We are now entering the second phase of the Credit Crunch, the time when the crisis has a direct impact on the rest of the economy. The first phase was a problem for the bankers and brokers. The second phase is a problem for all of us.

In the early days of the Crunch there was some pleasure by many in the US and the UK to see rich financiers finding their share options and bonuses wiped out. The years of plenty and easy money for bankers had produced plenty of jealousy and anger outside their privileged banking halls. The feeling that the bankers should be made to pay was still there when the Bush administration came up with its $700 billion package to buy distressed debt from the banks.

The political establishment who wants to “bail out” the banks argues correctly that crisis on Wall Street will also hit Main Street. They try to persuade their electors that they must spend all this money, otherwise the banks will be unable to lend sufficient to American borrowers to run their businesses, buy their homes and carry out their normal transactions. The public seeks guarantees that any bail out will not leach public money into shareholders dividends or bankers pay.

The revised version of the American bailout plan attempted to deal with these very reasonable concerns. It offered the US taxpayer a stake in banks that sell their loans to the government. It provided for controls over executive pay. It implied a new level of state control over US banking we have not seen before, on the very reasonable argument that if the taxpayer has to pay so much money then they deserve a say and a stake in the future business of any participating bank. The danger is that the terms may become too unattractive to banks, and knowledge that a bank has to participate in the scheme may not be as good for confidence as the Administration hopes. There are no easy answers.

There can be no doubt that the banking system is in trouble. Given the run of news on both sides of the Atlantic you would need to have avoided all media programmes and newspapers for a year not to understand that. There can be no doubt that weak banks unable to lend much will undermine the general economy. US and UK voters are beginning to accept that. The issue should be, what combination of actions by the banks, the rest of the private sector, the Central Banks and governments can get the banking markets working again sufficiently to avoid deep recession? That may include some spending of public money, but it may revolve rather more around the spending of private money to recapitalise the banks and around actions by the Regulators to move their rules into a shape which help fight deflation rather than inflation.

The sad truth is that even if you did want the taxpayer to take on the banking black hole and fill it with taxpayers money, it is too big to do that comfortably. Governments have been part of the problem. They have borrowed too much, and certainly in the UK have themselves used the modern off balance sheet techniques of finance which they are now criticising others for doing. Both the US and the UK governments have to accept there are limits to how much money they can borrow and commit to sorting out banks, otherwise the credit worthiness of government will become the issue. Governments must keep people believing in their financial management, so government guarantees when offered are things of value and mean something. The banking crisis will only be resolved when banks believe each other major bank has adequate capital, and a sensibly structured balance sheet. What we need is a debate about what kind of a package will have most chance of success, rather than a debate about whether there is any need for action.

One day I saw the Bradford and Bingley share price was falling faster than usual. The next day I read they were thinking of nationalising it. On the third day I heard they were nationalising the mortgage side of the business.

As an MP I was yet again sidelined by the long Parliamentary recess. There was no chance to debate or question the government. I wanted an opportunity to speak up to try to keep more of the jobs and the business than the government proposal allowed. As a taxpayer I was alarmed. How can we afford yet another portfolio of mortgages on top of Northern Rock? As someone who wants the UK economy to do well how could we afford to see another mortgage bank effectively driven out of offering new mortgage business?

During the fast moving story we were not told what the problem with B and B was. Many companies experience falling share prices, but that does not mean they have to be nationalised. A bank can carry on trading with little confidence in its shares and a low share price, if people remain happy with it as a deposit taking institution, as people did with B and B. If B and B needed more share capital it could seek new shareholders or ask existing ones to put up some more. If it was short of cash it could ask the Bank of England as lender of last Resort to lend it some, failing other sources of borrowing in the market. It could sell assets or seek a deal with another larger bank or a more cash rich institution.

Why should the taxpayer have to end up with a near £50 billion mortgage portfolio on top of the huge Northern Rock one? Why is government better able to manage this than the private sector? Are there any limits to how much debt the government wants to own? On my figures the government has now taken on a massive £1500 billion of debts and unfunded liabilities for taxpayers. Is there no limit? How do they plan to pay all this back? Whilst they claim to have protected the taxpayers with the Bradford mortgages, unlike the Northern Rock ones, there remain liabilities on the taxpayer as result of this deal.

Why do we need another mortgage bank unable to lend anything to anyone at a time when there are too few mortgages? Our mortgage market is starved of new loans already. Under EU rules the nationalised mortgage makers cannot compete to lend more money. Northern Rock is effectively in wind up. Why can’t we try to save the jobs of the mortgage workforce of Bradford and Bingley by looking for a private sector solution which would allow them to carry on advancing new mortgages?

The state of the mortgage market is now dire. Gross mortgage lending fell to £19.2 billion in August, the lowest level since 2002. Net lending slumped 95% to a mere £143 million. Those figures disguise the misery of many would be first time buyers who cannot now borrow to obtain their first home. They reveal a growing difficulty for people wanting to remortgage to obtain a suitable deal. That means job losses at the banks and Building Societies who do not need so many staff to process the loans. It also means redundancies amongst the estate agents, surveyors, carpet and furniture stores and makers and all the other people who earn their living from house purchase and sale. It is also devastating news for the building industry. Many new home sites are being mothballed, and others taken down to a snail’s pace of development as builders struggle to adjust to the sharp drop off in demand.

The government has long said it wants house prices lower so homes can be more affordable. It has long explained that in its view if we built more homes we could make them more affordable. Current circumstances shows us just how wrong the government’s analysis has been. Today we have rapidly falling house prices, when very few new homes being built, the opposite of the government’s prediction. It should teach them that crucial to affordable housing is the availability of mortgages. You can have more “affordable” houses, that is to say lower prices, yet find that people cannot raise the money to buy them. The problem of rising house prices was not mainly one of too few homes, but one of too many generous mortgages driving the prices sky high.

This looks like another very poor decision for British taxpayers, and another bad blow for the mortgage and housing market. Fewer new mortgages means a bigger house price fall, which in turn means more losses on existing mortgage books. The taxpayer is in for more bad news.

What a mess! The financial sector is in meltdown. House prices are falling. People are losing their jobs. Labour MPs are wrangling over who should be Leader.

Spare us the lectures to be united at a time of national crisis, Prime Minister. Weak leaders make speeches about loyalty, and the need for discipline. Strong leaders listen to intelligent criticism or ideas about better ways of handling problems. Strong leaders unite enough followers by doing and saying the right things about the issues. Weak leaders create division by boring everyone with platitudes and silly spin.

We are still prisoners of Labour spin. It is amazing just how long a shelf life New Labour’s simple minded misconstruction of 1990s politics has enjoyed.

In the 1990s the New Labs told the media that a divided party could not govern, and was not electable. They told us the Major government would fall because it was divided.

They also told us an anti EU party could not be elected, and said the Tories problems came from being divided over the EU and for being too anti the EU.

Both these soundbites were wrong.

The Thatcher government was deeply divided, between wets and dries. Their arguments regularly appeared in the press, but it did not stop them winning 3 elections in a row. There were regular threats to Margaret Thatcher’s leadership, with Michael Heseltine wanting the job. The Thatcher governments wrestled with the big issues of the day - Trade Union power, poorly performing nationalised industries, high unemployment - and found contentious but lasting solutions.

The Blair government was deeply divided at the top. The press was full of stories of rows and splits between Blair and Brown, but it did not stop them winning 3 elections in a row. There were pressures for a leadership change, with Brown seeking promotion. The huge political goodwill and the powerful position they enjoyed was frittered away. They failed to control the credit bubble or to run the national finances well.

Governing parties are usually divided, and some healthy debate about the way ahead can be helpful, as long as the Leader communicates a strong sense of direction at the same time as allowing the public debates about it.

The polling throughout the Conservative years showed that Euroscepticism was always more popular than Euroenthusiasm. Indeed, at the nadir of Conservative polling fortunes it was only our Euroscepticism that was popular. Under William Hague we won the European election where we were able to express our scepticism.

The Conservative government fell for one main reason – it adopted the European Exchange Rate Mechanism on the advice of the other two parties and the CBI, and it proved to be a very damaging economic policy. In that sense it was Europe that destroyed the Conservative party in the 1990s – because it was too European, not because it was too sceptical.

