We are now well into the Bank’s programme of quantitative easing. They have announced they will buy up to £125,000,000,000 of government bonds, with a few corporate bonds as part of the programme. The Bank’s own balance sheet, around £40,000,000,000 when the Rock crisis struck, was last seen at £215,000,000,000.

The Bank’s last report on inflation admitted it was still above target, but commented that given the large amounts of spare capacity in the economy and the downward pressure on wages and salaries, they expect it to go below target later this year. They did, however, go on to say:

“There is considerable economic stimulus stemming from the easing in monetary and fiscal policy, at home and abroad, the substantial depreciation in sterling, past falls in commodity prices and actions by authorities internationally”

There indeed is. The government hoped that the low interest rates and printing of money would push up government bond prices and make raising the borrowing easier. Instead, there has been an uneasy truce in the government bond market, with some worrying already about what will happen to prices once the stimulus is withdrawn. If the Bank started to sell the bonds it has bought in at the same time as the government is trying to sell more than £200,000,000,000 a year of debt, there could be a lot of indigestion in the market. In such conditions interest rates may be forced up.

It appears that a lot of the money being injected on both sides of the Atlantic is flowing more readily into shares and into commodities. That helps build a bit of confidence. It also helps raise the substantial sums some companies need to obtain from shareholders to repair their own damaged balance sheets. It is also inflationary, as oil moves from $35 to $60 a barrel.

UK inflation is still high owing to the large devaluation of the pound last year. We are still feeling the delayed affects of that, as businesses have to re-order from overseas at higher prices in sterling. It also gives UK businesses a bit mroe pricing power than they would otherwise enjoy in these weak markets. In the last few weeks the pound has performed better. Whilst there is no evidence that the UK authorities are trying to get the value of sterling up to dilute the inflationary effects, it probably reflects other major jurisdictions keen to see their own currencies lower for once. In this recession gripped world, many would like a cheaper currency to make exporting easier.

This is the easy part of quantitative easing. For a bit it creates a better mood without undue inflation. Then comes the difficult part. When do they have to stop it, before it does unleash uncontrollable inflation? How can they stop the easing without causing falls in asset prices and halting a recovery in activity? They need an exit strategy.

There are hints that they plan to hold the government bonds they buy for longer, not turning from buyer to seller, in an attempt to reduce the impact of their shift on the price of bonds. The government, however, still needs to sell bonds to cover the costs of repayment as they fall due. The impact may come down to how long a time gap there is between stopping buying up bonds, and when the big repayments arise. I expect the aim will be to delay the adjustment for at least another year. When QE stops on both sides of the Atlantic it will have an impact on markets generally. Asset prices today are higher than two months ago thanks to QE.

Conservatives like George Young and Frank Field as leading candidates. It is likely Michael Lord, a deputy Speaker, may run. Sir Alan Haslehurst, also a Deputy Speaker, is another possibility. These too could attract some Conservative support.

What matters more is how Labour MPs will vote, given the much larger number of Labour MPs. There does not yet seem to be a Labour establishment candidate. Labour MPs do not necessarily warm to Frank Field, given the independent and critical role he has performed in recent years. A couple I spoke too favour John Bercow.

Alan Beith has also said he would like to stand. I have not yet come across any of his supporters.

Well done to Douglas Carswell and to the Labour MPs who supported his motion. It was part of the process to change Speakers.

I hope readers can now see the wisdom of the judgement made by David Cameron and the front bench. If the Speaker was to go it was important he was not brought down by the official opposition party. He was brought down by a growing feeling throughout the House that he had to go. If he had not resigned today, more of us would have signed the Carswell motion, making sure the new names were balanced between parties. Every day that went by with the motion not for debate it would have weakened the Speaker further.

It was never possible to change the Speaker on Conservative votes. Labour had to see the case for change. Reluctanctly some of them did.

It is too early to say who will emerge. Frank Field and George Young are the current favourites, but there are several others who fancy the job.

Enough has been said in the press this morning about the Speaker’s performance yesterday. As feared he sought to tackle the issue of expenses, but could only say he would now discuss it with the there party leaders. He failed to tell us anything about his own position.

His Statement revealed yet another inadequacy in Parliament. Of course when the Speaker pronounces on a matter of interpetation of the rules of the House, or on a disciplinary matter affecting a Member, there must be no challenge to his authority, no questions to him to undermine the judgement. He is like an umpire or referee.

