When Mr Clarke yesterday called a manifesto promise and a firm policy pledge an “aspiration” the BBC and Labour went into overdrive. Here they hoped was manna from heaven. Here they drooled was a major Tory tax war, here they salivated was proof that Clarke was taking over as Shadow Chancellor, here was an opportunity to portray the Tory party badly. My phone kept ringing as programmes promised me cameras wherever I was if only I would denounce either Clarke or George Osborne, or would say something to turn a wrongly chosen word into a major row.

I explained to them with growing irritation that nothing had changed in Conservative policy. Mr Osborne is Shadow Chancellor and he had made the position quite clear in 2007. Mr Clarke should have said it was a promise, not just an aspiration, and would say so shortly.

The fact that the BBC thought this single misplaced word to describe a well established policy was a leading news item tells us a great deal about how the BBC runs its news services. In the meantime they cancelled the offer of an outing on the Today programnme for me to explain a better way of tackling broken banks this morning, despite the Sunday Express article setting it all out again and other media interest. I was offered a slot and probably a radio car to make it easy if I would build their non story about Tory tax wars. That was an easy one to call!

The problem with seeing politics as just a media strategy is you have to keep appearing on more and more shows, and finding different things to say to keep the audiences interested. It can also lead to media blunders, as it did with the unfortunate remarks about disability. Such “events” come to have more significance for some in this media age than the realities of bad government and failed policies which affect millions of lives. That’s an argument for not doing so many of these media fests, and for spending more time behind closed doors trying to work out what to do.

Yesterday the President seemed to announce a vital change of approach to Afghanistan in an interview. Wouldn’t it have been better to have worked out with his team how and when they can get out of Afghanistan first? What has happened to the strategy on which he fought the election of reinforcing the positions and intensifying the fighting? And why did he say Iraq was easier, when I thought he had been against Iraq?

As somone who has always wanted to see the UK get out of Afghanistan, I have never called for us to reinforce the position or implied that more fighting will suddenly transform the position. The President is the crucial man who will determine the tempo, purpose and success of this long and worrying war. His statements can put lives at risk. They need to be thought through, and are often best uttered after he has taken the necessary actions.

The same is true of his economic strategy. We learn that this week he is going to spend another half trillion or was it a trillion on bailing out bad banks and other financial institutions. Is there no limit to the amounts he will commit to this? Is there no sense of any danger, or that taxpayers might reach the end of their credit worthiness?

The President talks well and understands the mood of the country. That is fine, but he needs to govern well, otherwise his talk will not be believed. Spin is just spin, unless it accurately reflects what is going on.

Today I would like you to spare a thought and a few billion for the public sector fat cats. They have been going through a miserable time lately.

Fred Goodwin has been pilloried for his noble action in creating the largest loss making bank in UK financial history and for delivering it safely into the public sector.

Chief Executives the length and breadth of local government and quango land have been subject to abusive intrusions in to the privacy of their rewards by the Taxpayers Alliance, the Redwood website and others. They should be supported for increasing the costs of public services year after year, for keeping productivity down, and for tirelessly recruiting so many extra administrators, spin doctors, regulators and management consultants to help them. We need all the jobs we can get in a recession. One man’s productivity gain can be another man’s job loss.

Senior Regulators have been criticised for failing to stop abuses like sub prime mortgages, food poisoning and hospital infections. We need to stop these unrealistic expectations of these dedicated workers who have done so much to spread the box ticking passport carrying culture into every business and home.

All the public sector fat cats have been subject to criticism by the Leader of the Parliamentary Opposition.

Never a day goes by without some further assault on the rewards and further questioning of the work and performance of these important people. Worse still, Ministers who struggle to stay on the public fat cat list because their pay is so low, are assaulted for daring to fill in expense claims to keep them up there with the people they appoint and fail to supervise.

So today, I ask you to be generous. The fat cats need your tax contributions, and they need your sympathy. Never have so few been attacked so much by so many. So spare a few more billion. Your public sector banks need your help. Your public sector Chief Executives need their mega packages and their ample support staffs. Your Ministers need their housing allowances.

In between their bouts of overspending and money printing, the PM and Chancellor have set out their latest political wheeze to upset the Tories.

They propose a 45p tax on earnings over £150,000 a year. Their left wing is delighted. If the Tories oppose it they can say the Tories are the party of the rich, tone deaf to the mood music of a recession hit nation. If the Tories accept it they can claim the Tories too are tax raisers. They imply the tax can fill the massive hole in the nation’s finances, with no pain for everyone else. If only.

I thought George Osborne was wise to duck this simple bouncer today. He should settle his income and other tax levels once he has taken office and has worked out the full mess he has inherited. The Conservatives have no need to make this silly stunt a big issue. They should make the stunts the issue instead.

