A Fairer World

It's an ill wind

2010-01-07T16:20:00.000Z

This week's heavy snow has resulted in two incidents that made me think about the nature of community and feel upbeat about the prospects for Britain after the Election.

This morning, unable to get my car out of our untreated side road and having to get to a client in Redhill, I walked to a nearby bus stop, from which a service is allegedly still running. While waiting, I saw the driver of an expensive BMW convertible struggling to pull away from rest, as the driven rear wheels spun impotently on a surface of impacted snow with ice beneath. He got out and attacked the highway with a spade; if anything, this made the situation worse, exposing the frozen substratum. He revved the engine fruitlessly, and the car slewed sideways.

Next, first one by-passer, then another, came to his aid, working together to push the back of his car sideways onto a narrow track of Tarmac, partially protected by gritting and exposed by the tyre-tracks of previous traffic. Once the back tyres gained purchase on it, he was able to reverse, pulling the car's nose onto this strip of still-passable highway.

The two helpers must have been tied up for 15 minutes, at considerable personal discomfort and some risk of injury. Both looked to be of limited means, yet they appeared unconcerned with the obvious disparity in wealth between themselves and the driver they were assisting.

The second incident is much closer to home. About three days before Christmas, my partner Sarah and I noticed that one of the local cats was carrying one of his rear paws in the air, having presumably sustained an injury to either the paw itself or the hind leg or hip. We assumed his owner would take him to a vet. A week or so later, between Christmas and New Year, we were concerned to see him still hopping along on three legs, the injured limb not bandaged or strapped. But, knowing that broken limbs in small animals are often now dealt with by internal pins, thought nothing of it. Our concerns intensified a couple of days ago when the snow blew in: we know our cat, Popcorn, barely ventures out when the ground is this cold, yet the injured black and white Tom was still hopping along, only this time, issuing a plaintive maiow every few steps.

We called the Cats Protection League, who asked us to call on neighbours to establish whether anyone owned the animal or if it was lost or feral. So we trekked round the neighbourhood at nearly nine at night on the coldest night of the year to date. Everyone was happy to open the door to us, give us all the information they had and help with the attempt to save what we believe is a lost domestic cat that has lived locally for the past 18 months or so. Turns out that everyone else, as we did, had assumed someone owned the animal until the past few days, when it became obvious that the length of time its injury had gone untended, combined with the fact it was still outside all day in Siberian conditions, led them to conclude it needed help. What touched me is how many people, including those living in Housing Association properties who are therefore likely to be on low incomes, often with several children and animals of their own to care for, had tried to feed it, or catch it.

With the help of Cats Protection and food donated via a collection point at our local supermarket, a kennel and feeding point have been set up in a neighbour's garden that the injured cat is known to frequent. In time, the feeding point will be converted into a (humane) trap, which we hope will capture the animal before its leg can set wrongly (if broken) or become irreversibly infected (if wounded), whereupon the charity will pay for it to receive veterinary attention then take it in to recover, before re-homing it.

As I've written before on this blog, I see the two overriding challenges for the new Government as fixing the economy, which will entail slashing the public debt by getting more done with less, and healing our community, by fostering co-operative and caring attitudes in place of a sense of entitlement or self-interest, which have been the prevailing values of the New Labour bubble.

People old enough to remember World War II and the kipper years that followed talk of privation in positive terms, in that it created conditions under which people had to pull together for the common good. I'm not sure whether 'New Conservatism' really exists - the Left likes ideological labels more than the Right - but if it does, it strikes me that it probably has to do with a desire to empower people, on a grass-roots basis, to create change, rather than having it driven from the centre, as has happened, expensively, oppressively and ineffectively, under New Labour. This ethos pre-dated the recession, but has gained traction since the banking crisis because this bottom-up approach offers the opportunity not only to re-establish social cohesion but also to get things done more cost-effectively at a local level, often on a voluntary basis, without the use of expensive phalanxes of civil servants and Quangocrats.

The two little incidents that happened near me over the past couple of days have shown me how the community can still come together to help those in need, whatever their circumstances. Fundamentally, co-operation remains an important part of the British psyche and has not been entirely destroyed by the regulation-obsessed, State-will-provide Blair-Brown era. This strikes me as a promising start to 2010, after a difficult 2009.

"We have to do better than this"

2009-12-17T16:56:00.001Z

There are two things I'd really, really like for Christmas this year. The first is for David Cameron to invite Sir Gerry Robinson to work with his administration on the Herculean task of fixing public services; the second is that Sir Gerry should accept the offer.

If you've watched this programme, you'll know why. The second part of the former Granada Chief Executive's investigation into the state of dementia care in the UK, which I count as a public service because although most homes are privately owned, 70 percent of places are funded by local authorities, its findings both shocked and moved me.

The episode focused on a home that had recently been inspected, and upgraded from poor to adequate, largely because the owners had recently given it a cosmetic makeover and all the required documentation was in order. But this box-ticking approach overlooked glaring flaws in the standard of care: elderly people with Alzheimers and other conditions that demand frequent human interaction if sufferers are not to withdraw fully into themselves were being deprived of contact and left to vegetate. They were locked indoors, because it was deemed 'unsafe' to allow them to sit outside on summer days; on occasion, it was implied that they'd even been locked in their rooms at night to stop them roaming, allowing care staff to sleep, their emergency call cords tied beyond their reach, lest they interrupt staff's sleep.

The overriding culture, driven from the regulator downward, was driven by the need to demonstrate that residents' physical wellbeing was met, while ignoring their emotional and mental needs: better to wrap them in cotton wool than allow them to live, if living meant risking injury (the 'care plans' included diagrams showing evidence of any bruises, all of which had to be accounted for). In contrast, Robinson found a model home in which the staff wore casual clothes, rather than variants on nurses' uniforms and sat with the residents, engaging them in the process of helping to run the home - for instance, in preparing food, and cleaning the place. Needless to say, occupants in the latter environment were happier, and healthier - and the home's running costs were no higher.

The presenter brought in the owner of the role-model home, and the dementia care consultant who'd helped make it such a good place to live, to work their magic on the failing establishment. They found that many of the staff wanted to engage with the residents, some even volunteering to come in, unpaid, on their days off, to talk to them. The blockers were an owner who lacked leadership skills or the motivation to improve, coupled with a regulatory system that seemingly neither measures nor cares about the emotional wellbeing of residents.

But the temporary improvement in morale had a consequence none of those involved could possibly have anticipated: emboldened by the fact that people were now interested in what they had to say, a number of the residents began making claims about abuse. The police became involved, then the council, and in due course the home was closed down. And this an establishment that had just been rated 'satisfactory' by its regulator. Robinson made the point that this was a Pyrrhic victory, as a third of elderly people moved from one care home to another die within a year of transferring - a proportion which I suspect may be higher for dementia sufferers, given that their episodes of confusion would be likely to make such an upheaval even more traumatic. The presenter didn't make this point, but I couldn't help thinking that, even at the end, bureaucracy dealt the residents an appalling hand: why should the failings of the two individuals who owned that home result in them having to be displaced? Why couldn't the managers be removed, and the residents be allowed to remain in the environment that was familiar to them?

Sir Gerry concluded the report with a voiceover, which became a piece to camera, which was so well put that I felt the urge to transcribe it, and include it, verbatim, in this blog:

"It had been a fight - against complacency, low expectations, apathy, and poor regulation. At some point in the future, we will look back on this, and when we do, I really hope we’re staggered by the fact that we were prepared to treat our relatives in this way, our loved ones, to leave them sitting in rooms, bored, staring at walls, non-people. It beggars belief that we’ve allowed this system to continue for so long. We have to do better than this."

I'm not ashamed to say this was one of several points in the programme when I felt tears welling up, of sympathy for the vulnerable people who were treated so callously by the system, of anger at those responsible, and of empathy for Robinson, who I think is one of the best TV presenters of the current age and by far the best exponent of business on television. Where 'Sir Alan' is portrayed as a pile-'em-high bully and the Dragons primarily as opportunists, Gerry Robinson presents himself as a good business leader is in real life: an intelligent analyst, who agonises about decisions, cares about those involved and is angered by injustice.

He displayed the same traits in his two series deconstructing inefficiency in the NHS (I'll Show Them Who's Boss and Can Gerry Robinson Fix The NHS?). Both showed him frustrated at a system obsessed with targets, run by weak, disempowered managers who were unable to reward the productive and committed and unable to deal effectively with the lazy, incapable and self-serving.

I vividly remember the second series, in 2007, in particular his righteous indignation that millions of Pounds worth of operating theatre equipment was used only during office hours, four days a week, because consultants were reluctant to work shifts and those who scheduled their work assumed they'd want to play golf on Fridays. Prompted by Robinson, a handful of pioneering surgeons challenged hapless managers and were allowed to extend operating hours, but one of the most productive and committed among their number was head-hunted by a private hospital and the restrictive pay scales imposed from the top prevented his manager from making a satisfactory counter-offer: instead, the NHS Trust in question was forced to contract in his services at a premium from his new employer in a bid to slash waiting lists.

As the prospect of a change of government hardens, any number of management consultancy firms are lining up to demonstrate their commitment to re-engineering public services, cutting out cost and inefficiency while improving delivery, eager to distance themselves from being positioned as part of the problem, rather than the solution. But their costs are prohibitive, and few of their consultants have run anything more challenging than a half marathon. They're also adept at hiring former civil servants, local authority, NHS and quango executives, on the revolving-door principle that their successors will give them contracts now in anticipation of being looked after in due course.

Maybe I'm responding to a public image rather than reality, but I genuinely feel that Gerry Robinson would be above all this. He's a former Catholic priest, for a start, which suggests that some level of belief and altruism underpins what he does. He's also personally wealthy, which means he's unlikely to be driven by scrapping around to feather his own nest. But above all, in the programmes that he has made about public services, and indeed about private businesses, he has come across as someone who really cares.

I'm sure there remains a suspicion among the electorate that the Conservative Party doesn't much care for public services, on the false premises that many prominent figures are rich enough not to need to use them. The truth is that modern Conservatism is committed to rebuilding social cohesion, and that can only be done if those who make decisions that are critical to the NHS and other services have first-hand experience of them. As, indeed, Robinson has of dementia care (his father having suffered from the condition in his latter years).

The public wants to know that we do care about public services, and that our criticisms of them are borne of frustration and anger at their shortcomings, not contempt for those working in them, or using them. They want to know that our drive to eliminate waste is underpinned by a sense of responsibility toward those whose income is taxed to pay for the services, and who rightly demand accountability in how their money is spent, rather than an uncaring drive to cut taxes for the wealthy, at the expense of decent services for the many.

If you scroll back up to Gerry Robinson's closing comments about dementia care, you'll see precisely the kind of motivations that I think are needed to truly get a grip on public services: not to slash and burn, but to rebuild them, if necessary from the ground up, around the needs and aspirations of users.

Robinson publicly supported Tony Blair in 1997, and has given money to New Labour. But he has been a Conservative in the past, and in June 2008 made it clear he would no longer donate to the current administration while Gordon Brown was its leader. In some ways, I prefer this to the notion of him being a life-long, uncritical Tory: if he agreed to help reform public services, it would be because he wanted to help, not in expectation of preferment or to support long-standing friends.

Whether it's hospitals that deny patients scans and operations while expensive equipment stands idle, homes that lock up dementia sufferers to protect them from injury while simultaneously depriving them of care and human conversation, quangos that create self-perpetuating elites of non-executives and senior managers while doing little to help those they were established to assist, what's needed is reform based around making end users' lives better, harnessing the most committed and able of those in the systems - often not those at the top, or the self-appointed spokespeople - to cut through existing chains of command and challenge assumptions about how things can and can't be done.

I'd like to think that the programmes Gerry Robinson made about the NHS made him re-examine his support for New Labour. A party that represents a coalition between senior managers in the public sector and the trades unions, which in the current era exist overwhelmingly in public services, is too close to those vested interests to challenge the way things are done - which, all too often, is engineered to suit the producers, rather than the consumers. And while I accept that my own party has historically been stereotyped as representing the interests of another producer group, namely business owners, in a modern, share-owning democracy, an interest in the wellbeing of private business is very broadly spread. And New Conservatism is actually about achieving social justice, which means governing for everyone, not a coalition of special interest groups.

I don't know whether David Cameron saw Gerry Robinson's programme earlier this week, whether he has been in touch to ask for Sir Gerry's help, nor whether Robinson is minded to accept the challenge. But I hope the answers are yes, yes and yes - not for me, or the Party, but for the country.

The Thin Black Line

2009-11-18T18:26:00.001Z

When I began this blog, back in January, I set out to make the case for the advancement of social justice through Conservative policies. Along the way, I've written plenty about the state of the economy, and how best Britain can rebound from the recession. I make no apology for doing so: few things are less socially just than losing your job, business or home as a result of an economic shock in whose making most of us had no part.

Recently David Cameron took a significant further step in explaining the philosophy that underpins today's Conservative Party. Giving the 2009 Hugo Young lecture, he talked about creating a 'big society', as an antidote to the 'big state' that has burgeoned under New Labour. As well as resulting in a more cohesive nation, and one in which the views and aspirations of the individual, family and community are more accurately reflected in public policies and the allocation of communal resources, I believe that such a philosophy can also be adapted to provide the best possible engine for economic recovery.

At the heart of the UK's current financial malaise is the fact that the country's outgoings have exceeded its income, not only since the banking shock of late last year but in the preceding boom time when, supposedly, Gordon Brown was pursuing policies driven by 'prudence' but, in reality, was building up the interventionist state and weaning a sizeable proportion of the working class into benefits dependency. Redressing the balance will require output to exceed expenditure for an extended period. It also requires either spending to fall or income to rise - for people to receive less, or give more. Whichever way it's presented, these are the axioms on which any sensible government must act.

How does this translate to individuals? Imagine a thin black line, scored vertically down the middle of a sheet of paper. To the left are people who take more out of society than they put in; to the right, those who are net contributors. For the country to return to solvency, we need the latter to contribute more than the former take out. And for our nation to be a harmonious one, we need to minimise the number of people who are not net contributors and thus are resented by the rest.

That's a big ask. Read the Daily Mail - something many politicians disdain to do, looking down on its predominantly lower middle-class readership, but actually an essential requirement for anyone who has respect for the biggest and most psephologically volatile constituency within the British electorate - and you'll see plenty of resentment among those who see themselves as net contributors toward those who they perceive to be on the take. The takers, incidentally, come in many shapes and sizes: health tourists and fraudulent asylum seekers, 'lifestyle' benefit claimants, Quango gravy-train passengers, expense-manipulating MPs. Loading extra costs onto those who already perceive themselves hard done-by will lead to resentment, possibly even a breakdown in social cohesion, and of course to mass emigration of those whose co-operation we most need.

The first objective of any policy must therefore be to ensure that there is no feeling of resentment among the contributors toward those who are net beneficiaries. And the simplest way to do this is to ensure that those who take the most out of the communal purse repay that support in some way. Much has been written about workfare, a term widely stigmatised, but I see no reason why someone who is not working and in receipt of benefits shouldn't undertake work of benefit to the community. Whether it's doing the shopping for the frail elderly, providing childcare for working parents or running community centres, it behoves their own self-respect, and the esteem in which they're held by others, that they should contribute in some way.

Another attraction to this approach is that it affords opportunities for the state to pare back spending, in favour of passing responsibility for many areas of socially beneficial provision from local and national government onto the third sector, underpinned by benefit claimants and volunteers.

At the other end of the spectrum are people whose net contribution to society is significantly above the norm. Among their number are the altruistic minority who give up enormous amounts of their time to undertake voluntary work, or who contribute very generously to charities. Perhaps we should incentivise, reward or thank such people, for instance by giving them tax breaks? Then there are the very highly paid, whose tax bills are therefore very substantial. Are we sure that a flat rate of tax (albeit tiered) is the most just way of raising revenue from individuals' incomes? Other options have been suggested in recent months, including a much increased personal allowance of perhaps £10,000, combined with a much simplified tax credit system, but I wonder whether work is also needed at the top end, such as tapering tax above a certain threshold. The alternative could be to lose many of the country's greatest wealth- and job-creators.

So far, I've dealt with those on the outer edges of the scatter diagram: the non-contributors who are resented, and whose continuing presence threatens social cohesion, and the most generous contributors, whose continuing goodwill we need to preserve. In reality, most people are pretty close to the thin black line, and small differences in policy can have huge impacts on their lives and, crucially, their life decisions.

A pertinent instance of this emerged last week, when Gordon Brown stepped back from the brink of a hugely unwise decision to remove childcare vouchers from the majority of the population in favour of entirely free childcare for those on very low incomes. The truth is that, by the time childcare costs are paid, many couples on average, or even slightly above-average incomes, are barely any better off as a result of mothers working than they would be if they stayed at home. This is even more true once all the costs of being employed are taken into account, including commuting costs and a working wardrobe. But the cost to society of women deciding to stay at home are much greater - more families would qualify for tax credits and social housing, the tax and national insurance take would be reduced and, of course, the women in question would have substantially lower lifetime earnings and hence spending power.

By the same token, foolish meddling such as the previous attempt to abolish the basic 10 percent rate of income tax result in large numbers of people finding themselves worse off as a result of working than they would be if they took the benefits option. And, setting aside questions of tax and benefits-in-kind policy and looking purely at details of implementation, one of the most callous aspects of the New Labour state is that many people who are dependent on benefits dare not take jobs because they know that if, for whatever reason, a new role doesn't work out, the system will leave them penniless for up to 10 weeks while faceless workers, on secure, public-sector contracts, in a back office somewhere, process their claim to revert to state support, during which time they may have little alternative but to resort to loan sharks for temporary support and will be ineligible for a swathe of forms of indirect support such as children's free school meals.

Such policies can also have very personal implications. There are many single mums who remain alone in part because the financial cost of becoming part of a couple, in terms of withdrawal of benefits, is so onerous. Even if a potential partner is earning a good income and willing to support her and her children, the jeopardy if the relationship doesn't last can be considerable. Likewise, the system for allocating social housing encourages dependency, reduces social and geographical mobility and is difficult, if not impossible, to exit.

By ensuring that the biggest net beneficiaries of social support make a commeasurate contribution, the stigma of accepting such aid will be much reduced. We should also ensure that the safety net is easy to both enter and exit. That way, those who are moderate net contributors to the system - the 'hard-working families' about whom Gordon Brown so often speaks, the Daily Mail readers, Worcester women and Mondeo men, will have much less reason to resent their status, because they will be reassured by the fact that the safety net will be there for them if their circumstances change for the worse. One of the great sadnesses of the recession has been hearing tales of people who've worked all their adult lives having to claim the dole for the first time and finding that, despite their many years' contribution, they were entitled to a mere £60.50 per week, whereas if they had chosen from the outset not to own their own homes, and if their partners weren't working or they were single, they would receive much more support.

I wonder, too, whether the tax and national insurance and benefits system shouldn't also have more of the characteristics of an insurance scheme: the more you pay in, the more you could get out, should you need it. For instance, if you are fortunate enough to qualify for social housing at one point in your life, that tenancy is, in essence, for life; in contrast, if you buy your own home on a mortgage and lose your job, the best you can hope for from the state is that it will pay the interest component on the first £200,000 of your loan, for a period of two years.

