The government used to tell us we were best placed of the major economies to weather the “global storms”. The government suggsted we would be first out thanks to the massive public sector “stimulus” administered. They ignored the UK hurricane they had created by their mad monetary and banking policies of the previous ten years.

The second quarter figures tell a different tale. The UK economy continued to fall, falling faster than the USA, falling faster than the stronger major economies which saw some recovery. It is true government consumption rose, thanks to the spending spree and the massive borrowing, which helped the figures for output. Overseas trade improved but little despite the devaluation of last year. The big reason the UK continued to fall was the continued squeeze on the consumer.

The government as always wants to have it both ways. The authorities brought the consumer boom to an abrupt end by their hikes in interest rates and their scarce money policies of 2008-9. They did so presumably because they thought consumers were borrowing too much and the party had to end. They got into a panic late in the day, and slashed interest rates and printed money to try to offset what they had done over the two preceeding years. Meanwhile consumers are taking the hint they gave them earlier, and are busily repaying debt. That means they spend less. All the time people are highly borrowed – as many are – and all the time many fear unemployment – as they do – they will repay more debt than the government now wants and spend less than the government wishes.

One of the reasons people are likely to stay cautious and repay more debt is the likely pattern of interest rates. few consumers believe 0.5% rates. Firstly, we can’t borrow at those rates. If you can get a loan it will be many times base rate. Secondly, most people expect rates to have to go up again. They have been burned by the past interest rate hikes. They realise that given the huge sums the government needs to borrow, higher rates are likely in the medium term.

The government hopes to keep rates down through quantitative easing to see them through to near the election. Once that is out of the way markets are likely to force rates up on government debt, unless sufficient action is taken to rein in the deficit and the borrowing requirement. Markets might do that earlier of the numbers continue to alarm. Meanwhile canny consuemrs will carry on paying off debt, and worrying how long they may keep their job.

It is slowly dawning on the public sector that we need to do more for less. Spending and borrowing are out of control.

            I have found going into various parts of the public sector and into various companies that there are common themes to make something work better, and some common rules on how you can turn round an underperforming  organisation. The similarities in the leadership challenge are often more striking than the differences or special problems.

Stressing that we need to improve quality and control costs is not demanding the impossible. It’s what good private sector organisations do all the time. Nor is it just saying the obvious. Good leadership requires setting out what can be achieved, and the creating the conditions in which it is achieved. That requires knowing how far the organisation has got, how much better other organisations are, and how much to expect of your team,.

            Good management is about using the minimum of resource to deliver the best of service or product. It is about continuously striving for improvement. It is about getting the morale of your workforce up and keeping it up. A strong leader defines what success is, makes sure that success is stretching, but then helps his or her team reach it. Higher efficiency comes from the full engagement of the whole team in achieving that success.

           
            Parts of the public sector have too many spin doctors, managers, bogus consultations, management consultancy projects and partnerships. They need to slim down. The elected and official heads of each institution need to simplify, and set out a vision of higher quality core services to which they dedicate their organisations. You need a can do culture, a culture where the senior managers steps in only when things are going badly wrong to rescue them, or to praise and reward and demand more  when they are going well.

               The check list of areas to improve and the issues where costs can be cut and quality raised is  the easy bit. If your senior managers do not know that already then you have the wrong senior managers. There are too many noises off, chasing too many peripheral issues, and padding too many organisations with words that complicate and distract. It is time for change.

The government is busily printing money through the Bank of England on a colossal scale. As a result the Stock market has been rising strongly. The combination of money printing in the US and UK, and the actions taken to stimulate money in China, are leading to sharp increases in commodity prices, which we feel again at the petrol pumps.

It is not yet easing the problems facing local businesses. It is still difficult getting a loan for business purposes, and new mortgages are in short supply. Whilst the Bank of England’s interest rate remains very low, actual rates if you want to borrow are altogether a different matter. There are some signs that the violent de stocking by business in the first two quarters of the year is coming to an end, but that does not yet mean there is going to a resumption of “normal” business conditions similar to those before the Credit Crunch.

I fear we are in for a long slog of sorting out too much borrowing in the private sector first. Then we need to turn our attention to the huge debts being built up in all our names by the government. In the two years 2008-2010 the government will borrow more than they inherited as the total public debt in 1997! Taxpayers have to pay interest on all that borrowing, and one day have to pay it all back. It means as a country we will have to run with a much higher savings rate, and therefore with much less spending, than we have been used to.

The government says it needs to carry on spending and borrowing to save us from a worse recession. It is difficult to see how we could have a much worse a recession. The truth is if the government spends too much in the public sector the best it can do is to delay the painful adjustment, if it prints the money. If it borrows it, it means that those lending the money to the government to spend can no longer spend it for themselves. In those conditions it may not be reflationary at all.