Let’s point out that it is Labour incompetence with the public finances that has left them needing higher taxes. Let’s point out that if you confiscated all income above £150,000 you would hardly notice the dent in their whopping deficit in the first year , but you would notice the further erosion of the wider tax base as successful companies and entrepreneurs fled the country in subsequent years.

All the Tories need say is they are the party of lower taxes on effort and savings, as we will need more of both to turn this economy round. There is no need to walk right into Brown’s silly trap. We should carry on pointing out the magnitude of the debts and deficits, and the need to control public spending to start to turn it round.

I should point out that Labour’s tax trap soon brought me a phone call from the BBC. Would I like to go on to condemn the 45p? If I said yes, that would make the story “Tory tax wars”, which they would love. Meanwhile yesterday an offer to appear on Newsnight to discuss the debt petered out without any explanation before I had the details of time and place, and an accepted offer to do the Today programme this morning on the same subject was cancelled. Was it something I said, or something I would not say?

How much more will the government have to borrow next year?
Lots

Does it matter?
Yes it does.

The government only has one policy to get out of this mess – spending more. They will spend and spend, to the limits of their ability to borrow and print it.
There is one huge problem with this. We have to pay the money back with interest. It’s just one enormous delayed tax bill.
I am all in favour of paying some tax to make sure we have enough good teachers, nurses and doctors, and to make sure the disabled are looked after and the unemployed have some help
I am not in favour of paying more tax to make sure the bankers have their bonuses, the spin doctors can lie some more to us, the quangos can carry on regulating the wrong things in the wrong way. I am not in favour of unelected regional government, a lot of quango government, and the growing army of officials intruding into our daily lives. That does not make us richer, it makes us poorer. If we have to borrow to pay for it, it is even worse. The government should get a grip on it now, before we drown in a sea of debt.
The Chancellor wrongly told us that he would only borrow £78 billion this year, and many in the media have obligingly reported that, seeing next year as the difficult high borrowing year. The actual figures the government published said they would borrow £157 billion THIS year, or well over 10% of our National Income. It now looks as if next year could be even dearer. All of these numbers of course are dwarfed by the huge liabilities now heaped on the taxpayer by the government’s irresponsible approach to supporting the banks.
Taxpayers are standing behind more than £500 billion of casino bank. How much more will that lose before they call time on it? Taxpayers are standing behind mountains of corporate and mortgage debt. How much more are we going to lose on that?
The authorities refusal to cut interest rates and ease money in the summer and autumn of 2007 will cost us dearly. This site called strongly for a different policy at the time. As the authorities persevered with driving by looking in the rear view mirror, it was bound to be a big crash.Recent news on the state of the real economy shows how big it is. That in turn means a further nose dive in tax revenues.
Still the BBC said this morning the Chancellor is “doing his best”. I don’t recall them saying that about Conservatives. The question they should have asked, if that is their view, is “Is his best good enough?” And “Can we afford it”.

Mr Mandelson said tonight that the government is not a bail out fund.

He was talking of the car industry.

Meanwhile down the road at the Treasury that is exactly what the government is – a bail out fund for mega banks which have lost mega bucks, still wanting to pay their top employees mega pay.

The contrast in treatment between the car makers and the banks is exteme.

When will they stop being such a soft touch for the banks, to put some fairness into the situation, and to put some discipline into those banks?

The Fed has now joined in the fun of printing money and buying up its own government bonds, to try to reassure investors that all is well with the world. Monetarists assure us that this will create more deposits in banks, which in turn might be spent and start to lift the recessions. That would be good news indeed. If you hurl enough money at a problem, someday some of it might start to do something useful depite the broken banks and the falling property prices. The monetarists are right to say people and companies are short of money. It’s deposits they need more than bank loans, turnover businesses require more than working capital bank facilities.

My worry is that on both sides of the Atlantic the governments are trying this at the same time as running collosal government deficits, and issuing huge quantities of bonds to pay for them. Markets are being told that buying different government bonds is a “flight to quality” which can never be criticised. Those who think this have not read their history books.

History tells us that many countries have in the past defaulted on their public debts when the burden becomes too great. It’s not just the well known South American villains who have let the international money lenders down. Countries like Spain, Japan and Germany have also been serial offenders if you go back far enough. The UK and the US have not in the past cancelled obligations or refused to pay interest, but they have often inflated their way out of the full rigour of the repayments, paying the lenders back in depreciated dollars or pounds.