In reality, those who are able to support themselves tend to get re-employed relatively quickly, so the cost of tying support if things go wrong to previous contribution levels needn't be onerous. But the benefit of doing it is that it would become a lot easier to retain the support of the net contributors at a time when more may be demanded of them.

Gardeners' question time: how to nurture green shoots

2009-10-26T17:32:00.002Z

Last week we learnt, against media expectation, that the UK recession did not end in the third quarter of 2009. While this is just a provisional finding, with decline for the period estimated at 0.4 percent, there are many indications I've received in my working life that lead me to believe that those who predicted that the economy is unlikely to hit the bottom until the final quarter - and even then, largely because of the ending of the car scrappage scheme and VAT reduction - may well be vindicated.

For it's my view that while consumer confidence may have improved marginally, feeding through to retail sales that are less disappointing than many had feared - the fact is that companies are not investing in jobs, or anything approaching capital expenditure. At the heart of this problem is the sad fact that bank lending to businesses large and small continues to decline. The much-trumpeted Enterprise Finance Guarantee Scheme has largely failed, the few loans being made under the initiative being either replacement lending for existing facilities or, where they're new loans, they're being advanced against fixed assets or directors' property-backed guarantees - or both. There is a dearth of lending to back entrepreneurial activity: at the lower end of the market, start-ups and expansion and at the top end, management buyouts.

Sadly, this is unsurprising. The banks continue the long, hard slog of improving their balance sheets, and exercise that requires them to take minimal risks and charge the highest possible margins. Sterling is being artificially depressed to permit interest rates to remain at a historically low level for a record period in order that banks can lend out money at rates that barely deviate from the long-term norm, generating record profits, which are translating into (much resented) record bonuses for key personnel. Meanwhile, the rest of the economy is starved of the kind of lending that creates jobs in small businesses, drives efficiencies in big ones and generally keeps the wheels turning.

There has been much talk in recent days about whether bankers' bonuses are immoral or bad for society. Lord Griffiths, who chairs Goldman Sachs International, says that they are "good for Britain" and we should learn that "inequality is a way of achieving greater opportunity and prosperity for all". As a Conservative, I have some philosophical empathy with these statements, on an abstract, philosophical level: I'd rather than money was earned (and spent) in the UK than elsewhere, and I accept that some degree of inequality generates growth, as long as those who benefit from it spend it locally and wealth is used as a beacon to which all can aspire, rather than a cap on their aspirations.

But in the context of bonuses, I think he's wrong. Every penny paid out in this way is money not sitting on a bank's balance sheet, delaying the date when proper lending can resume and jobs and affluence can be spread more widely. George Osborne's response, which echoes proposals supported by most G20 countries, is that, until banks are truly solvent, in the sense of being able to survive without governments as shareholders or guarantors of debt or dodgy assets, any bonuses should be paid in the form of equity, to be held until that solvency returns.

Of course, there are difficulties with this approach, not least that greedy bankers will insist on higher basic salaries, to cushion them from the short-term damage to their personal cashflow positions that such parsimony threatens. And it's true that there's a risk of losing the best brains to our competitors. Unless, of course, we use the G20 as anti-capitalists fear, albeit to an end that they would applause: as a cartel. If every major nation agreed a policy on controlling bankers' remuneration, we could cap their earnings without risking damage to any individual nation's banking industry. Ironically, this would benefit the UK more than any country, with the possible exception of the US, and yet it's Brown that has blocked the introduction of such a measure.

Ideologically, I feel uncomfortable about countries forming cartels: on one level, that's what the EU has been guilty of for years, freezing out imports from (mainly developing) countries, whether overtly, through import duties, or surreptitiously, by introducing ever-changing CE certification standards that companies and farmers in less affluent territories struggle to keep pace with. But sometimes it's necessary to fight fire with fire. One of the reasons why the misdeeds of some bankers proved so catastrophic to the world economy is the same reason why it's hard to squeeze their excessive remuneration out of the system now: there are simply too few banks, and by extension, too few experienced bankers. A process of ongoing consolidation over the past century, which accelerated in the 1980s in the UK and Europe and 1990s in the States, means that there are actually fewer banks now than when the horse and cart was the preferred means of transport in the world's capital cities. That has to be wrong.

So any attempt to moderate bankers' pay must be accompanied by a determined, activist programme of encouraging the creation of new banks. Not only would this allow more people with the relevant intellectual capacity and application become bankers, widening the gene pool and reducing the pricing power of key individuals and their employers, but it would also foster and incentivise the creation of different banking models, practices and norms. The credit crunch happened because banks had become the dinosaurs of the world economy: large, slow, aggressive but stupid, they survived on a narrow diet, gorging themselves on derivatives until they neared collapse. I'd like to see banks run by charities (Age Concern for old people, Gingerbread for single mums), retailers (Tesco and Marks and Spencer have white-labelled others' retail banking services for years - it'd be interesting to see how they'd do it themselves), while the Institute of Directors could open one aimed at small businesses. And while part of me quakes at the prospect of Labour-run local authorities running banks, if they were truly reflective of their areas I think they could do a lot of good in generating suitable jobs.

How can Government 'encourage' the creation of new banks, and is it the state's role to do so? On the latter question, my view is a resounding 'yes'. Even the driest Tory believes that the state has two roles: defending its citizens and protecting the free market. As to the means, the simplest is to sell off the constituent elements of the banks part-owned by the state separately, rather than together: it's not many years since Lloyds Banking Group, for instance, was four independent entities - Lloyds, TSB, the Halifax and Bank of Scotland.

Another option is to use the tax system to encourage investment in the creation of entirely new institutions - say a tax break on the earnings of newly-formed retail banks for an agreed period and incentives for solvent individuals and organisations to invest in such businesses - and fiscal disincentives for businesses that are cash generative on such a scale that they could found (or fund) new financial institutions to hoard that cash or distribute it as dividends.

One of the enduring sensitivities, the elephant in the room, is that the UK has lived well on the proceeds of the banking industry over the past 10-15 years and nobody wants to threaten the sector's success. But the fact is that the sector failed, publicly and expensively, last year. Creating more and better banks should strengthen our ability to compete globally, not undermine it.

I suspect the public harbours a residual suspicion that we Conservatives are the friends of big business, even when it's greedy and corrupt, rather than of the man in the street: Wall Street rather than Main Street, in American rhetoric. I believe that David Cameron's closing address to conference went a long way towards disabusing the electorate of this notion. While he is unlikely ever to take on the fashionable 'Red Tory' label, Cameron certainly believes in localist, decentralised politics and the economic model that goes with it, which is one that instinctively prefers small business to big.

I therefore hope, and believe, that between now and the General Election, my party will develop policies aimed at disrupting cosy oligopolies wherever it finds them, starting with the banking industry. Mervyn King's frustration with New Labour's (read Gordon Brown's) inactivity on reforming the sector most recently came to a head last week, with the question of whether banks that are too big to fail should be broken up, and specifically whether 'casino'-type activities should be confined to banks that are separate from the mainstream, retail ones. Even setting aside the compelling arguments about such measures preventing a recurrence of the credit crunch, I believe that such a program would be a crucial first step along the necessary path of creating more banks, which in turn will create more liquidity and, with it, more opportunities for small businesses to be started and expanded, and more jobs to be created.

Election battleground revealed: who's the better butcher?

2009-09-22T21:25:00.000+01:00

As the conference season opened this weekend it became clear, if ever there was any doubt, about the ground on which the election will be fought: which party does the public most trust to scythe away the fat that has grown around the midriff of our bloated public services in recent years, without harming the flesh?

Last week we were treated to the spectacle of Gordon Brown's first ever endorsement of the c-word. I wonder how hard Darling and Mandelson had to work on him to extract that concession. Next, timed perfectly to spike Nick Clegg's opening address guns, Ed Balls weighed in with the bombshell that he can slash £2 billion a year from the education budget. Cleggy offered up surprisingly little meat, leaving that honour to the man his nominally politically correct, but in reality institutionally ageist members must now be wishing they'd chosen to lead them, Vince Cable, to do the honours: he wimped out, preferring headline-stealing but insignificant tax-raisers such as an annual levy on owners of £1m-plus homes to an extensive programme of public expenditure economies and asset sales. This position was undermined only two days later, with Richmond Park MP Susan Kramer not unreasonably pointing out that £1m doesn't go that far in many parts of London, including her (marginal) constituency, resulting in swingeing taxes targeting people living in relatively modest homes in the capital.

As an enthusiast for the writings of George Orwell, and someone with an interest in politics, I feel a certain envy toward him for having lived in an era when politics mattered more than today. In the 1930s, fascists and communists alike marched through London. Rich and poor alike engaged in political debate as an economic system collapsed and the world edged toward war. In recent years, it has seemed as if the choice of who to support in an election was just another consumer decision: Tesco or Sainsbury? Who's best at managing the economy, and whose brand do you feel best for buying?

At face value, a cuts-driven election campaign based on brand strength looks like a shoo-in for my party: New Labour created the mess, so will be disregarded; the LibDems talk mainly about tax rises; meanwhile, the Conservative brand has always been associated with a smaller state and the current leadership took the lead in opposing major projects such as the proposed national identity card scheme, so has the great benefit of appearing consistent, and hence credible at a time when others are hastily adopting cost-cutting credentials.

My concern is therefore with the election due to take place in 2014 or 2015, not next year. I worry that if spending cuts are implemented wrongly, the result will be a deterioration in public services, and that the public will punish us by voting us out. Worse, if the axe falls in areas such as state schools and the NHS, areas in which the electorate harbours a residual suspicion that we are naturally inimical, our brand will be further weakened in these regards, harming our long-term electability.

So - how to cut without harming? Get that one right, not just in the privileged context of a blog but in the hectic, pragmatic, day-to-day battle of implementation, and my party will not only reassert itself as the natural party of government but also make the UK a very much more tolerable place to live over the next decade than it would otherwise be.

'Holby City' is on the TV as I'm writing this: a weekly drama about a fictional Bristol hospital. We see patients, doctors and nurses, one manager and barely any managers. The reality, as we all know, is that the NHS is packed to the gunwals with Directors of Stakeholder Engagement, Diversity Officers, Sustainability Consultants and an army of other self-serving leaches. In a typical NHS Trust there will also be teams of highly paid interim managers, management consultants and huge sums outflowing under poorly negotiated PFI deals. So it's not only the left-leaning middle classes that are bleeding the health service of resources, but the private sector too.

It's an axiom of human structures that elites are self-perpetuating: they utilise their power to surround themselves with others who think alike, to ensure they're not threatened from within, and modify the system over time to augment their power and the resources they control, to protect themselves against external threats. To an inefficient, profligate public sector organisation, a new government committed to making savings is a threat. If such an administration takes the easy route to achieving cost reductions - trusting the existing management team to find the money somewhere - it's human nature that they will start in the area furthest from their own back yard, with the least powerful, most vulnerable people in the structure.

It's my guess that the public would much rather their local NHS Trusts shed non-clinical staff than doctors and nurses. And they'd rather the doctors and nurses sacrificed their final salary pensions than that there should be fewer of them. But it would take a courageous manager to pursue such an agenda. Which tells me that citizens, as the end users of public services, have to be involved in the process of determining how cuts should be implemented.

There are some in my party that believe we are about to enter a brave new world in which we can move towards an Athenian model of direct democracy in which major decisions are taken by the entire populace through regular referenda, possibly through mechanisms such as online and text voting. The public is happy to determine the winners of reality TV shows by these means, goes the thinking, so why not matters of national import?

The flaws of this approach are manifest. For a start, the outcome of X-Factor requires little thought, the payback is immediate and there's no jeopardy if you get it wrong. Second, while a General Election run on such lines might result in an increase in participation, familiarity breeds contempt, and I question whether people can be bothered. Finally, re-engineering public services for cost efficiency is not a binary decision but rather an endless series of small choices requiring ongoing, detailed engagement.

But there are ways of ensuring that the public is at the centre of reforms, without requiring them to vote. I advocated in my previous blog that the objectives of a system should be determined by its customers, as should the measurement of the extent to which those goals have been achieved. In the context of cutting public spending, the first step should therefore be to establish what taxpayers deem to be a good service, then building the process around ensuring that those benchmarks are hit. Any processes, people or external costs that are incidental or irrelevant to those goals can be excised. And at the other end, user satisfaction can be measured and processes revised or reversed if needs be, if the outputs aren't up to scratch.

On one level, this is Tesco versus Sainsbury: if the above approach is as beneficial as I believe it could be, and if my party adopted it, we might enjoy a competitive advantage. But many such advantages are eroded over time - as happened, for instance, with loyalty cards.

Is this inevitable? In business, unless a concept can be covered by a patent, copyright or an exclusive arrangement, yes; except where a company not only pioneers an initiative but shouts so loudly about it that it makes it a permanent part of its brand. Others can mimic the initiative, but they will always be seen as copyists.

In the political context, I believe it's time to reassert the notion that politics matters and declare, proudly, that our party has a philosophy that is superior to others, one which underpins the fact that we are uniquely well placed to fix the problems that face our country. New Labour didn't create bureaucracy and waste because they were stupid or uncaring: they did it because they believe that big government is a good thing and that those at the centre know better what's good for the people than the people themselves. In contrast, we will put the people at the heart of what we do. As Conservatives we believe that we're the electorate's servants, not their masters, that the state should do only those things that the people want, in the way they want it done. Unlike New Labour we will not be in the thrall - or the pay - of any vested interest, whether that be the public sector unions or big business.

The small-state, consumer-driven party? On one level, this is nothing new: the Conservative party has always been an advocate of a smaller state. In the past, however, the suspicion has been that our objection to a bloated state was driven by a desire to cut taxes for the wealthy, and for companies, betraying favouritism toward the wealthy, and big business.

But not this time. If we're going to succeed in trimming public spending, and hence the national debt, without scything the services that matter, the axe will fall disproportionately on high earners in the public sector, as well as the big companies who sell their services to state agencies and their well-paid employees. If we play this right, we can position ourselves as modern-day Robin Hoods, redistributing wealth currently bestowed on the lavishly rewarded quangocrats, PFI bankers and the like and investing it in maintaining the number of primary school teachers, student nurses and others whose numbers are much larger (more votes!) and whose impact on the average voter is much more tangible.

I believe that one of the biggest threats to our democracy is the high level of cynicism about politics: many people believe that politicians are driven by self interest and that it little matters how they vote. We can't change this before the next General Election: but we'll win that one anyway. We desperately need to earn the public's confidence by the end of our first term, and I believe the best way to do this is to show that we are focused on shaping policy, and the delivery of services, around their priorities, and quality of life. And it is this philosophy that represents the best way to butcher the bloated public sector.

Conservatives: the true progressives?

2009-08-11T20:21:00.003+01:00

It's pleasing, if coincidental, to see the ideas floated in this blog being picked up and developed by senior figures in the Shadow Cabinet. Interviewed on this morning's Today programme, George Osborne sought to position the Conservative Party as the progressive force in British politics because of its willingness to reform public bodies to cut costs without damaging services. Here's an excerpt that, for me, neatly encapsulates the goal:

"I think because of the debt crisis that the country faces we have a choice: we can either reform the way those services are developed so that the money goes further and you get more for less, or you can face frontline service cuts."

Inevitably, an efficiency drive on the scale required by many of the UK's public services will result in job losses, and public sector workers have votes, like anyone else. I've written previously that the key to this apparent paradox is to stress that the objective is to eliminate unproductive initiatives, bureaucracy and internal politics: sins committed principally by a relatively modest number of senior managers, whose meddling not only affects the people the culprits patronisingly call 'customers' or even 'clients' but also creates a never-ending cloud of frustration for those lower down the hierarchy charged with implementation and exposed, on a daily basis, to said end users.

Apposite, then, to have had the pleasure, last week, of attending a session organised by the influential centre-right think tank Policy Exchange on the abolition of command and control from public services. Led by occupational psychologist turned management consultant and author John Seddon, whose mission in life it is to fight the imposition by central Government of arbitrary targets, the event was attended by a mix of MPs, policy wonks and management consultants.

Seddon argued convincingly that targets are counterproductive: introduce one and an organisation works towards it, which eliminates the possibility that, without such guidance, it might otherwise have achieved a much better result. Moreover, a push to achieve a measureable result may mask structural and procedural flaws in an organisation by encouraging managers to throw more resources at achieving the target, as opposed to questioning whether the systems have been optimised and hence the opportunity created to achieve good results with much more modest inputs.

One area the speaker covered only in passing, but which interests me greatly, is the question of processes. The National Audit Office, and a number of spending Departments, have decreed not only what must be achieved (targets) but how they must be reached (processes). As a Conservative, I believe in competition and diversity. I'd like to see neighbouring local authorities, schools and NHS Trusts try different ways of organising themselves to see who can best deliver the only result that matters: not a ticked box on a bureaucrat's inspection sheet but satisfaction on the part of those who use, and fund, the services in question.

At one point I found myself in disagreement with Seddon, to the point that I wondered whether he was, in fact, a closet sympathiser with the worst elements on the public payroll: bizarrely, he believes that all workers are motivated primarily by recognition and praise for doing a good job. It therefore follows that while he supports the notion of measuring performance (judged by customer satisfaction) he doesn't agree with offering rewards - financial or otherwise - for those who excel or penalties for persistent underperformers.

Worse, he poo-pooed my suggestion that league tables be produced of comparable service units ranked by quality then introduce measures to identify best practice in the high-performers and inspect the underperformers to establish whether they could benefit from adopting some of their more successful peers' ideas ". The answers are to be found within the organisation itself" was his riposte: a strange approach, I thought, for someone who made his name popularising and adapting the Toyota Production System in the UK public sector and selling management consultancy, a service that, as a management consultant myself, I recognise is e3ssentially about identifying good practice in one context and adapting it for another.

I came away excited by the notion that there are people who are close to the Conservative Party who are keen to question the way in which public bodies go about delivering services to the public, shifting the emphasis away from inputs ("how much can we boast that we're spending?"), processes ("you have to do it our way") and targets ("can we tick this box, then move on?") to thinking about the people who use and pay for services, what they want, and whether they're satisfied. While I was unconvinced that John Seddon offered all the solutions, I felt relieved to see a think tank that enjoys considerable influence within the party inviting him to speak, because I enjoyed the way he questioned the status quo.

Interestingly, Osborne's Today interview followed a speech he gave Demos, hitherto seen as a centre-left forum, and one closely associated with Blairism. Could it be that the progressives who were attracted by the then fresh-faced Labour leader's energy for challenging the shibboleths of the remote, arrogant and self-serving public services are now keen to share their ideas with a newly radicalised Conservative Party?

Destroying entrenched privilege and spreading the benefits with the marginalised and underprivileged are principles often associated with the left; but when the privileged are well-paid, over-pensioned, generously cushioned senior managers in the public sector and the dispossessed are over-taxed, poorly served members of the public, the agenda is one that Conservatives are keen to progress. Let the debate commence...

How the other half live...

2009-06-29T16:13:00.005+01:00

I've mentioned in previous blogs that when I was a student I briefly flirted with the Left. What drove me into its arms was not so much a desire for social justice (the factor that, today, makes me a Conservative) but, rather, a hatred of privilege - especially when combined with complacency, or contempt for the less fortunate.