I do hope the government and the pundits are right in saying the worst is now behind us. It is true that the rate of decline should now ease, and the comparisons will soon start looking better because we will be comparing with dire periods of declining activity. However, most seem to agree that unfortunately there is more unemployment to come. Wages and earnings remain under pressure. This all points to reduced demand, which makes business conditions more difficult.

Everyone apart from some Ministers understand that public spending has to brought under control soon. Those of us who want to see action taken have been clear that we see no need to sack teachers, nurses, doctors and other important service providers. What we want to see is the elimination of waste and undesirable expenditures.

Labour in opposition rightly campaigned against two types of public spending they claimed not to like. One was debt interest. It makes it even more ironic that they are now presiding over the biggest ever increase in debt the state has seen. The other was what they called the costs of “economic failure”, the benefit bills for those out of work.

In government they allowed the numbers of working age people without a job to exceed 5 million even before the recession hit. It is too many people to leave without work, and a large cost to taxpayers. A new government needs to put welfare reform at the top of its agenda, as Bill Clinton did successfully after his election as President. Cutting benefit spending by getting more people into work would be a popular cut.

We also need to tackle the large costs of public sector pensions. We need to tell any new recruits to the public service that they are not eligible for the generous deals that used to be on offer. We need to negotiate a new deal with existing members of public sector schemes for their future contributions. That should include the MPs scheme, where consultations are already underway to cut the costs of the benefits under the scheme.

I was most suprised to read the Rothschild “road privatisation” story on the front of the Sunday Times business pages today. I will reverting to this story when I have made some enquiries next week.
In the meantime I wish to make clear that I last worked for Rothschilds in 1989 before becoming a government Minister. They did not invite me back after I resigned from the government.
They did not tell me they had picked up the £100 billion road scheme idea. I also noted that one of their variants uses shadow tolls. I have never favoured shadow tolls, as the schemes I have heard of using them seem to me to be expensive ways of the government borrowing money. What we need is transfer of risk to the private sector, direct collection of revenue from customers by the private sector, and full offsetting tax reducitons so motorists are not worse off.

I have been fascinated to read responses to my proposals on roads from people usually up for a smaller state telling me I am going too far. If you can’t take government out of the main road business, what can you take them out of? It should be one of the easier ones.

The criticisms all boil down to one thing. People see it as another opportunity to fleece the motorist, when I have in mind for the first time in more than ten years offering the motorist a better deal!

Some of the critics misread the scheme, and think the government will be collecting the tolls and benefitting from them. On the contrary. The tolls would be levied and used by the franchise owners. The last thing I want is the government to start charging us tolls on top of everything else they charge us. Nor do I want us to pay twice, which is why the scheme includes the abolition of the VED levy on everyone with a vehicle.

Some critics think the private franchise holders will be monopolists and will milk us all at the toll booths. Again, why on earth would I propose something like that? The scheme includes splitting up the roads into different packages, so whereever possible there would be choice of pay road. In addition, all single carriageway roads and many bigger A roads remain free, so there is always a free route home if you want it. On top of that the franchise sale would include an upper limit on how much per mile they could charge. The franchise holders would be free to charge less,and would doubtless charge less at off peaks to encourage a better spread of use.

What people are missing is the obvious improvements that would come from such a system. As one supporter concluded, the Highways Agency could be wound down, saving money. Private franchise holders would want to improve their roads to improve flows, as they will only get lots of business if there are savings in journey times by using their better roads. The competition would be for the length of the franchise they needed for the government to get the money it wants. We would soon see use of the emergency lane at busy times as already happens on sections of the M42. They would need a suitable duraration so it was worthwhile putting in more capital for improvements. Where they wanted to make a major improvement to the road they chould be able to negotiate a lease extension or a capital repayment from the new franchise holder if it ever changes hands.

Some of you worry about the congestion toll booths can cause. It would be up to the franchise holders to choose the least disruptive technology to get paid. The US system where you can buy a smart card in advance which allows you straight through toll points without stopping is an obvious way to do it. That could also reassure people they were not being logged and monitored where they were gooing, as if you had a valid card the system could be designed not to record your vehicle. Alternatively there could be monitors and you could receive a bill once a month like a mobile phone bill- which also of course can monitor exactly where you are at any time you use it. The Oyster card on the tube already logs whereever we go by underground. Two wrongs don’t make a right but it shows even us freedom lovers will put up with it.

We need to break the state monopoly grip on road provision. We need to get more access to private capital to invest to bust congestion by removing bottlenecks. I look forward to your response to future radical proposals for sorting out our deficit and poor public services. This was meant to be the less contentious one!