Even if this time round they do prevent a return of high inflation and meet all the repayments, it is still possible to lose money fron a “flight to quality” if you buy a long bond on too low a rate of interest. There can be bubbles in gilt edged securities, as well as in properties and private sector shares. One of the problems the Japanese encountered when trying money printing in the 1990s was deciding how quickly to withdraw the cash once it seemed to be working, to avoid triggering a great inflation. They also discovered that if you did not first mend the banks, it was difficult for anything else to work.

It is worrying how quickly the Obama administration has been bogged down by the Credit Crunch. They try initiative after initiative, just like the UK, allowing nothing to work through. At the base of all this trouble is the obstinate refusal of the authorities on both sides of the Ataltnic to take a tough approach to the broken banks and financial institutions where the public sector now has a significant investment. It is causing political pressures for the politicians, who seem incapable of finding the people to sort out these broken and badly run organisations. The financial sector living on public sector subsidy is living well beyond its means and failing to sort out its businesses quickly enough. The result will be more losses, more bad news for taxpayers, and more anger about the remuneration of the executives responsible.

Mr. John Redwood (Wokingham) (Con): Let us first of all get rid of some of the nonsensical soundbites that the Government offer in substitute for serious analysis and debate. I am glad that the Government no longer talk of “no more boom and bust”. Even they see how absurd that is, but it is disappointing that they still tell us that they made the Bank of England independent. As my right hon. and learned Friend the Member for Folkestone and Hythe (Mr. Howard) explained, the Government did grave damage to the Bank of England, which we highlighted at the time and continue to highlight.

In the report by the group I chaired, which the Govt often misquote, we made a big thing about how the Bank of England was gravely damaged in 1997, which made it very likely that when a crisis struck the Bank would be unable to handle it properly. It was damaged not only by the removal of responsibility for financial regulation of the clearing banks—something that a central bank needs to do so that it knows the day-to-day positions and the true financial state of those banks—but by the removal of the responsibility to manage public debt. Anyone who understands money markets knows that public debt is the life and substance of the money market. The Bank of England was blind and deaf in its own money markets, because it was no longer in daily contact with clearing banks—one side of the equation—and nor was it handling minute by minute the Government debt requirements. No wonder it made an awful mess of the money markets in 2007 and 2008. No wonder it was not sighted in the massive credit explosion that the regulators allowed the banks to perpetrate, and that created this immediate crisis.

We now have two more soundbites substituting for serious policy and analysis. One is that this is a global crisis, as if in some way that excuses the Government of all responsibility. Their refusal to understand that we have a worse version of the crisis than others is extremely depressing. Their refusal to admit that the global recession is happening for different reasons in different places means that they will find it very difficult to tackle the problem here in Britain. They do not seem to understand that the crisis is very different in Japan, Germany and China—the successful saving and exporting countries—from the crisis in Britain, the US, Ireland and Spain, the over-borrowed, over-extended credit countries.

The exporting countries merely face the very serious problem that their export markets are temporarily very badly damaged, but they have strong fiscal positions and strong savings, while the heavily borrowed countries have a double crisis. We have the downturn in activity, like the successful exporting countries, but we also have extreme credit crunch problems, meaning that we do not have the financial flexibility to pump up our economies and return to previous levels of activity. The levels of activity reached in 2006 and 2007 were unrealistic, and were sustained on a sea of debt and those funny instruments that were allowed by the Government’s regulation.

The Government now say that the problem was created by deregulators, as if a deregulatory Government had been in charge in Britain for the past 11 years. However, never has more regulation been put on the statute book than in the past 11 years. Every feature of the financial regulatory system that they inherited was taken apart and recreated with far more cost, far more expense, many more regulators and far more complexity. Anything that has gone wrong on their regulatory watch is the result of their style and choice of regulation, and it certainly was not deregulatory.

What we said in our economic review, which Labour Members love to misquote, was that we needed stronger and tougher regulation of banking cash and capital, and that that had to be done by a reunited Bank of England, which saw all the business and the money markets and understood them. We said that we did not need the new regulation of mortgage process that the Government had introduced. If we needed proof of that, we need only consider that we have had more mortgage process regulation than this country has ever known at the same time as we have had more dodgy mortgages than this country has ever known.
Mortgage process regulation does not stop credit over-expansion. It does not tackle a credit crunch. I find it very odd that intelligent Ministers cannot understand that point; perhaps they deliberately misconstrue it. It seems so obvious to me that they were regulating the wrong things in the wrong way and that they were not doing what a regulator should do. When businesses can extend credit and lend lots of money to people and companies, we should control their cash and capital to ensure that they are prudent.
The massive expansion in bank balance sheets should have been ringing alarm bells by 2004-05 in the Treasury and with the Chancellor, let alone in the Financial Services Authority and the Bank of England. It was ringing alarm bells on the Opposition Benches, as we have learned today. I shall not treat the House to loads more quotes or say that we saw all this coming, as that does not matter. What does matter is that the Government did not see it coming. They were not listening, they were not watching and they were not carrying out their prudential activities sensibly and well.