When he wishes to tell us his views on reform or improvement to the House, he is more like a Minister reporting on a department. In that role he should give a statement, then take questions in the usual way. He is not infallible on those matters, must gauge the mood of the House and be answerable to it. Yesterday he allowed a number of Points of Order. When one of these which strayed from Points of Order too far he declined to deal with it.

Douglas Carswell has now succeeded in collecting some Labour signatures for his motion of No Confidence. That is what is needed. As we were reminded yesterday, the Motion will only be debated if the government puts it on the Order paper. The government needs to see it is not just Opposition MPs who want that to happen. It should recognise that most Opposition MPs do want that to take place, and take place soon.

The Speaker’s Statement failed to reassure an unhappy House.

He did say he is calling in the party Leaders to try to reach an agreement on a new system for expenses. That is too little too late.

He did not say what his personal plans are. He was subject to a barrage of hostile Points of Order.

It appeared from the exchanges that the Motion of No Confidence has to be tabled by the government. All the forces of opposition in the House should make clear they want the government to do so.

If the government has any wisdom it will do so for tomorrow. If Labour wishes to retain this Speaker, they can then vote for him and he will have a renewed mandate of sorts. If enough of them now wish to change Speakers, he will go.

We then have an election for a new Speaker, under the new procedures of secret ballot.
If Labour use their votes wisely we will have a Speaker who can begin to lead us out of this mire. If they help the House chose badly, a new Parliament can always challenge the newish Speaker on its first day.

Sir,

Your story concerning my expense claims is wrong. I did not move the designation of my main home to sell a property in London.

In 2004-5 I was living in London in a house, paying a mortgage. I spent more time there. I rightly claimed on the constituency home as the second home, and the taxpayer’s interest was served by doing so as it was cheaper.

When I sold the London property I paid capital gains tax on it to protect the taxpayers interest.

Since 2005 I have lived mainly in the constituency, and have made that my main home. I have extended and improved that property at my own expense. I have claimed first for a rented flat, and more recently for a bedsit which I purchased in Pimlico. I purchased as this will prove cheaper.

When surrendering the flat I received a repayment of the deposit minus the last rent and services payment which I returned to the Fees office. I explained to them what I was doing. I cannot see what the issue is here.

Yours faithfully
John Redwood

We read this morning that the Speaker will today make a statement about MPs expenses. He should also make a statement about his own position.

Nick Clegg and the Lib Dems have called on him to go. Some senior Labour figures have expressed unease. The Conservative leadership have made clear that any motion of No Confidence is a free vote issue for Conservative MPs, and many are likely to vote against the Speaker. This is an unprecedented position for a Speaker to be in.

Along with most Opposition MPs I did not vote for Michael Martin to become Speaker. Many like me accepted the will of the Labour majority as our democratic duty. Instead of winning us over to his tenure he has lost support by the way he conducts the business of the House. Today he needs to tell us what is going to change, and what his own personal plans are. It cannot go on as it has been.

Had I been a Lloyds shareholder I would have voted against the merger with HBOS. At the time I called on the Competition authorities to block the merger, and advised shareholders to vote against it. We have now seen the huge losses of HBOS, and are beginning to see the damage it has done to Lloyds.

Sir Victor’s decision to step down in due course is a good one. UKFI, the holder of the taxpayers’ shares, now does not have to decide whether to support him. Lloyds/HBOS needs leadership that can root out bad business, cut costs, and stabilise the loan books. It needs to sell assets, raise some more cash, and concentrate on deposit taking and lending on a prudent basis. The architect of the last mega merger of the old era is not the right man to carry out that crucial work. Taxpayers need the reassurance that the bank is now going to be run on a more restrained basis.

Sir Victor was encouraged to do what he did by the government. I do not expect to see a Treasury Minister also announce their departure, or any apologies from them over their misguided agreement to this deal.

There is continuing worry about the ratification of the Lisbon Treaty, and rightly so.

Doubtless the EU will want to rush the ratification through in Ireland as soon as possible. They have sought to impose a November 2009 deadline for another vote and given various “assurances”. They must be well aware that David Cameron is serious about holding a referendum here if the Treaty has not been ratified and brought into effect by all EU members before the time of the next UK General Election. They must also be aware that there is likely to be a large majority against accepting the Treaty.