If the Labour government falls, it will fall for one main reason - the poor economic policy it has followed, and the way it has made the Credit Crunch worse in the UK.
Its enthusiasm for all EU bureaucracy is a further irritant. Far from helping an unpopular government, its love of the Lisbon treaty and its refusal to honour its promise of a referendum has made it worse.

I am fed up with all the interviewers challenging Labour rebels with the nonsense that they are making the problem worse by daring to want a debate and a change of leadership. They are not the problem. The problem is the government and its policies. The interviewers should start asking the rebels instead, what they would do to make things better. That’s what the public wants to know.

The depressing thing about the Labour rebels is not that they are showing some life at a time when the government is performing badly, but that they are not yet offering an alternative strategy that makes sense and might ameliorate the economic crisis. We need to have lower interest rates, control over public spending, an end to off balance sheet government financing, and a programme of private sector led works to build us the power stations, energy facilities and transport links we need.

The West has aroused the Russian bear through its contradictory actions over Kosovo and Georgia. Russia now sees the West as asserting its power too far, recognises the West is now overstretched in the east, and thinks the West is becoming too intrusive close to Russia’s borders.

I wish to stress that I like most Westerners condemn the invasion of Georgia and the military actions taken by Russia in the Georgian war. I also disagreed with some of the actions taken by the EU and the USA during the Yugoslav wars, which are an important part of the background to Russia’s attitudes today. The West is in danger of reaping what it has sown.

Now the bear has awoken we need to analyse carefully what are the legitimate and illegitimate aims of Russia, and how might it use its growing military and economic power? We need to think before we speak, and plan and act before we commit ourselves too deeply, beyond the range and strength of our power. Our freedom is at stake, endangered by the West’s weakness and folly.

The irony of the present situation will not be lost on the Russians. The West is paying Russia to re-arm, thanks to the failure of the UK, the US and other western governments to take the necessary action to cut dependence on imported oil and gas from parts of the world that are unstable or unfriendly. The more oil and gas we buy from Russia at these new higher prices, the more missiles they can finance and the more tanks they can manufacture. The first thing the West should do, if it wishes to strengthen its hand vis a vis Russia, is take urgent action to cut its dependence on imported fuel. There are many obvious things the UK could do to increase its supplies of domestic coal, oil, gas and non carbon electricity.

The second thing the West should do is think through its position more clearly on whether it should help defend all existing borders of states or not. It has been normal in the post 1945 world to attempt to defend existing states borders, buttressed by the UN. It required UN agreement and action to ratify changes in states borders. That changed with the recognition of Kosovo, opposed by Russia, a UN Security Council member with a veto.

This doctrine is also in conflict with another Western doctrine, the self determination of peoples. Under this doctrine, if a dominant majority in a substantial region of a larger country wish to secede and form their own state, they should be allowed to do so following referendum and legal process. This is, for example, the view of the Scottish Nationalists over how they should take control of their country, and the growing view of many English nationalists who want a vote on the independence of England from the UK and the EU. It is a view that the US set out as a war aim in the 1940s, seeking to liberate European countries from German control, and favoured by the US when supporting the removal of colonial powers from Africa. Czechoslovakia was allowed to split in two when the popular wishes were so clear.

In the modern complex world we live in there should be no reliance on one of these doctrines to the exclusion of the other. Sometimes they will be in conflict, and decisions need to be made. In practise each case has to be settled on its merits. The judgement will be better if it is supported by more countries, including all the important global and regional powers who can help maintain the peace around whichever decision is made. I incline more to favouring self determination, but accept there may be occasions when that cannot work. There have to be some limits to it to avoid a constant state of flux and an endless movement to ever smaller states.

So how should the West respond to Russia? Today the West needs to understand why Russia is so alarmed by NATO’s current stance, and to understand how there is no acceptable military option for the West to dominate in Georgia and to determine borders so close to Russia. In other words, we need to talk to Russia, and to discuss the issue of splinter regions from Georgia. We need to discuss the whole architecture of states around Russia’s western and southern border, to avoid committing NATO to maintain borders we cannot in practise enforce at an acceptable military cost, and to allay Russian fears to make Russian military action less likely. We need to see how big the disagreements are and to assess if any other state apart from Georgia is in danger of a Russian invasion. So far the West has not won over enough independent world opinion to strengthen its hand in negotiation with Russia.

At the same time we need to strengthen NATO and the Western economies, so we are less dependent on Russian fuel and more capable of acting if Russia pushes too far and uses her military in even more unacceptable ways.

The USA has been the world’s only superpower for a couple of decades. It has got lazy about using its power and enforcing its will. Only asymmetrical warfare and terrorist attacks have challenged it for years. Now US power is coming up against other important powers in China, Russia and the Middle East that it would be unwise to attack head on. Worse still, the US is in danger of creating too many different enemies and threats, fighting a live war in the Middle East, a cold war with Russia, and engaged in a superpower struggle of various kinds with China, primarily in the economic sphere in the first instance. There are flash points in all of these relationships in each border state near Russia that the US guarantees, in Taiwan, in Iran and Iraq. Even the world’s superpower has to be careful not to overstretch. It is dangerous to create so many opponents who might one day help each other against their common enemy. The US needs to ask itself what are its long term interests? How many of them can it pursue backed with effective military force? The EU needs to stop posturing as a major player when its words can be inflammatory and when it lacks the military capacity to enforce. I am not recommending it has military capacity I am recommending it should remember its limitations. The UK needs to look to its economy first - it is now so weak it cannot afford its current defence commitments properly, and is vulnerable thanks to the lack of a cogent energy policy. We need some strategy rather than more foreign policy spin.

If you want your country to be free, it needs to be both strong and wise. We are in danger of being neither.

We have been living through an old fashioned Sterling crisis. If we were still living in an era of fixed exchange rates, or managed ones, we would be deep in panic by now. The UK government would be borrowing abroad to buy pounds to try to stop the currency falling. The foreign money lenders would be demanding cuts in public borrowing and spending as part of a package of better economic management. Floating rates takes the immediate sting of such a crisis away from a Chancellor wishing to prolong his holidays away from London.

A little bit of devaluation, when you are running a big balance of payments deficit, is no bad thing. It helps your exporters become more competitive, so they can sell more. It puts people off buying a few luxury imports, so you spend less. The balance of payments start to correct. Just as Japan found a little bit of inflation was preferable to deflation, so a little bit of devaluation for the UK is fine in current circumstances.

The problem is, we are now getting a big bit of devaluation. There is a sense of carelessness, even of incompetence in the air, underwritten by the Chancellor’s foolishly pessimistic remarks from his Scottish holiday home. Overseas holders of sterling have got the message that the government does not seem to care about the value of the currency, and is taking none of the steps to run its own affairs prudently that you expect from a strong country wishing to have a strong currency.

This does now matter. It means we will have to pay more for many imports, including commodities like oil and wheat that are priced in dollars. We will all be worse off.

There is likely to be an immediate price to be paid for this imported inflation. The Bank of England will feel it has to keep interest rates higher for longer than it would otherwise. The Bank, if it were truly independent, would tell the government we need lower interest rates badly, but can only afford them if the government takes other action to reassure foreign holders of sterling, sufficient to stop the collapse of the pound.

What should the government do to stop the slide? It needs to reassert itself in a way which breeds confidence in its actions and in the UK economy as a whole. That means issuing some credible forecast of how bad the downturn is going to be, and changing what it says about the state of the UK’s economy. It means getting a grip on public spending and borrowing.

Floating exchange rates are usually a good thing. They allow adjustments to be made in easier ways than fixed rates allow. If a government thinks they give it carte blanche to spend and borrow as much as it likes it can get away with it for quite a long time, but there comes a reckoning. The first thing to go is the currency. That is now happening to the UK. Later it might become difficult or too costly for the government to carry on borrowing at the level required. They need to take corrective action now. That’s why we need the Chancellor full time in London, and we need Parliament back to put some pressure on them to take the necessary stabilising action. I am frustrated that I am not allowed to cross examine the government in Parliament on any of this, as they refuse to recall it to discuss the crisis.

The odd billion pounds for the residential property market is not going to turn it round - the sum is too small. Another billion on the deficit is a further increase in an already alarmingly large figure, and does not help restore confidence in the conduct of public finance.

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

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

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

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

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

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

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

Well done to our Olympians. I recently talked to St Crispin’s School about how you can live your dream if you really really want to. If you put the hard work in and take the reverses in your stride, you too might make it. It is great to see just how many young athletes from the UK have lived their dream so spectacularly in the last few days. We are proud of them all. It is good to see our local area represented on the honours board. May they inspire many more to live their dreams too.