What should the Government do now? They are making a worse crisis now than the one that they are talking about. We know about the over-expansion of credit, and they do not talk about how they brought that to a grinding halt in a very damaging way—that was the second part of the crisis. We might go into a third crisis if they do not control the public accounts and the public obligations sensibly.
There are huge disputes about what should be factual matters. It seems very clear to me that this country is massively indebted in the public sector, and that that debt has expanded many times in the past two years as a result of the policies that the Government have been pursuing, both through their running of large deficits and, more importantly, through their very expensive policies of support, subsidy and guarantee to the banking sector.

Let us look at the figures. The Government admit—I think—that there is public borrowing of about £700 billion. If we add in private finance initiatives, public-private partnerships, Network Rail and some other off balance sheet liabilities, that figure is about £1 trillion. I hope that they would accept that figure.
There are, too, about £1 trillion-worth of unfunded pension liabilities. The Government can say that it is not convention to put them on the balance sheet in state accounts, but it is convention to put them on the balance sheet in the corporate sector. Indeed, it is a legal requirement to do so—imposed by this Government and strictly enforced. The hon. Member for Twickenham (Dr. Cable) might think that I have made a mistake and I am misrepresenting those figures, but I assure him that pension liabilities are liabilities of the state. They represent money that we do not have and that we have to pay out.

On that basis, the figure is £2 trillion, but to get the Government’s true financial position we then have to add something for the banks. If we took on the Government’s private sector accounting rules, we would have to put on the balance sheet the gross liabilities of the banks that we have bought, in the proportions of the shareholdings that we have acquired. That would add another £2.5 trillion—for the banks, the liability is £3 trillion, and we own most of that. That adds up to £4.5 trillion.

Of course, those banks have some assets. I am pleased to say that we will not lose £2.5 trillion, but I fear that we will lose quite a lot of money on these banks. We have, after all, already lost £24 billion in about six weeks on the RBS shares that we bought, based on the losses that RBS has had to report after the shares were purchased. We have lost £10 billion on the HBOS shares that we have bought so far, based on the losses that HBOS has had to report through its profit and loss account. The losses on the shares, based on the current share prices, are similarly very large figures. We can lose a lot of money on this.
If Government Members still do not like the idea of putting those gross amounts on the balance sheet in the way that a company would, why not put on the specific guarantees, subsidies and injections, which would amount to about £1 trillion?

Mr. Brooks Newmark (Braintree) (Con): The Chancellor has asked the banks to be transparent in their accounting only this past week. Is this not a case of “Don’t do as I ask; just do as I do”? The Government should at least be making what is going on off balance sheet as well as on balance sheet far more transparent.

Mr. Redwood: Of course they should. The Government should not think that everybody outside in the real world is a fool. The outside markets and commentators are already adjusting for all these figures anyway, so why do the Government not get real and accept that they have to introduce them?
Mr. Bone: Is it not a fact that international accounting standards require them to do so? There are no ifs and buts—the Government have to consolidate.

Mr. Redwood: The Office for National Statistics is going to demand quite a big recognition of these banking risks. That recognition may not be for the full amount that I have suggested, but it will take our total indebtedness as a country, as defined by the ONS, to well over 150 per cent. of national income. That is well above many comparable countries around the world that have not blundered into so much bank ownership as this country has through the actions of the Government.

What should the Government do to start to cut the risk? First of all, they must recognise that the risk is colossal and that, if they get it wrong, taxpayers could be left hopelessly stranded and have to pay enormous losses. They must recognise that house prices are still falling, that the mortgage experience is deteriorating and that there could be more bad loans than we know about. They must recognise that the corporate sector is in deep trouble—I fear that there could be many more bankruptcies in the months to come—and that corporate loan books are still deteriorating at a terrifying rate.

For some unknown reason, the Government have made the taxpayer stand behind all those problems. Although a central bank must make sure that a main bank does not go under, it should do so through short-term lending. It should act as an intelligent bank manager and tell the bank involved to cut its costs and risks and to close down its casino banks. It must tell that bank to stop paying people £200,000, £300,000 or even £400,000 a year when they are making colossal losses that the taxpayer has to stand behind. It is grotesque that we, the taxpayers, are now expected to stand behind people who want to earn £200,000, £300,000, £400,000 or £500,000 a year, with pensions to match, even though their banks are loss making and need state capital and subsidy to survive.