Back then, I had cause to feel that way. Having been brought up in a single-parent household with an absent and irresponsible father, money was tight. I'd won a scholarship to a private school and witnessed a certain kind of arrogance on the part of many of those whose parents' affluence had put them there; I briefly attended Cambridge University which, back in '87, still contained a smattering of dimwit kids whose parents had money, who'd scraped in on the back of two Es at A-level and a pass, post-crammer, of the infamous entrance examination. I also seen how some of these kids conducted themselves: there were private clubs, open only to the alumni of certain, select schools; food fights and mistreatment of what they insisted on calling college 'servants' was commonplace, as was contempt for those of lesser means. When I told one fellow student I'd grown up on a housing estate, he couldn't resist asking whether my parents had a Hilda Ogden-style flying duck mural on the dining room wall...

Today I detect new class resentments forming in the UK. The upper class, and the old-moneyed middle class, are no longer the object of hatred: for the former, decaying estates and the obligations that accompany them are now widely recognised as burdens, while the latter has learnt humility, in contrast to the hubris I encountered more than two decades ago. In order to demonstrate the source of this gnawing sense of injustice, let me provide an illustration.

How would you like to live in Pan Peninsula, the UK's tallest and most luxurious apartment block? Situated a couple of minutes from Canary Wharf, it's 50 storeys tall. Designed by award-winning American architects Skidmore, Owings and Merrill, it boasts panoramic views of London, including the Thames. Inside, uniformed concierges provide hotel-style services to residents, from valet car parking to booking theatre and plane tickets. Communal facilities include a luxurious, air-conditioned private cinema, a business centre, a Six Senses spa, a 50th-floor cocktail lounge, a residents' gym (with pool) and a restaurant. The apartments themselves are air-conditioned, triple-glazed and wired for sound. Interior design is by the same designer that fitted out the world's only seven-star hotel, Dubai's Burj Al-Arab.

There are two ways to own such a home. You can either be prosperous; a banker, perhaps, from the Wharf, looking for a bachelor pad or perhaps a pied-a-terre. Or you can be relatively poor, in which case you'll be pleased to learn than 27 of the apartments have been set aside as 'affordable' housing, according to the criteria set out by the London Borough of Tower Hamlets. So, as the many people who work in Docklands who earn relatively modest incomes in the private sector - the secretaries, IT engineers, salespeople and journalists - brace themselves for a hot, sweaty, packed Tube ride back to the suburbs, where they own their own, heavily mortgaged, far less salubrious homes, they can comfort themselves with the fact that a handful of privileged souls, many of them economically inactive or employed by the public sector from their taxes ('key workers' being the official term) will already be home, perhaps sipping a cool drink in that 50th-floor cocktail lounge...

I stress that the concept of homelessness in a wealthy country such as the UK appalls me; I'm also concerned for those whose homes are clearly unfit for human habitation or insufficient for their needs. But by no stretch can it be argued that these luxury Docklands apartments represent a sensible way for funds garnered from taxpayers to be used to alleviate such social ills. given that the entry price for a one-bedroom apartment was around £400,000 when the project was released a couple of years ago, it would surely have made more sense to sell all the units on the open market then, through the corporation taxes levied on the developer and stamp duty raised from purchasers, provided solid, adequate homes in an area in which land is not at such a premium, for those in genuine need?

Not that, ironically, the UK's most lavish social housing is likely to appeal to those in genuine need. For a start, they're available only on a part-buy, part-rent basis and prospective owners need to be able to put down a deposit of at least 12.5 percent of the purchase price. The latter is subsidised, but nevertheless, the cheapest apartments cost £260,000 - roughly double the average UK property price - so only those with £32,500 in savings need apply. There are parts of the country where that's enough to buy a home outright. Then there's the rent or mortgage on the rest - £6825 a year, in the former case. Plus you'll need to allow for service charges which, given the panoply of exclusive residents' facilities, isn't cheap - it'll set you back another £3600 per annum, making a total of more than £10,000 a year. OK, in some cases housing benefit may pick up the tab (which raises the question of whether the £32,500 savings ought to be a bar to claiming, but I'll waive that aside for now), but in most cases I'll wager these homes will go to people who could afford to provide themselves with perfectly decent housing a commute from these rather more salubrious, taxpayer-subsidised homes.

Thus is wealth transferred from those who work hard to stand on their own two feet to those who'd rather live off the endeavour of others. That's the first group of people that I think is becoming widely reviled in Britain in 2009. The recipients of unduly luxurious social housing provide just one instance of this; for others, check out the voluntarily unemployed - those who know how to work the benefits system to maximum personal advantage - and those who exploit the immigration system to gain unwarranted residency in the UK then take full advantage of the NHS, benefits and housing system while making little or no contribution to the tax coffers.

The second group is those who allow, or even encourage, them to get away with it: the army of ostensibly altruistic rule-setters and caseworkers who've created and applied rules and regulations in a way that makes it possible for flagrant examples of social injustice to go unpunished and who, all too often, encourage or defend those guilty of such actions.

As always with generalisations based on groups rather than individuals, these are stereotypes, and the risk is that every social housing tenant, benefit claimant or asylum seeker is assumed to be a freeloader until proven otherwise, while every public sector worker is presumed to be engaged in living away the nation's hard-earned wealth unless there's firm evidence to the contrary. Such assumptions undermine social cohesion, as they make pariahs of people who may, respectively, be needy and conscientious.

Which is why any Government that places a high priority on maintining a peaceful and cohesive nation has a moral duty to change the culture in our public services to one in which those employed to set and administer the rules recognise that their primary duty is to ensure that taxpayers' money is not wasted. In the context of social housing, for instance, the benchmark for success is not the number of people placed in 'affordable' accommodation but, rather, the number of people homeless or housed inadequately; in the benefits system, the number of people trapped in real poverty or unable to support themselves and in the immigration process, the number of people wrongfully granted the right to remain in the country.

I've written before that we seem to be entering an election campaign like no other, with Gordon Brown keen to position the Conservatives as poised to cut public services, in contrast to Labour's committment to maintain 'investment'. In recent days this debate has taken an interesting turn, as it has emerged that the Government plans to defer the Comprehensive Spending Review until after the Election, enabling them to make uncosted commitments about maintaining public spending while pushing David Cameron to put numbers to his plans, enabling them to point to reductions and create scare stories about worsening services.

I believe that this approach will be unsuccessful because, with almost a year to go before the poll, we already have independent voices such as Mervyn King and the OECD warning the Government that it needs to announce concrete plans to contain spending if it is to continue to borrow at sensible rates. If the public don't hear such messages from Brown, it will conclude, rightly, that he's being reckless with their money. Perhaps more important, I believe the culture I've described in this blog is becoming sufficiently widespread for the public to appreciate that cutting public sector spending and slashing services are two very different things.

In order to get its message across, my party has to play to this sentiment, stressing that there are some things the State currently does, or is planning, that are illiberal and instrusive and can simply be stopped, and many more than are inefficient and can be achieved more effectively at lower cost. It's important, though, that in sending out such signals we take care not to demonise everyone working in the public sector, or every recipient of its support. For a start, there are a lot of them, and they all have votes; but also, we need the goodwill of many public sector workers, and the forebearance of those whose need for support is genuine, in helping us make the transition from the current mess to a new, leaner, more just delivery of services for all.

Meanwhile, Labour will continue to portray us as the 'nasty party', hell-bent on depriving those most in need of support, by implication because we're a party of the privileged. We should fight such stereotyping, stressing that, in fact, we want to deliver better services for those genuinely in need, by redistributing taxpayers' money away from undeserving recipients. As long as quarter of a million pound, triple-glazed apartments with access to a private cinema are allocated to people deemed to be 'in housing need', that shouldn't be too difficult...

Creating the next legacy

2009-06-11T14:51:00.006+01:00

I've deliberately stayed away from blogging over the past couple of weeks, largely because the storm over MPs expenses and resultant plots to unseat Brown meant I would have been aiming at a moving target. Now that the dust has settled, it appears that the Prime Minister remains in situ, if tenuously, based on the dangerous premise of bribing many of his worst enemies with ministerial posts - many of them in Cabinet. So we have a top team, including a Chancellor, that not even the PM wants, but that he's stuck with, because the price of not having them would have been his own removal.

Two interesting events occurred this week, which both point to the Conservative Party being on the cusp of an exciting new era. First, a dinner was held to mark 30 years since Margaret Thatcher came to power, which the press noted that David Cameron didn't attend. Second, Andrew Lansley made what some interpreted as a substantive announcement about our public spending policies coming into the election, stating that while the overall spend on the NHS, education and overseas aid will be ringfenced, there will be a 10 percent cut in other areas over three years.

On the one hand, we risk once more being perceived as 'the nasty party', the one that cuts public spending and allows the most vulnerable to suffer; on the other, we have a leader who continues to make a conscious effort to distance himself from that stereotype by avoiding comparison with Margaret Thatcher.

The truth, of course, is that whoever governs the UK after May 2010, which is when I assume the General Election will now take place, there will be an undeniable and compelling requirement to cut spending. And it's equally self-evident that New Labour, by now looking distinctly Old, is institutionally ill-equipped to apply the cuts where they're most needed, due to its historical relationship and ongoing funding links with the trades union movement. These days, the union writ runs large principally in the public sector, and the brothers will fight tooth and nail to ensure that their members' interests will be ringfenced. So, ironically, a Socialist government's angle on public sector spending cuts is more likely to result in indiscriminate cuts that reduce the quality of services, because it's much harder for them to cut deeper into the bureaucracy, Spanish practices, anachronistic benefits in kind, overstaffing and culture of low productivity than it is for us.

We could take the view that the urgency of cutting public spending and repaying debt is such that blanket cuts are the way forward: reducing the number of staff of all kinds, including teachers, is quicker and easier than a fundamental re-think of how education is delivered that results in perhaps 40 percent fewer administrators, much reduced premises costs (through cancelling or re-structuring PFI arrangements), which may well preserve or increase the number of teachers and hence avoid the increases in class sizes that might otherwise result. But if we did, the risk is that we'd repeat the cycle of three decades ago: in the short term, we'd be seen as heroes, fixing a broken economy and bringing back growth; but in the medium term, we'd again allow ourselves to be stigmatised and returned to opposition.

What's needed, therefore, is a new way of thinking, that will result in the creation of a new and lasting legacy. We should bypass those who claim to represent the workers, the bully-boy union leaders, and their (mainly useless, and defensive) managers, and deal direct with those who genuinely provide public services: nurses, doctors, teachers, police officers, social workers and the like, to find ways of making their work more productive and rewarding. I know many public employees who are driven to distraction with the level of bureaucracy they have to deal with, the proportion of their time that's spent filling in asinine forms and having to justify themselves. Not only is this resentment justified, as it gets in the way of providing services the public values, but it also creates waste. It has to go. And while we may have some bad news for them in areas such as final salary pensions and some of the working practices that have been permitted to date, we also bear gifts in the form of additional rewards for (real) productivity gains.

Shockingly, the National Audit Office this week revealed that public sector productivity has fallen 3.2 percent over the last decade - a time during which the wealth-creating part of the economy has achieved a gain of 22.8 percent. Simply getting those whose incomes are provided from the tax take on those who've achieved this efficiency gain to mirror their level of improvement, from a much lower base, would enable the salary element of public spending to be slashed by more than a quarter, without affecting what the Left is wont to call 'service delivery'.

At the same time, we need to deal with the many Quangos that have sprung up and been allowed to grow uncontrollably under New Labour. The vast majority of them contribute nothing of value, and the few that do anything useful could be absorbed into local authorities or farmed out to the voluntary sector. Which brings me to my third major point: another way to improve public services and promote social cohesion at a difficult time is to harness more effectively the efforts of the third sector. Here, I don't mind seeing a modest increase in the amount of State provision of facilitators whose job it is to identify and mobilise the hidden army of people in the UK, from all walks of life and across all age groups, who would potentially be willing to spend a few hours a week helping their communities.

Perhaps the most obvious group of people to target are those who were fortunate enough to retire in the past decade or so, often long before the age of 65, on final salary pensions. History may judge these baby-boomers to be among the most economically advantaged in British history. Now, society would like a little back from them, in the form of a modest contribution of their time to help, for instance, keep children entertained in after-school clubs, to provide meals and other assistance to older and less mobile pensioners and to pass on parenting skills to young parents from disadvantaged backgrounds whose lack of capability in these areas, often passed on from their own parents, is an underlying cause of anti-social behaviour and criminality among a further generation of young people.

But they're not the only group that could do more: another is the aforementioned young people themselves. All too often they hang around on street corners, drinking, smoking and taking drugs, acting anti-socially, claiming they've got nothing to do. And yet, just a few streets away, you can bet there's a house-bound pensioner, needing help with shopping and cleaning. Rather than pay Eastern Europeans the minimum wage to undertake these duties, and tier upon tier of local authority workers (all blessed with final salary pensions, and overseen by diversity and inclusion managers, work-life balance co-ordinators and other leeches on the working population), let's get those kids off their backsides and into the community. The advantages would flow both ways: the young people might just find the older folk have some wisdom to dispense about the mistakes they've made and lessons they've learned along the way.

Another area where the knife can be wielded without harming quality of life is in the area I call the Big State. As a Conservative, I want the state to be small. Not so small that it can't provide a decent infrastructure and an environment that enables everyone to achieve their maximum potential and enjoy a good quality of life, but small in the sense that it should not seek to intrude unduly into our lives and communities. New Labour loves the state. It believes we need to be told how to conduct ourselves, and snooped on to ensure we don't do anything that offends its morals. Hence we have plans for the hated national identity card scheme and crackpot initiatives such as cameras hidden in wheelie bins.

Big schemes such as the identity card one can simply be scrapped, while there may need to be clear guidance to Whitehall departments and local authorities prescribing what they are, and are not, responsible for doing. This should help put an end to the armies of people holding 'non-jobs': put simply, the work they do ought not to be happening.

I've written in previous blogs about the benefits and social housing system, so I won't dwell unduly on this area here. But it's clear to me that we can't truly become an efficient society, let alone a fair one, while there's a substantial group of people who are not only immune from jeopardy if they choose not to be economically productive but, in many cases, face Government-enforced jeopardy if they attempt to be so. People without jobs need to be physically mobile, which means any subsidy for housing should be attached to the individual or family unit, rather than a property; and they need to be economically mobile, which means there must never be circumstances under which a person's standard of living suffers as a result of their earned income increasing.

To bring about these changes may require some reduction in the standard of living of some people in this country. It will be difficult to deliver this change without risking falling into the 'nasty party' trap. It may be that we will need to unveil how the social support system will look in 'year zero' a couple of years in advance, providing transitional support in the meantime. We may also have to look after some people, for instance long-term benefit dependent mothers and couples who chose to have more children than they could hope ever to support in part because doing so improved their benefits position, on a legacy basis, while flagging up a fairer, and less expensive, system for the future.

In all, the UK faces a tough challenge, but it needn't be insurmountable. The key is to move the debate away from sms of money being spent or saved - as long as it's seen as politically unacceptable to cut funding of the NHS, for instance, inefficiency in that crucial area of the economy is unlikely to be challeged - and replace it with a focus on standards of service. Rather than promising to ringfence Labour's spending plans in areas such as health and education, we should commit ourselves to achieving goals that, even with its current, unsustainable largesse, Labour has failed to deliver: stretching but achievable benchmarks for the provision of preventative healthcare, rapid access to consultants, smaller class sizes and elimination of sub-standard teaching.

Canada faced a similar problem to the UK - a national debt almost equal to its GDP - in the early 1990s, and it fixed the problem with a combination of a 20 percent spending cut over three years in all but the most politically sensitive areas, combined with utter ruthlessness where waste was concerned. As a result, quality of life actually improved, as a result of which it has long been perceived as one of the best countries in which to live. Right now, even after a decade in which public spending has outpaced output and debt has consequently spiralled, I'm not sure the same can be said for the UK. If the next Conservative Government can change this, while also nursing the economy back to health, that will be a powerful legacy.

Gravy train hits the buffers... only one casualty

2009-05-14T15:18:00.007+01:00

So - what to make of the recent furore over MPs' expenses and allowances? The number of embarrassing details that have emerged over the past week is so great that it's impossible to comment on them all, so instead I plan focusing on a few underlying trends and draw conclusions from these.

First, there clearly are a handful of those who rule over us, including former and possibly even current Ministers, who are likely to receive visits from the Police. Despite benefitting from an extremely lax remuneration regime, in the sense that the Green Book afforded a wide measure of discretion and its rules were very loosely applied, it seems there are a few Members who, to borrow a phrase from the late Alan Clark, excercised economy with the the actualité. I hope those who have defrauded taxpayers receive custodial sentences. I've heard that Ford Open Prison is the establishment of choice for such white-collar crimes.

Second, it's clear that the Green Book and the culture that surrounded it, were crafted in such as way as to give Members of Parliament the maximum possible income consistent with a headline salary of £64,766. They were even exempt from wide-ranging aspects of the tax system, and enjoyed a pensions regime that is illegal in the private, and even public, sectors. I keep using the past tense; technically, the Green Book and tax and pension breaks remain in force, though there appears to be all-party consensus that change is needed.

A cynic might suggest that, until Freedom of Information campaigner Heather Brooke forced Parliament into a disclosure process and an un-named source forestalled the process by selling the revelations to the Telegraph, there has been something approaching a conspiracy of silence to encourage the British public to believe that their elected representatives earned 'only' a little more than two and a half times the national average full-time salary.

And what politician would have dared be the first to propose that a back-bench MP's labour was worth more than that figure? While many on both sides of the House may have agreed with this sentiment, the first to express it risked accusations of fat-cattery. But now the truth is in the public domain, perhaps it opens the door to a constructive, unemotional discussion about the appropriate level of remuneration for Parliamentarians.

As the Taxpayers' Alliance has demonstrated, once allowances and tax breaks are taken into account, the truth is that most MPs have been collecting at least four times the average wage. For a politician who knows how to play the system and benefit from flipping and the associated CGT break, and who employs family members up to the £100k annual limit, it can be very much more lucrative even than this. I'd be interested to see a true calculation of the average annual cost of running a Member of Parliament: salary, NICs, pension, staff, accommodation, expenses - the lot. I bet it's not far short of a quarter of a million pounds. And I bet that three-quarters of it, maybe more, finds its way, directly or indirectly, into their pockets.

This blog is about Conservatism and social justice, the latter being a concept to which the Left likes to lay claim, but which I believe more properly belongs with my party, and which I wish to do my little bit to help to rehabilitate. For me, social justice is not about creating equality or even, necessarily, eliminating poverty, because a just and ordered society is one in which there exist incentives for self-sufficiency and self advancement and, yes, disincentives for wilful failure to display such characteristics. But above all, social justice is about eliminating obstacles to self-fulfilment. Never should a person's parentage limit their options. This isn't just a moral issue - if people's potential is unrealised, society as a whole loses out.

In the context of MPs' pay, if we're to have a socially representative Parliament, politicians' remuneration should be set at a level that appeals not only to the independently wealthy, and those who are on low incomes before standing for election, but also those who come from modest backgrounds but, thanks to intelligence and hard work, are now relatively well rewarded.