Business Post
Rt Hon John Redwood MP

There is a nasty squeeze underway on people’s incomes. Most wages and salaries are going up by less than inflation. The prices of food and energy have soared, putting the most intense squeeze on those on the lowest incomes, who spend more of their money on the basics.
The government says it feels our pain. It is doing nothing to alleviate it. Indeed, in many respects it is making it worse. Every time the price of oil goes up, the government increases its tax take on petrol and diesel because the VAT it charges automatically goes up with the price. I am glad the Opposition has suggested a sliding scale of tax rates on petrol, which would go down when the price goes up to help stabilise pump prices, and go up when the price goes down to maintain the revenue. We need a cut now in petrol and diesel tax to reduce the rip off at the pumps.
Electricity to heat our water, and light and heat our homes is also soaring in price. The last ten years have seen no major decisions taken to licence new power stations, so we are facing shortages as the older nuclear and coal stations are retired. We need an urgent programme of new works, to produce more and cheaper power, with less waste and fewer harmful emissions than the present.
The Prime Minister’s line at the recent G8 summit was to blame someone else and pretend he could nothing. He told us the slow down or recession was made overseas, refusing to see the policy errors made here at home that have given us first an inflation and now a slow down. He told us we should waste less food to solve the food price problem, and blamed OPEC for producing too little oil. What we need is a government which not only says it shares our pain, but does something to ease it.
If only Gordon Brown had said at the Summit:
“Today we face the twin problems of energy and food shortage, driving the world prices of both higher. This is damaging the prospects of recovery for the rich western economies trying to overcome the Credit Crunch. It is far worse for the poorer countries, where more will be forced into undernourishment and greater poverty by the surge in prices of these basics. We had planned at this summit to concentrate on the response to global warming and African poverty. We need to concentrate on African poverty, and to see that any attempt to ease this requires us to grapple more successfully with the world shortages of energy and food than we have managed over the last few years. We cannot solve the African problem unless we can resume faster growth in the West and supply them with better market opportunities for their goods. We cannot resume faster growth in the West unless we can get on top of scarcity and inflation in the prices of the basics. We cannot help Africa by expanding ourselves if we drive the relative prices of the basics so high they cut Africa’s effective income further whilst raising our own overall.
The cases of food and energy are different. The West needs to change its approach to food production and trading dramatically to be fair to the rest of the world. I will be pressing to dismantle the Common Agricultural Policy, which prevents poorer countries selling us as much as they would like at the same time as restricting our domestic output by encouraging set aside and non productive use of land. At current world market prices – and at lower ones than now – we should abandon managed prices and assume world prices, allowing free trade in food. The US should also dismantle its protectionism. The European system needs to be changed, to allow idle land to be brought under the plough where farmers have been subsidised to do nothing with it.
To ease energy shortages I will be bringing forward the permits and licences necessary for the UK to construct a new set of power stations that do not need fossil fuel, and I will be encouraging the development of clean coal technology and carbon storage as the UK has plenty of coal. I am also today reversing the tax increases I have imposed on North Sea oil in a way designed to encourage more exploration, development and recovery from existing fields. I am sorry I have wasted the last ten years in doing none of these things, and now wish us to catch up on the missing years of underinvestment in new energy”

One of the many policies and aspirations of the present government that lies in tatters is its wish to see many more houses built in Britain. With an impeccable sense of timing and no sense of irony, the government chose the top of the housebuilding cycle to announce that it intended the building industry to step up from around 180,000 new homes a year to 240,000. With all the certainty of the old Communist regimes announcing their tractor production targets, Minister told us solemnly that another 3 million homes will be built by 2020. The policy was to be pushed through by the construction of numerous “eco” towns on greenfields, coupled with brownfield redevelopment, town cramming and back garden building. Doubtless Ministers would like to force too many new homes on us here in Wokingham, without making the money available to build the schools, roads and drainage systems they would need.

All of this looks absurd when you see the reality of the Credit Crunch. The first thing the government did to “help” implement its policy was to nationalise the most aggressive of the mortgage banks, and then stop it undertaking new lending! The Bank of England and the government failed to keep markets liquid enough, so credit dried up at many of the smaller lenders, and the larger banks all had to rein in their lending and raise new capital. As a result in the first quarter of this year only 32,000 new homes were started – an annual rate of a mere 130,000 if the first quarter’s activity levels can be sustained, or little more than half the government’s ambition.

At the same time the government decided it needed to speed up the granting of planning permissions for major projects. It has chosen to do so by legislating to set up a new quango to become involved in these decisions. In our recent debate on the subject Ministers were themselves unable to confirm it would be quicker to wait for the new quango if you want a major planning permission, whilst the Opposition pledged to abolish it and pointed out it was likely to delay matters with judicial review of decisions a distinct possibility.

Regional government - unelected, expensive and much disliked – is currently dividing up these top down government targets for more housebuilding. It is playing the part of a faithful retainer in this process of illusion – instructing Councils to make land and planning permissions available on a huge scale, as if the industry wanted to build all these homes, or people could borrow the money to buy them. I look forward to a Conservative manifesto pledging to abolish both these hated regional governments and the silly housing targets they generate. Planning applications should be considered on their merits by the local authority involved. If a company or a landowner wishes to gain a permission which greatly enhances the value of their land, they should make it worth while for the local community and the people who will be adversely affected by the development. They should not be able to rely on unelected regional officials, on Chief Executives of Councils keen to do the government’s bidding to advance their own careers, and on the idiotically optimistic government view of how many houses people can afford to build and buy.

I was pleased to hear Shadow Spokesmen sharing my view that top down targets, regional control and over optimistic plans are a bad idea. The planning system at the moment suits no-one. Developers think in better economic times they cannot get the planning permissions they want, whilst most people feel the system fails to take their views seriously and fails to protect communities against unwanted development or to provide the additional facilities needed to make a housing estate part of a thriving community.

So what should Councils about the pressures from the top to identify more greenfields to be bulldozed? They should argue, remonstrate and use every clause in the long manual to slow things down.It’s time for masterly inactivity. There is no need to identify new sites at the moment. This system cannot last. There is no need for more planning permissions this year, as the housebuilding industry is going through extremely difficult times. Land values are going to fall. There is too much land with planning permission around for current needs. Leading housebuilders need to sell land and finished houses to pay off some debt. The government is in a world of its own. The problem today is not a shortage of planning permissions, but a shortage of mortgages and people to buy the homes.

Congratulations to David Lee, the new Leader of Wokingham Borough Council. He takes on an important job at a difficult time nationally, with people feeling the pressure from their household bills and the sharp increases in the costs of food, fuel and motoring. He inherits a Council from Frank Browne which has performed well in the national local government league tables for value for money, has backed some good schools, with a strong Conservative majority that can get things done for the District.

David has promised to involve and value all the Councillors in the Group, and to use their abilities. This is important, as all Councillors have an equal mandate from their electors and have a contribution to make. He sees his job as orchestrating the talents rather than running a major portfolio himself, which is a wise call. There is quite enough to do, motivating, encouraging and advising the members in their different tasks without trying to run a department as well.

He wants to cut down the number of meetings, to give Councillors and officers more time to get on with their jobs, and to ensure meetings are focused on proper examination of the crucial decisions that need to be taken at member level. This should save money as well as time, and is to be welcomed.

The first priority has to be to control the Council Tax. The new Leader has rightly stressed the need for a low tax, as people are very stretched in their household budgets and have not enjoyed the way the government has used the Council Tax as a Stealth Tax, requiring more of local government without giving the grants to pay for it all. Central to achieving this will be the performance of the relatively new Chief Executive, Susan Law, the highest paid public servant in our area, and her relationship with the new Leader and majority Group.

Councillors will probably ask her to prepare a budget based on no increase over inflation. I think she can do better than this. She would be wise to come back with a lower Council Tax proposal based on further reductions in the overhead and reductions in less useful expenditure. Much of the overhead cost is imposed by responding to government and following government advice. The Council should move onto a policy of minimum compliance to stay within the law, but declining to spend money on advisory matters from government or chasing ring fenced grants when we do not agree with the underlying purpose of the policy or scheme.