The EU realises that it is not going to be easy getting the Treaty agreed by the Irish people in time. There also remains the question of the attitude of the Czech President. The UK Conservative pledge to have a referendum if the Treaty is not ratified is an important one. Some of us have been desperate to have a referendum on any aspect of the EU over the last decade, as we have opposed the large transfers of powers in Nice, Amsterdam and Lisbon and wish to let the people have a say. We have been powerless at Westminster to stop the federalist rush, given the large federalist majority from the combined forces of Labour and the Lib Dems.

The Conservative leadership does not wish to spell out what it would do in the event of full ratification everywhere else. There is a good reason for this. You do not normally in politics set out your position on the assumption that you lose the next war. The Leadership would not wish in any way to undermine the opposition to the Treaty elsewhere in the EU by implying it is bound to be ratified in every other country.

We are left with the phrase, the Conservative leadership “will do whatever it takes” to deal with the problem. That must mean a renegotiation. There is not just Lisbon which Conservative MPs (with perhaps 5 exceptions) oppose strongly, but also Nice and Amsterdam which we voted against. Some of us still have disagreements with parts of Rome and other Treaties as well.

The big issue will be how many powers does the UK want back? How many opt outs and different arrangements do we need to add to the important opt out from the Euro which we already enjoy? Can we get control of our borders back? Can we restore our authority over employment and social legislation? These were areas which previous Conservative governments carefully protected and which Labour has given away.

As far as I am concerned, what will be needed if it comes to this is the promise of a referendum on any deal that the Conservatives do negotiate in Brussels to restore powers. That has two great advantages. It means the rest of the EU will understand if they do not give the UK enough self government back, the public are likely to veto the deal, increasing the chances of a better settlement. It also means the UK public will at last get their chance to express an opinion on the whole project.

For all who love the idea of Parliamentary democracy, this has been the worst week of our lives.

Over the last decade it has been bad enough to see too many powers given away to Brussels in three major Treaties we did not want.

It has been compounded by giving away too many powers and duties to unelected quangos and external bodies.

It has been made worse by the rigorous timetabling of business, preventing Parliament from having its proper say on important issues, and taking away the time weapon from Opposition.

Now the last vestiges of dignity have been stripped away by an expenses system that was too generous and by the way some MPs have used it.

Where does it go from here?

The need for urgent reform has become clear to the Leaders of the three main parties. The Prime Minister, who should have the votes to drive through reform, has tried and failed to initiate urgent reform that will work. The Leader of the Opposition has come up with a reform plan. He is now imposing those parts of it which he can introduce unilaterally on his own party in the hope that other parties will do something similar.

The Cameron plan has several aspects. They are all designed to cut the costs of MPs, and to bring their claims more into line with public expectations.

In future no Conservative MP will be able to claim the big range of items to furnish and maintain a second home which have been common and legal but not wise under the old scheme. If an MP wants and can afford a swimming pool, sauna or massage chair they should pay for it out of their taxed income.

All claims made by Conservatives will be published on line as they make them, allowing press and public to see what is being claimed.

The Conservatives will abolish the £10,000 a year communications allowance introduced by the present government, saving more than 5% of total expenses.

The Conservatives will reduce the number of MPs by 10%.

These measures would produce a substantial saving for taxpayers and would remove the most unacceptable features of the current regime. Overall they should cut costs by around a fifth.

The problem is how we can do enough as a whole House of Commons. Presumably the governemnt still wants to hear from Chris Kelly, commissioned to review the whole system and come up with proposals. That will mean delay until near the year end. I guess the Labour party will come to the view that the range of items that can be claimed under the second homes scheme has to be cut. Meanwhile the public is far ahead, with many wanting the public provision of accommodation for MPs to replace the pay it and charge it system that currently operates.

This Parliament is drifting dangerously, and looks incapable of making the important decisons that need to be made. A General Election would be good, but is very unlikely. A new Speaker is urgently sought by many, but that too looks unlikely unless enough Labour MPs decide they need to do that.

This week-end the Prime Minister, as the Leader of the large majority party, needs to think again and consult widely. We need Labour votes for reform. If he does not agree with the Cameron plan, he needs to offer us one which we and most of his MPs agree with or can recognise as an improvement.

Many of you think I amk feeble in not leading the calls for the resignation of the Speaker. Some of you think I am afraid he will not call me if I do.

Let me make it clear. He frequently does not call me anyway. I am not one to be silenced by such considerations.

I did not vote for him. I would like better leadership of the Commons.

