in the circumstances, as very soon we will be talking real money here.

Readers of this site will know that I have always thought RBS is too big and risky for taxpayers to take on. Once the government committed, I argued strongly for organised disposals and wind up of risky businesses, to limit our risks and likely future costs and losses. I restated the view at some length in “It’s the banks, stupid” on 3rd February.

The government and UKFI should encourage Mr Hester to go further faster than the outline plan we have seen today. The government should also be very wary of buying out loads of dodgy debts from the banks. The UK state is already overcommitted, so why do they think we can take on more debt? World markets may only a limited appetite and limited patience when it comes to UK government borrowings.

Can spinning get any more trivial?
What matters is the content of any meeting between PM and President, and whether it is in our interest and the US interest to develop the relationship.
Do we agree with Obama’s warlike moves in Afghanistan?
Can we advise the President to a wiser course in the Middle East?
Can we protect mutual intelligence from EU incursions?
Let’s talk about the real issues, instead of trying to cock a snook at other world leaders for being slow into Washington.
It’s so juvenile – playground tests for who’s whose best friend.

In January both share prices and government bond prices fell. This meant that most pension funds in the UK lost money, some of them very large sums.

In the through the looking glass world of pension calculations, the deficits of the UK funds actually fell a little. The combined deficits of all the funds coming under the Pension Protection Fund reduced from £194.5 billion to £`190 billion. This is because as government stock prices fall, interest rates rise. This is taken as good news for pension funds, meaning they might to be able to buy more income in the future for any given amount of cash.

It still seems to me losing more money by holding bonds that go down is bad news for them. If they had held more cash they would be in a stronger position today, able to buy bonds or most other investments at cheaper prices. I fully agree with those who work out the sums that losing lots of money in equities was unqualified bad news for the funds. In 2008 overall they lost 14% from holding equities, and in January 2009 another 3.7%. February so far has brought no relief from the plunge.

Why does all this matter? You could say these sums are all notional, that one day markets will rise again, that most companies will meet their obligations to present and future pensioners over the long haul. If you took such a relaxed view, you would be missing the serious crisis now facing many companies with final salary pensions.

The UK government set in train three different policies which have combined to undermine final salary pensions.

The first was the Pensions tax on investment income, costed inaccurately at around £ 5billion a year(the government refused to let us have the true figures). This removal of substantial income from the funds both hit their earnings on the investments, and helped drive down the capital values of the shares so taxed. If shares yield a large class of investors less income, it usually means they are worth less as a result. The funds also had less investment income to reinvest, so cumulatively it became a big hit.

The second was the decision to set up a Pension Protection Fund with powers to levy an additional tax on successful pension funds, to pay for the funds that got into financial difficulties. The danger today is that more companies will go bankrupt, placing their pension funds in the hands of the Protection Fund. This could strain the resources of the Fund further, requiring ever bigger levies on the funds that are still being supported by their sponsor companies. Sponsor companies strapped for cash to run their businesses will not only have to tip more money into their own fund, but will have to find extra to pay for other people’s funds that have got into an even worse mess.

The third is the regulatory system developed by the government. The Regulator for understandable reasons demands repairing the damage done by falls in values of investments within a limited time period. It means that companies have to start filling in pensions black holes whilst they are still struggling to generate cash in their own businesses. There becomes an unintended additional pressure on the company itself, where the demands for larger contributions to support the pension fund could be one of the straws that breaks the camel’s back in companies running out of cash.

Keeping the company going is probably the best way to underwrite the pension fund. Taking too much off the company to buttress the pension fund may make short term sense for the fund, but may make the longer term position worse, placing yet another fund into the hands of the stretched Pension protection fund.

What should we conclude? We can conclude that there is no substitute for pension funds making or preserving their investment money, and no substitute for each pension fund being backed by a strong company. The present combination of regulation, taxation and poor economic circumstances will spell the death knell of quite a few pension schemes, as well as the companies that went with them.

It will confirm the corporate sector’s view that final salary schemes cannot be afforded and are too risky. They are going to be a phenomenon primarily of the public sector where people still think money grows on trees. In the meantime, if the government wishes to save some pension funds and ward off more corporate collapses, it needs to do some constructive thinking about the system of creeping death it has invented for so many pension funds. If it hadn’t bought so many bank shares it could afford to do more to help. The problem is the government itself is showing itself to be a worse investor than Pension trustees, capable of losing more money more quickly.

The government’s stealth taxes have slowly but surely taken more of our incomes. Tax Freedom has crept later, from May into June.

Now the UK government takes financial responsibility for a very large bank with a medium sized government attached, Tax Freedom Day will advance still later, beyond the half way point of the year.

You need to add annual borrowing to the annual tax take. It is now well over 50%. The borrowing takes money away from the rest of us as surely as does taxation, leaving the state free to spend more and more of our national income. Sooner or later, depending on the whims of the markets, extra borrowing will need to become extra taxation, as we seek to repay some of the debt and meet the soaring interest bills.

You cannot run a truly free society nor a successful economy at these levels of state intervention. The government needs to get rid of its overmighty banks, back to the private sector, before they gobble the available cash and jeopardise the governent’s credit worthiness too much.