Council officers during the Labour years in many other Councils around the country have tended to try to run Labour style Councils in their own career interests. They should now sense the change of mood, and seek to help Conservatives implement their approach, which is to deliver good school and social care by devolving as much power and money to each institution as possible, curbing the central bureaucracy. We do not need armies of networkers, co-ordinators and the like, and should have in place a staff freeze on administrative posts. Leave running the Health Service to the NHS, and keep selling the surplus assets.

At a time when private sector Chief Executives are seeing their salaries and bonus packages fall by an average 16% because their performance is falling in difficult times, it would be a good idea to make sure that our top local officers also have a financial incentive to deliver more for less as the private sector has to do to survive. Councillors were impressed with Susan law when they appointed her. My message to her, is to help the new Leader deliver what Wokingham people really want – good core services, no expensive extras, and a lower Council Tax.

If at the same time she can convert Peach Place development into action, and can find a way through the redevelopment of the tatty structures on Elms field without destroying the open space amenity, she will earn her large salary.

David Runciman has written a clever book. He seeks to show that hypocrisy is an essential part of political life. The main part of the book is an analysis of the views of political hypocrisy by a range of thinkers running from Hobbes and Mandeville through Bentham and Trollope to Orwell. The book also seeks to draw lessons for modern politics and politicians from the insights and philosophical approaches of Runciman’s chosen thinkers.

Runciman thinks that Trollope, the novelist with the least philosophical background, has the most penetrating insights into the nature of political hypocrisy. He shows considerable sympathy for the amusing views of Mandeville, who shocked his contemporaries and successive generations, while he argues rather more over what Hobbes and Bentham meant to say. It means that in part Runciman’s book is an attempt at a rather narrow interpretation of a small part of Hobbes and Bentham’s work, while in other ways it is an essay on the abstract noun “hypocrisy”.

The book opens with a definition of hypocrisy which is wider ranging than the conventional notion that hypocrisy is where a politician holds a set of stated public views which do not confirm to his own way of life. Runciman’s definition runs almost as wide as including all types of lying, which he sees as essential to political success. Towards the end of the book we learn that Runciman really believes that as a politician you can either be sincere and untruthful, as he thinks Clinton and Blair were, or you can be honest and hypocritical as he thinks Brown and Gore are.

It is where David Runciman tries to draw these general views out of his sources and apply them to modern politics that the book is least satisfactory. It is difficult to see Gordon Brown as honest. He has continued many of the practices of the Blair regime in spinning stories in the press in response to the public mood as gauged by pollsters and focus group research, which do not necessarily relate to what the Government he leads is actually doing. Mr. Brown has got into difficulties through seeking to sympathise and emphasise with England and Conservatives when he himself is statist and, at heart, more of a socialist. I am quite sure that Gordon Brown honestly wishes to reduce what he calls “child poverty”. Indeed, that is an aim he shares with his political opponents as well as his own party. But it is also the case that Mr. Brown wishes to pose as a tax-cutter because he sees that tax-cutting is now extremely popular with Conservative voting England, which he needs to woo over if he is going to win the next election. Given that Mr. Brown’s main method of tacking child poverty is to spend more public money on benefits, it is quite difficult to combine this with a general tax-cutting strategy, which leads him to spinning rather than acting to get taxes down.

I do not agree with David Runciman that lying is a necessary or essential part of politics, and we merely have to decide which kind of hypocrite we wish to elect. The public usually loses confidence in a politician who turns out to be a hypocrite or liar in an important area of policy or life, and where the politician’s intervention is seen to be damaging to voters and to the country. Thus the Labour governments of 1974 to 1979 under Wilson and Callaghan were brought low, for whilst they said their closeness to the unions meant they could get on well with the trade unions, the long and damaging strikes over the winter of 1978 to 1979 showed the public something different and inconvenienced the voters. John Major claimed during the election in 1992 that a vote for him would lead to economic recovery starting the day afterwards, only for the electorate to discover that his commitment to the ERM entailed further grief. Indeed, the very nature of a political deal to espouse fixed exchange rates requires leading politicians to lie when they have to reassure the public that the exchange rate will never be devalued, knowing only full well (if they have any self-knowledge) that it is all too likely it will be if the other policies they are following are unhelpful.

Tony Blair got into grave difficulties with his war in Iraq. He told the public that we needed to intervene because we faced a possible threat from weapons of mass destruction. After the invasion it transpired that the intelligence was inaccurate and had been presented to the public in a rather different, positive way from that intended. This greatly reduced the Labour vote in the 2005 election and lay behind the pressure to get rid of Tony Blair for his unpopularity.

David Runciman does not think that Al Gore’s own lifestyle, jetting around the world whilst having a very large house which eats energy, is particularly damaging to his campaign to get other people to take action in their personal lives and limit their carbon outputs. I would disagree. I think the hypocrisy revealed by the Al Gore lifestyle made many people find his preaching extremely unattractive. If a politician is asking people to do something they do not wish to do – in this case, curb their travel, turn down their heating, and lead a less comofortable modern life – that politician should expect great difficulty in winning the argument and persuading people if he or she is not living to the high standards they set for others.

The fact that many politicians in the past have been hypocritical does not mean that hypocrisy is a necessary part of successful politics or that, in the way David Runciman seems to say, we should recommend clever hypocrisy to our politicians. It is not inherent in the political arts that you have to lie. Of course a successful politician builds a big coalition, which means making compromises without leaving aside more difficult issues, and seeking agreement between people who do not have a lot in common. This can be done in an honest and open way, and may be more successful for having been done in that way. Most examples of political hypocrisy one can think of in David Runciman’s canter through the politics of Clinton and Lincoln, Blair and Cromwell imply that when they were at there most hypocritical and were seen through, they faced their greatest difficulties with those they sought to govern. David Runciman has produced some interesting sidelights on some important political thinkers, and he has challenged our little grey cells to consider how much hypocrisy is essential or desirable in politics. He has not convinced me that being a hypocrite is the best model for being a successful leader, and I think he misjudges some of these leaders he seeks to analyse. It is perhaps difficult for a senior lecturer in political theory to have enough grasp of history to appreciate the interplay between ideas, actions and words in the case of so many historical figures operating at different times.

If I had to choose between being a democrat and being a Conservative I would choose democracy every time. When you see the misery of Zimbabwe, the oppression of communist states and military dictatorships, you remember just how important it is that we have the power to choose our governments, and to get rid of them by peaceful means if we wish.

For that reason I want to thank on behalf of the whole community all those who stood as candidates in the recent local elections, and all those who gave their time to deliver leaflets and knock on doors in all the parties that participated. Only if people are prepared to do that does the electorate have a choice. Only if enough people do that with differing views and interests do we preserve our liberties. I would also like to thank all those who took the trouble to vote, for that too is an important part of maintaining a free society.

I am naturally grateful that voters decided to elect a majority of Conservative Councillors. I am also conscious of the weight of responsibility that rests with them, and the need for them to serve the District well. Whilst the overall political complexion of the Council has not changed, we will soon have a new Leader of the Council following Frank Browne’s retirement. We also have a number of new Councillors. Whilst I trust they will draw on the experience and knowledge of their longer serving colleagues, I hope also they will not be shy about making their own contributions based on the experiences they have gained elsewhere and the passions and enthusiasms they bring to the job.

Some constituents imply that as the local Member of Parliament, sharing a party with the majority on the local Council, I am just a phone call away from changing anything that the Council is doing. I would like to assure you that it cannot – and should not – be like that. Our Councillors value their independence, and accept their responsibilities to exercise the legal powers they assume. Many of them would not welcome me overseeing their every move or seeking to guide them on what to do. They hire senior officers to advise them and to carry out their decisions.

Of course I work closely with the Council when they want to influence government, for that is my task. Of course when constituents complain about something the Council is doing I refer it to Councillors or officers as I want my constituents either to have a good explanation of what is happening, or hope the Council will change its mind if constituents have a good case. If something is going badly wrong I will add my voice to the clamour for a rethink, if I believe that would help rather than being counter productive.

The forthcoming change of leadership gives me an unusual opportunity to say bit more about the direction I would like to see. I do not myself have a role in the choice of Leader, and have no vote. It will be decided by the elected Conservative Councillors. I think that is the right answer, for they know their colleagues best, and can judge who would give them the best lead. I do not have a preferred candidate, and do not know the WB Councillors from outside my constituency as well as I know the ones from within.