For this reason, unfashionable though it may be to say this in the context of the current furore, I wouldn't like to see MPs put on a flat rate of a little under £65k a year and no fringe benefits. Why? Because I believe that the financial sacrifice involved in pursuing such a career would be unacceptable to a lot of candidates for election, probably including myself. Granted, Labour would have no difficulties filling its benches: there are plenty of middle-ranking public sector workers and Trades Union officials on that kind of money who would welcome an opportunity to spend our money on a bigger stage. And my own party would still be able to field candidates with family wealth, or who had been fortunate enough to build up and sell businesses early enough in their careers to be left with sufficient time to pursue a life in politics.

But there exists a band of actual and prospective MPs, not only from my party but also from the LibDems - for instance, Vince Cable, formerly Chief Economist of Shell - who have left well-paid jobs in the private sector, but whose previous roles have not been so well remunerated that they have become independently wealthy, for whom the salary of a back-bench MP, if taken in isolation, represents an unrealistic diminution in their, and perhaps more important, their loved ones' standard of living.

So should the current Green Book be replaced with a new set of rules, this time more transparent, with less 'wriggle room', but equally generous. No. Because it's bad for democracy. Take, for instance, the issue of second homes. There are many MPs who represent constituencies within commuting distance of London who choose to have bolt-holes in the capital because the system pays them to do so. Eliminate the John Lewis list and simply pay their mortgages and the problem remains. Better to limit the option of State-funded London accommodation to those for whom commuting is impractical, because their electorate is better served by their representatives spending as much time as possible in the communities they represent and experiencing the same public services, so far as is achievable, as the electorate.

If the rush-hour trains from, say, Watford Junction to Euston are perpetually so full, much better that local MP Claire Ward experience this first-hand every day that Parliament is in session (which is a lot less commuting than many of her constituents must endure) than that she be isolated from the problem by a combination of a smart weekday flat in Kennington and a secretary who sends a standard response to constituents who complain about the trains.

Some years ago, I found myself in a business meeting with a former Cabinet Minister. I found him uncouth and lacking in social skills, not least because he kept answering his mobile phone, which he declined to switch off. But I'm grateful for the experience, because it gave me the chance to eavesdrop a series of conversations. Reading between the lines, the wife of a prominent Labour politician (I won't name her, she's entitled to her privacy) had been diagnosed with cancer, the local NHS Trust had been unable to see her promptly, the husband had been tempted to go private, and my contact pulled a few favours so she could see a top consultant - presumably, a Party member, or well-wisher - quickly. I don't know whether he thought this would impress me, make me think he was a player, and a fixer, but it had the opposite effect: it merely reinforced my profound belief in the corrupt values at the heart of New Labour.

I offer the above anecdote as an illustration of my view that it's unhelpful for there to be this feather-bedded Westminster elite, physically removed from the experiences and opinions of their electorates. The current scandal has occurred, in part, because MPs became too remote from the reality of how the public lives, and how we feel. Had they been better at understanding the public's expectations of them, they would never have constructed such a regime, nor interpreted its rules so loosely.

If there's one good thing that could, perhaps, come from the past week's revelations, it's a commitment for MPs to become more closely attuned to the interests of their electorates. This touches not only upon the issue of how they live their lives, but the backgrounds from which they're drawn.

Most people in the UK today are, broadly speaking, middle class, and work in offices, for private sector employers. Most Labour MPs, I would venture to suggest, are also middle class, but very few of them have worked for any length of time in the private sector; and if they have then, atypically of their voters, they've been active Trades Unionists and officials. Today, many Conservative MPs come much closer to the profile of their constituents, though, unhelpfully, the expenses storm has highlighted a few instances of wealth and privilege that don't help its image.

Were I working in HR, I'd probably recommend setting the salary of a Member of Parliament at a level comparable to other jobs that require similar skills, in order that nobody with the kind of experience we as voters would like the Commons to attract is dissuaded from standing for election, while depriving them of every possible benefit-in-kind that unnecessarily isolates them from the world of their electorates.

It seems to me that the job that has most in common with that of a back-bencher is probably a barrister: indeed, there are many former briefs on both sides of the House, and, notably, our previous Prime Minister hailed from that profession. Typical salary? Perhaps £100-150k for someone with 10 or more years' experience. They can earn £300k-plus by taking silk - the equivalent of becoming a Cabinet Minister, perhaps?. Other similar roles might include the Chief Executive of a district council or a college Principal. As with the barrister, these kinds of roles offer salaries of around, or a little more than, £100k.

So I'd like to see MPs of all parties arguing for a basic salary of perhaps £100-120k a year, combined with the total elimination of back-door payments. If they live beyond commuting range of London, they can rent flats in the capital judged sufficient for their needs, but no more than that, and they should be prevented from paying more (or less) than market rate, or renting from unconnected parties. If they require staff, let them make the case for the Fees Office, which should then engage those employees directly. Should a Member of Parliament's spouse, partner, child, other relative, lover or friend wish to apply for such a role, there should be an open and transparent recruitment process and the expectation should be that the appointee will be monitored closely to ensure that the work is real and that value is being delivered. And as for expenses, living costs are out; necessary incremental expenditure only should be reclaimed, and all claims should be examined, and if they're found to be fraudulent, dismissal should be high on the list of possible outcomes.

In the current climate, which David Cameron rightly described this week as 'a time when the public sector will be expected to do more, for less', there's a risk that even the above will be perceived by the public to be too generous. I'd like to offer them something in return, that would result in a step change in the cost of running Parliament - and, into the bargain, would further improve the functioning of the Commons: fewer MPs.

Apparently India has only 100 more Members of Parliament than the UK, for a population of 1.2 billion. There are around 60 million people in the UK, so on the same basis, we'd have just 35 MPs. That may be too few, but who's to say that the current 646 is the optimum number? There are some constituencies, especially in Wales, whose populations are up to a third lower than the average; there are also towns, cities and boroughs whose populations think of themselves as a single community but are divided arbitrarily into two or more constituencies. I'm on the fence about proportional representation, but I wonder whether re-drawing the map based on identifiable communities and geographical boundaries then varying the number of MPs for each constituency in proportion to population levels might not lead to a more representative system, and a much smaller lower house.

Setting aside questions of cost and effectiveness, it's clear that something has to be done about the current boundaries: depending on the level of support for the LibDems at the next General Election, it has been estimated that the Conservative share of vote needs to exceed Labour's by six percent simply for us to equal their number of MPs; winning an overall majority could require a lead of nine percent.

Talking of a General Election, it's now not much more than a year away, tops. Fantastic! A chance to rout this smug, complacent, corrupt bunch. The local council and European Parliament elections on 4 June will be interesting. There are mutterings that if Labour finishes third in the latter, which is possible, there will be a leadership challenge. Let's hope this doesn't happen: while Brown will clearly be a casualty of this scandal, better in a year's time than now, as he is currently doing so much good for my party.

Social justice and prudent economics CAN be bedfellows

2009-05-06T20:26:00.009+01:00

Last Sunday marked the 30th anniversary of Margaret Thatcher's election. Three whole decades! I was a 10 year-old schoolboy when she came to power, and recall standing outside my primary school on election day, helping local party workers count in the vote. I was a Tory boy, back then, long before my student dalliance with the left.

Round our way, an estate of mixed private and social housing, it was Mrs T's commitment to allow council house tenants to buy their homes that won it. Back then, to live in local authority housing was to lack geographical and social mobility and to be on the receiving end of a litany of petty rules and an all too often uncaring housing department, whose apathy could easily result in avoidable deterioration in living conditions. Until Margaret's historic victory, to a large degree the class a person was born into determined where and how they would live their entire lives; from this flowed everything from their work opportunities to the standard of their children's education to their life expectancy.

Margaret Thatcher set the working class free, and it was grateful. Britain became a better place as a result, with greater social and labour mobility. But there was a price: the best social housing moved into the private sector, and it was some years before it was replaced. And when this happened, it was through the mechanic of housing associations. Based on the model of philanthropic landlords such as the Guinness and Peabody Trusts of the Victorian era, they were intended to allocate and managing housing on more of a grass roots, community-centred basis than big, monolithic municipal authorities.

Trouble is, as often happened when New Labour became involved, political correctness, 'the diversity agenda', nepotism and good old-fashioned corruption weren't far behind. Recent years have seen the emergence of a great many instances of injustice in the allocation of housing association tenancies, some of which have caused inter-community tensions, especially along racial lines. For instance, many HAs prioritise what they see as disadvantaged groups - members of a particular religion, refugees, resettled offenders or drug users. And those with no nearby friends or relatives who could offer them a spare bed also jump up the queue. As a result, there are many areas in London alone where an indigenous family in acute housing need has no realistic prospect of winning a housing association tenancy - I use the word 'winning' intentionally - within a decade. Ironically, by the time they near the front of the queue, chances are the children will be leaving home, for which points are deducted and places lost.

With a plethora of HAs established by and for special interest groups, the risk is that those who don't identify with an obvious minority aren't catered for: apparently Greater London has more than 80 black housing groups. Can you imagine the furore there would be if someone dared start one catering solely to white people?

As well as fostering resentments, the arbitrariness with which social housing is allocated is hugely wasteful of taxpayers' funds. While social mobility has, in some regards, thankfully improved since 1979, those doling out subsidised social housing tenancies still work on the assumption that a person's circumstances on the day on which that tenancy is granted determine their needs for the rest of their life. This not only risks tying up a very expensive community-funded asset for two generations or more but it also means the occupiers of that property are freed from the same economic pressures that drive the rest of us to work hard, not only supporting ourselves but also paying taxes that provide the social infrastructure we all enjoy - and also subsidising the lifestyles of those unable, or, increasingly, unwilling, to support themselves.

What prompts me to remark on this? Only this story, revealing that a Labour peer accused of fiddling her expenses by claiming a second home allowance on her London home based on the pretence that an empty flat in Maidstone is actually her principal residence is actually the lucky beneficiary of a housing association tenancy on her London property. Turns out that the smart three-storey townhouse in Wapping that is absolutely, definitively (her lawyers insist) not her main home, and which she therefore claims £174 a night tax-free to stay in when in town on Parliamentary business, is actually a Housing Association property rented for a reported £104 a week - a sixth of the market figure.

Today, Baroness Uddin is not only a peer but also enjoys a string of well-remunerated public sector non-executive directorships and drives a BMW X5. It's reasonable to assume she could accommodate herself at market rates in London, especially if she really does live mainly in Maidstone and therefore can legitimately claim an accomodation allowance for when she's in the capital. There's no suggestion that she misrepresented her circumstances when she was awarded the tenancy by Spitalfields Housing Association, but the fact that such a dramatic change in her fortunes does not result in her having to either move out or pay a fair rent surely points to an injustice: her comfortable lifestyle is being subsidised by taxpayers who are far less advantaged than her and her family, and she's blocking the allocation of a social asset to someone in real need.

I headlined this blog 'Social justice and prudent economics can be bedfellows' because one of the unwritten axioms of New Labour is that fairness costs money. They'd like voters to think that voting for a Conservative Party that promises to get public spending under control means stepping back into the days of workhouses and rickets. In fact, I believe that the opposite is the case. The best way to eliminate poverty is to create the circumstances under which every person does everything in their power to support themselves and their families and to make their fair contribution into the tax pot. Society is then much better placed to ensure a dignified life to those who genuinely can't - and, just as important - to provide them with the helping hand needed to get back on their feet. We need to reform the entire tax, benefits and social housing system. This should be driven by the need to promote social justice and end perverse incentives, but the outcome will also be to save shedloads of money.

In the past I've written about the imperative to reduce the number of people employed, directly and indirectly, by the State. I should stress that this isn't about having fewer doctors, nurses, police officers and others who deliver genuine services to the public but, rather, that the number administrators, managers and quangocrats has spiralled out of control and now needs to be slashed.

A good example of this is in social housing. The Housing Corporation, which dispenses taxpayers' largesse to housing associations, the managements of the HAs and the local authorities they work 'in partnership with' (why does it always say that on the signs?) could all be dispensed with if we instead phased out lifelong social housing tenancies in favour of extending and reforming housing benefit and promoting the more widespread investment by individuals and institutions in private-sector rental property. The Left will no doubt argue that this will simply create more work, and hence jobs, in local authorities' housing benefit offices. But actually, 80 percent of HA tenants already receive housing benefit, and I believe the outcome of the proposed changes would be to push most, if not all, of the remaining 20 percent into owner occupation, so the savings would be real.

If there's one thing that drove us out of power in 1997, other than the economic downturn in the first half of the 1990s, it's the gnawing feeling that Mrs Thatcher went too far for much of the public in some areas. Few Conservatives today would endorse her infamous quote that 'There's no such thing as society, only individuals and families'. Tony Blair was swept into number 10 on the back of a feeling that, at a time of increasing affluence, voters wanted a more caring administration, not necessarily for themselves - they were, in the main, doing just fine - but, paradoxically, because they felt they could afford to be a little more generous to the mythical 'others' who weren't so well off.

This is unlikely to be a factor in the run-up to a recession election in Spring 2010. But the factor that will determine whether we're confined to a single term, to undo the economic damage and profligacy of the Brown era, or instead succeed in reasserting ourselves as the natural party of government, is whether we succeed in promoting fairness and social cohesiveness and reducing genuine poverty and suffering, not only as a sop once we've fixed the economy, but as an intrinsic part of the necessary cost reduction programme.

The Budget: maybe it's not all bad news...

2009-04-23T20:03:00.003+01:00

Record peace-time debt levels, a rise in National Insurance contributions, swingeing tax rises and punitive withdrawal of reliefs for those on high incomes... yesterday's Budget has provoked a strong reaction.

Personally, I believe that every cloud has a silver lining, and in this case it's that we're barely more than a year away from a General Election. Ad I detect more than a few hints of electoral desperation in Alistair Darling's announcements.

Take, for instance, the 'soak the rich' measures. Raising the tax burden on those earning more than £100,000, and further ratcheting up the pain above £150,000, makes little economic sense. Many commentators have pointed out that by the time a proportion of those affected have left the country, taking their job-creating skills to countries that will welcome them, and others have revisited their tax-planning (read 'avoidance') strategies, it's quite possible that the Treasury will suffer diminished revenues as a result of the initiative.

But, crucially, such measures play well with the Old Labourites in the Trades Union movement. And their money will be crucial in bankrolling the forthcoming election. In the past, in Blair's time, the party could have counted on the financial support of wealthy business figures. A few of them may genuinely have left-leaning tendencies; most wanted to curry favour with those in power. This time, I'm sure Brown realises it'll be an uphill battle: for a start, he is personally loathed by many of the party's erstwhile supporters; perhaps more to the point, those in business who previously backed his party are still smarting from the train crash he caused to the economy. And even those whose support was wholly pragmatic, based on the storing up of favours, will surely not stump up for New Labour in the run-up to the plebiscite, on the grounds that the party is unlikely to win.

Interestingly, while there was a vague commitment to £10bn of efficiency savings in public spending, further elaboration has conveniently been left until after the Election. It's my betting that Darling had a quiet word with the brothers heading up the principal public service unions to reassure them that this was merely rhetoric and it would quietly be forgotten in the unlikely event that the party secured a further term.

Worryingly, the Government that revealed the highest real-terms public borrowing projections for any peacetime UK administration unveiled no plans to address the chronic problems that need to be overcome before the country is to begin its long journey back to solvency. The punitive cost of final-salary pensions for public sector workers, the productivity gap between the public and private sectors (and implied overstaffing in the former), the hard core of elective unemployed and fallacious long-term claimants of Incapacity Benefit, uncontrolled immigration and resultant pressures on public services and the unsupportable number of people going into further and higher education courses of doubtful value are just a few of the challenges any administration that's in for the long term will need to overcome.

Darling's Budget did precisely nothing to tackle any of these glaring problems, the most obvious of which is the need to slash discretionary public spending - including areas such as public sector pensions - in order to help the debt burden reduce over time. My guess is that this is because they don't expect to be in power much longer and would rather hand the poison chalice of having to take unpopular measures to the Conservatives.

A generation ago, we might have fallen into the trap and positioned ourselves as 'the nasty party', slashing public spending across the board, resulting in reductions in services, as a consequence of which, as soon as people felt affluent again, they'd vote us out of power. Today, though, I believe the party is committed to the harder, but ultimately more rewarding path, namely cutting that which is genuinely non-productive and driving efficiency savings in the productive and valued areas of public services. So a Conservative future shouldn't mean fewer nurses and police officers, though they may have to get used to money purchase pension plans, and the days of early retirement, often in workers' 40s, on spurious 'ill health' grounds should soon be history.

So if there's one positive I take from the Budget, it's that Darling sidestepped all of these issues, which makes me think he and his colleagues realise the game's up. The downside is that the country will be left to drift for a further year, and some damage could be done in the meantime - in particular, some talented entrepreneurs who might otherwise have created much-needed employment will undoubtedly quit the country in favour of other nations where the fiscal environment is more welcoming - but at least there's now light at the end of the tunnel.

Driving a really bad deal

2009-04-17T08:06:00.004+01:00

Trust New Labour to snatch defeat from the jaws of victory! As always in politics, the detail matters more than the big gesture, and now the details are emerging of the much-flagged plan to stimulate car sales, they're worrying in the extreme.

First, Peter Mandelson (I'm uncomfortable using the 'Lord' honorific for someone whose conduct in public life has been so shameful) has announced that the scrappage allowance will apply to all cars aged nine years or more. This is unjustifiable, in fact damaging, on environmental grounds. The average lifespan of a car in the UK is 19 years, and the energy consumed in its manufacture and scrappage is roughly equal to that consumed in fuel in that time. So halving the operating life of a car is wasteful of energy - and, if you believe that the consumption of carbon-based fuels creates global warming, also damages the climate.

Second, relatively little progress has been made in the energy efficiency or pollution levels of cars in the past nine years, so there will be little environmental upside to counterbalance the profligacy of scrapping such young vehicles. In the past decade, cars have got more efficient, but also heavier - because of increased pressure for safety measures - and to compensate for this, more powerful. In my view, the scrappage scheme is wrng-headed in its entirety, but if it has to proceed, better to set the cut-off date in the early 1990s, a time when there were few diesel cars (which are inherently more efficient than petrol) and before local emissions were improved through the introduction of mandatory catalytic converters for petrol models.

Third, the scheme is indiscriminate, in that any car more than nine years old qualifies - from an ultra-efficient diesel hatchback to a gas-guzzling limousine. Had environmental concerns genuinely been at the forefront of Mandelson's mind, better surely to focus the subsidy on those scrapping the worst-polluting vehicles. As things stand, there's a risk that the initiative will result in the greenest decade-old cars being taken off the road and the worst polluters remaining in use. Nobody is going to scrap a car worth more than the allowance, so the cars most likely to be crushed are the small, economical hatches that cost the least when new.

Which brings me on to my fourth point: the £2000 taxpayer-funded bounty applies to all new cars, not just the most economical. And in the current climate, when it's very hard to get personal loans and only the asset-rich feel comfortable making a big capital purchase, the prospect surely exists of wealthy buyers of new Porsches and Ferraris scouting around the classifieds for a cheap secondhand supermini to present as a trade-in. Thus, one low-consumption car is taken off the road before its time, to facilitate the purchase of a new supercar.