I am a well known exponent of free enterprise capitalism. I am all in favour of people in the private sector getting great bonuses and lots of money if that is what they deserve and if they do it in the normal way, but I also think that they have to live with the downside. High rollers who get it wrong should get no benefit from doing so, and it is deeply offensive to many people in this country—and I am sure, in their honest moments, to many Labour MPs as well—that this Government are far too generous with the subsidy and capital that they give to the broken banks. The result of the Government’s actions is only that there is a delay in adjusting those banks and getting them sorted out so that they are in a position to behave normally again.

The banks involved cannot be subsidised into lending more: they have to be sorted out to lend more, and that means getting rid of the rubbish. They must sell some of their foreign banks and some of the assets that are good so that they can get cash to do something with. There has to be a patient and difficult case-by-case analysis of every loan on their books, and there also has to be some intelligent banking to see how many people can be got through the crisis and how many unfortunately cannot. For the latter category, it may be better to close the loan down quickly before there are more broken dreams and more lost money.
The Government will find out—as I think that they are beginning to do—that owning something means being responsible for it. By all means let us have intelligent and able people who are not politicians or civil servants running the banks that the Government own on behalf of the taxpayer, but they have to do so according to a sensible and understandable remit from the Government. They are not being given that remit, even though it should be very simple: cut the risk and the losses, get us out of dangerous things like investment banking activities, sell some of the good overseas banks because we need the money and should not be standing behind them.

The Government have placed the country at grave financial risk, financially. They were warned, but they ignored the warnings. They blundered because they regulated, and over-regulated, but they did not regulate the thing that matters. Will they now please concentrate on the thing that matters? That is that we now have, on the taxpayer’s account, two broken banks that are bigger than the national income. Do the Government understand how risky that is? Will they issue immediate instructions to cut the risk? Will they understand that the British people will not put up with, or be grateful for, paying enormous salaries to people for doing the wrong things in broken banks that then lose us a packet?

The proposed migrant tax on immigrants from non EU countries is a typical response of this government. It tackles a problem of the government’s making in the wrong way.

Why has it come forward now? Because the polling shows them that people are very worried by immigration on Labour’s watch. Many people think the government should have controlled our borders better, keeping out people who might be a threat to the state, and controlling the overall numbers. Labour has to face the European and Council elections, which gives voters a chance to express their dismay with the current situation. They are spinning a new initiative to give some cover to “British jobs for British workers” which they famously and misleadingly offered recently.

Why is it a tax? Because they need the extra money, and here is another group of people they think they can tax without existing voters getting angry about it. It is always another tax or another regulation with this government, usually with an extra quango thrown in.

Why don’t they control the numbers coming in more effectively, which is what many people have wanted them to do? Because then they would not be able to tax them on the way in, and would not be able to recruit them in to the ever expanding public service workforce. They have found this easier to do than to train and incentivise more people already living here to do these jobs.

Why doesn’t it apply to people coming in from the EU? Aren’t there queues of people trying to get here from Calais, and isn’t Calais in the EU? Because the government stupidly gave away control over our borders with the rest of the EU against Conservative advice and votes, and now cannot control these borders without getting the approval of our partners. Clearly Labour does not think they have enough influence with the rest of the EU to deliver the changes we need. The obvious thing to do is to take the power back to control our own borders in the way we wish, but don’t expect them to do that.

Why doesn’t belonging to the Commonwealth mean anything any more? Many people in the UK deeply resent the idea that people from Australia and New Zealand, from the West Indies and Canada, are treated less well than people from the EU. Why isn’t India treated better, as she becomes one of the new great powers of the world? We have special cultural, historical and kinship ties with many people in Commonwealth countries. And why didn’t Mr Brown tell Americans when he addressing both Houses of Congress that the special relationship did not extend as far as to exempt Americans from a new “you are not welcome” tax for migrants?

Lord Turner is an intelligent and hard working man. He is untainted by the failures of the bankers and their regulators over the last giddy decade of excess credit. Let us hope he shows some wisdom in responding to the present crisis, and let us hope he understands that Regulators have to look ahead. The issue today is not how we stop the last crisis, but how we stop the next one. It is likely to be different from the last one.

Leaks imply the authorities now think banks should be made to hold more in cash and government securities. They should ask themselves why they want to feed the bad habits of the last heavyweight debt junky left on the bloc – the UK government.

Shouldn’t the Regulators be warning that the next problem could be a government debt problem? Shouldn’t they say to banks that lending to the UK government at very low interest rates has in the past been a very unrewarding pastime. It is true the government may print enough money to buy enough of its own bonds to drive the prices higher in the short term. But won’t there be a day of reckoning? Doesn’t the turbo buying have to stop at some point? What happens then? Couldn’t the banks all lose money if they hold too much government stock bought at high prices? How does that strengthen them?