On Wednesday I had to give in and pay to drive in central London after 7 am. I had to deliver a heavy package to one place, drop off a print for framing at another, and fit in a haircut at another. I could not do all this on foot or by tube, and I could not do it before 7am when the charge comes in, given the hours of the other people involved

I got to the edge of the Charge zone after the rush hour. As soon as I could see the Congestion Charge zone signs hoving into view, the traffic jams began. The Cromwell Road was seized up. I discovered as I went about my business one lane of the two lane Fulham Road was closed for roadworks at the same time as the Cromwell Road problems. There were all too many places where our money was being spent on making the roads worse, only to delay us all more owing to the restrictions on use of the carriageway. The blockages on Southwark bridge are especially spectacular as they work to restrict the road system around that part of London and take the remaining useful general parking spaces out.

How right Ken Livingstone was to call it a Congestion Charge. He not only imposed the tax, but made sure with the changes to traffic light phasings, lane narrowings, chicanes and closures that you would be permanently in congestion if you still dared to use the zone. Under Ken only the rich could travel by car – as you would need to be very well off to afford £8 every day out of taxed income. It took me around 3 hours to get to all three places, have a hair cut and reach my Westminster office. To have to pay £8 on top was the last straw. I look forward to Boris carrying out his promise to scrap the charge in the west, and to rephase the lights so we can have less congestion in London. Maybe then he could rename the residual charge the Free flowing charge, and make sure we get something for the odd occasion when we have to pay it and need the roads to work. Shouldn’t it be refunded on days when they close too many streets,plunging us all into chaos?

First, the magazine industry lobbied MPs hard about the way the BBC moved into their business, using its own free ads for its own products to gain entry to their market. Next, the local and regional papers lobbied MPs about the impact the free BBC web and media service was having on their sales. Now James Murdoch points out the obvious main concern – the stronger the BBC brand and web offer is, the less private sector competitors can charge for news and views and the less plurality and choice there will be. THe BBC web offer is paid for by a poll tax which others cannot share or levy.

There needs to be a new settlement, to promote a vigorous and diverse media. We want the digital revolution to open up and sustain more choice and diversity of opinion, not to reinforce an old statist centralising system.

The war in Afghanistan is the defining action of Mr Brown’s administration, just as the war in Iraq defined Mr Blair’s. Now the first round of the election is over, it is time to ask what is the purpose of our mission, how long will our troops need to be there, and when will the Afghan security forces be in a position to police their own streets successfully? We need some answers.

If the government is determined to fight such a big war as intensively as in the recent past, it needs to make more men and equipment available. It needs to tackle the high level of casualties as a priority. It also needs to be more forthcoming in its explanations to the British people of what it is doing, why it matters, and what support it is offering to our armed forces. I would rather the UK government talked seriously to the new Afghan government once formed to set out a timetable for Afghan troops to take over the front line roles from ours, moving us to a support and training role.

Meanwhile, it could be significant that the Sun has taken such a tough line. Maybe they are picking up a shift in mood in their readership. Most of the people I talk to are at best in two minds about what we are doing in Afghanistan, and are united in wanting our troops to be given more support and back up for their arduous and dangerous mission.

The Bank’s last official Statement, and the Deputy Governor Mr Bean’s recent remarks, tell us that the Bank has little idea how much quantitative easing to do, or how to assess its impact.

The Bank’s main economic view is based on the economic theory that if there is excess capacity in an economy then you will not get price rises. Businesses will bring more capacity into use as people’s income and spending rises. In competitive businesses the presence of spare capacity elsewhere should prevent any one comapny raising its prices. Because there has been such a sharp drop in output, the Bank reaons there must be plenty of spare capacity. As money is injected so more goods will be produced without inflation.

Like many economic theories, the answer to that is it all depends. The Bank should take more seriously these points:

One, if the pound starts to fall again as it did last year, we will experience substantial price rises on the many goods we import. The authorities should not be so lax that they jeopardise the currency.

Two, this severe recession will remove capacity, as well as temporarily reducing it. Today we hear that the last TV manufacturing plant in England is closing for good. Many factories are being shut down, not to re-open.

Three, quantitative easing on both sides of the Atlantic, and the huge monetary stimulus in China, is boosting commodity prices. This will exert some upward price pressure on finished goods.

Four, because many companies cannot get more bank credit they are taking a tough line on price levels despite falling output. Some may continue to do so in the upturn.

There is a bigger worry. Both the Bank of England and the Fed ignored price bubbles in assets in the long boom prior to the 2007-8 collapse. The Bank of England seemed to take the view that high and rising house, property and share prices were not in themselves inflationary or a worry, yet they were fuelling the boom which in due course led to faster overall price increases. It seems that both the Bank and the Fed want to create another asset price bubble,and are beginning to do so. They should learn from the past. Asset bubbles in the end have to be deflated. They can also be inflationary.