Whoever they choose, I would offer the following advice. Deliver more than you promise. Make sure something can be done and can work before making a firm promise. Remember just how squeezed people fell, so be ever vigilant to control costs and keep the administrative burdens down. Even prudent Conservative Councils can do things better and cheaper, and Council taxes generally are high.

As Leader listen as well as lead. There may be times when you need to lead Councillors in a direction that make some unhappy, but always seek to persuade rather than boss or assert. Do not have favourites, do not exclude any colleague from decision making through the Group, and never stop listening to the criticisms you will receive from all quarters. The Opposition will not always be wrong. Great leadership is strong and subtle – it happens without people noticing. Weak leadership is characterised by endless calls for loyalty, botched attempts to stifle debate, and reliance of an ever dwindling band of admirers and supporters. For all our sakes please avoid that.

I come to praise the sub prime mortgage. It has had such a bad press in the last eight months. Sub prime is now used as an excuse to explain why banks fail, shares go down and why fear stalks the markets. All the wise acres and most of the commentators now know the world will not be right until the sub prime is no more. The Regulators are busily slamming doors long after the horse of confidence has bolted. They wish to root out sub prime wherever they find it, put off balance sheet lending back onto stretched balance sheets, and warn people off lending to people who need the money. The new conventional wisdom is that banks should only lend money to people and companies who are already rich. They have discovered that the problem with lending to the poor is they might not be able to pay it back.

I have no time myself for sub prime salesmen who pushed the hopeless and the helpless into a mortgage they could not afford by offering a year or two of easy terms and seeking to play down the reality that at some point a commercial rate of interest kicked in. Nor do I have time for the many who now seem to think people on low incomes should not be able to buy their own home. Home ownership is one of the great breakthroughs an individual or a family can make. There is nothing like the freedom of being able to shut your front door, and then do what you will with the property inside. I welcome all positive moves to make mortgages and homes more affordable for all.

In the USA the authorities do seem to have realised that pushing thousands of sub prime mortgagees into default is not a clever – or pleasant – thing to do. The cuts in interest rates have come thick and fast from the Fed, as they fight to get rates down to a level where more people can hope to pay the mortgage and keep their home where they have mortgage rates linked to market rates. On this side of the Atlantic, we have authorities who see the time as suitable to preach a few homilies about the evil of debt. They are keeping interest rates high to “teach borrowers and bankers a lesson”. They risk bringing house prices down, and with them the dreams of many a heavily mortgaged home owner.

The Credit Crunch so far is a story of two rival traditions responding in very different ways. When the UK experienced a run on Northern Rock it took six months to offer financial support, look around for a private sector buyer and eventually to nationalise the luckless institution. When the US saw a run developing on Bear Stearns it took a week-end to find a private sector buyer, put in place a Fed package of loans and announce confidence boosting proposals to markets, including another interest rate cut.

The US authorities are fully into recession fighting mode. The President, the Treasury Secretary and the Fed act as one, supervising a tax cut plan, boosting the market with substantial liquidity and slashing interest rates. They work together, they each have their clear responsibility, and they give the impression they will do whatever it takes.

The European authorities look paralysed by comparison. The UK budget deficit is too high to allow easy tax cuts. There is little effort to root out the waste and unnecessary spending that would allow tax cuts. The Bank of England and the ECB both have to concentrate on low inflation, unlike the Fed which has a general duty to help sustain economic health. The European Banks keep interest rates inflexibly high, and are sparing with any extra liquidity to their markets. For Northern Rock it was a sad case of too little too late supplied to the market, to be followed by a colossal bill for the taxpayer. The ECB remains mesmerised by the divergent behaviour of the different Euroland economies under its gaze. It watches as the Euro soars, making great swathes of European industry uncompetitive.

Some love the sense of the rich and mighty in the financial world being brought low. Prosecutors sharpen their pencils to take evidence in possible fraud and corporate irregularity trails. Regulators thumb through their huge rule books to see which rules in practise had been broken during the heady days of off balance sheet loans and sub prime mortgages. Politicians sound off with all the certainty of hindsight about the errors of the bankers and the mortgage companies. They should all calm down and grasp these self evident truths.

Lending is important to help the economic wheels go round. You do need to lend to people who need the money, and the poor have every right to expect a mortgage service as well as the rich. Lending was overdone, thanks in no small measure to monetary authorities who kept interest rates too low for too long, and thanks to Regulators who through the Basel rules encouraged banks to push their loans off balance sheet.

We need to get from our current fragile over borrowed condition to a position where normal levels of transaction can take place again. To do so we will need lower interest rates on both sides of the Atlantic, not just in the USA. The banks have to recapitalise quickly, raising money from shareholders, bringing in new shareholders with new capital or by cancelling dividend payments. The authorities have more to do in the days ahead to make the markets more liquid. The problem now is not inflation, but too rapid a deflation.

Nor did they tell us at the last budget they would be charging us more than 70p a litre in tax on unleaded with a pump price of 110p.

Who would have thought that a few months into Gordon Brown’s premiership the main Forties pipeline would be closed down owing to an industrial dispute that stems from his taxation of pension funds and the consequent closure of many funds to new members?
The more the government says “Don’t panic” the more people worry that the government is not in charge and there may be shortages at the pumps. You can feel the authority draining away from the government by the hour.

The government did not tell us when first elected in 1997 that they would want to damage our liberties in the name of security. They did not stand for election as the party that would give us more surveillance cameras than a communist state, nor did they campaign strenuously for much longer detention without charge or trial, yet that is now their stock in trade.

The government did not tell us in 1997 that putting education first meant changing the exams system into a succession of short term cramming exercises to get through modules so schools could hit their targets. Never before have children been so often examined, in so many different exams, to so little purpose.

The government did not tell us in 1997 that they would spend unparalleled sums of money on public services, spending so much on spin doctors, glossy brochures, management consultants and extra administrative staff. Can the Prime Minister really need £2 million a year of spin doctors as recently reported? Wouldn’t spending more time on sorting out the underlying problems be a better way?

They did not tell us that their anti poverty programme would entail large armies to take tax off many people, and more large armies of officials to give some of it back in the form of tax credits.

They did not tell us they would give away so much power to Brussels, claiming each time an unpopular law came in from the EU that Britain was winning the argument.

They did not tell us that lop sided devolution for Scotland would fuel English nationalism, creating resentment at the better financial deal many English people now think Scotland gets from the Union.

They did not tell us their idea of local government devolution was to seek to create uniformity of policy and approach through hundreds of rules, regulations and guidance notes, and a star system to grade the results as if the electors had no role in judging.

They did not tell us they would face headlines in papers complaining of fraud and error in our electoral systems.

They did not tell us that government to them meant a continuous conversation with the media, rather than seriously trying to identify and solve economic and social problems that government can tackle.

Professor Anand Menon of the University of Birmingham has responded to John Redwood’s article, Britain in Europe, published on the e-International Relations website. The text of Professor Menon’s criticisms can be found here, and John Redwood’s response, is reproduced below.

I thank Professor Menon for his apology and change of tone. He may not agree with my views, but they are sincerely held and based on a sustained argument and a view of how the world works. In a democracy it is best to meet such positions with courteous and well argued disagreement.

I am also delighted to learn that Professor Menon agrees with me that the Uk should not join the Euro, and wishes to rule out any idea of more political Union or the creation of a country called Europe. Like him, I think such a course wrong for the UK. Unlike him, I do think that is the direction of travel of many of our partner countries and the Commission. The language and centralising powers of recent Treaties underlines this point.

I do argue strongly for different and better policies from the EU. I want to see the end to the protectionist CAP, which puts up food bills at home and deprives developing countries abroad of markets for their produce. I want to see many regulations withdrawn, as they are not necessary to be able to trade with each other. They can limit competition, choice and innovation. I want to see lower taxes, which requires less government at all levels including the European one.

It is good to know that the Professor too, shares some of these aims. The problem is, I see no chance of achieving them in the near future given the attitude of the main political parties on the continent of Europe.

I come to praise the sub prime mortgage. It has had such a bad press in the last eight months. Sub prime is now used as an excuse to explain why banks fail, shares go down and why fear stalks the markets. All the wise acres and most of the commentators now know the world will not be right until the sub prime is no more. The Regulators are busily slamming doors long after the horse of confidence has bolted. They wish to root out sub prime wherever they find it, put off balance sheet lending back onto stretched balance sheets, and warn people off lending to people who need the money. The new conventional wisdom is that banks should only lend money to people and companies who are already rich. They have discovered that the problem with lending to the poor is they might not be able to pay it back.