It is my judgement that if I tried to lead moves to challenge him it would not help resolve the current mess. Labour put him in, and Labour have the power either to keep him or displace him. We need to see how Labour attitudes to him change over the days ahead. His decision to argue with MPs who are critical of the current mess clearly lost him some Labour support. Time will tell how much Labour support he still enjoys. You all need to remember just how outnumbered the Conservative party is in this Parliament. If you want to remove a Speaker it is numbers that count. All the time he commands a majority we have to behave appropriately.

I have often written about how much many people hate the bossy, autocratic snooper government which has damaged our freedoms in the last decade. We hate the cameras, the road blocks, the hectoring public advertisements, the multiplying army of regulators, the aggressive tax collectors, the enforced political correctness, the thought police, the concrete blocks around Parliament, the spying on our rubbish bins and the stealthy approach to making us all have Identity cards. Government, both national and local, has become a bunch of snoopers who know how we should all live and know where we live.

They want us to know they are watching us, with a view to fining us if we put a foot out of line with their view of how and where we should walk. They have used the threat of terrorism as an excuse to intensify their prying eyes, their eavesdropping and their defended lives. They have used climate change as an excuse to raise more taxes. They have sought to change people’s drinks and diet, using that as another excuse to raise more taxes.

In the age of the internet they are now discovering that the cameras which point at the public can also capture them. When people ask the old question, Quis custodiet ipsos custodes? – who will watch the watchers themselves? – we now have a new answer. The watched can watch the watchers.

Many people have mobile phones which contain cameras handy for instant recording of an offisde official. The internet allows access to plenty of public information. It permits people to transmit their anger and experiences of the guards instantaneously around the world. We can all now issue our own newspaper by web publishing, or make our own broadcast by webcasting.

The anger with the political elite in Britain is now enormous. The expenses row allows people to vent their anger about the behaviour of the politicians. That anger has been intensified by the them and us approach to life which has been on display from so many of the politicians who have lectured and hectored others on how they should live. Too many MPs spent taxpayers money on trying to create a ring of concrete and guards around Parliament, when Parliament should be open and welcoming to the public that pays for it and looks to it for justice and wise law. The public now have the means to put the guards under surveillance, and now have the issue to fashion their revenge.

I used to find latin hard work, but I do recall Quod me nutrit me destruit – what nourishes me also destroys me. That sums up what is happening to MPs who loved to regulate and tax people more.

We are in the midst of the debates about the Finance Bill in Parliament. I voted against the whole Bill last week, and will be seeking amendments to it this.

The budget was not the budget we need at this time of national financial crisis. We needed a budget that would start to control public spending and borrowing, before the whole country is up to its neck in oppressive government debt. Instead we got a spend more ,waste more, borrow more budget.

We needed a Finance Bill that eases the tax burden on people and companies to help the recovery. Instead we got a budget which marks the transition from Stealth taxes to Spite taxes.

I reminded the Commons in my speech that the way to tax the rich more is to set internationally competitive rates of tax. Then more rich people stay here and set up business here. They pay more tax here. When the Conservatives cut the top rate of tax from a confiscatory 83% to a more normal 40% the amount of tax the rich paid went up, and the proportion of income tax paid by the rich went up. Surely that is what we need again today? The economy grew faster.

The Irish did that on a bigger scale, slashing business tax rates and income tax rates. Their economy grew well for years, as more and more businesses and enterprising people opted for an Irish base.

We need to set a rate which attracts more entrepreneurs and capital here, and encourages people to set up the new manufacturing businesses we need to start to reduce the huge balance of payments deficit. We cannot go on living so far beyond our means. The day of reckoning has arrived. We need to make more and sell more.

The Finance Bill hit all the usual groups that Labour dislikes. Car drivers will have to pay more thanks to the fuel escalator and higher Vehicle Excise Duty in many cases. Drinkers and smokers will be hit again. Business people will need to wade through another 400 pages of legislation to make sure they are complying with the latest requirements.

Just to add to the misery, there are stronger powers for Revenue and Customs. Tax law is now so long and so complicated it is difficult even for the experts to tell you what you owe and what you have to pay. With the government in its current mood of wanting to rob anyone who works hard or makes a good investment, these new Revenue powers are worrying.

Yesterday saw another lamentable performance from the Bank of England.

Some see it as commendable humility and honesty to tell us on many occasions they do not know what will happen next.
It should lead instead to questions about why they employ so many highly paid economists and forecasters if they do not have a well informed opinion. Why issue forecasts at all, if you they are as wrong as the Bank’s have been in recent years, and if even the boss has little confidence in them?