Leaks also suggest they want to impose a limit on lending to people buying homes of three times income. They are right to think that interest rates are going to have to go up again. It would be wrong to calculate how much mortgage people can afford based on current low rates of interest.
A three times limit is well below the limits banks and Building Societies have been applying in recent years. It implies the authorities want to see a further substantial fall in house prices.

There is a case for driving prices lower again. Some of my correspondents have made it, saying it is high time homes became more affordable. A young person or couple starting out today still faces a house price mountain to climb to get their first owner occupied home.

Such a policy also means further distress for the banks, as lower house prices will leave many more mortgage loans they have made higher than the value of the property which is their security. It means weaker banks for longer, as the adjustments take place. That in turn means fewer mortgages, driving the price of homes down further. It means fewer jobs – fewer jobs building homes, and fewer jobs elsewhere, as lower house prices means lower consumer confidence.

One thing we can do without is yet another regulator, the Euro regulator, coming in to the game on top of everything else. We need simplicity and clarity, not more expense and more complexity. One of the worst features of the banking world in recent years in the UK has been the lack of choice and competition on the High Street for our banking business. More levels of regulation will mean more barriers to entry, and even less banking choice.

Would counter cyclical regulation of banking cash and capital be a good idea? Asking banks to have more capital in the good times, to protect them in the bad times? Yes it would. Will the Regulator be able to judge the cycle? Time will tell. The Regulator will be more likely to get that right if he is not trying to do too many other things as well. The problem with counter cyclical regulation is you need to be able to read the cycle. That was clearly beyond both the banks and their regulators in recent years.

By definition the regulators will not stop the next crisis. By seeking so many ways to stop the last one happening again, they will doubtless be looking the wrong way for the next one.

Last week the Opposition wanted to use one of their days to choose the business of the House to have a debate on the economy. They were told the Chancellor was not available.

They agreed to debate something else, and to debate the economy today instead. The Chancellor I hear still refuses to come.

Meanwhile, today is the chosen day to feed to the media the dreadful news of the Staffordshire NHS.

If the government is really proud of “doing what it takes” to tackle the economic crisis why will it not do what it takes to put the message across in the Commons? And why is it so reluctant for their conduct of economic policy to lead the news today?

I have been sitting by my phone waiting for the BBC invitation to give an interview on the state of the economy, but so far it hasn’t rung!

The Credit Crunch has brought a rash of moralisers onto the media to condemn the immorality of bankers and capitalism. My advice to all who feel a strong urge to do so is to remember the Christian injunction, let he who is guiltless throw the first stone.

The moralisers think the crisis is an easy story. A small group of very greedy bankers lent too much so they could pay themselves huge bonuses. The answer recommended by these self appointed national preachers is equally easy. Nationalise the banks, and in some magic way lending too much and paying bankers too much will no longer be possible, whilst at the same time the economy will miraculously grow again. As we have seen, the nationalised banks still seem to pay large pensions and salaries to people working for loss making concerns, whilst the government itself decides it and its nationalised banks need to lend and borrow more, not less. Meanwhile the economy goes from bad to worse, with all too many people losing their jobs or their businesses.

If lending too much was greedy and wrong, wasn’t it also wrong for so many people to borrow so much, especially if they cannot now repay it and are going to walk away from their obligations? Who was more guilty – the lender or the borrower?

If the bankers who did the lending were greedy and wrong, weren’t the shareholders in the banks similarly guilty as they were happy to receive the dividends from all that excessive lending? Didn’t that include most people in the country? The Church Commissioners who pay the clergy salaries doubtless owned lots of bank shares, as did practically every pension fund in the country. I don’t remember them speaking out at Bank shareholder meetings asking for the banks to grow less and pay smaller dividends.

If the bankers who did the lending were immoral, surely the governments and Regulators who allowed them to do so by signing off their balance sheets and business plans were also wrong? Weren’t they employed as upholders of public morality, and didn’t they set the tone for the age of irresponsibility?

And if it were morally wrong for us collectively to borrow too much from the private sector, isn’t it even more immoral for us now collectively to borrow staggeringly larger sums through the government, as we are being forced to do?

It it were immoral for the authorities to sanction so much easy credit in the good days, wasn’t it even more immoral for them to bring the whole system crashing down in the bad days, by hiking interest rates too far and by demanding the banks suddenly held more capital? Why is too much private sector credit immoral, whereas too little private sector credit is moral? And why above all is too much public sector credit moral? Is printing money the height of morality and responsibility, a new kind of public duty, as some now have it?