I have no time myself for sub prime salesmen who pushed the hopeless and the helpless into a mortgage they could not afford by offering a year or two of easy terms and seeking to play down the reality that at some point a commercial rate of interest kicked in. Nor do I have time for the many who now seem to think people on low incomes should not be able to buy their own home. Home ownership is one of the great breakthroughs an individual or a family can make. There is nothing like the freedom of being able to shut your front door, and then do what you will with the property inside. I welcome all positive moves to make mortgages and homes more affordable for all.

In the USA the authorities do seem to have realised that pushing thousands of sub prime mortgagees into default is not a clever – or pleasant – thing to do. The cuts in interest rates have come thick and fast from the Fed, as they fight to get rates down to a level where more people can hope to pay the mortgage and keep their home where they have mortgage rates linked to market rates. On this side of the Atlantic, we have authorities who see the time as suitable to preach a few homilies about the evil of debt. They are keeping interest rates high to “teach borrowers and bankers a lesson”. They risk bringing house prices down, and with them the dreams of many a heavily mortgaged home owner.

The Credit Crunch so far is a story of two rival traditions responding in very different ways. When the UK experienced a run on Northern Rock it took six months to offer financial support, look around for a private sector buyer and eventually to nationalise the luckless institution. When the US saw a run developing on Bear Stearns it took a week-end to find a private sector buyer, put in place a Fed package of loans and announce confidence boosting proposals to markets, including another interest rate cut.

The US authorities are fully into recession fighting mode. The President, the Treasury Secretary and the Fed act as one, supervising a tax cut plan, boosting the market with substantial liquidity and slashing interest rates. They work together, they each have their clear responsibility, and they give the impression they will do whatever it takes.

The European authorities look paralysed by comparison. The UK budget deficit is too high to allow easy tax cuts. There is little effort to root out the waste and unnecessary spending that would allow tax cuts. The Bank of England and the ECB both have to concentrate on low inflation, unlike the Fed which has a general duty to help sustain economic health. The European Banks keep interest rates inflexibly high, and are sparing with any extra liquidity to their markets. For Northern Rock it was a sad case of too little too late supplied to the market, to be followed by a colossal bill for the taxpayer. The ECB remains mesmerised by the divergent behaviour of the different Euroland economies under its gaze. It watches as the Euro soars, making great swathes of European industry uncompetitive.

Some love the sense of the rich and mighty in the financial world being brought low. Prosecutors sharpen their pencils to take evidence in possible fraud and corporate irregularity trails. Regulators thumb through their huge rule books to see which rules in practise had been broken during the heady days of off balance sheet loans and sub prime mortgages. Politicians sound off with all the certainty of hindsight about the errors of the bankers and the mortgage companies. They should all calm down and grasp these self evident truths.

Lending is important to help the economic wheels go round. You do need to lend to people who need the money, and the poor have every right to expect a mortgage service as well as the rich. Lending was overdone, thanks in no small measure to monetary authorities who kept interest rates too low for too long, and thanks to Regulators who through the Basel rules encouraged banks to push their loans off balance sheet.

We need to get from our current fragile over borrowed condition to a position where normal levels of transaction can take place again. To do so we will need lower interest rates on both sides of the Atlantic, not just in the USA. The banks have to recapitalise quickly, raising money from shareholders, bringing in new shareholders with new capital or by cancelling dividend payments. The authorities have more to do in the days ahead to make the markets more liquid. The problem now is not inflation, but too rapid a deflation.

Last week the Prime Minister at last grasped that the credit crunch and the banking crisis is serious. I have met people on the doorsteps and in the streets who have told me how it is already affecting their lives. When the banks catch a cold we all suffer. Those working for the banks themselves, those involved with creating and issuing mortgages, those earning a living from selling and buy properties are all immediately affected. As other companies find it more difficult to borrow, so more businesses will be unable to create new jobs or even hold on to all the employees they currently have.

A number of my correspondents and website respondents have said they feel no sympathy for the banks. The banks did well in the good times, and did not take enough care to prepare for the bad times. Some of the bosses walked off with huge paypackets and bonuses when they were failing to sort things out as they should. Many think the banks should be made to pay for their own mistakes, with the Treasury and Bank of England watching from the sidelines.

I do not agree. Of course bonuses for the bosses should be removed when results are bad, dividends for shareholders should be restrained or reduced to husband bank cash, and shareholders should be asked to put some more capital. That on its own will not be enough. We need more cash in the markets to allow banks to go about their normal business. It is one of the duties of the Bank of England to manage the money markets. They failed to take enough cash out and put interest rates high enough during the credit binge. It is important they do not now make the opposite mistake, and put too little money in and leave interest rates too high during the credit crunch.

Many of you are finding it difficult to balance the family budget each month. The government tells us inflation is under good control because they use the CPI which seems to include too many things where prices are not rising, and distort the normal shopping basket the rest of us have to buy. We all know just how much fuel, food and taxes have soared in recent months. The petrol and diesel price is a shocker, and most of that is tax. (More than 70p a litre now goes to the Treasury). We need some respite from all of this. Lower mortgage rates would help. A more restrained and efficient government would also help, by stopping the upward drive on taxes.

One of the changes I would like to see is a greater sense of urgency in Whitehall about the need to increase central government efficiency and reduce its administrative costs, as the burdens on taxpayers are so large. If only more of the money we paid went on teachers, nurses, doctors and police we might then have better public services, but more than three quarters of it does not go on these essential public servants. It is high time the government stopped saying it was going to deliver value for money, and got on with trying to do so. The government is spending too much, taxing too much and borrowing too much. It is the pot calling the kettle black when the government says the banks lent and borrowed too much. The biggest borrower and the biggest user of off balance sheet vehicles to buy things on the never never was the government itself. We will all be paying back those debts for many years to come.

Back in February, John Redwood had an article published in e-International Relations concerning the Lisbon Treaty, entitled Britain in Europe in 2008: Big World, Bad Europe, Ugly Consequences. This article was criticised by Professor Anand Menon of the University of Birmingham, who published a response under the title of Britain in Europe: A Response to John Redwood. Today, John responds to Professor Menon’s criticisms and argues that those who oppose EU integration are not “little Englanders”, but “big worlders” who wish to see Britain successfully respond to the challenges of US technology, and the economic and political rise of China and India.

It is such a pity that pro European Union apologists like Professor Menno demean their case by spiteful personal attacks and silly misrepresentation. His personal distaste comes out throughout the course of his casual remarks, as in his conclusion that “Redwood and his ilk should look beyond their narrow anti European prejudices”.

I have no anti European prejudices. Europe is my continent, and I admire many of its cultural, architectural, scientific and political expressions. I enjoy travelling, hearing the music and learning from the literature, admiring the great paintings and standing in the buildings that represent the European achievement.

I do have a point of view about government and regulation which is shared by the majority of my fellow countrymen and women. There is too much government, it is too expensive and too prescriptive, and too much regulation which often achieves the opposite of what it sets out to achieve. Like President Sarkozy, I admire the creation of a great democracy in the UK over the centuries, and the spirit of freedom and global vision which characterises the British at their best. I am not a little Englander but a big worlder, responding to the huge changes of economic and political power of our century that come from the excellence of US technology and from the rise of mighty India and China.

Professor Menon sniffs at Conservatives offering a referendum on Lisbon for no good reason. We have always said further transfers of power to Brussels need the consent of the British people. Why is the Professor so afraid to make the case for the Treaty if he thinks it is so good for us? Why do so many people in the UK disagree with him?

He denies my point that debates over constitutional change reveal how undemocratic the EU has become. What more evidence does he need than the way the French and Dutch governments ignored the results of referenda in their countries, or the breathtaking way the UK government denied us the referendum they solemnly promised to win a General Election? He says that was the national politicians, not the EU – but as he should know, the EU is a political elite made up of present and former national politicians, some of them now Commissioners, and some Ministers in national governments pushing the EU agenda. It is this elite which has become so cut off from popular opinion in the UK, and who lost the referenda in France and Holland.

The Professor claims Lisbon reinforces national control. He should try reading the full Treaty, which sacrifices 50 national vetoes, some of them over important areas of national policy, and pushes us further towards a common foreign and security policy and a common criminal justice policy. Those are legitimate aims for those who want a country called Europe governed to a greater extent at EU level, but proponents should make an honest case, not deny this is happening.