The Bank wanted to get over two messages. One was the green shoots the market sees may not be robust. It may be worse than the Stock Exchange mood of last week. The second was monetary easing and ultra low interest rates carry on for the long haul.

These are both forecasts. I hope both are wrong. This economy needs more savings. That requires higher interest rates than the Bank’s guideline rate. This economy needs better control over inflation. That too requires a sense of monetary discipline.

In the real world people are getting a bit more for their savings than the usual margin over Bank base rate, and borrowers are having to pay a lot more than base. The market is ignoring the base rate in many cases. We are still experiencing the full impact of higher prices from the devaluation, and now face higher prices from commodity rises brought on by easy money worldwide.

What I wanted to hear yesterday from the Bank is how they intend to get from Quantitative Easing to a rational market? How are they going to withdraw all that extra liquidity before it is inflationary? Who is going to buy all the gilts they own, as well as all the gilts the government needs to sell?

I understand the growing anger about the Speaker, which some of you have written to me about. Some of you ask, do I support a motion of No Confidence in the Speaker?

I did not vote for Speaker Martin when he was first elected. I accept his authority by virtue of his holding the office, all the time it is the wish of the House that he is Speaker. He holds his office because he commanded a strong majority of the majority party when he was elected.

In these circumstances the issue rests with the Labour majority. They elected him, and they will determine whether he stays in office for the rest of this Parliament. If Labour now wants a motion of No Confidence then I will tell you how I will vote once it is tabled with Labour support. A partisan Conservative motion against the Speaker would not be a helpful idea at this juncture.

Yesterday was an important day in the battle to change attitudes towards public spending. MPs started to repay amounts they had claimed legally which the public thought unreasonable, as well as amounts that should not have been claimed. The day brought in more than £100,000 of returns. The boss of Network Rail who is paid a high salary realised that to take a bonus as well would be wrong in the circumstances, though not all his senior collegaues shared his wisdom. This heavily subsidised business which has cost taxpayers a fortune in recent years needs to improve its efficiency much more before bonuses are paid to people at the top.

David Cameron confirmed tighter rules for Conservative MPs expense claims which should bring them down this year compared to last, and renewed his calls for fewer MPs. Labour Ministers showed they now understand the public mood about excessive expense claims.

Unfortunately Ministers still have not grasped the need to control the large sums and the large projects under their control. We still have not heard them stop the ID computer and other very expensive computer schemes. Recent answers to my questions show the consultancy bandwaggon rolls on. And yesterday the taxpayer was told he had to stand behind another £1,000,000,000 of Olympics spending that was meant to be privately funded. Maybe they should review the total costs of the project and find ways of saving some money.

We cannot afford many more days when the net increase in spending is still almost a billion pounds, even after the refunds to the taxpayer.

Speaking in yesterday’s debate on the Finance Bill, John Redwood warned that we need to look beyond the current trough of the recession and recognise the seriousness of the threat to British industry from other G20 countries. He recommended cutting Corporation Tax to 25% as a basic first step, but said further cuts to 20% were needed if we wanted to encourage businesses to stay in the UK rather than relocate to competitors with lower tax regimes.

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

Mr. Redwood: I am a director of two companies, as declared in the Register of Members’ Interests, but I wish to make some general remarks about the tax system.
My hon. Friend the Member for Fareham (Mr. Hoban) has been quite right to say that a lower headline rate of tax could be very important in attracting more business to this country. I think he could have added that it will also affect the judgments of quite a lot of multinational businesses that already have some representation in Britain but have options over where they could carry out their various activities.

Quite rightly, it is not legal for a company to fiddle its transfer prices by suppressing profit in a high-tax regime in order to allow the transfer of that profit to a low-tax regime by artificial means. Under this and previous Governments, the Treasury has rightly adopted methods of preventing or stopping that practice. It is, however, an entirely legitimate business strategy for a multinational with factories, service areas and operational centres around the world to decide where, at any given time, it is best to allocate particular types of business. Obviously, if a multinational has footloose business of a high-technology, high-value-added, high-growth kind which will produce a high margin and plenty of profit, it will look very carefully at the effective and, especially, the headline tax rates around the world. All other things being equal, it may then decide to put more of its high-value, high-profit business into the parts of the world that offer the most competitive headline rates.