Iceland and Ireland should be a warning to them. The UK is not in such an extreme position as these two small countries, but the UK state is cruelly over exposed to risk and financial commitments. The £1 billion of bonus payments the government has seemingly accepted at RBS is £ 1billion more of loss for the bank, £1 billion less the government can spend on something more worthwhile in the public sector. There is no magic money or special pot money for the banks. It is all ultimately a caim on the poor taxpayer, who is under the cosh of excess government.

The Labour government is getting several of the things it said it wanted, but discovering they are not what they were cracked up to be

They said they wanted homes to be more affordable. Now they have house prices in free fall, they are not so sure it was a good idea.

They said they wanted fewer lorries and cars on the road. Now a deep recession is bringing that about, they are in a panic about it.

They said they wanted to balance up north and south, to stop the south outpacing the north as it did in the credit boom years. Now the southern economy is being sandbagged by the credit crunch the government is worried by the impact.

They said they wanted us to generate less CO2. Now our industrial demand is collapsing, the CO2 output will contract. They are no longer so keen to bring it down, if that is what it takes to do so.

Now we the taxpoayers are paying, there should b e no discretionary bonuses at RBS. The senior executives with contractual bonuses should be asked to forgo them in view of the collosal losses.

If you own a business you are responsible for appointing the management, for deciding how to remunerate them, and setting them objectives. As the taxpayers representatives the government has a duty to tell the nationalised banks what their aims are, who will run them, and what we will pay them. They cannot deny all power or involvement. That’s a stupid cop out.

It’s none of the government’s business how much Barclays pay their staff or how big their bonuses are. That’s still a matter for Barclays shareholders as they refused taxpayer share capital. Barclays made a profit and can afford to let staff join in the success.

At least there has been recent briefing from RBS that they are at last going to slim the Group down to cut taxpayer risk. Let’s hope the government backs this or even encourages this. Or is this further evidence of banks we own but do not control? Was this a spontaneous policy on the part of the new management, quite unconnected with the interviews and job offers made? What is UKFI doing in all this to earn their bonuses? What guidelines are they setting RBS? I of course as an MP am not allowed to know, as my questions on it are blocked. People should not be so surpised. Many of my questions on all sorts of subjects relating to public money are blocked, and many of the ones that are allowed do not receive anything a normal person could call an answer. It’s just the way this government treats Parliament.

They are looking at cutting back the size of the investment banking activities substantially, as they should. They are looking at disposals of overseas activities. The sooner the better, as we need to get the bank down to a size the government can manage, before completing the return of the viable parts of the business to the private sector.

Meanwhile the Chancellor kicks bank bonuses into the long grass of a year long review. Why is it so difficult to accept the consequences of his mistaken nationalisation of RBS? Why can’t he come out and say as owner he wants to sell it off bit by bit as quickly as possible before it does more serious damage to the public accounts? And in the meantime there will be no bonuses for 2008, because the bank as a whole lost a stunning £28 billion and needed public money to preserve all its jobs. Cross examining past senior people from failed banks is not going to pay the bills. They walked away with their past bonuses intact. I do not ant my constituents having to pay more tax to subsidise highly paid bankers in loss making banks.

The Unions are right to be worried about the future of British car manufacturing capacity. They are not necessarily right to say we need to preserve the capacity and the model ranges we currently have. We need to export more vehicles.

Even at the height of the over borrowing in 2007 the world had too much car capacity. Many of the west’s factories were geared to selling expensive and complex vehicles to the successful and to the affluent in the west. Some manufacturers concentrated on selling second and third cars to the very rich. Volume manufacturers often specialised in company car products to middle managers or ever more sophisticated vehicles to discerning individuals who could get access to large car loans. These markets are badly damaged by the end of easy credit, and may not return to their former levels for a long time.

The car market is a good illustration of the imbalances that bedevil the world economy. In the east are millions of people who have never owned a car. Many of them work very hard for low wages. A sophisticated and expensive vehicle is way beyond their dreams and current capacity. They would like the chance to buy a simpler, cheaper more rugged vehicle suitable for their pockets and local conditions. The Indian industry is now experimenting with just such a product.

In the west are millions of workers with cars, who are now finding it difficult to take out the loans to buy more modern and better specified replacements. When people fear for their jobs they rein in spending on cars. When banks are stretched, cutting down the car loans is an easy option for them.

The industrial renaissance of post war Germany in part revolved around production of the Beetle. A simple relatively cheap car became a popular icon, because it was affordable and reliable. Asia needs several such products to lead the expansion of domestic demand for cars. Is the west’s industry going to come up with something, or is it going to ignore that opportunity, watching the switch of leadership from western to eastern car companies?

Come to think of it, some smaller more fuel efficient cheaper products could go down well in the West as well. Many retired people, unhappy with the attack on their savings, might be persuaded to buy a realistically priced run about from some of their savings before government policy destroys more of its value.

The industry has to rethink its strategy. The Western regulators also have to take on board that their many requirements have been adding cost and weight to Western vehicles, putting them out of reach of many people round the world who would like to buy a car.

UK government policy is to cut private sector living standards for many, by increasing taxes, increasing borrowing from private sector savers, and slashing interest rates on money saved. That means we will not be able to buy so many cars.