He complains that post Northern Rock I want less financial regulation not more, as if it was obvious we needed more. We already have masses of regulation – far more now than years ago when we did not experience runs on banks in the UK. The issue to ask is why should we believe all this regulation is good for us, when we survey the current mess created by the Basel global framework and the EU regional framework of regulation in recent years? We need less and better, not more, and more levels of regulation. It is best to have global agreements, as financial services and banking know no regional borders.

He also thinks an EU common market needs a strong regional government. You do not need a common government to trade with people. You need willing buyers and sellers, and World Trade Organisation rules, which are now good at policing more open markets at least in industrial products. Unfortunately EU rules block up agricultural markets in ways which damage the interests of UK consumers and developing countries and have not yet been dealt with by WTO engagement owing to the unhelpful stance taken by the EU in trade negotiations.

Professor Menon and his friends should understand that people like me want better living standards for all the peoples of Europe, and want Europe to make its contribution to a more prosperous and happier world. We do not find the protectionist and power seeking policies of the European federalist political class helpful in pursuing these goals which is why we want a freer gentler Europe with less government, not more.

The oddest thing about this slowdown and credit crunch is the delayed reaction – or the lack of reaction – of the UK housing market. Shares have slumped. Commercial property prices have fallen substantially. Retailers have complained about the squeeze on their customers. Yet house prices are still slightly up on a year ago, and the last few months have seen only small declines in the national house price figures.

High Stamp duty, Home Information Packs and higher mortgage and transaction costs must be encouraging people to sit tight and not move. The market has been short of homes to sell, just at the point when otherwise it might have gone down. Fortunately unemployment has not been shooting up, and most people have been able to meet their mortgage payments even though their budgets are under more pressure. There has been an uneasy equilibrium created by inertia and the new impediments to selling and buying.

We may still, however, be in a for a slow but painful decline in house prices. There is plenty of evidence that new buyers are finding it more difficult to obtain a mortgage. Gone are the deals offering total borrowings in excess of the house price, and gone are the days when you could get by without much of a deposit. US interest rates may be plunging, but UK general rates are much stickier, and banks and building societies are keen to rebuild margins by charging more for a mortgage relative to the general level of interest rates.

There are those who say they do not think lower interest rates will make any difference to the Credit Crunch – indeed that seems to be the fashionable position. They link this with fears about inflation in the UK getting out of control if any action is taken to cut rates. This is a strange misunderstanding of the position.

Lowering the general level of interest rates could be crucial to avoiding the slowdown of the housing market becoming something worse – a price crash. As part of the Credit Crunch is the banks’ unwillingness to accept mortgages when lending to each other, anything that makes it more likely more people can pay their interest on the outstanding mortgages would be good news. Surely more people will be able to afford the mortgage if the mortgage rate comes down, than if it stays up or even goes higher? In the USA the authorities have grasped it. They are fighting the battle of the bulge of the sub prime. If too many sub prime mortgage holders give up on the mortgage, then the losses will multiply through the banking system and more credit will be destroyed. The UK may not have had such an extreme version of sub prime lending as the USA, but similar dynamics apply in our housing market.
If the UK house price slide gathers pace, then more people will be in negative equity where the home is worth less than the mortgage. If more people lose their jobs, more will struggle to pay the high mortgage bills they currently face.

Meanwhile, many people are struggling with an inflation rate much higher than the official figures suggest. There is the shock at the petrol pumps, the increase in Council Tax, the surge in electricity and gas bills and the hit on bread and meat. The public sector is at last taking a tougher line on public sector wages. There is no evidence of inflationary pressures building up on private sector pay, as the market for goods and services is still competitive enough to make passing on big cost increases difficult. Private sector bonuses, especially in the financial sector, will be well down, deflating total remuneration. All this makes it uncomfortable for many people to pay the bills and get to the end of the month with something to spare.

It also means the UK authorities should not worry too much about inflation. We are living through the worst of it now. They should worry much more about slowdown and credit squeeze, which will curb price increases in due course but could do lots of other damage if allowed to get out of control. I urged the government to do more to relax the squeeze in my speech during the Budget debate.

So how was the budget for you? Few are pleased that drinks are going up a lot, whilst the tax attack on motoring is postponed rather than cancelled. The headlines were understandably taken by the bad news on whisky, wine and wicked cars.

Beneath the front page stories the Chancellor shuffled a few hundred million here and a few hundred million there, as if he were running an economy one tenth the size of the UK’s. The overall increase in spending is dwarfed by the huge supplementary estimates that went through with precious little explanation on the Monday of budget week. The big tax hike on alcohol will pay for very little of those big spending increases, so we now know most of that money is going to be borrowed. Pensioners will welcome a one year increase in fuel allowances but they would have been more reassured if they were promised for future years as well.

The budget speech contained endless references to “stability” as if repeating the word would deliver the desired result. If the Chancellor really wants stability, he needs to take the kind of action the US is taking to prevent the sharp slowdown getting out control – tax cuts and more assistance in money markets. The reason he cannot do this, is he has allowed careless spending in his inefficient public sector, taking public borrowing and spending to record levels just before the downturn in growth hits the figures.

What we needed was a serious analysis of the turmoil in credit and banking markets; an explanation of how quickly the vast sums lent to Northern Rock will be repaid; and a drive to raise the productivity of the public sector to curb its inflationary costs. Instead we were treated to little homilies on plastic bags, drinking and driving, as if they were the most important things on the Chancellor’s mind. He should be spending his every working hour trying to get to grips with the credit crunch and the Rock mistake. That is serious money. This was a budget of penny packets that will have no overall economic impact, though it will annoy those in the drink trades.

Our economic destiny instead rests on global events, and on the wider financial conduct of the UK government. Of course the sub prime crisis started in the USA, and some of the worst strains in the system are in the US banks. If the US authorities are successful with their policies of slashing interest rates, pumping liquidity into the parts of the money markets that most need it, and offering substantial tax cuts to keep the consumer spending, that will help all of us. The banking problems do not stop on the Eastern seaboard of the US. The only serious run on a bank so far after all occurred in Newcastle, not in New York. The global banking system is interconnected and feeling the pressures throughout. The UK is so constrained by the size of its own annual government borrowings, that it cannot afford to make the tax reductions the US has been able to offer to stop the downturn getting out hand. UK inflation is so entrenched, in part owing to public sector costs like rail fares and Council taxes and charges, that the Bank of England dare not cut interest rates as strongly and quickly as the Fed.

To give us more room for manoeuvre the government needs to get a grip on its own spending. This year has seen billions more in spending overruns, as weak Ministers just present the larger bills to Parliament and borrow the money. If the government were not borrowing so much it would be able to keep off the higher taxes. If it were not borrowing so much we might justify lower interest rates.

If you truly want to run a stable economy then you have to avoid borrowing at all in the good times, even pay some off, to leave you space to borrow in bad times. Unfortunately this government took advantage of an easy credit binge worldwide to spend as if it were going out of fashion. It is time to sober up, and quickly, before it gets hit by its own higher drinks taxes.

You couldn’t make it up.

Two weeks ago a Government Minister told parents whose children do not have places at their first choice school to appeal, in areas where the allocation was made by lottery!
The whole point of the lottery (sadly) was to stop parents who care about their children’s future, or who live near to one of the better schools, from automatically getting a place there. This was the Government’s cruel solution to the fact that there are not enough places at good state schools to go round.

Instead of tackling this underlying problem – too few places at good schools – they decided to tackle what they think is the problem – “middle class” parents gaining the places at the better schools for their children.

Had he cared about consistency, the Minister would have said that he was delighted so many parents had failed to get their children into the school of their choice - because it shows the lottery system is working. He should have told them there is no chance of their winning on appeal, as all those places in the popular schools have been earmarked for children whose parents did not covet them, to be awarded by lottery and government fiat.
I oppose a lottery scheme because I believe in choice, and I think that people should be able to improve their lot in life and the lives of their children. I want a government that uses choice, and frees the schools more, to drive standards up generally. If money follows parent choices, more children will go to better schools. As it is, parents and children in the lottery system are fed up, and the Minister himself cannot live with the grim reality of his own policy.