I think it unwise to make this a morality tale. I could take no pleasure in thundering against the immorality of one or two scapegoat groups. We all lived through the age of private sector irresponsibility, and are now all having to live through the age of government financial irresponsibility. It’s a very one sided morality which condemns lending too much but does not condemn borrowing too much. It’s even more bizarre that over lending only matters if it is done by a private sector bank but is encouraged if done by a nationalised one. If lending and borrowing to excess is immoral these moralisers should be on the airwaves condemning the excess of public debt now being built up on a scale which dwarfs the credit boom of 2003-7.

I have expressed my strong concerns about the way in which the government is combining printing more money with borrowing to excess and putting so much of our money into damaged banks. I want them to cut our risks in bad banks, and make those banks sober up and sort themselves out. Giving them too much money too quickly just delays the day of reckoning.

Mr. John Redwood (Wokingham) (Con): What, if any, should be the limit on the amount that the UK Government print and borrow to avoid a run on the pound, a debt crisis or a trip to the international moneylenders?

Mr. Darling: If the right hon. Gentleman is referring to quantitative easing, he knows that I set out limits in the publicly available exchange of letters between me and the Governor of the Bank of England the week before last.

When I asked the Chancellor yesterday in the House if there is some limit to how much the UK government can prudently borrow and print, he was reluctant to answer.

I pointed out that if we flex the state credit card too much, we could face another run on the pound, or a buyers strike on public debt, or need a trip to the IMF or some other international money lender.

I was giving him an opportuntiy to reassure us all that he was in control of the build up in public debt, and that he had worked out the maximum limit that was safe. I would have welcomed a number in his answer as well as some reassuring words.

Instead he decided to answer only half the question, the bit about how much he could safely print, and ignored the other half about how much he could safely borrow. He confirmed that the current printing programme was reasonable, without specifying if that was just the first £75 billion or the whole £150 billion. Treasury sources, I am told , don’t have a clue how much it will take.

I suspect, along with many other commentators and the markets, that debt is running well above the levels set out in the Autumn Statement. We should also remember that the Chancellor on that occasion persuaded most people that he was just borrowing £78 billion this year, when the figure hidden at the back of the FBR was twice that. Come the budget he will have to give us more plausible updated figures, revealing the true horrors of the position.

The Prime Minister we read is keen on yet another fiscal stimulus for the economy at Budget time. That’s code for printing and borrowing more. Yet even he has chosen some more careful words for his Guardian interview. Maybe the Chancellor is at last showing some independence and is trying to warn the PM that there do have to be limits to how much they can borrow.

It is mystifying to see people roundly condemn too much borrowing by the private sector in the past, only to do the same on an even larger scale in the public sector and think there is no price to pay.

Click here to read the exchange between John Redwood and Alistair Darling from Hansard.

I have always been more interested in how we get out of the present mess than in how long it will take to wring an apology from the saviour of the world.
The Guardian interview is, we are told, a kind of apology. The PM accepts he was responsible – well that’s progress. He regrets that he did not “mount a popular campaign ten years ago to demand more responsible regulation of the world’s financial markets”.

There’s a clever wriggle. In one bound the apology becomes part of the spin to tell everyone that this is a global problem, with the implications that the problems lay elsewhere and to underline that the PM himself was right all along in his thinking.

It’s too clever by half. It won’t wash. It shows he still does not understand.

Let’s try once again to explain it.

Northern Rock, RBS and HBOS were all British banks, controlled by British Regulators.

The British regulators had the power to require those banks to hold more capital and cash if they thought that necessary. They did not do so. The British Regulator signed off on the Northern Rock business plan.

The damaged Bank of England, undermined by the Brown reforms, the very same bank that is now printing fivers in desperation at the shortage of money, was lecturing the banks that it was their fault the money markets had no money in August and September 2007, when they helped bring on the crash. The British competition authorities could have stopped the mergers which created mega banks. The size of RBS made it an especially difficult case to handle, and the merger of LLoyds with HBOS damaged LLoyds needlessly and badly.

This crisis was brought on by bad regulatory calls as well as by greedy senior bankers. The supervision of banks, as the Chancellor reminded us yesterday in the House, is primarily a matter for the host country of the headquarters of a global bank. In the cases of RBS and LLoyds/HBOS that was and is the UK.

The Prime Minister today is proposing to help Iran build civil nuclear power stations to tackle global warming.

I wonder how he will find the money to do that, given the tightness of budgets? I also wonder why he thinks the the way to tackle global warming is to build nuclear power stations in the Middle East, when he could build them here at home instead.

He has told us – just as his predecessor did – that he wants a big debate on nuclear power before we have any more of it. Is that debate now over, as I must have missed it? When will we see them building new ones here, if he is so keen on them?