At least the Bank now accepts that printing more money will not necessarily create more credit, the original aim of the policy. They need to persuade the FSA to change its bank regulations if they want more credit. It would also help if the government didn’t want to pre-empt all the money for its own borrowing.

The idea that we should now tax bank transactions to stop them paying mega bonuses is absurd.

The government says it wants the banks to lend more money to business. The Regulator says the banks need to have more cash, capital and reserves before they can lend more to business. The best way for them to get more cash, capital and reserves is to make more profit. Now if they make more profit it is proposed they should pay more tax, removing the extra profit from contributing to the cash and capital. They should make up their minds what they are trying to achieve.

I have no time for mega bonuses to the highly paid in state aided banks. Why doesn’t the government just ban them? They are either the owners, or set the terms for the government assistance, so they can just do it.

Given that the Regulators allowed too much excess risk taking in the good times and now want to allow too little in the bad times, wouldn’t it be better to change the Regulators? And can we have an assurance that in the meantime no highly paid Regulator is enjoying one of these bonuses they now condemn?

I understand why many of you are very sceptical about any proposal to shift the log jam – and the over taxing – on our roads. Many politicians are anti motorist, and do see motorists as an easy source of tax. You should know me better. The scheme I outlined does not increase the revenue take from the motorist for existing travel levels. It offers more motorists the chance of a better deal.

You win if you travel less than the average in your car.
You win if you travel on non toll roads.
You win if you travel on toll roads outside peak hours.
Everyone on the roads wins because there would be more capacity and better management of the roads.
You pay a user charge for using big roads at dear times of day instead of having to pay a tax which you cannot avoid

Our roads are grinding to a halt. They are very badly managed. The motorist is ripped off every day for a rotten service. The phones used to be like that. We were short of capacity and phone lines because they were part of the public spending exercise and rarely took priroity. After privatisation they provided much more capacity, and the companies concerned started paying tax to the Exchequer instead of needing subsidy.Prices fell.

Most of you tell me regularly the state is doing too much and should be smaller. Let’s get it out of the super highways business.

Who will rid us of these turbulent banks? The government has landed taxpayers in a dreadful and expensive mess.

First they blundered by allowing banks to lend too much and balloon their balance sheets in the good times. The Regulators fell down on the job. The government encouraged them for political reasons, wanting to keep interest rates too low and credit plentiful. Few were to be denied a mortgage, regardless of whether they could pay it back.

Next, they made the crisis worse by hiking interest rates too high for too long and starving the money markets of cash, leading to the crash in 2007 and 2008.

Then they panicked, buying shares in RBS, Lloyds, and Northern Rock without valuing all the dodgy loans properly. They didn’t ask for a discount or protect the taxpayers interests. Vince Cable became the apostle of nationalisation, given large amounts of airtime to help the government dig us deeper into the mire of owning too many risky banks on bad terms.

Messrs Darling and Cable tell you they had to intervene to buy all these nasty bank shares at high prices and then watch them fall once in public ownership. They claim it was the only way. They want you to think they saved the world.

Their actions were damaging and costly. Far from saving us, they have lumbered us with huge debts for years to come. So what should they have done?

In the good times they should have raised interest rates earlier and told the banks they needed to be more careful. When the bad times started they should have slashed interest rates much more quickly, and lent money to the banks in trouble on tough terms to see them through. There was no need to buy shares in RBS or Lloyds. Northern Rock need not have gone under if they had seen the obvious warning signs in August 2007 and done then what some of us recommended.

We are now being mugged by these bad banks. The government makes us stand behind them as their owners. On top of that the government is offering to take all their worst loans off them and give them to – yes you’ve guessed it – us the taxpayers. What ever did we do to deserve that?

So what should they do? How could we get out of this catastrophe?

The first thing to understand is that RBS and Lloyds/HBOS are simply too big and too risky. They should be split up. Their profitable foreign banks should be sold off as quickly as possible. There are buyers out there now for good overseas banks.

Investment banks in the private sector are coining it in again. The investment banking arms of RBS and Lloyds should be put quickly on a commercial footing and sold as well. The taxpayer should not be expected to stand behind casino banks. RBS had £500 billion at risk playing the markets at its last year end. That is far too much for taxpayers to have to underwrite. They are playing with almost as much as the government spends in total in a year.

The loss makers, including the UK banking arms, should be told to cut costs and get back into profit quickly. There should be no bonuses for senior executives in nationalised loss makers. If they want top drawer remuneration they should produce top drawer results – or do it with someone else’s money, not the taxpayers.