The fifth drawback to the scheme as proposed is one I've raised before: most new cars (I believe it's 78 percent) sold in the UK are built abroad, so the scheme will largely stimulate manufacturing in the Far East, Eastern Europe, Germany, France and Italy. Mandleson's counter-argument is that many of the components used in new cars built abroad are made in the UK. This is true, though these represent a small proportion of the total value.

However - and this is the sixth drawback to the scheme - component suppliers will also suffer as a result of the policy because they will be deprived of the replacement parts business associated with keeping the cars scrapped under the scheme on the roads. It's a basic principle of the economics of car ownership that as a vehicle ages, maintenance bills grow as parts wear out, while depreciation - the scourge of new car ownership - diminishes.

Seventh, the transfer of revenue referred to above will also take income from the many independent mechanics dotted around the country who service and repair these older cars. Family-owned small businesses, they are locally owned and managed, and the money they earn is spent locally too. In contrast, new cars are sold and serviced by franchised dealerships that are nowadays owned overwhelmingly by large plcs, whose shareholders may be spread throughout the globe. Thus New Labour assaults small business, yet again.

Eighth, in a bizarre twist, it would seem they intent extending the scheme to 'nearly new' cars, not just newly registered ones. So taxpayers could be saddled with all of the costs of the scheme with none of the claimed, if doubtful, benefits to the UK automotive components industry.

My ninth, and penultimate, argument against the scheme, before I move on to the greatest craziness of the lot, is that, as is so often the case with New Labour schemes, is that it will disproportinately benefit a pampered elite, namely public sector workers. Most of those in the private sector have either lost their jobs or are too uncomfortable about their job security to want to make a major capital investment. The state of the economy, rather than the cost of cars, is the principal reason why new vehicle registrations are hovering around half their normal level. Those who feel best able to buy, who I suspect will disproportionately consist of the public sector workers whose jobs remain secure, may possibly bring forward purchases, but I don't see them buying more cars due to this measure - and if they did, how perverse it would be to see a supposedly 'green' incentive putting more cars on the road...

Finally, the real fruit loop: the £5000 incentive to buy electric vehicles. Thankfully, this measure has been deferred until April 2011 and includes only fully electric vehicles, not hybrids. But it's spin from start to finish: the product cycle for bringing a new car to market is such that there will be no significant enhancements to the viability, and hence popularity, of all-electric vehicles in the next tw years.

Of course, the case for encouraging the purchase of even much-improved pure-play electric vehicles is far from being a slam dunk. They're only as green as the means by which the electricity that charged them was generated. And the UK doesn't have a great track record in this area.

As always with New Labour, we've been presented with a headline-grabbing scheme that seems on the surface to address two problems - the state of the economy, and the environment - but which, in reality, achieves neither goal. Along the way, the scheme makes Brown and Mandelson look good with the EU, whose nations will build many of the cars purchased with the subsidies, and a few mainly public sector workers will save a few quid by bringing forward purchases they would have made anyway. But the cost to the rest of us, those who work hard to create wealth and pay our taxes, will be immense.

The Circus is Coming to Town

2009-03-29T15:23:00.003+01:00

Yippee! We're all going to be famous! This Thursday, London will be the focus of the world's attention as the G20 leaders and their security personnel, spooks, economic and PR advisors and associated hangers-on fly into the capital for a conference at the ExCeL exhibitions centre.

Word has it that Brown's original plan was to use the event as the springboard for a successful June General Election. He hoped that the couple of weeks he's just spent flying around the world, meeting other leaders, lobbying for an enormous global fiscal stimulus plan, would have resulted in tacit approval for such a measure, which would then have been rubber-stamped and announced at a modern-day Bretton Woods in London's Docklands events venue. Next would have come the delayed Budget, with Opposition concerns about the scale of indebtedness created being drowned by praise for Brown's statesmanship, followed by an announcement that our unelected leader was going to the country.

Such a clever plan, Mr Brown, but for one thing: the US aside, much of the world, including the Governor of the Bank of England, steadfastly opposes further fiscal stimulus. Angela Merkel, Nicholas Sarkozy and others have refused to sign up to his plans. And if a minority of countries opt for the quick fix of a stimulus package, but others don't, those taking that option will find that it is of limited benefit, because export markets don't recover so fast as their domestic ones, transferring much of the benefit (but none of the debt, or future tax liability) elsewhere. And both fiscal stimulus and quantitative easing risk producing rampant inflation at a future date. Which may, just about, be acceptable if everyone's doing it, because it needn't devalue our currency relative to other nations'. But if we're going to be in a minority, possibly alongside only the US, then our competitiveness could be impaired for a generation.

Let's therefore hope that Brown's few friends among his fellow G20 leaders are generous enough to steer him away from any kind of bipartate action with the US. Brown should realise that, in this instance at least, our best interests are served by taking a lead from the European Union, which will take only prudent steps aimed at improving bank liquidity and improving regulation of financial institutions to avoid a repetition of recent history.

Looking at the public stances of Merkel, Sarkozy and some of the Eastern European heads of state, it seems unlikely that the EU was ever going to toe the Brown/Obama line in agreeing a huge, debt-fuelled stimulus package. But I'd like to think their minds were, if not changed, then strengthened, by one of the few moments of recent political debate so powerful and compelling that it captured the imaginations of millions of voters: the three-minute speech made by my local Euro MP, Daniel Hannan.

Delivered in Brown's presence (he was slouched over a table, and appeared to be doodling), it represented a concise, incisive condemnation of the Brown legacy. When, in decades to come, political historians attempt to summarise the strengths and weaknesses of Gordon Brown's premiership, as well as his record as Chancellor, they could do a lot worse than reproduce Hannan's speech verbatim, which is why I take the liberty of doing so here:

'Prime Minister, I see you’ve already mastered the essential craft of the European politician, namely the ability to say one thing in this chamber and a very different thing to your home electorate. You’ve spoken here about free trade, and amen to that. Who would have guessed, listening to you just now, that you were the author of the phrase ‘British jobs for British workers’ and that you have subsidised, where you have not nationalised outright, swathes of our economy, including the car industry and many of the banks? Perhaps you would have more moral authority in this house if your actions matched your words? Perhaps you would have more legitimacy in the councils of the world if the United Kingdom were not going into this recession in the worst condition of any G20 country?

'The truth, Prime Minister, is that you have run out of our money. The country as a whole is now in negative equity. Every British child is born owing around £20,000. Servicing the interest on that debt is going to cost more than educating the child. Now, once again today you try to spread the blame around; you spoke about an international recession, international crisis. Well, it is true that we are all sailing together into the squalls. But not every vessel in the convoy is in the same dilapidated condition. Other ships used the good years to caulk their hulls and clear their rigging; in other words – to pay off debt. But you used the good years to raise borrowing yet further. As a consequence, under your captaincy, our hull is pressed deep into the water line under the accumulated weight of your debt We are now running a deficit that touches 10% of GDP, an almost unbelievable figure. More than Pakistan, more than Hungary; countries where the IMF have already been called in. Now, it’s not that you’re not apologising; like everyone else I have long accepted that you’re pathologically incapable of accepting responsibility for these things. It’s that you’re carrying on, wilfully worsening our situation, wantonly spending what little we have left. Last year - in the last twelve months – a hundred thousand private sector jobs have been lost and yet you created thirty thousand public sector jobs.

'Prime Minister, you cannot carry on for ever squeezing the productive bit of the economy in order to fund an unprecedented engorgement of the unproductive bit. You cannot spend your way out of recession or borrow your way out of debt. And when you repeat, in that wooden and perfunctory way, that our situation is better than others, that we’re ‘well-placed to weather the storm’, I have to tell you that you sound like a Brezhnev-era apparatchik giving the party line. You know, and we know, and you know that we know that it’s nonsense! Everyone knows that Britain is worse off than any other country as we go into these hard times. The IMF has said so; the European Commission has said so; the markets have said so – which is why our currency has devalued by thirty percent. And soon the voters too will get their chance to say so. They can see what the markets have already seen: that you are the devalued Prime Minister of a devalued government.'

Economic recovery? Don't bank on it...

2009-03-18T19:16:00.005Z

Today it was announced that the unemployment queue lengthened in February by a greater number than in any previous month in history. Meanwhile, the IMF is saying the UK's recession is likely to be the worst of any major economy and the only one to continue into 2010. And I suspect there's more bad news to come.

Interestingly, while the Government remains in denial about the extent of the problem - only yesterday, for instance, Solicitor General Vera Baird claimed that the UK is having a much less severe recession than other G7 nations and that the infamous green shoots of recovery will soon be visible - other voices are beginning to voice the one proposal likely to solve the liquidity crisis undermining our economy: setting up 'good banks'.

In the past week, Sir Richard Branson has floated the idea of establishing his own clearing bank, while a coalition is proposing the formation of a 'post bank', which would use the post office counters network as its branches.

However, both bids concern me. Taking Branson's first, the man's historical modus operandi is a concern: he likes to deploy a minimal amount of his own capital, marrying his brand and PR chutzpah to someone else's cash, taking receiving 'sweat' equity and royalties in return for his contribution, often making a nuisance of himself to the joint venture partner until it resorts to buying him out. Were he prepared to sink much of his net worth into a good bank, it'd be a long way towards sufficient capitalisation to make a difference to the economy. But it's not going to happen. Worse, such is the scale of the challenge that even the bearded one admits that the timescale for achieving his ambition is a couple of years, minimum.

Compare this to the post bank proposal. Though nominally cross-party, the most senior Conservative they've been able to attract is Phillip Blond of Demos. And it's fronted by left-wing Labour MP Jon Cruddas and promoted by the old-school trades union the CWU. Its thoughts on funding are as yet ill-defined: 'the taxpayer' and something to do with bonds. Worse, its constituents talk about their pet project lending to individuals and small businesses that would otherwise not be able to borrow. If the only obstacle to them being able to access finance was the credit crunch, that would be legitimate; but they mutter about saving the vulnerable from the jaws of loan sharks, which speaks to their hidden agenda: lending on non-commercial terms.

In principle though, the Post Office could be a great vehicle for the launch of a new bank: the infrastructure already exists (indeed, it's under-utilised) and the brand is trusted. Given the demographic profile of its core users - the elderly - it would be an attractive deposit-taker. If there's a downside, it's that it might compete with National Savings, worsening the Government's balance sheet.

Considering that we got into this crisis through write-downs by lenders who've overreached themselves while setting out to lend to companies and individuals who stood a decent chance of meeting their repayments, the prospect of a nominally 'good' bank, set up in chastened times, deliberately lending to those who wouldn't normally qualify for such borrowing, sounds like history about to repeat itself.

What we have here are two extremes: an entrepreneur who's a popular hero, but also something of a chancer, floating the idea of forming a good bank in the hopes of attracting capital, somehow, to see it through, contrasted with a coalition of left-leaning dinosaurs hoping that Government and other public sector bodies will gift it cash which it will then lend to hopeless cases.

I'd like to think that organisations that are heavier in weight than Virgin but a lot more commercial than the post bank lobbyists are already working on plans to form good banks. The likes of Tesco, Sainsbury and Marks and Spencer have long offered financial services products. To date, they've been white-labelled offerings, operated by other financial institutions. Who's to say they can't go it alone? They already have branch networks, their brands are trusted, the cost of adding call centres, online banking and a back office needn't be prohibitive, especially if, as would surely be the case for a 21st century greenfield operation, thinking was unencumbered by history and thus the cost base much lower than is the case for legacy banks.

On a day when Lord Turner, for the FSA, floated proposals to avoid a recurrence of the banking crisis, it's apparent that those who currently work in the industry have no monopoly on how things should be done. Indeed, it could be that encouraging new players into the industry will prove to be the best way to bring about lasting reform: given a choice between regulation and competition, as a Conservative, it's my instinct to prefer the latter.

For instance, one idea floated by Turner that clearly demonstrates how little regulators have learned from recent experience is that mortgage lending could, in future, be restricted to three times borrowers' salaries or a maximum percentage of the property's purchase price. Such measures are deeply flawed: a person with heavy debts, liabilities such as maintenance and child support payments and an extravagent lifestyle may be unable to afford a loan of three times income, whereas someone on a higher salary who lives frugally may be able to afford five or six times their annual stipend, especially if they choose a fixed, rather than variable, mortgage rate, and are hence protected against increases in interest payments. Likewise, a loan of say 85 percent of the purchase price at the peak of the market could represent a heavier burden than 100 percent of a distressed buy when the market has cooled.

One solution might be to allow lenders wide discretion in their lending criteria but to have their loan books audited and given Standard and Poor-style risk ratings. A sub-prime lender might rate as a C-, whereas one specialising in low LTV mortgages for public sector workers might merit an A+. If a highly rated lender acquires a less well regarded one, or acquires liability for its loans, its own rating would be affected. And rather than requiring banks to keep more tier one capital, as Turner is suggesting, which could further ration access to borrowing, capital ratios could be determined in proportion to the risk profile of each bank's loan book: the higher the risk, the more cash it must keep in reserve.

The Government continues to increase the debt burden of taxpayers for a generation trying to stimulate the economy, but it will fail until the fundamental problem of the banking system's lack of liquidity, brought about by the uncertain solvency of current lenders, is resolved. We don't have the time to let their balance sheets become more transparent over time and we can't afford to pump in so much cash that it ceases to matter. So creating an environment in which new banks can spring up and flourish, and encouraging this to happen, is surely the one route by which the pain can be foreshortened.

You read it here first: why quantitative easing won't work, and what should be done instead

2009-03-06T23:39:00.009Z

On Thursday, as well as dropping the base rate to its lowest-ever level - half the previous lowest-ever figure, reached only a month earlier - the Bank of England announced it will put £75bn into the banks by way of quantitative easing.

It's my understanding that it will purchase Treasury bonds and AAA corporate bonds, most of them from the banks. The hope is that the banks will lend this cash and more to companies and individuals.

Hope? We're taking a step that could lead to rampant inflation in years to come in hope?

Worrying, the move seems to have wrong-footed George Osborne, who muttered something along the lines of 'they've messed up the economy so badly, they might as well give it a try'. Much better would have been to have explained why the move is almost certain to fail and, to avoid the 'do-nothing party' criticism levelled by Brown, instead reiterated the party's proposed alternative measures.

Politicians, especially those in opposition, are often accused of trying to appear wise with the benefit of hindsight. Though I'm not yet a politician, I aspire to be one. So I'll commit to my blog, now, the reasons why I believe the Bank of England, perhaps under the influence or direction of its political masters, is making a big mistake, and what I believe it should be doing instead. Let the future be my judge.

The root cause of our difficulties lies in the opacity of the balance sheets of our clearing banks. No-one knows how many of the loans, bonds and other assets they hold will turn out to be worthless, and how many will be redeemable for less than their balance sheet value. Some banks may be terminally insolvent, but no-one knows which. For this reason, they can't afford to take the risk of lending to one another, and they're under intense pressure to improve their own balance sheets, by retaining as much cash as possible.

Retaining as much cash as possible. Now there's a phrase. So if a nice man from Threadneedle Street turns up with a big pile of cash, offering to swap it for some bonds, what's your average bank likely to do with the cash? Retain as much of it as possible, obviously. Not just to improve its liquidity ratio, but also to boost its share price. Because shares in a potentially insolvent institution aren't worth much to anyone. And the one thing that's keeping the directors of the clearing banks motivated in this new, no-cash-bonus climate, is the prospect of share options granted at today's peppercorn stock prices. Which is fine in principle, except that the detail can result in those at the top being incentivised to boost the balance sheet (i.e. retaining cash) rather than profitability (i.e. lending the cash out), against a background of their institutions' shares being dragged down primarily by solvency fears and write-downs rather than a lack of profit on continuing activities.

Granted, cash is only slightly more secure than the top-grade bonds that it'll be swapped for, but it's more liquid, given the risk that Treasury bonds will soon become as commonplace as pizza home delivery leaflets, due to the country's need to borrow to buy its way out of the mess it's in. It also has the great benefit of being the asset that banks will need to accumulate over the next five years if they're to redeem the preference shares the Government was granted when it rescued them last year - something else the directors know they need to do to boost the share price.

I predict, therefore, that this first tranche of £75 billion will make no discernible impact on money supply in the real economy. The Bank of England has already said there'll be another £75 billion to follow if the first doesn't work. Which seems a strange approach to me: better, surely, to try something else, rather than repeat the exercise, if a plan doesn't succeed?

It seems to me that the banks are like wells. We'd like them to contain enough water that, when we pump the handle, a steady flow is delivered. Currently, the water level is below the point reached by the pump, so only air comes out of the standpipe. After we've chucked in our £75 billion barrel-full of liquid, it'll still be too low. So we'll do it again, Still no good. So next, in goes £100 billion worth. Only now, there's too much water in the well, and it's gushing out, over the sides, being wasted and flooding people's homes.

The same could happen with the banks. In parallel with the quantitative easing process, they will continue the long, hard work of establishing just how bad the situation is, writing off and down assets and establishing the true state of their balance sheets. Until the second job is complete, none of the cash coming in from the Bank of England is going out to businesses and individuals. The downside to quantiative easing is that it's a nothing-or-everything measure: injecting £75 billion will either result in no new lending, if the banks' capital ratios and balance sheest are still found wanting, or up to £1 trillion if it's judged that the bank is now solvent enough to return to business as usual. And it's my prediction that the Bank of England will have to put as much as £200 billion into quantitative easing before the banks start lending again - which means they could eventually have the capacity to lend perhaps £2.5 trillion. And it'll find its way into the economy very quickly indeed. With that amount of cash in circulation, which the banks acquired so cheaply, they'll be fighting each other to place it. Hey presto - we'll be back in a debt-fuelled consumer boom and our companies will be over-leveraging themselves again.

So next time you hear Gordon Brown talking about prudence, remember it's not just the boom of the past 7-8 years and the current bust he didn't anticipate or head off; he's also, now, sowing the seeds of the next disastrous cycle.

Of course, I appreciate it's easy to criticise but harder to offer constructive alternatives. Actually, my party, and I, have proposed other solutions. Early on in the downturn, David Cameron proposed a £50 billion loan guarantee scheme aimed at keeping businesses solvent. I believe it's little short of criminal that the Government hasn't had the humility to follow this path; had it done so when David raised the idea, the number of business failures we're now seeing, and the resultant rise in unemployment, would have been less severe. A state-backed guarantee for ringfenced loans bypasses the problem of the state of the banks' balance sheets, enabling them to engage in profitable lending without having to concern themselves with its implications for their cash reserves. And it would make a lot of difference to the ability of businesses to survive the perfect storm of difficult trading and unsupportive banks, resulting in the preservation of many jobs.

The only drawback to a guarantee scheme is that it's a Pound for Pound measure, at least in the short term. £50 billion of taxpayers' money results in no more than £50 billion of lending, at least until the first tranche of loan repayments are received. I can see the attraction of quantitative easing: put £75 billion in, get up to £1 trillion out.