I am sure that, in their saner moments, Treasury Ministers agree that that is the case. They know that it happens and that it is a real possibility now, which is one of the additional reasons why I think my hon. Friend the Member for Fareham is right to press them again on whether they are certain that 28 per cent. is a sufficiently competitive rate at a time when the whole world is hungry for jobs and for higher-technology and high-value-added business, and when there is not enough business to go round and there are not enough jobs to go round.
It is true that our debate takes place against the background of a sharp devaluation of the pound. Such a devaluation has many drawbacks. It makes us all poorer, and it pushes up inflation—although it has one important advantage in that it makes our industrial and service activity much more competitive in the short term from a British base, which I trust will limit the damage in Britain compared with that in some of our competitor economies. However, we need to think beyond the one-off impact of the devaluation. We need to think beyond the present trough of the recession. We cannot be sure how long it will take, but there will be recovery, and we need to ask ourselves that fundamental question: is 28 per cent. a sufficiently competitive rate at the present time?

The hon. Member for Coventry, North-West (Mr. Robinson) rightly pointed out that the present Government had continued the previous Government’s policy of cutting the headline rate. That was very sensible, but I think that they got stuck. I do not think that they realised how rapidly the rest of the world had moved on. In the opening exchanges today, my hon. Friend the Member for Fareham was asked if he recognised that all that we needed was one of the more competitive rates in the G7, and that if we had it we would be all right. Of course we will not be all right. The world has been completely transformed. The Prime Minister accepted that in hosting and chairing the G20. The serious competitive threat to keeping manufacturing in Britain or attracting it to Britain today comes primarily from China and India. It is a serious option for most multinational companies to switch production from the United Kingdom or Germany to China or India. Most multinational companies already have several factories in those countries, as well as having manufacturer capability in Britain, Germany, the United States or some combination of all three.
The proposal that we are discussing goes to the heart of that issue. Why are we talking about the headline rate? Because it is the headline rate that people usually use in their simulations, models and forecasts when considering where to put their future investment. They also look at the underlying trend of policy. If, as in Canada, it is clearly a commitment to make the current rate the maximum and to say that in future it will be reduced, that will be a fairly influential factor when it comes to the judgment on the back of the numbers. If people see a Government who face a monumental deficit and who seem to think that it is only possible to secure more tax revenue by raising tax rates—itself a very dubious argument, in my view—they may well say to themselves that the Government could not be bothered to cut the rate below 28 per cent. although they knew that 28 per cent. was no longer particularly competitive, and that in a year’s time they, or some other Government, might be forced to put the rate up. That is not a good background against which to make an investment judgment.

I urge Treasury Ministers to think again. I urge them to understand that our prime competitors have much lower tax rates than ours, as well as having lower remuneration and other competitive advantages. I urge them to understand that the big investment players in manufacturing in this world already have capacity around the world, and the ability to switch. I also urge them to understand that we are talking about not just where the new factory goes, but where the work is allocated around the different factories of the world, and that if we allow our country to be perceived as more hostile to business—less competitive in tax and regulatory terms—we will start to be on the wrong end of business judgments. The people in the American, Japanese or Chinese multinational will start to say, “Well, we’ll leave the old, low value-added, less profitable business in Britain because of the tax rate,” and that means that Britain will lose jobs rather than create them, and that, in the end, the British plant will be the one most likely to face the closure notice because—surprise, surprise—it has the worst business and then it has the worst figures. The people in the multinationals will forget that the reason why that particular country has less good factory results is because, for tax reasons, they chose to locate a less profitable business in it. Therefore, if countries are not careful, they can find that they are on a very slippery slope indeed.
In today’s exchanges, we have already heard Labour Members voicing scepticism about whether the setting of a 10 per cent. rate in Ireland was the reason why so much business was attracted there. I can assure Labour Members that, from conversations I have had on account of my work on the policy review and for other purposes, it is clear that the low headline rate of corporation tax has probably been the number one attraction to footloose international businesses in choosing to go to the Republic of Ireland. They did not go there for the European Union grants; most of those were paid to agriculture, which was not a particularly successful sector. They did not go there to join the euro either, because they have to deal in a multi-currency world and what matters to them is the rate into the dollar, the renminbi and the rupee, so the euro is not that important. What mattered to them was that they assumed that they would run profitable businesses—and for quite a lot of years, many of them did—and it makes a huge difference to their forecast cash flows on an investment if they are keeping 90 per cent. of them rather than only 70 or 72 per cent. of them with the rest going to the Government. The Financial Secretary is a clever man, and he knows the power of compound arithmetic. The compound effects of taxing at 10 per cent. are so much more benign than the compound effects of taxing at 28 per cent.