Meanwhile, the government and its regulators need to get their act together. Mr Darling has recently lectured the banks on the need to lend more. He has told them he did not make all this public money available for them to sit on their hands.

Oh yes he did. For at the same time as grandstanding and lecturing them, the FSA, his regulator, is telling the banks they need to keep more of the money they have in liquid form. That means they are not allowed to lend it to you or me or to companies. The rules stop them.

The authorities have created a self serving money go round. Taxpayers put money into the bad banks. The banks are then told they need to keep more of the money handy and lend it back to the government!

The government was wrong to allow all the mega mergers that created a bank on the scale of RBS. They could have blocked some of them. They were even more foolish to urge Lloyds and HBOS to get together. Merging a bad bank with a good bank does not create a good bank, as we have seen in the latest figures showing huge HBOS and Lloyds losses.

We the taxpayers now support banks that risk more than twice our total national income, what we all earn. I warned when they embarked on this crazy course that they could easily lose us the equivalent of the defence budget. It is going to be more than that. HBOS alone lost £13,400 million in the first half of the year, which was close to what we spend on our armed forces. What benefit are we getting for that?

It is time to try a different approach. This government can no more suspend the rules of sound finance and the laws of arithmetic than the rest of us. If our nationalised banks go on losing us money on this scale, it means much less available to spend on other things. It is high time they were put under some pressure, to shape up and sell off their businesses. And in the meantime, don’t insult us by sending us the bill for large bonuses. Can’t Mr. Darling at least sort that out?

The government which gave you such a spectacular boom and bust in the private sector thanks to their crazy money and banking policies, now seems to want to repeat the experiment in the public sector – with the bust delayed until after the Election.

We learn that cuts will be needed after all. Some are pushing to scrap Trident. Clearly the defence budget is being singled out yet again for a mauling, with plenty of softening up with stories about poor and expensive defence procurement. Today Labour has adopted the populist mantle by attacking the so called Boomerang bosses – Council CEOs who earn too much, receive too large a pay off when asked to leave Council A, only to appear earning even more shortly afterwards at Council B. Readers of this blog will be well aware of the mis naming of some so called CEOs in local governent, who are not revenue responsible, and maybe cost irresponsible as well. The government has sanctioned the downgrade of benefits under the RBS pension scheme – is this a harbingner for their plans for civil service pensions as well?

Wouldn’t it be better to seek value for money now, instead of waiting for another year? Why does the mad over recruitment of so called managers have to continue? Why does the quango world need to expand more before it contracts?

Shortly before Labour tried to close down all serious debate on public service reform I promised you all some more ideas on how we could raise quality and save money on public services. Let’s get back to this, our agenda, on the day after Mr Brown himself concedes there needs to be cuts after all – after the Election!

The government cannot be trusted to run our roads. They have all the hallmarks of a monopoly – expensive, poor quality, and in short supply. You literally have to queue so often when you want to use them, and motorists have to pay many times over through taxes for the costs of provision and management. Government management these days often entails expensive and fiddling changes which end up making them them less safe with increased congestion. Stopping free flowing traffic seems to be one of the main aims of the car haters who design our road policy.

Meanwhile most UK people make it clear they like the personal freedom that car use brings. It is the main way people get to their jobs, to the shops and to their friends. The last time I spoke to six formers about green issues, the questions were mainly about how they got access to a car of their own.

So I have a simple proposal. Let’s franchise the main motorways and trunk roads to the private sector to run. Let’s do it in a way which sends them clear financial incentives to cut pollution and congestion.

The maths would be good for taxpayers as well. I would start by abolishing the vehicle Excise Duty, a tax on ownership, and replacing it with permission for the private sector to impose tolls on use of the main roads. The aim would be to impose tolls that yielded £5.6 billion a year at current usage levels, the exact cost of vehicle Excise Duty. This would be neutral for motorists as a whole, but would cost those of us who travel more a bit more, and those who travel less would benefit. People who travel less tend to be worse off. There would be regulation to prevent excessive charging, with clear stated maximum toll levels.

The main motorways and trunk routes would be put up for franchising in suitable packages. Where possible alternative routes would be in different packages, bringing competition between franchise holders. In return for access to the assets and the toll revenue they would need to pay the state a premium. We would need to raise around £110 billion, so that the state could pay off £110 billion of debt which would save it currently around £4 billion of interest. By the time the scheme came in I reckon it would save us about £5.5 billion of interest given the likely trend of government borrowing costs. This makes the scheme self financing in terms of its immediate impact on state finances.It gives the first franchise holders a running return of 5% on day one, rising as they improve the use and management of the asset.