There's another idea, not yet adopted by my party, but I believe worthy of consideration, that potentially combines the best of both approaches. The Government should up three 'good banks' - meaning new institutions, with clean balance sheets from the get-go, and giving each of them say £50 billion to play with. This would give them the ability to lend around £700 million each- collectively, a couple of trillion Pounds - because, with clean balance sheets, they would be able to lend around 14 times their cash reserves, based on a liquidity ratio of seven percent. They would also be able to borrow from non-credit crunched banks abroad as well as institutions such as pension funds and local authorities, potentially boosting their ability to lend still further. To avoid overheating the economy, they would be directed to phase this lending over a number of years. Over time, they could even take over some of the enfeebled existing banks - once the true state of their balance sheets had become clear, of course, unlike Gordon Brown's ill-conceived 'shotgun wedding' between LloydsTSB and the car crash that was HBOS.

I appreciate that a bank capitalised to the tune of 'just' £50 billion is a minnow relative to the abovementioned whales - beached ones, admittedly. The kinds of new banks I have in mind would resemble Firstdirect rather than Barclays - no legacy branch network, just phone- and internet-based, with even its commercial lending personnel being mobile workers, visiting clients rather than esconsed in palatial offices. So why not just one 'good bank', working with £150 billion of capital?

It's simple: as a Conservative, I believe in competition and free trade. Even if we could fix the liquidity problem immediately, in the current environment consumers and businesses will be deterred from borrowing because rates and lending policies will remain both prohibitive and suspiciously uniform because of the alarming degree of consolidation that has taken place - and, in fact, encouraged. A minimum of two 'good banks' are required to bring about competition in lending to consumers and businesses by solvent institutions, while three are needed so each 'good bank' has a choice of two others with which to trade and from which to borrow.

Such an approach would also enable private equity firms to finance leveraged buyouts, which drive business efficiencies, help the public sector re-start new projects through PFI schemes - resulting in more employment in the construction sector - and also inject fresh capital into the mortgage market. Better still, as the providers of these institutions' shareholders' funds, we, the taxpayers, would own them, and could benefit from any future floation, and dividends in the meantime. And it would take away the pressure to keep pumping money into rescuing the existing banks, some of which (Lloyds and RBS in particular) are, through their own avarice and hubris, probably beyond long-term salvation.

During the current downturn, with banks calling overdrafts, many companies have been forced to try to raise equity investment. In almost all cases, investors have fought shy of buying into companies with deficits in their balance sheets due to historic losses or debts to creditors; the result is that managers and administrators collude to set up 'pre-packs' - new companies that acquire trading assets from troubled precursor businesses. Hitherto, taxpayers have been forced into acquiring equity in what are, in essence, lame duck companies - banks with toxic balance sheets. Much better, surely, to invest in shiny new businesses with no inherited problems.

As a Conservative, I feel deeply uncomfortable with the notion of state-owned banks. The risks are obvious: politicians and civil servants bring pressure to bear to have them pursue social objectives, at the expense of commercial prudence. So I stress that my preferred option for these 'good banks' is not direct Treasury funding but, rather, making shares available to the public, if necessary with sweeteners.

Take pensioners, for instance: many are asset-rich, but income-poor. And never more so than at a time when the base rate is a mere 0.5 percent. Maybe they could acquire interest-bearing shares in a newly-formed 'good bank'? And perhaps, to incentivise them to do this, the Government could agree that the income this brings them will be free from tax for, say, five years, after which the bank is likely to be into profit and its shares can be sold on for a capital gain (again, tax-free)? And wouldn't such an institution be a better home for local authorities' cash than a bank in a country such as Iceland or Ireland, with the risks that these places entail?

We live in interesting times. Even those who favour quantitative easing admit that the measure's track record is, at best, mixed. For the country's sake, I hope my pessimism is misplaced. But if it proves to be prescient, I very much hope the Government will not encourage the Bank of England to repeat the futile exercise but will, instead, pursue other, more original, but more rational, solutions.

To Fix The Economy, Stop Digging Holes

2009-02-20T16:59:00.005Z

The tax take for January 2009, at £8.4bn, was down by 45 percent year-on-year. As a Conservative, my instincts are to favour low taxes and small government, so in a sense I should be pleased. But, of course, I'm not, because the modesty of the Chancellor's drag on the economy is not reflective of small government but, rather, of collapsing business activity. And because public spending continues apace, £7 billion was added to the national debt last month alone.

Worse, the biggest area of shortfall was in the area of corporation tax - an imposition that reflects a downturn in trading for a full financial year. We know that the economy hit the rocks in September/October - most sectors were relatively healthy for the first half or more of the year. So this suggests that the scale of the shortfall is likely to increase in subsequent months.

Unsurprisingly, my party is calling on the man who, for now, can call himself Prime Minister, to put the brakes on public spending. I'm pleased to hear this call, which was immediately rebuffed by the Keynesians in New Labour, because it suggests we're firmly in a period in which Politics Does Matter and There's A Real Difference Between The Parties.

The Government's objection to slashing public spending is that it's likely to add still further to unemployment, which, incidentally, I think could well exceed the pessimists' projection of three million by the year-end. I'm more eager than most to see the proportion of the workforce employed, directly or indirectly, by the state, fall, but I agree that it's undesirable at this time. However, that doesn't mean I reject the notion that now's the time to get a grip on public spending.

Rather, I'd like to see the announcement of a five-year plan for Smaller Government. Here's how it might look:

STEP 1: END STATE-FUNDED FINAL SALARY PENSIONS

I understand that public sector workers, in the broadest sense, now account for more than 80 percent of the British citizens in work and still benefitting from defined benefit retirement schemes. That's clearly anomalous. Keynsians are fond of talking about how the economy can be stimulated by Government getting the public sector to dig holes and the private sector to fill them in again. It's a crude, but effective, way to get cash moving through the economy. Trouble is, not only are public sector workers on average better paid and less productive, but they also come with a large, often unfunded, pension liability. So our children and grandchildren will still be paying for the holes they dig today.

I'd be brutal: close all the schemes now, including for current employees. If they don't like it, they can go and get jobs in the private sector. I fully accept that there are some areas of public sector employment in which salaries are modest and employees consider their pensions to represent a major reason to remain in the sector; where switching them to non-contributory stakeholder plans results in a flight of labour, such that recruitment becomes a critical problem (with two million unemployed, heading for three or more?) I accept that salaries may have to go up. But only if there's a real crisis, not as a pre-emptive sop to the unions. Frankly, especially now, with a recession threatening to become a depression, I'd rather see public sector workers receive high salaries, which are spent now, than gold-plated pensions, which are stored up for the future.

There's another benefit to this approach: forcing state employees into stakeholder pensions will give the financial services sector a much-needed break and also drive more cash into equities, helping the stock market to recover (or protecting it against further falls).

Finally, this levelling of treatment between 'them' and 'us' will be popular with 'us' (the majority) and will represent an iconic step, similar to Blair's abolition of Clause Four. It will demonstrate that the Conservative Party is willing to stand up to the unions and is committed to doing what's needed to get public borrowing under control.

I appreciate that proposing such a policy will require a deep intake of breath by politicians, whose own retirement planning would be adversely impacted. The solution may require honesty: MPs are underpaid, dramatically so, relative to their skills and contribution to society, so their basic pay should increase significantly, while the many benefits in kind to which they're entitled should be scaled back dramatically.

STEP 2: BIN 'RUBBISH' JOBS, CREATE USEFUL ONES

It's sad that, in recent years, the public sector has become demonised. In truth, many of the people working in the police service, hospitals, schools and local authorities directly provide useful services to citizens. The problem is, and they're often more conscious of this than the rest of us, that for every one of these jobs there are two managers, diversity officers, communications specialists or sustainability advisors. And, perversely, they tend to earn more than the teachers, nurses and other 'frontline service providers' they're supposed to support but, all too often, frustrate.

They're going to have to go. And, sadly, some of them will find there are no jobs for them to go to. But there are ways in which the state can and should create new roles, based around a simple principle: a value-for-money test. If a public sector job delivers benefits to taxpayers in excess of the cost of providing it, we'll have it; if not, we won't. The tragic Baby P case occurred in part because the local authority in question had too few frontline social workers, in part because the salaries offered by London boroughs are insufficient to attract and retain sufficient staff. So employ more of them, pay them more money - but forget about having an environmental sustainability officer for the team. Which brings me onto my own variation on Keynesianism...

STEP 3: DON'T DIG HOLES, BUILD SOMETHING USEFUL

... or anything else that we know we'll need, if not now then in the future. Returning to the Keynesians' iconic example of the public and private sectors digging then filling holes, it may move money around the economy in the short term, but in the long term, the landscape remains unaltered. Much better to have the public sector dig some holes, then have the private sector dig some more holes - provided we have a use for lots of holes. Maybe they could be used as graves or, more cheerfully, swimming pools. As long as the work is genuinely needed, it could be argued that getting it done at distressed rates in a recession actually saves taxpayers money in the long run, because it would be more expensive to have the work done in more prosperous times.

I'm not against seeing the Government bring forward capital expenditure and put money into projects that boost employment, but for me the objective is this: for every £1 of debt we saddle taxpayers with today, the country should save considerably more than that sum, or receive in excess of that figure in income, in the future.

Here's an example: Heathrow. In the long run, whether or not it gains an additional runway, it's in the wrong place. London, and hence the UK, will be better placed to compete internationally 10-20 years from now if we build a new, truly world-class London airport to the uncongested East. Not only would the whole economy benefit, but it would act as a magnet, attracting much-needed development and private investment to the East of the capital - something that previous publicly funded white elephants such as the Dome and the Olympics have failed to achieve. And actually, the cost to the state might not be that great, because a scheme of such obvious commercial merits is one of the few big infrastructure projects likely to bring in private sector funding, even in the current climate.

But here, the Government's role might not be purely financial. It took eight years simply to get planning permission for Terminal 5. Hong Kong constructed an entire airport in less time. If we stick with current processes, even with all the political will in the world, it's unlikely that contractors would break ground on a new London airport for a decade. So how about short-circuiting the planning process, starting the feasibility studies and getting the architects underway this year, with the aim of commencing construction in 2010? If we were in Dubai or China, we'd do it, so why not the UK?

There are many other areas in which judicious promotion and, where appropriate, funding of works today would lead to a more successful, and hence lower-tax, Britain tomorrow. One of the worst-hit areas of the economy is recruitment: unsurprisingly, few people are hiring. Another is banking, for obvious reasons. Among this army of newly redundant white-collar workers are consultants and small business advisors who could be redeployed helping other unemployed people choose new careers in which it's easier to find new work, or set up their own businesses.

The latter is particularly important, which brings me on to my next point.

STEP 4: RE-BALANCE THE ECONOMY

The recession has hit the UK second-hardest of all the major economies, behind only Japan. One reason is that we were over-reliant, especially when it comes to the income we generated from abroad, on our banking and financial services sector. Traditionalists on the left don their flat caps - flatter, even, than their vowels, and proclaim that we should re-establish a vibrant manufacturing sector. They're hopeless romantics. We will never be able to compete with nations such as China, because our land is too scarce and expensive, as are our raw materials, and our standard of living precludes us working for competitive labour rates.

This is one of the few occasions when we can usefully learn from America. The US doesn't export much in the way of manufactured goods, but it does export something else of value: intellectual property. Computer software, movies, music, inventions, that kind of thing. The great thing about this kind of export is that it has a high value and it's not easily undercut. Being able to produce it requires an excellent educational system - if not for everyone, then at least for those most able to benefit from it. It also requires ready access to venture capital.

In order to compete more effectively in these areas, we need to improve our elite universities, ensure that the best education is available to our most able students, and also reinvent the process by which capital is allocated to promising new ventures, especially those which are based on ideas and knowledge, rather than fixed assets. In the short term, promoting such initiatives will create good jobs, albeit that they will also cost the taxpayer money. But, if done well, they will generate many times the initial investment in years to come.

STEP 5: INVEST WISELY FOR PUBLIC GAIN

With the existing clearing banks largely insolvent, the economy is likely to remain deprived of liquidity for some time. One idea currently doing the rounds is to allow the passage of time to heal the existing banks' balance sheets, rather than pumping more money into them or acquiring 'bad assets' using a new, 'toxic bank', and instead to set up one or more new banks, with clean balance sheets, which can therefore lend to companies, individuals and each other.

There may be opportunities for local and national government, and individuals (perhaps encouraged by tax incentives) to invest in such establishments. If run by suitably qualified and incentivised individuals - and properly regulated, of course, not only could these revitalise the economy but they could also create considerable wealth which, on eventual flotation, or through the ongoing distribution of profits by means of dividends, could pump considerable wealth back into the Treasury and local authorities.

STEP 6: IT MATTERS WHERE THE MONEY GOES

I've already pointed out that, as things stand, one drawback with putting money into the public sector to revitalise the economy is that it creates a liability in the future, namely the need to honour the future pension cost of those employed today. But is the private sector any better?

The risk with the latter is that much of the money put into projects today will flow abroad, to parent companies, subsidiaries and shareholders located outside the UK. Think EDS and new IT systems. The project management will be local, but the programming could be outsourced to India, and the management overheads and profits will flow out of the UK to its ultimate parent, Hewlett Packard, in the US.

Protectionism is widely held to be a dangerous thing, as it reduces global trade and hampers the efficient allocation of capital. But at the same time, if taxpayers' money is to be spent pump-priming the economy, it's a shame to see much of it benefitting the citizens of other countries. Which is why other countries, including the US and France, have attached blatantly protectionist conditions to some of their Keynesian initiatives.

There's a way that the UK could help maximise the proportion of the money channeled into restoring economic growth at work at home, which would also benefit employment and preserve the fundamental health of the private sector: encourage, or even require, the public sector to spend an increasing proportion of its budget with small businesses.

While large companies routinely bid for cross-border contracts, that's not the case for smaller enterprises. So parcelling up Government contracts into smaller assignments indirectly increases the chances that the winning bidders will be domestically based; throwing in an obligation to shortlist smaller firms and, perhaps most important, re-engineering what are often Byzantine procurement procedures so small companies don't find them unduly burdensome and changing the criteria on which contracts are let to favour them would ensure that the crucial, and vulnerable, SME sector would benefit more than currently from taxpayer spending.

STEP 7: CONTROL PUBLIC SECTOR PAY

As the economy pulls out of recession, unemployment will fall. The private sector may start to experience a skills shortage. Rather than do as New Labour did in the 1990s and turn a blind eye to systemic abuse of the asylum and immigration system, exploiting recent migrants in low-paid jobs, freeing up the indigenous population for better-remunerated work, this is the time to start squeezing the public sector.

Rather than spend money on expensive redundancies (while I have no proof, I bet that a lower proportion of state employees are on only statutory redundancy and notice terms than their private sector brethren), a salary freeze should help encourage migration of some of the best and most motivated of public sector workers into the wealth-creating part of the economy. Where possible, they shouldn't be replaced; of course, where their work is of significant tangible benefit and there's a real recruitment problem, wages may have to go up. But memories linger, and the greater job security that goes with state employment should be sufficient enticement to encourage many to remain.

None of the above is party policy, but I offer it for debate, on the basis that 'whatever it takes' is what we should be doing, and I think there could be benefit in widening the range of possible solutions that are discussed. For me the guiding principle has to be that Government should stimulate the economy now, which includes boosting public infrastructure spending and improving liquidity, but it should also be planning how public borrowing can be reduced over the economic cycle, and therefore it should be looking to do what's necessary to stimulate the economy now in ways that also bring down the public debt in the future. It can be done.

The Big Idea

2009-02-15T17:23:00.006Z

Conventional wisdom has it that Gordon Brown will wait until the last possible moment to go to the country, on the basis that he waited so long to take on the Premiership (Blair having repeatedly welched on his Granita promise) that he will not willingly jeopardise it in an election he is unlikely to win.

I've long wondered whether this is necessarily the case: he looks tired, he has repeatedly misjudged the seriousness of the credit crunch and its consequences and, as I've hinted previously in this blog, I think there are times when parties are actually quite keen to lose plebiscites in order to allow other parties to carry the can of making politically unpopular but economically necessary decisions.

If there's truth to this hypothesis, it wouldn't surprise me if we saw a General Election this year - quite possibly on the same date as the European and local votes to be held simultaneously on 4 June. OK, this is an unlikely scenario - I'd guess the bookies would offer very long odds on it coming to pass. But I imagine that the Conservative Party has contingency plans in place, just in case.

Given the (admittedly small) chance of a General Election in less than four months' time, I'm surprised that we've so far seen relatively little from the blue corner that could be described as an easily communicated, catchy, media-friendly 'big idea'. While 'responsible capitalism' is a sound principle on which to manage the economy, and is an interesting debating point for the chattering classes, it's no election slogan.

My guess is that we can probably win on the basis of public dissatisfaction with the mismanagement of the economy alone, but having a Big Idea will help safeguard that win - especially given that recent years have seen demographic changes that mean we need to surpass Labour's share of the national vote by at least six percent to win the biggest number of seats, let alone obtain an overall majority. More to the point, if the public understands and buys into this Big Idea, and is behind us in what we're setting out to do, there's a much higher chance that the electorate will remain on side during what will inevitably be a very difficult period. According to a report in today's Sunday Times, public spending will have to be slashed by up to £100 billion by 2020 - AND the higher rate of tax will have to rise to 50p in the Pound.

Clearly, the UK economy is very badly broken, so the Big Idea needs, above all else, to communicate our ability and commitment to fix it. But the public outrage over Alfie Patten and Chantelle Steadman, the children who conceived a baby at the ages of 12 and 14 respectively, only to sell their story to the tabloids, together with the ongoing dismay felt by the majority of Britons at the perverse incentives created by the benefits system, the increasing financial pressures on those who prefer to stand on their own two feet, the two-tier system that sees public sector spending soar and its workers cushioned by a culture of complacency while being feather-bedded by generous pensions and the revolving door between the Government, public sector and pro-Labour business leaders, policy reversals and contradictory messages over drugs, the loss of control over immigration, worring levels of gang-based youth crime in urban areas, all demonstrate that the electorate believes that the country is broken in other ways, too.

And the links between the broken economy and the other aspects of our country that are also broken are manifest. As a result of the economic crisis brought about by the current administration's complacency, taxpayers will be forced to shoulder a burden for a generation. No politician with a conscience should be able to face the electorate and expect them to take on that liability unless he or she has done everything in his or her power to ensure that the load is spread as widely as possible. That means that life will have to get a lot harder for the elective unemployed, with the benefits and housing system reinvented to incentivise endeavour and penalise Shameless-style work-dodging. Equally, the days of the public sector final salary pension - including MPs' - must draw to a close, as must the many sinecures funded by local authorities and quangos.

In the business world, it's normal to talk about RoI - return on investment. In the years to come, the same test will have to be used before spending even the smallest amount of taxpayers' money, if we are to reduce the gargantuan debt created by New Labour without impoverishing those most in need. It's often said that if one gives a starving man a fish, he eats well tonight; whereas if one gives him a fishing rod and teaches him to fish, he'll eat well forever more. The risk is that an indebted Britain shashes public spending across the board, including, to continue the analogy, the provision of fishing rods and angling courses for those most in need. Instead, we should forge ahead with those initiatives - albeit provided on the most efficient basis possible, by a mix of the voluntary and public sectors, rather than on a top-down basis by lavishly funded quangos headed by the great and the good, and delivered by a surfeit of public sector agency workers able to retire in their 50s on gold-plated pensions, supported by armies of diversity and sustainability officers.