I do have one, friendly, disagreement with my Conservative Front-Bench colleagues in that I believe that the Laffer curve works—they are sitting up and taking notice, Sir Alan. I am trying to make our lives easier, because I believe that this is one of those rare cases where we can have our cake and eat it. I believe that if a country is brave enough to set a lower tax rate, as the Irish were in spades, it can attract a huge extra amount of business, because world business is very footloose and very sensitive to the individual tax rates on offer. The Irish moved from being a lot poorer than the United Kingdom to being a lot richer. At the same time, they moved from spending less per head to being able to spend a lot more on public services because the low rates brought in so much more revenue. Such low rates can therefore have an extremely benign effect, but there is also the reverse effect: if a country allows itself to become too uncompetitive on the headline rate, it discovers that even putting it up does not solve its revenue problem, but can actually make the revenue problem worse.

Fortunately, so far, although we have had a run of companies leaving the country, such departures have been paced out and the Government have managed to suppress a lot of bad commentary on that, but I suggest to them that they should not push their luck any further. My hon. Friend the Member for Fareham (Mr. Hoban) produced a partial list of those companies that have gone. There are others as well, and in certain sectors, such as insurance, it is becoming a rush to get to the exit on time. The situation could be the same for some of the higher charging investment management companies, one of which my hon. Friend mentioned. This is a serious problem for the United Kingdom. To those on the Labour Benches who say, “Well, we don’t want to keep those sorts of businesses if they’re that sensitive to the tax rate and do not want to pay their fair due”, I say that that is a very short-sighted view. Businesses are, on the whole, motivated by profit and money as well as by wishing to serve the public, but they know they have to serve the public well to generate the revenues—that is the deal—and if we are too cavalier in our approach to taxing them, we do not just lose the tax revenue they were paying in terms of corporation tax, but we lose the tax revenue they were paying in terms of the tax on their employees, the national insurance and the VAT on the money their employees would have spent in the shops. We lose a great deal of tax revenue if we become too cavalier about where businesses are to be located.

The case is very straightforward: cutting the rate from 28 per cent. to 25 per cent. would send a very strong signal to our international competitors and, more importantly, to international manufacturing investors that this country is serious about remaining tax competitive. I hope that my Front-Bench colleagues agree that a change to 25 per cent. is the minimum that we need to do and that it is not the final resting place. I would be much happier with a rate of 20 per cent., because that would make a huge statement, would catapult us back to being a place that people talked about as a desirable location for investment and would definitely illustrate the Laffer curve—one might say that one would be “Laffing” all the way to the bank if one was to do that, because so much more business would be attracted and so much more revenue would be coming in.

As a result of these straitened times, my hon. Friend the Member for Fareham says that we should be absolutely sure and pay for this proposal out of removing allowances. That is my second-best option—I would rather just cut the rate—but it makes more sense than doing nothing, because it does take the trick on the headline rate and I do not believe it does the damage that the hon. Member for Coventry, North-West (Mr. Robinson), who is no longer in his place, seemed to suggest. Past corporation tax reforms have cut allowances and cut rates, and they have been helpful and benign; they have usually resulted in more flows of business as long as they establish a competitive international rate that we can work with and of which we can be proud.

I do not think that those on the Treasury Bench are communicating a strong enough sense of the danger to our economy that the current situation represents. Perhaps they are resting on the laurels of the devaluation and perhaps they do not understand how tough the situation is, particularly in the manufacturing heartlands. They are not energetic enough in making the case within government that if we are serious about rebuilding our manufacturing, we need to put in place a package of measures, and this considerably lower corporation tax headline rate would be an important first step.

I would like this country to export more and make more, as that is part of the necessary process for recovery. A lower corporation tax rate would help to do that. I do not despise financial services. I would like us to grow and improve our financial services offering in Britain and keep London as a very important financial centre. That, too, is very dependent on a very competitive corporation tax regime. The Financial Secretary knows that I am not happy with the huge sums tipped into banks, which have grossly distorted the economy’s adjustment process and have delayed the necessary adjustment in those banks. I wanted to keep them going at a much lower cost.

Of course I did not want the banks to go bankrupt, but it is a disgrace that so much money has been absorbed in them. If we had not wasted all that money in the banks, even the Financial Secretary could have afforded my 20p in the pound proposal for corporation tax, given his view that it does not generate the extra revenue that I believe it does. That option would have been a much better competitive package for Britain than losing billions in RBS and delaying the time when RBS sorts itself out and actually generates some money for British taxpayers and for the Treasury, instead of taking away all the money that we need in order to offer a more competitive package. I hope that the Treasury will also go away and think about squeezing some money out of the banks to make the rest of British business profitable, rather than squeezing the rest of British business to try to buttress the banks.