The prices of the packages could be fixed to ensure the state received enough money to pay off sufficient debt. The auction would be based on bidding for length of franchise, as the state would want the road assets back at some point to do the whole thing all over again, to the financial benefit of taxpayers. Bidding for the duration enables bidders to work out how they can make money, without changing the state finances.

The results would be dynamic and favourable. Bidders would be expected to come forward with plans to enhance the assets. They may well want to add another lane, or to use the hard shoulder. Their interests would be to encourage more free flowing use of the road, so they could charge more and charge more users. If they ran a bad or congested motorway use would drop off, going to alternative routes.

The state, as a result , would benefit financially as well. The more toll revenue the franchise holders enjoyed,the more profit there would be for the state to tax. The state, as in all private businesses, has a share in success. The immediate future after the scheme was launched would also see some much needed improvement capital investment. Free flowing motorways are both our safest and greenest roads. We need to use them more to cut deaths and raise the fuel efficiency of travel.

This morning’s posting was delayed as I was asked in to the Today programme studio to discuss the high and rising contributions the Uk now has to make to the EU.

The programme highlighted the big increase in the UK’s net contributions to £6.3 billion next year, and correctly drew attention to the loss of rebate which Mr Blair negotiated away.

They invited Mr Macshane to put the case in favour of the new higher sums. He did so on two grounds. Firstly, he claimed there would have been no expansion of the EU without our surrender of rebate. Secondly, he said the spending by the EU was very good, citing an example of a new Polish motorway. Neither of these propositions was a credible response. For every Polish motorway there are dozens of marginal projects and much administrative waste and worse. The new member states would have joined even if the UK had successfully defended the Thatcher rebate.

The truth is we cannot afford the large increase in our net contributions, and need to be pressing for a lower gross contribution. It is not just the money we do not get back that should worry us, but some of the money we do get back where the EU decides what we should spend it on. We need to be masters of our own budget, and capable of weeding out cost and needless expenditure where it rests. Quite a lot of those two categories can be found in EU budgets.

Mr Macshane resisted the temptation to say that our partners would not agree to cuts and to seeking better value for money from this big spend. Had he done so I would have reminded him of two things. Firstly, he and other Labour Ministers and ex Ministers are always telling us they have influence in the EU. There would be no better way to prove this to us doubters, than show we could have more of our way on the budget. Secondly, the EU itsefl wisely tells member states to keep their public deficits to just 3% of National Income. When ours is now four times that level, and many other member states are exceeding their limits, surely the EU must see it needs to help all member states to cut spending by leading the way and cutting its own?

Many of us want the EU to do less and spend less. Now would be a good time to do so. Why do we need a system of overseas aid for relatively rich countries? Why are we paying so much of the bills?

Click here to listen to John’s discussion with Denis MacShane on the Today programme.

Last week I had to renew my tax disc for the car. I received a notification that I could now find an easy way to pay the new rip off levels of the tax. I rang the number late one evening. It proved as easy as advertised. The cash was taken from me effortlessly over the phone. I was not kept hanging on, nor did I have to listen to endless multiple choices requiring me to dial some other number. The new tax disc came by return of post well before the month end.

This week I received a follow up card. It told me I still had enough days left to pay my tax disc. If I had not already done so, I should try the new friendly phone line or the web pages, available any time of the day or night. If I had by any chance already paid I was to ignore this card. It was no marks for the system picking up quickly that the tax had been paid, but full marks for persistence, and fulll marks for ensuring the maximum take as quickly as possible.

It leads one to ask, if this government can be good at taxing us, why can’t it show similar skill and customer awareness when delivering services?If you want to contact a government department or many a Council department about what they are meant to be doing for you, you need to try in the minority of hours during the day when there is meant to be someone there. So often you are left hanging on, being told you are in queue. You may face ordeal by multiple choice, be lectured by a computer,or be told that all call lines are busy. If you do get through to a person, you may discover there is some other reason your query cannot be dealt with.

No wonder people are so cynical about government. It is good at taking the money off us, but so bad at spending it for us and providing value. There is one level of competence at milking us, and a far lower one for everything else.

The Sunday Times did not tell all the story in their page two article “Cameron’s MPs want more private health care”. They reported that they “contacted all Tory backbenchers to ask whether they had private health insurance”. They say “Most refused to answer” but name four who said they had insurance. Why I wonder did they not include in their story those of us who said, as I did, we do not have private health insurance? Every word of the article strains to set up Labour’s anti Tory story on health, without the evidence to back it up. Their only quote came from a Conservative MP who is retiring and not fighting the next election, and that quote merely said we need a debate.

According to government Ministers and Spin doctors the choice before the public is a stark one – Labour investment or Tory cuts. At the heart of this battleground is the NHS, the largest single spender amongst the public service departments. So often these days Mr Brown’s statements are flanked by pictures or comments on the NHS, as he thinks this will be the defining issue of the coming election.