'Fixing broken Britain' is a simple, easily communicated concept that brings together the overriding economic imperative and the many areas in which New Labour has been shown to have failed the electorate. Iain Duncan Smith flirted with the same slogan during his leadership but, in those better times, the public hadn't yet come to recognise the full extent to which both the economy and British society had been fractured by New Labour, and focus groups were telling Conservative strategists that it had to distance itself from Thatcher-era moralism: out with 'the nasty party, in with chinos, organic skinny lattes and, ultimately, hugging hoodies.

That was then; this is now. Today, the public recognises that we live in desperate times and that decisive action is required if the country is to regain its economic strength and a functioning social structure. They don't want nice, they want effective, and trustworthy. I therefore hope that, behind the scenes, David Cameron's team is working on bringing together its policy initiatives under the 'broken Britain' theme. I'm sure that it's the key to winning the next election.

Can poachers really turn gamekeepers?

2009-02-13T14:05:00.008Z

The past few days have seen a media frenzy over the fact that former HBOS Chief Executive Sir James Crosby, who personally took the lead in making redundant the bank's then head of risk management shortly after he expressed concerns about the lender's over-reliance on the wholesale money markets to back its mortgage book, subsequently became Deputy Chairman of the Financial Services Authority.

It's difficult to prove a causal link between whistleblower Paul Moore's departure as part of a 'restructure' and his public statements about the bank 'going too fast', so I believe the campaign that resulted in Crosby resigning - or, possibly, 'being resigned' - is a case of playing the man not the ball. I'm more interested in the wider questions raised by the episode.

Is it really in order for there to be a revolving door between the clearing banks and the supposedly independent body set up to regulate and supervise them, as would seem to be the case? Shouldn't there, at the very least, be a mandatory period between an executive's departure from the employ of a bank or other financial institution and his or her employment by the FSA? Without this, there's a risk that the individual in question might be put in a position of having to make decisions about investigations relating to activities that took place on his or her watch; there's also the potential for conflicts of interest if many of that individual's contemporaries, some of whom many be long-standing personal friends, remain in key positions in the organisation in the spotlight.

Equally, is it appropriate for someone who, given the seniority of his role within HBOS, is likely to have owned several million Pounds worth of shares in that company, holding any position of influence within the regulator set up to police it? It may be that Sir James was required to demonstrate that he had divested himself of his holding in the bank before joining the FSA, but my suspicion is that he didn't, because everything I've read about standards of ethics and supervision at that body prior to Hector Sants' welcome changes suggest that the culture was far too lax for anything of the sort to have been demanded. And even under his leadership, the organisation has today displayed an astonishing level of hubris and insensitivity by announcing plans to award its own staff £33m in bonuses - this at a time when the country is reeling from a deep recession directly attributable to what must amount to the single biggest failure of a regulator in living memory, the FSA's negligence and impotence around the solvency of UK clearing banks.

In the 12 or 18 months prior to the 1997 General Election, when it looked like New Labour might just form a government, I recall what began as a trickle and ended as an unseemly rush of senior business figures rediscovering long-lost socialist leanings, cosying up to Blair and his cronies in expectation of winning influence with a potential incoming administration. Prior to that period, Labour-supporting captains of industry were a rarity, and I remain of the belief that there can be very few whose leftward leanings are genuine, not least because I can't see how anyone who runs a company of any scale can be anything other than frustrated with the layers of red tape introduced by this administration, nor the large-scale inefficiency with which it manages the business of government.

While I stress that I have no evidence to suggest that Sir James is a supporter of New Labour, nor a donor to that party, press reports over the past week have consistently described him as 'close to' the party, and in particular to Gordon Brown, including suggestions that the two have socialised together. Again, is this in order? It seems to me that there are, in effect, five 'estates' in modern Britain: the political elite; business; the not-for-profit sector (encompassing charities, faith and community groups); the news media and what used to be called public service but is now known by the catch-all term 'the public sector', which encompasses not only Civil Servants and those, such as teachers and nurses, who provide services direct to the public but also the armies of 'agencies' and other quangos established to do New Labour's bidding.

It seems to me that those who work in any one of these sectors are under a moral duty to be able to demonstrate that they are free from any links with any of the others that could potentially compromise their independence and effectiveness. Recently the country has been outraged by a shocking case of politicians tainted by business interests (members of the House of Lords taking money from lobbyists to table amendments to legislation); I wonder if there are cases of business leaders, toadying up to New Labour, hoping for knighthoods and personal advancement, taking decisions in their working lives that are not in the best interests of shareholders? It wouldn't surprise me. Indeed, history may judge, in particular, the LloydsTSB board, for agreeing to the shotgun wedding with RBS. And in James Crosby, of course, we see someone whose business background should have precluded his acceptance of a high-profile role with the regulator in the sector in which he had worked.

We know there's a fast-spinning revolving door between Ministerial careers and non-executive directorships and consultancy work in the industries with which they were in contact while in office; the same goes for senior Civil Servants and quangocrats. What's less well publicised, and equally invidious, about New Labour's term in office is the extent to which even humble charities, supposedly bastions of volunteerism and benevolence, are also now instruments of the state: many receive direct or indirect grant aid from central government or Labour local authorities and plenty are also contractors to government, providing services in return for fees.

Whatever the rights or wrongs of Sir James Crosby's conduct during his tenure as CEO of HBOS, the fact that he was appointed to the FSA in the first place shows that standards in public life have degenerated alarmingly. I hope that the game soon moves on from this one incident to a broader consideration of standards in public life, where there is a lot of work to be done - most likely by the new administration, rather than the current one.

Responsible capitalism: is it the answer?

2009-02-01T20:18:00.003Z

Speaking at Davos, and expanding his theory in an email debate with New Labour grandee Will Hutton in today's Observer, David Cameron has called for a new era in politics: responsible capitalism. He argues that free enterprise should be matched by a sense of responsibility in business.

The move will raise eyebrows among traditional Conservatives, for whom the market is sacrosanct. In the wake of the credit crunch, with the public mood set against greedy bankers and hedge fund managers, it is likely to play well electorally. But, assuming it's not merely a positioning exercise in the run-up to a General Election, how might it translate into policies, and would such government be good or bad for the country?

Cameron's email exchange with Hutton is possibly the clearest explanation to date of what Cameron terms "progressive conservatism", but which Hutton prefers to term "capitalism with a conscience". Actually, I think the difference in terminology is crucial; in fact, it goes to the heart of what's significant, and potentially very exciting, about the Conservative leader's stance.

I believe that the long-run history of political history is that every net step forward a country takes, if examined more closely, in fact consists of two steps forward and one back. Under Margaret Thatcher, an enterprise culture and emphasis on home and share ownership brought affluence and economic freedom to the many; but, even as a Conservative, I feel that those on the margins of society didn't get the help they needed to come into the mainstream. This was the era of naked capitalism from which Cameron seeks to distance himself.

When parties are in opposition, seldom do they become electable without acknowledging what was popular about the party in government and including those principals within its own proposition: thus, we move forward by a process of thesis, antithesis and synthesis. Labour spent many years in the wilderness before it recognised that free enterprise and the desire for self-improvement are at the core of the British psyche. Hence, when it contested the 1997 General Election, it did so on a platform that could be summarised as 'the free market - with added social conscience'.

With hindsight, voting New Labour in '97 was akin to buying a copy of the Big Issue: at a time of renewed affluence, it was a cheap way of feeling good about oneself, and demonstrating that one possessed concern for those less fortunate.

So why did New Labour, for so long inimical to big business, not bleed it dry once in power? Why, indeed, did it befriend it, toady up to it, invite it into its 'big tent'? Because, for the grands projects dear to Blair's inner circle to come to fruition, they needed capitalism to do its rapacious best in order to throw off sufficient cash to fund the largesse they planned to bestow on their favoured groups. And for those at the top of those businesses to co-operate with New Labour and not bleat as those in power heaped onto them additional costs and red tape, the bonus culture had to be preserved.

So if Margaret Thatcher's era in power can be characterised as "naked capitalism" and New Labour's regime as "capitalism with a conscience", how will "progressive capitalism" bring together the best of both?

Actually, the fundamental principle is contained in one of Cameron's emails to Hutton. Here's what he wrote:

"the best way to achieve progressive goals such as a fairer, greener society, is through conservative methods, such as making sure that government lives within its means and decentralising responsibility and power".

I'd sum it up in even fewer words: achieving social justice through efficiency and enterprise.

The thing about grand, top-down, public sector schemes is that, however well-intentioned they may be, they can come across as statist and arbitrary, and the layers of administration involved make them inefficient. Recently, BERR trailled a workfare scheme: it resulted in large-scale resentment because of the lack of common sense and humanity with which the rules were applied. In one incident, a man became aggressive after being denied benefits for attending his father's funeral.

In contrast, a Conservative government would not be prescriptive in laying down a single template for getting the unemployed back to work. Instead it would encourage public, private and voluntary organisations to set up local schemes to help people find work and reward them for successfully doing so, simple as that. Some such schemes might be run by churches, others by trades unions or local authorities; equally, unemployed recruitment consultants might set up businesses in the sector. In time, best practice would be established, which might differ from one part of the country to another, and those models that don't work would die out. Its economic Darwnism, but for a social benefit.

Economic Man will never be uninvented and should always be at the heart of Conservative assumptions about the economy. But the banking crisis has shown that Economic Man's pursuit of his own best interests can sometimes be counterproductive towards the country as a whole, and can even undermine his own wellbeing, if the incentives are crafted in such a way as to promote perverse outcomes.

Much has been said about the bonus culture within parts of the banking industry. Too much of it was discretionary, doled out to those who achieved the biggest numbers in a given year - who, with hindsight, were all too often the hares, rather than the tortoises. They appeared to add a lot of value in a short time, but the value turned out to be illusory. Equally culpable were the share options awarded to the directors of publicly quoted companies, especially the banks, many of which were also too heavily weighted towards the generation of short-term share price uplifts, rather than long-term, indeed permanent, creation of enterprise value.

It may well be that New Labour will introduce new legislation, or perhaps establish some kind of working party of sympathetic grandees from big business to recommend new guidelines, in the area of banking and publicly quoted companies directors' share schemes. That's their way: prescription. I'd like to think that progressive Conservatism will take a different approach, allowing companies to do what they wish, but incentivising the practices that are in the best interests of society. A simple way to do this would be to offer preferential tax treatment to bonuses and incentive schemes that reward the creation of long-term value and levying higher rates on those based on speculative, short-term value.

I've written in the past about a progressive Conservative approach to the housing market: rather than taxing those who have worked hard to accommodate themselves at no cost to the state in order to provide lifelong subsidised tenancies for those who haven't, better to encourage the former group to invest in pooled private rental housing provision, with short-term, needs-based rent subsidies for individuals and families temporarily unable to pay market rents.

I hope that the coming months will see further policy announcements in which the principle of decentralised, entrepreneurial thinking are brought to bear on social issues in order to create a fundamentally just and decent society in the most efficient way. This, I think, will prove very popular with the electorate, since voters know that times are tough and Government must look after the vulnerable, but they are sick to the big teeth of expensive, taxpayer-bankrolled schemes that don't really work.

Economic stimulus, like charity, should begin at home

2009-01-26T16:14:00.004Z

It looks like Peter Mandelson's ill thought-out proposal to boost new car sales by offering to guarantee personal loans used to buy them, which I've previously criticised on this site, may well be going ahead, along with a range of other hare-brained economic stimulus measures. Taken as a whole, the package is so last-minute, and so ill thought-through, that it's rumoured the Budget may have to be put back by a month to give civil servants time to cost their political masters' pet schemes and hopefully smooth a few sharp edges.

The headline reason for objecting to the car loan scheme is that more than 85 percent of new vehicles sold in the UK are build abroad, and the margins made on retailing and importing cars are wafer-thin, so hadly any of any additional sums spent on shiny new wheels will remain in the UK economy.

But that's not the only problem. Given that last week brought the biggest increase in unemployment since the early 1990s and the sharpest fall in economic output since 1980, quite a few of those who may be tempted back into showrooms by improved access to loans will subsequently default due to abrupt changes in their personal circumstances. Not only will this result in many of the guarantees being called in but, even if the lenders ultimately have recourse to the State if they can't recover any shortfalls from borrowers, I'm concerned that individuals and families will be dragged through bankruptcy proceedings as a result of borrowing they wouldn't otherwise have undertaken. Should the State be enticing people into debt in this way?

There's another aspect to all of this: if the scheme goes ahead, it will transfer wealth from British people on average and below-average incomes to skilled manufacturing workers in car-producing nations such as Germany, Japan and, increasingly, Slovakia. How so? Currently, used car prices are on the floor. There are more used cars than there are buyers for them. If that's the case now, when getting credit for new car purchases isn't easy, what'll happen if loans become freely available? Used cars will get even cheaper. Which means everyne who owns a secondhand car will suffer further depreciation.

Those who support the scheme point out that there's an environmental upside: new cars pollute less than old ones. This is true, at least if you ignore the impact of building and scrapping vehicles. But the scheme, as proposed, will simply put additional cars on the road; it won't take old ones off it. If going green is the objective, how about copying an initiative already working in France and Germany and offer a scrapping incentive for those who trade in some of the 'dirtiest' old cars against new models?

Such a scheme should target petrol-engined cars without catalytic converters, which became mandatory in the early 1990s (possibly January 1993). These are the worst-polluting private vehicles, not so much in terms of CO2 - which counts as pollution only if you accept the scientifically doubtful proposition that manmade emissions of this gas are altering the climate of our planet - but in terms of the emissions of nitrous oxides and other demonstrably harmful substances.

In contrast to the easy credit scheme promoted by Mandelson, this would actually put money into the pockets of the less well-off. Let me explain. Few people progress directly from a pre-1993 vehicle to a brand new one. Rather, people who intend buying new cars create a booming market for end-of-life ones, which they acquire for a price close to the scrapping allowance in order to trade them in against shiny just-registered ones. This is an indirect transfer of money from taxpayers to those who can afford only the oldest cars. And they're the best people on whom to bestow largesse in a recession because they're apt to spend it immediately, and locally.

In the States, Obama has lost no time in pressing ahead with the vote-winning protectionist measures he promised in his election campaign; in particular, he has pledged that steel used in publicly funded infrastructure projects may be sourced only from within the US. EU rules preclude the UK from acting similarly; but we can at least avoid stupidities such as boosting new car sales despite knowing it'd worsen the balance of trade deficit at a time when Sterling needs all the help it can get.

There really is no such thing as a free lunch

2009-01-23T21:45:00.003Z

It looks like Channel Four chief executive Andy Duncan is set to get his wish and gain a public subsidy for his advertising-supported TV station: OFCOM has given the thumbs-up to proposals for C4 to merge with the BBC's commercial arm, BBC Worldwide.

The regulator has rejected earlier representations from Duncan to top-slice the licence fee and contribute a 'public service precept' to enable 4 to run minority programming that can't be justified on the strength of the ratio between the cost of commissioning and broadcasting the shows and the value of the advertising slots generated; likewise, it showed no enthusiasm for lobbying for Channel 4 to be gifted BBC Worldwide, in order to use its profits to subsidise such programming.

I've had some dealings with OFCOM in my professional life. It's the worst of the public sector, distilled into a single organisation. If the regulator's employees are in a meeting with an external guest and the end of their working day arrives - I believe it's 5pm - they all get up and walk out. In the private sector, that would be deemed bloody rude and probably a disciplinary matter. As for cost control, not only are they in a plush new landmark building fronting the Thames, better suited to an American merchant bank, but they also buy in their own mineral water - in neat, OFCOM-branded bottles.

In this cloistered environment it seems not to have occurred to them that any merger between Channel Four and BBC Worldwide that results in the former being subsidised by the latter - and without this, what's the point? - will, indirectly, have exactly the same impact as subsidising the broadcaster from the licence fee. For the entire raison d'etre of BBC Worldwide, and the reason why it has been allowed to use assets funded from licence fee payers to compete, often on a privileged basis, with private sector media owners, is that the cashflows from its commercial activities help keep down the licence fee. Give any of them to 4 and there'll be upward pressue on the licence fee.

There are many difficult questions that OFCOM should have asked Duncan but didn't. The underlying premise of his pitch for licence- or tax-payers' funding is that advertising revenues for terrestrial television are in long-term decline because of the growth of digital, a trend that will accelerate with the switch-off of the analogue signal in 2012. But doesn't Channel 4 have digital channels? Not only E4, More4 and FilmFour, but also the ex-EMAP music channels it acquired in 2007. If these are insufficient for it to be a net beneficiary from the migration of ad spend from terrestrial to digital, why hasn't it been more active in this area? After all, it's sitting on a £200m cash pile and also owns the freehold of a rather smart, Richard Rogers-designed headquarters with a desirable SW1 postcode that could easily be sold and leased back.

Likewise, if it feels it needs subvention from the BBC's commercial activities, it's reasonable to ask why Channel 4 hasn't been more successful in generating income from such activities itself. Here I should declare an interest: between 2004 and 2008 I chaired a company that endeavoured to do precisely this. In 2002 I proposed forming a joint venture with the channel to exploit its programme brands in magazines, exhibitions and online. My proposal was that it would receive a chunk of equity, another tranche would go to a venture capital provider - unless the channel wanted to invest - and I'd take the remaining slice for building up and running the enterprise.

Lacking vision, they declined to pursue this option, instead licensing individual brands. Worse, they sleepwalked into a deal that saw the production companies that supply its programming gaining the rights to exploit shows' brands commercially. At this point the business I was involved in offered to give them a shareholding, in return for its assistance in negotiating licensing deals direct with programme-makers and promoting the resultant products on air. Sadly, they chose not to take this option, and once we'd launched a slew of such magazines, they decided to launch against two of them, promoting the resultant title heavily after programmes in breach of the broadcasting code.

There are some good people at Channel 4, many of whom find the corporate culture frustrating. There are many more people employed there who, like those I've dealt with at OFCOM, would not prosper in a commercial environment. While C4 employees don't benefit from bespoke bottled water, they do enjoy a flexitime scheme that results in the place being almost deserted on Fridays.

Recently, there have been two waves of redundancies in response to the downturn in advertising revenues brought about by the recession. Channel 4 being Channel 4, it went out of its way to offer voluntary severance on attractive terms rather than grasp the nettle of losing those staff whose positions were surplus to requirements, but who were recent joiners who could be terminated inexpensively. The result? A very high proportion of those with a decade or more of service each received upward of a year's salary to go. And you don't have to be a great mathematician to recognise that if the people being made redundant walk away with an average of 12 or more months' wages, the payroll for that year actually goes up, rather than declining...

The scale of the public debt being created by Gordon Brown's administration is eye-watering. When the economy returns to something approaching an even keel, whoever's saddled with picking up the pieces will have to consider privatisations and asset sales in order to reduce this burden. Channel 4, with its turnover of around £900m a year, could, in better times, and run along private sector lines with margins to match, be worth around £1.5bn.