Last night we had a trip down memory lane to a time when Parliament had some rights. The government allowed us to talk for as long as we liked about parts of the Finance Bill. We had a rare Parliamentary day without a guillotine. We could carry on with our work after 10 pm.

The House held debates on corporation tax, small business taxation, and VAT. The government refused to accept a Conservative amendment to take the Corporation Tax rate down to 25%, to attract more business and investment to the UK. They refused to believe that if you set lower tax rates you can end up with more tax revenue. They declined to put the small business rate down to 20%, at a time when every little helps small business under pressure.

By 10 pm we had reached Clause 11, the big increases in alcohol duties. There was substantial interest in this debate, given the strenuous lobbying by the industry and the licensed trade. They have made the case that the sharp increase in pub closures results from high duty levels and therefore higher prices. The government got bored with having to face arguments about job losses, closures and the impact on communities, so it reverted to form and moved a premature end to the business.

Nonetheless, we did have three hours or so to examine the problems of a highly taxed industry, and did have a Parliament capable of functioning after 1 am. I felt nostalgic for a more democratic era as I spoke on the topic after 1 am this morning. If only we were allowed democracy more often, we might be able to educate Ministers some more. They still do not seem to understand the impact their fiscal decisions are having on jobs and output.

I have long been predicting slumpflation. It was inevitable, given the wild fiscal policy and the manic monetary policy the government and Bank are following. Figures for the last quarter show that is exactly what we now have.

Manufacturing output is down a massive 13 % on a year ago. Why didn’t the authorities cut interest rates in 2007, when some of us urged them to do so, to cut the prospective decline in output in Q4 2008 and Q1 this year? The likely crash was obvious. Mr Blanchflower on the MPC foresaw it as well. Unemployment soared by 244,000 in the first quarter, and by 268,000 in the last three months.

Meanwhile, consumer price inflation as measured by the CPI, the government’s chosen measure and the one used for the Bank of England’s target, rose at a 2.9% annual rate last month. That is a massive 45% over target, and a high rate of inflation for a country experiencing a slump.

Why didn’t the MPC heed the inflation warnings some of us made in the second half of last year? Why didn’t they leave interest rates at say 2%, to offer savers some return and to send a signal they were not going soft on inflation and the value of the currency? Why didn’t they see that too large a devaluation would trigger further inflationary rises?

Has the MPC given up on watching inflation and trying to hit its target? Do they expect the slump to take care of all problems? Whilst most commentators expect price inflation to fall more in the next few months, we do not wish to see the seeds of the next inflation sown at the same time.

They should look at the recent performance of oil prices. They are today around 70% above their lows of earlier in the year. It looks as if the money from money printing on both sides of the Atlantic is finding its way into share prices and commodities.Some people call that inflation.

The authorities are getting themselves into the pickle of having no good choices left. If they are not careful we will end up with more of the same – slumpflation.

I hear this morning from the BBC that Mr Cameron is now “isolated” in Europe because he dares to take the Conservative Group out of the EPP.

That puts us into line with the majority of people in Ireland who voted No to the Lisbon treaty. It puts us in line with the majority in France who voted down the first version of it. It puts us in line with all those Danes who voted No to past federalist plans. It puts us in line with the millions of citizens across the European nations who want to trade with each other and be friends with each other, but who dislike the self appointed EU political elite living high on the hog at our expense.

We hear that Mrs Merkel will freeze him out. Not if and when he becomes Prime Minister. She will have to listen to what the UK wants. I bet she still wants us to pay huge sums into the system.

We are told we will have no influence. We have no infuence under this craven, back peddling, mendacious government, who offered us a referendum to win an eleciton, then denied us one after it. They give in on everything the EU elite want us to accept. They even gave away a big chunk of our rebate for no good reason.

The public is in no mood for lectures on being good Europeans and having to tow the line to be in the in crowd. The tide is out for political elites. The EU one is no exception. Well done. David. You’re better off out of the EPP. Its high time the European Parliament had a substantial group that provided some opposition to the long march to centralisation and more Euro control.

The BBC and the rest of the EU establishment must be rattled, to make this an issue in such a one sided way.

Our headline is “Conservative Leader resigns from political elite to join his fellow countrymen and women.”