The Conservatives have been very cautious about the NHS. Mr Cameron has strong personal experience of its importance through his family. Any Conservative politician who wants to be re-elected knows that the pledge of care free for all in need is an important one. There are no votes in wanting to close wards and sack nurses, and I don’t know any elected Conservative who has ever wanted to do that. Yet time and again Conservatives are wrongly represented by their opponents as wishing to do just that.

This week David Cameron went further than before in talking about NHS spending. Instead of just repeating his pledges to look after the NHS , he also said that the NHS like the rest of the public sector, had to make economies where it could, whilst raising the quality of what it offered. He will doubtless again be wrongly accused of wanting to cut the NHS, rather than wanting to cut waste and bureaucracy within the NHS. The government often implies no cuts of any kind are possible without damaging front line services.

So who said the NHS should face value for money savings of £8.2 billion by 2010-11 compared to 2007-8? No, not David Cameron, but the government. Whilst implying in the political debate that the NHS is fully efficient, the Ministry is busy telling the NHS to become more efficient at the rate of 3.5% a year in 2010-11, after demanding a 3% improvement this year.

Ministers and the Treasury have become alarmed by the lack of any growth in efficiency and productivity in the NHS. Between 1995 and 2001 productivity fell slightly. From 2001 to 2005 productivity fell by a massive 2.5% per annum, or by more than tenth. The following year saw a smaller fall of 0.2% . This led to the demands that the NHS cuts its costs and internal prices.

So what is curious about the political debate is that the two main parties have very similar policies on the NHS, yet Labour tries to make it such a huge defining issue as if there were major differences around their false analysis. The truth is very different. Both parties are committed to avoiding cuts in front line services, and both want to see more reductions in waste and inefficiency. So the real issue is, who will be more successful ae generating value for money? How feasible is it to expect major gains in quality and productivity from this huge service? How would you go about doing it?

There is a bigger difference over this between the two main parties. The Conservatives want to delegate more power and authority from the centre and the quangos, to the wards and surgeries themselves. Labour believe in the efficacy of many national interventions, endless orders and requirements from a large number of national quangos, with regional authorities offering direction and budget control. Their approach has led to the expensive national computerisation scheme, often resented by those who have to use it, and to events like the handling of swine flu leading to the creation of a new network of call centres offering advice and drugs outside the normal NHS framework.

My experience of management tells me you are more likely to succeed if you empower and trust people doing the work, than if you try to second guess and micromanage from a headquarters far away. Cutting out bureaucracy, form filling and box ticking from the centre and regions could free resources and raise spirits in the hospitals and GP centres, so more can be done for less. If there were fewer central targets distorting priorities, more sensible decisions might well be taken by doctors, nurses and other medical decision takers.

When I supervised the Welsh Health Service in the 1990s I found it was possible to take out cost and raise quality at the same time. I settled for one main executive branch under the control of the departmental Permanent Secretary, doing away with a separate CEO and his office. We invited the pharmaceutical companies to deliver drugs directly to the wards when they needed them, instead of us holding expensive stocks centrally. Many modern hospitals rely on too many expensive agency staff, which makes quality and efficiency more difficult to achieve as you are not working with experienced people who know your hospitals routines all the time. Absence and low morale are staff problems in part of the NHS.

Cutting out errors raises quality and lowers cost. Making fewer mistakes means less expensive litigation (now £1.1 billion a year and rising) and higher morale. Building and valuing experienced teams of people and giving them more say over how they do the job should cut cost and raise quality.

The real row over Health spending is not Tory cuts versus Labour investment as the government wants you to believe. It is between Conservative claims of devolved efficiency and Labour’s centralised waste. Even the government admits that, when they say they are now looking for large savings from within the huge NHS budget.

Today I am writing an open letter to the Prime Minister.

Dear Prime Minister,

The Scottish Parliament will meet to debate the decision of the Scottish Justice Minister over the Lockerbie bomber. When you first took the highest political office in the UK you stated that you wished to restore the Uk Parliament to a more central role in our democratic life. You cannot be serious unless you today recall the UK Parliament, to meet later this week.

Since we were last allowed to convene and do our jobs as MPs, the government has endorsed a substantial increase in so called quantitative easing, has revealed a larger deterioration in our fiscal position than in the budget, has shown that whilst competitor economies on the continent are growing again our economy has continued to decline, and has watched helpless as many more people lose their jobs. We need an urgent debate on the state of the economy.