Parliament had a bad week. Most of the MPs were there, and we were allowed to work late for a couple of days as there was a huge amount to fit in to the end of the Commons committee stage debates on the EU Constitutional Treaty. However, when it came to the big debate on a referendum on the Treaty, time was too short to allow all those who wanted to make speeches to do so.

During the course of the debates the government and their Lib Dem allies told us that nothing significant was being given away in the new Treaty. They stressed that it will reduce the number of Commissioners and allow member states who want to leave the EU a way to do so. They accepted that 50 vetoes are being given away, but pointed out that some of them only apply to Eurozone members and others are relatively minor. They pointed out that the shape and length of the document is different from the Constitution it replaced.

Those of us who oppose the Treaty have shown line by line that some of those 50 vetoes matter a great deal. This Treaty gives the EU more power to make decisions in criminal justice, foreign affairs and defence, and encourages the Union to play a more prominent role in these areas. It will result in a President of Europe who will want to strut the world stage, and a High Representative in Foreign Affairs who will often be a more important visitor than the British Foreign Secretary and who will wish to corral us into a common policy on the main issues. It removes our veto over energy matters, where the UK’s interests as a substantial oil and gas producer can be very different from those of the consumer nations on the continent. Our famous red lines – which were supposed to protect the UK’s national interests – are not nearly as strong or as good as simply keeping our vetoes. It is true the Constitution has been recast, but as many a senior continental politician has been honest enough to point out, the result is almost identical to the Constitution. All they have done is replaced a document which rewrote all the old Treaties with a document which amends the old Treaties to get them into virtually the same shape as the Constitution!

Clearly our government thinks we were all born yesterday. All they have to do is to examine the results of the ballots, organised in ten marginal seats where the incumbent MP decided to rat on his or her promise to vote for a referendum in Parliament, to see that they have been rumbled. 88% of those voting want a referendum. They have not been persuaded the Treaty is sufficiently different. 89% want to vote against the treaty, because they do not wish to see more power passed to Brussels. I was pleased to be able to cast my vote for the referendum I always said we needed. I was pleased to be vote against the Treaty itself, and pleased to co-sponsor amendments and New Clauses which if passed would have strengthened democratic accountability here in the UK.

My regrets are twofold. It was sad to see Parliamentary debate on many of the important issues prevented by the government’s timetabling decisions, and sad to see such an easy victory at the end for those who are now against the very referendum they promised in 2005. These matters now go to the Lords. They doubtless will be given some time to pick up some of the points we were prevented from tackling, as well as having their own vote on a referendum. Neither Labour nor the Conservative Party have a majority in the Lords, so there will be keen interest in how all the other peers are going to go as they will decide the result. Labour peers will, on the whole, be against a referendum and Conservative peers will, on the whole, be for one. The Lib Dem and cross bench peers can decide the matter. I fear they will prove no friends of a democratic vote, but would love to be proved wrong.

Out and about talking to people over the week-end, the clear message was “We’ve had enough”. Council Tax bills, income tax, threats of higher green taxes and public sector charges, energy bills and food bills - the squeeze is on, and much of it results from wasteful government.

We live under rip off government. They have piled high the parking charges, the fuel duties, the pensions tax, the extra National Insurance, postal charges and rail fares. Never has so much money been spent by so few to so little effect.

Polls show the public were prepared to pay more tax a few years ago. They wanted to believe that just a bit more tax would lead to better hospitals, and more successful public sector schools. No-one minded paying a bit more to have more police on the local beat, and more nurses and doctors.

Instead people were asked to pay hugely more, only to see the money dissipated on a stunning array of extra officials, more regulations, bloated quangos, more management consultancy contracts, big computer schemes and large pay rises all round for the senior people in the state sector. As a final dose of salt in the wounds, people discovered that the MPs appointed to oversee good value for public money were themselves keen to test the elastic In their system of allowances and expense payments.

In the last few weeks we have seen a government gorged on wasteful spending blow another £100 million or so on financial advice about Northern Rock, only to conclude that the taxpayer has to stand behind all £110 billion of its liabilities, guarantee the jobs and the pensions and agree to pay any losses from here. People in the North-west voted against regional government, so we are still lumbered with it throughout England. It means we are one of the most over-governed countries in the world, with Parish, District, County, regional, national and EU government in many places. Layers on layers of officials write to each other and pass the blame around.

Some asked me if it would be the same under the Conservatives. They were alarmed by the comments of Mr Lansley, misconstrued by some in the media. Let me explain why I am not concerned.
The Conservatives have said that in office they would share the proceeds of growth between extra spending and tax cuts. Let us assume the economy produces £1.5 trillion of output in election year. Every one per cent of growth means an extra £15billion of income, and an extra £6 billion of tax revenue on that activity.
If the economy grows at its trend rate of say 2.5%, that is an extra £15 billion of tax from just one year’s growth. So the Conservatives could decide that say £10 billion of that was needed for increases in spending in priority areas like Health, and £5 billion was available to start tax cutting.

The Lansley remarks said that by 2023, if Labour’s plans went ahead, the NHS would take 11% of national output, instead of the 9% today. He did not promise to increase it to that level. Nor, over that time period would such a level necessarily pre-empt tax cuts. If at the same time the civil service was cut by natural wastage, regional government abolished in England, ID and other computer schemes scrapped and the quangos cut back to size, it would be possible to spend much more on health and pocket some much needed tax cuts.

More importantly Andrew Lansley pledged that a Conservative government would work with the NHS to raise quality and productivity – we need to get more for what we are already spending. People may say, they’ve heard such promises before. The truth is that any sensible government now should work hard to achieve just that. Everyone is fed up with a system that gobbles the cash without delivering the results.

Conservatives need to promise service improvements that can be delivered, not large sums of money for any particular budget. If you let people know in advance there are large extra sums available, they will work out ways of spending that money as quickly as possible without pausing to think if that spending is both necessary and likely to bring worthwhile results. Similarly, it is not easy to carry out a successful pay negotiation, ending in fair settlement, if you announce in advance that you have plenty of money to meet more or less any request.

For too long we have watched as Ministers have failed to engage with the difficult managerial issues that dictate how well run a service is and how much it costs to run. Their fascination with media events and spin, and their strange belief that they are at the beck and call of media, has left them short of time and energy to chair the meetings, lead the officials, encourage the machine to deliver more for less. The private sector has been under the remorseless cosh of intense competition. Everyone in manufacturing knows they have to do more with less to stay in business. The worst parts of the public sector have got used to doing less with more. No wonder we all feel over taxed and overcharged.

I hope you all feel better about being a part owner of Northern Rock than I do. Last week we had but little time as the Government whisked through the Nationalisation Bill to take over £110 billion of liabilities and all the staff, property, and contracts of Northern Rock. This amounts to an average commitment of £2,000 for every person in the country.

I am very nervous for the North East. Northern Rock is the most important business in the area. It is a big employer in its own right and has been a generous donor to the local community during its profitable private sector days. I fear for it in public ownership, as the record of nationalised industries has not been good.

Many of you will know that I am no great fan of nationalisation. I have come to this conclusion by seeing all too often nationalised industries put up prices by more than is acceptable, slash their numbers of employees by more than is desirable, deliver a poor quality service, and cost the taxpayer a fortune. I have seen and heard nothing from current Ministers in their approach to Northern Rock that gives me confidence that it is going to be better run in the public sector than it has been by private sector shareholders.

Wokingham has its fair share of problems from our current batch of nationalised industries. One of the oldest and biggest is the Post Office. Many people have petitioned against the closure of the London Road and Barkham Road sub-Post Offices. Many people think that the stamp price has been put up too much by the current management, regret the passing of two deliveries a day, and dislike the fact that the one delivery in the day often does not turn up before they have gone to work.

I don’t think Labour Ministers arrived in office ten years ago wishing to close lots of Post Offices and looking to make the service worse. They, after all, believe in the joys of nationalisation and would have told us, in those happy days before they got into office, that under them the Post Office would go from strength to strength, improving its service and providing a good deal. So, what went wrong?

Ministers decided to cancel a lot of Government business that had been transacted across Post Office counters. The loss of this business and revenue undermined many of the smaller Post Offices around the country. The Government had to ask taxpayers to pay more tax in order to subsidise the Post Office network. The losses escalated, and the new management the Government brought in decided on a series of measures that have proved very unpopular. They have put up prices by much more than inflation. They cut back on service levels. Now they are embarking on a large closure programme