I met Chris Smith, the CEO and the Thames area Manager of the Environment Agency today to chase progress on the Winnersh and Wokingham Emm schemes, the need for a wider Loddon plan and projects, and to chase issues where there are still disputes over which agency is responsible. I will keep you all posted of their written responses which they have promised.

The government is taking too much financial risk. Taxpayers are being dragged further and further into massive debt.

A couple of years ago the government claimed that national debt was around £500 billion, or under £10,000 a head. This was understated. You really needed to add in the pension liabilities of the state, and the money borrowed under the so called Private Finance Initiative. Even a cautious accountant would have concluded the total was around the level of the national income, or say £30,000 a head.

Today the numbers have gone crazy. RBS has a balance sheet larger than the National Income. We the taxpayers now own most of it. That more than doubles the national debt if you add it to the state’s balance sheet. Meanwhile the government aims to borrow another £157 billion this year and almost as much next year on its current probably understated forecasts. The national debt and the state’s liabilities now add up to more than £4000 billion , or nearly £70,000 each.

The government defends this rapid run up in debts and guarantees on the grounds that there is no alternative. They say they need to underwrite all the big banks, and offer them as much as it takes. They also think they need to spend more than they collect in taxes on an ever bigger scale to “reflate” the economy. The banks after all have assets as well as liabilities.

So far there is no sign of either of these very expensive policies working. What should they do instead to get us out of this ever bugger economic hole we are in?

They need to offer the banks tough love. They should not rush to put so much money in. It just delays cutting the costs, writing off the bad business and sorting out the casino banks that the majors all added to their balance sheets for no obviously good reason. I do not want to see a major bank go under, but I do want to see government tell them to clean up their acts for themselves, with as little recourse to taxpayer loans as possible and no recourse to taxpayer share capital.

They should remember that spending more to “reflate” means the private sector spending less. The private sector either has to save more and lend them the money, or pay more in tax so they can spend more in the public sector. Neither way of paying for it is necessarily reflationary. It just intensifies the squeeze on the poor private sector.

The private sector needs more demand, more orders, more money coming in from customers,. It does not want more bank loans if there is going to be no improvement in demand, for that just delays bankruptcy a little and means the business ends up losing even more. If the public sector keeps on squeezing, that will make matters worse.

We need the government to understand there is no quick fix or magic formula. You cannot borrow your way out of a crisis caused by over borrowing. There needs to be intelligent and painstaking work to right the banks and right the economy. The government is borrowing too much to support the banks, and needs to stop.

There used to be a welcome consensus on charities in the UK. We all knew a charity when we saw one. If you were doing something to further education, or the welfare of animals, or looking after children, you were running a charity and you could claim tax exemptions.

Like much else which was traditional, lightly regulated and worked, this was not good enough for Nulab. Under them they pushed the envelope in two directions. Educational charities were challenged for being elitist, and had to jump through new hoops to keep their tax status. New charities sprang up, which some of you are calling bogus. Some of these new “charities” spend considerable sums on what looks like political campaigning, some through detached political wings and some in other ways.

Clearly there needs to be a new charity settlement which is fair and which works. I would like to hear from you about what types of things should and should not be qualifying activities for charitable status. Please don’t make the editing job too difficult by too many libels against existing institutions, however tempting it may be!

One of the most wasteful features of the modern life of an MP are the endless standard postcards and standard emails sent by well meaning constituents to get you to sign an EDM. On some EDMs you may receive dozens of exactly the same form of words, each one needing a reply. Constituents often do not realise how many of the same card you may be getting, and how futile the EDM game can be.

This has become an industry all of its own. Well paid lobbyists or charities design an EDM on their pet subject. They find a tame MP to table it for them. They then persuade as many people as possible to send exactly the same form of words to their own MPs, demanding they sign the lobbyist’s EDM. They imply to the constituents that if enough MPs sign all will be well, as if signing the EDM will resolve the problem or is in it itself an answer.

They never explain that there are thousands of EDMs in any Parliament. They are a kind of Parliamentary graffitti. They never explain that EDMs languish undebated, and are never voted on. Unless an MP sends the form of words to a Minister, no Minister need even read it , let alone respond.

A sensible MP takes the concerns of constituents seriously. That concern is is best expressed in the constituent’s own words, and best pursued in the MP’s own way. The EDM merry go round is all part of the spin world, where big money is raised to pay lobbyists salaries, who then play the EDM game to show they are busy.

If you want something changed you need to persaude the government to change it, as they control the business of the House and have the votes to decide the answers. MPs can help influence governments to do the right thing, but it takes more than an EDM to do it.

MPs and even Opposition parties do use EDMs from time to time – sometimes out of frustration that there isn’t a better way of raising the issue and getting some action, sometimes to congratulate the local football team.