Since we last were allowed to meet several good Committee reports have been issued, including some worrying criticisms of parts of our health care. Labour figures have been keen to whip up a specious debate about Conservative attitudes towards the NHS through friendly media. Wouldn’t it be better to allow a proper Parliamentary debate on the state of the NHS and how it can be improved and reformed, so claims and counter claims can be tested in a proper forum free of the behind the scenes distortions of the spin doctors?

Since we last were permitted to do our jobs more of our troops have been killed in Afghanistan. There have been recent leaks about the state of our military procurement, along with Minsiterial denials that this has had any bearing on the lives of our soldiers. We need to cross examine Ministers on this. At the very least poor procurement has had a big impact on the state of our budget deficit. We need to ask Ministers to explain what their strategy towards Afghanistan will be once the new government is up and running. We understood the need for the British army to help create a peace sufficient to enable voters to get to the polls. What is the mission now? How do we define success and how long is the new mission to last?

Today we also want to know more about the UK’s relationships with Libya and the USA. The conduct of foreign policy remains a Union responsibility. What actions did the UK governemnt take in the run up to the important Lockerbie bomber decision by the Scottish administration, given its importance to those two relationships? What action is the Uk government now going to take given what has happened?

As far as many English people are concerned, these recent events reinforce what a lop sided and unfair system of devolution we have. A powerless UK government allows the Scottish government to make this decision, washes its hands of the foreign policy consequences, and doesn’t even allow English MPs to have a voice on that foreign policy, whilst Scotland not only makes the decision but has a functioning democracy to debate it.

You should recall Parliament immediately.

Yours

John Redwood

The old battle lines are being redrawn as if it were 1979 all over again. Let me surprise you with my answer to the question. Some daring commentators suggest we need a new dose of Thatcherism. Labour are out to portray their old caricatures and lies about the Thatcher era. My answer to the question is “No, we don’t”. But then, I never saw myself as a “Thatcherite”.

Don’t misunderstand me. This is not some latter day conversion on the road to Damascus, not some repentance for past sins which I only committed in the fertile imagination of my opponents. I admired Margaret Thatcher then, and defend her still, for two great qualities she brought to the job of Prime Minister – honesty and courage. She was the best boss I ever worked for. If only her successors as PM had half her honesty in tackling problems and half her courage we would be in a much better position today. She was not driven by focus groups and by the best spin. She wanted honest anslysis of problems from her advisers, and serious debate of options for tackling them. She would back a course of action if she believed it was right, even if it were unpopular. I hope our next Prime Minister will share those caracteristics, as they will be much needed.

The reasons I do not think we need another dose of Thatcherism are two fold. There are presentational reasons, ever popular in today’s debased politics, and reasons of policy.

Thatcherism was a creed defined as much by its opponents stressing what they did not like as by its supporters turning it into a cannon of truth and light. I have never written essays defining or defending Thatcherism, as in a way to do so is to accept the opposition baggage that was deliberately heaped on the idea. Labour were always good at spin, even when they were losing by a mile. They endowed Thatcherism with the negatives – cuts, get on your bike, there is no such thing as society. Some of their imputations were lies, others selective half truths that misrepresented by failing to point out the purpose or the greater good being served. The current crisis facing our country is different from that in 1979. We do not have time to waste fighting the presentational battles of the past.

Today we do not face a problem of excess Trade Union power making it impossible for any government to govern. In 1979 we were very conscious that Trade Union power had gravely damaged the first Wilson government, defeating their Trade Union policy “In place of Strife”, had brought down the Heath government, and had brought down the Callaghan gvernment through the winter of discontent. The next government has no such bitter legacy, and would be wise to see modern Trade Unions as a force for the good whilst not being a push over when it comes to public service management.

Today we do not face an immediate inflationary surge as we did in 1979. The money taps were only turned on in late 2008, so it takes time. With broken banks it takes longer.

We do, on the other hand, face a spending and borrowing crisis on an altogether bigger scale than that of 1979. In 1979 we were a couple of years beyond the IMF visit and their enforced cuts, which started the process of sobering up after the big spend. In 2010 we will be at the peak of unprecedented waste and over spending. We need to tackle the immediate problem of malfunctioning, highly expensive and loss making nationalised banks, which were absent in 1979. Unless we get the banks to work better and return them to the private sector promptly, not much else will work. We need more banks, and more competitive banks. We need to split up the naitonalised monoliths as quickly as possible.

There is one important similarity. Just as in 1979, we face long months of rising unemployment, as the full impact of the disastrous economic policy is felt. To sort this out requires the maximum degree of common purpose throughout society. That is why another dose of Thatcherism would set the wrong tone. We need a new dose of a new medicine for the dreadfully damaged economy. Welfare reform and banking reform are essential ingredients. The agenda of popular capitalism, empowering more people in the economic life of the nation, will also be part of the answer. Everyman and woman an owner is a slogan for a future that could work.