Much as it sticks in the throat to imagine Andy Duncan benefit even further than his famed £1m annual package from what can most charitably be described as an unspectacular tenure as CEO to date, I'd like to see the Government set a timeline for floating or selling 4 - I don't believe the alternative to the BBC Worldwide merger, a deal with Five, will come to pass - and incentivise the executive board to cut out cost and focus on driving revenues from digital TV, online and commercial activities in anticipation of a windfall for taxpayers when the advertising market recovers. But the chances of this happening in the current environment are slim, because OFCOM and 4 are fundamentally birds of a feather, and the regulator shows no signs of challenging the institution it ought to be supervising.

Obama's inauguration - after the dust has settled

2009-01-22T17:35:00.008Z

I've purposedly waited a couple of days for the excitement and hype to die down following Barack Obama's inauguration before taking stock of how I think his Presidency may impact on the US - and the rest of the world, in particular the UK.

First, the obvious: there's a black man in the White House. On one level, this is an encouraging sign - a country that, in the living memory of many people still with us, openly treated African Americans as second class citizens, chose a man of mixed race over an All-American WASP war veteran.

A note of caution, however: it's easy to dismiss the fact that, while discrimination on grounds of race may have diminished, that based on religion became all too evident during the campaign, with some Republicans and sympathisers in the media playing on the Obama-Osama similarity, the candidate's middle name and his father's Muslim faith.

In a sense, also, a non-white president being elected at this specific point in American history is a high risk occurrence. Had Obama - or, rather, Jesse Jackson, given the Chicago professor's age - been inaugurated in place of Clinton in 1993, an era during which America enjoyed unprecedented economic growth and was relatively free from external threats, there's every chance that his presidency would be recalled as an elysian period.

Obama, in contrast, has taken the helm at a time when the global economy, led by the US, is more broken than at any time in history. Granted, Americans are more prosperous than they were, say, during the great Depression, but in terms of the country's debt and the structural problems its new leader has inherited, things have never been worse. Public spending will soar - he's a Keynsian at heart - and some, though not all, will feel the benefits. But, soon enough, pretty much everyone will share the pain through their tax bills. It's easy for a politican to become popular if people feel they're getting wealthier; much harder if one's time in office coincides with considerable hardships.

And yet, if he pulls it off...

As I listened to Obama's inaugural speech, which wisely steered clear of triumphalism and over-promising in favour of reminding Americans of the scale of the challenges facing their country and asking for their co-operation in facing them, I recalled another tale of black progress in the US: Alex Haley's Roots. One of Haley's ancestors - possibly his grandfather - was employed in a nominally menial role by the white owner of a sawmill. His employer was an alcoholic, so he found himself as the de facto manager of the enterprise. When drink finally claimed the business' owner, potentially resulting in the company failing, other traders in the town - many of them suppliers to and creditors of the sawmill - met to decide what to do. They concluded that Haley's ancestor should take over, their anxiety to see the most capable person run the company overriding their reluctance to place a black man in such a position.

As a Brit, I find some aspects of American political culture somewhat alien. Among these is the feeling that, as a general rule, presidents should be 'ordinary Joes' and not too intelligent or, heaven forbid, intellectual. Take George W Bush for instance: he doesn't look like he has read a lot of books, does he? Unless they're ones containing lots of big pictures and not a lot of words. Obama, in contrast, is a University professor who has not only read many books in his life but even written two (very well received) tomes.

Another breakthrough represented by Obama's election is the fact that he's not personally wealthy. And it's not as if the US electorate didn't have a choice: when asked how many homes he owned, John McCain famously admitted he couldn't actually remember.

But in terms of the cultural and political significance of Obama's inauguration, there's no doubt that his ethnicity is more significant than his relative intellect and modest means. As Jay-Z put it:

"Rosa Parks sat so that Martin Luther King could walk. Martin Luther King walked so that Obama could run. Obama's running so that we all can fly"

There's no doubt that Obama's presidency, over and above any initatives introduced to help African Americans achieve their full potential, raises the bar in terms of the expectations of what black people can achieve in the famed land of opportunity. More than this, it provides an alternative role model for black people, especially young men, for whom, for all too long, the rapper has been the default icon. And while the reality of individual rappers is that many are thoughtful lyricists, talented musicians and successful businesspeople, there's no getting away from the fact that much of the genre's output celebrates the gangster (oops, gangsta) culture - crime, drugs, prostitution, violence, mysogeny and homophobia.

Some commentators excuse the excesses of rap and hip-hop, claiming it's the authentic voice of the ghetto, Obama's election leads to the question: why should the words 'black' and 'ghetto' be associated by popular culture in this way? Black people increasingly live in middle-class suburbs. And one of them's now settling into the White House.

There's another angle to Obama's ethnicity: unlike most African Americans, his ancestors didn't come to the US in slave ships hundreds of years ago; rather, his father chose to immigrate to the States, where he married a white woman. So although the new president's roots may differ from many black Americans, first and second-generation Americans, many of them Hispanic or Muslim, have identified with him, while his heritage doesn't exclude white people.

The Muslim thing is potentially significant. I have a good friend who's Jewish, who claims that America's excessively pro-Israeli stance has been the single biggest obstacle to peace in the Middle East. I think he may be right. Granted, if terrorists bomb or shell a country, it's entitled to defend itself, but all too often, Israel's response to such attacks has been so disproportionate, in part because it's so well armed (largely by the US), that it has created international sympathy for its attackers, as well as spawning the bitterness that gives birth to the next generation of terrorists.

America has been too slow to condemn this. Worse, because the country has been seen as Israel's principal international backer, other, impartial nations have been reluctant to get involved. My vision for peace in the Middle East is that a multi-national force, including troops from Muslim nations, patrols the area and intercedes if either side commits an act of aggression against the other. It's the only way to break the vicious circle of violence. Dubya was never going to get that kind of co-operation. But a man whose middle name is Hussein might just achieve it.

But will he be able to heal the running sore that is the Palestinian issue? On the face of it, there would appear to be a consensus among mainstream Israeli opinion that its borders will have to return to their pre-1967 positions, give or take. And most Palestinians, and Arabs generally, recognise that Israel can't be uninvented. If some kind of peace can be kept long enough to negotiate a change to the boundaries, he might just be able to swing it.

The biggest obstacle is Iran. Will Obama, like his predecessor, steadfastly refuse to talk to Tehran? Iran sponsors terrorism and is developing a nuclear weapons capability to strengthen its influence within the Middle East and gain the power to determine the price of oil. However, these goals are unrealistic, especially at a time when much of the world is in recession and when his own, pro-West, population isn't behind him. So a Muslim-born US president whose first action in office will be to lay plans for withdrawing forces from Iraq, will be talking to Tehran from a position of strength.

And what of the UK? Well, Bush is gone, which can't be bad. I don't know whether Blair was so anxious to do W's bidding because he was in awe of his wealth and power or, as Lib Dem MP Norman Baker claimed in his whodunnit about the death of David Kelly, because the Americans had some dirt on him, but whatever the reason, it resulted in the UK being dragged into a conflict in Iraq that was almost certainly illegal under international law and a shameful period in our country's history.

On one level, Bush was entertaining. To me, he always looked like he enjoyed his job, almost worryingly so in fact: it was suspiciously as if he lacked the intellectual capacity to understand the complexity of the role and hence was untroubled by the worries of high office. There are too many sites documenting the many Bushisms uttered during his presidency for there to be any benefit in me repeating them here. Instead I'll focus on just one cameo: the 'shoe incident' in which an Iraqi reporter threw his footwear at the US president during a press conference. Bush saw the first one coming, ducked behind his dias - logically enough, call it an automatic reaction. But then he got back up. Maybe I'm out of line here but I would have thought his security advisers wuld have trained him to hit the deck at the first sign of an attack and stay there until the threat had been dealt with, just in case it was escalated. But up he got and, sure enough, another shoe headed his way. He ducked, then popped back up, clearly enjoying himself now. Then - would you believe it? - he seemed quite clearly to be waiting for the next one. Next one? How many people does Dubya know who have three feet? Or perhaps he'd lost count... One, two, errr... two?

Enough of the cheap shots. But you see where I'm coming from: a new man in the White House heralds an opportnity for a new, more productive, relationship between the UK and the US, without the legacy of the Bush-Blair axis. Quite what Obama will make of Brown, time will tell. There's an obvious imbalance in charisma between the two, and if accounts from within New Labour are to be believed, Gordon can be prickly in the extreme, almost to the point of paranoia. Can Obama break through this brittle veneer? If his campaign slogan is to be believed, yes he can. In the coming weeks and months, we'll hopefully be able to see whether this is actually the case.

Helping who?

2009-01-21T13:18:00.005Z

Hot on the heels of the long-awaited announcement of plans to rescue the banking sector with long-overdue 'grasp the nettle' measures to restore their liquidity and boost inter-bank lending, comes talk about the Government guaranteeing personal car loans.

I oppose this proposal, for one of the reasons I was against the VAT cut: if it succeeds in boosting spending, much of the money will disappear abroad. Fact is, with the UK making alarmingly few cars these days and even British-badged marques such as Ford and Vauxhall building most of their stock in mainland Europe, only the retailer's margin - which is tiny - remains in the UK economy when a new vehicle is purchased. Same goes for the VAT cut which, if it has had any impact at all, has been felt only on big-ticket items such as plasma TVs - which are made in the Far East.

Fixing consumer confidence is the best way to get people spending again. With the latest unemployment figures released today, and the psychologically devastating two million threshold getting ever closer, not only those who've already been deprived of their livelihoods but many more who fear it could soon happen to them, would be well advised to cut their spending and conserve their cash. Indeed, I'd question whether it's right for Government to be enticing them to do otherwise.

One of the great injustices of the benefits system is that, in general, the more you pay in, through taxes and national insurance, the less help the system gives you if your needs change. Judged as an insurance scheme, it's a disaster. It's possible to live quite comfortably as a long-term benefit dependent, provided you plan accordingly: obtain a tenancy to an 'affordable' home, have plenty of children, don't bother saving, that kind of thing. But if you've worked hard, bought your own home and put some money aside, the most you can expect is £60.50 a week.

If the Government wants to get the great mass of what Brown patronisingly calls 'hard-working families' spending again, better to focus on what assistance the state gives homeowners, especially those with mortgages greater than £200,000, if they lose their jobs; that way, they will feel more confident in continuing with life as normal, knowing they needn't face ruin if the worst happens. Better still to get on with fixing the core liquidity problems that are putting their jobs at risk in the first place...

If any help is needed, via the tax system, to boost consumer spending, I'd rather see it focused on the services, leisure and entertainment sectors, where almost every penny spent remains in the UK - and, coincidentally, where a high proportion of owner-managed businesses and minimum wage workers are to be found, two groups of people particularly deserving of support.

In France, for instance, the rate of VAT on restaurant meals is lower than on, say, computer hardware. Would the same be feasible in the UK? Differential VAT rates are certainly permitted under EU law, so the means exists to do it if there's the will.

Housing market recovers, green shoots are spotted - and the moon's made of cheese

2009-01-18T16:18:00.003Z

Great news! The housing market is experiencing an 'upturn' and there has been a 'pickup' in prices. So says Margaret Beckett, housing minister. Coming as it does just days after her business counterpart Lady Vadera talked of seeing the 'green shoots of [economic] recovery', it seems we can all relax: Britain's on the mend.

So why are the papers full of speculation of a second wave of measures to rescue the banks from solvency problems and resuscitate inter-bank lending, reported to cost taxpayers between £100bn and £200bn - enormous figures that will affect the tax take for a generation. Is this profligacy - something with which New Labour is all too familiar - or are Beckett and Vadera wide of the mark?

It's abundantly clear that the stockmarket has concerns over the solvency of most British clearing banks, that the dramatic downturn in new mortgage lending and fresh loans to businesses shows no sign of abatement, that the economy is slowing at the most dramatic rate since the 1930s (check out this week's statistics for the final quarter of 2008: they won't be pretty) and that house prices are still falling.

As I've written previously on this blog, I don't see any of these things changing until the Government grasps the nettle and fixes the underlying cause of these problems: the underlying lack of transparency about the value of assets such as loans, derivatives, bonds and other instruments held by our banks. As long as so-called toxic debt remains on the balance sheets of banks, it's almost impossible for any one of them to lend to another, because they can't be sure of getting their money back.

If this week's press speculation is accurate, and it's sufficiently widespread and detailed to look like the result of formal, if unattributable, high-level briefings to soften up the money markets for what's to come, it's just about possible that New Labour may, at long last, be taking faltering steps towards doing what's necessary to clear up the car crash it created through its complacency in failing properly to regulate the sector for the first 12 years of its administration - albeit at huge cost to taxpayers.

Of course, the detail of the rescue package is crucial. Will the Treasury sell insurance policies covering any shortfalls on existing assets? If so, how will these be priced, and will they be mandatory or optional? Or will it go down the route of setting up a 'bad bank' that will buy such assets from the banks and hold them to maturity? Will it, as has been mooted, reduce the usurious and ultimately counter-productive 12 percent interest rate on the rescue lending provided to banks last Autumn?

I hope that any package of measures will not only deal with the question of bank solvency created by historical mistakes but also encourage fresh inter-bank trading, including the wholesale market for funds to be used for mortgage lending. If so, Beckett's premature comments could one day be vindicated. As things stand, it's likely that new mortgage lending will almost disappear this Autumn, in which case the biggest-ever drop in house prices experienced in the past 12 months may prove to be a drop in the ocean compared to those to come...

That said, I do think there's an element of truth in part of what the housing minster said. Not the hogwash about demand and prices being on the rise, obviously, but rather, her comments about the risk that the current downturn could be sowing the seeds of a bubble to come by creating such a dramatic downturn in the construction industry.

Not only is it likely that the number of new homes delivered between mid-2008 and the end of 2009, if not mid-2010, likely to mark a low point since the War, but those that are still being built are being constructed disproportionately for the subsidised rental sector, storing up a famine of units for private sale.

When, eventually, mortgage lending recovers, the expected 3.25 million unemployed find new jobs and consumer confidence returns, it would be a tragedy if a generation was priced out of the security and self-respect that comes with home ownership because of the short-sightedness of Gordon Brown's administration.

Civil Service could be cut in half, says ex-minister

2009-01-15T20:46:00.005Z

Hot on the heels of a serving Cabinet minister admitting that New Labour's asylum laws were widely abused, a former minister has admitted that the Civil Service is overstaffed by a shocking 50 percent.

Lord Digby Jones, former trade minister and ex-head of the Confederation of British Industry, told the Public Accounts Commitee:

'Frankly the job could be done with half as many, it could be more productive, more efficient, it could deliver a lot more value for money for the taxpayer'

Jones also said he was 'amazed' how many of those he dealt with 'deserved the sack' and lamented the fact that they appeared largely exempt from such sanctions.

Why should this be? In times gone by, public sector workers were seen as dedicated, earnest, poorly paid servants of the people. And of course, some still are. But in recent years public sector salaries have outstripped those in the wealth-creating sector that pays for it, their pensions have become more generous (while others' have fallen back) and, thanks to heavy unionisation and New Labour's sympathies with the not-for-profit sector, it has become a safe haven for backsliders and those employed because their demographic ticks a box, rather than on merit.

I began this blog in pursuit of social justice. It may seem to contradict that goal to advocate taking a harder line with Civil Servants. But when one group of citizens is being better rewarded than another, while also being, in the estimation of someone well placed to know, significantly less effective, that smacks to me of a wrong to be righted.

Clearly, with the eye-watering public debt being created by the New Labour recession and Brown's bodged attempts to deal with it, which would ordinarly lead to swingeing tax rises in years to come, there's a need to take a hatchet to the numbers employed by the public sector. Crucially, the focus must be on protecting productive roles - teachers, doctors, nurses, police officers - at the expense of layers of management, PR people, diversity and sustainability advisors and the like. Not only are these roles often among the best paid but they cost the taxpayer twice over because of the over-generous and often underfunded pensions they enjoy.

But is now the time to start the cull, with unemployment rising at a record rate? Possibly not. However, it might be a good time to redeploy a number of Civil Servants on a new, crucially important project, the public benefit of which is not in doubt: identifying ways of taking cost out of their areas of the organisation by losing jobs. Come the slightest hint of an upturn, the plans laid now could be implemented, resulting in a much reduced burden on taxpayers as the country recovers from the downturn and begins to pay for New Labour's mistakes.

But what if, as Jones says, many of them are useless? It'll soon become apparent in their inability to identify suitable savings. And guess what? They'll be the first to go...

Gordon Brown: bankrupt of ideas?

2009-01-12T21:59:00.006Z

So - New Labour plans incentives of up to £2500 per person to encourage companies to take on and train new workers who've been unemployed for six months or more. Didn't David Cameron suggest something similar, some time before Christmas? He even proposed the same financial incentive. Brown could at least have dressed it up as his own idea by offering, say, £2495 per person taken off the dole queue.

Trouble is, along with the Government (read 'the taxpayer') standing behind bank lending to businesses, it's a good policy for dealing with one of the symptoms of the recession, but is only of value when taken in conjunction with measures to cure the disease: the lack of bank liquidity.

As British Chambers of Commerce head David Frost points out, an incentive to take on the long-term unemployed is of limited impact at a time when almost no employers are hiring, as recession is decimating their trading and they're battling to survive.

And, this being a New Labour implementation, I'm guessing a Quango will be set up to oversee the scheme - which is bound to have its own 'head of diversity and sustainability' and other non-jobs, on generous salaries and scandalous final salary pensions - and a small army of civil servants will be hired to implement it - eventually. We may well see TV and newspaper ads, all intended to make people think that Something Is Being Done in the run-up to a General Election. So, much money will be spent, and much noise made. But how many people will actually move from the unemployment queue into salaried roles as a result?

If you believe Gordon Brown, the answer's half a million:

"We estimate that with this additional financial support we will be able to help people into work or work-focused training over the next two years."

My guess is that the true figure will be in the low tens of thousands, tops. It'll be interesting to see whose estimate is closer to the truth, and, indeed, the average cost per person taken off the dole queue. I'll try to establish what the outcome was in two years' time and post it here, on my blog.

Will New Labour ever accept that there's only one way to get us out of this recession: it was caused by a collapse in inter-bank lending, and it's that which needs fixing in order to restore spending and jobs. Every time they dance round this and meddle at the edges, be it with the VAT reduction or now this job creation scheme, they're merely storing up an ever-increasing tax burden for years to come, which will burden the country and slow recovery.

New Labour admits failings in asylum system

2009-01-11T17:03:00.003Z

Immigration and asylum under the current administration has been 'a free-for-all'. In whose words? Not some racist party of the far right, nor Migrationwatch, and not even the Conservative Party; no, the latest critic of the Government's control over our borders and citizenship system comes from a Cabinet Minister, the Communities Secretary (whatever that means), Hazel Blears.

"Initially it was a kind of free for all," she admitted in an interview to the Sunday Times. "We had a big surge of asylum seekers, a lot of people coming as economic migrants, but through the route of asylum seeking."

I have a surprise for her: the ruse of making fraudulent asylum claims as a means of gaining residency in the UK for economic reasons isn't confined to the early days of New Labour's time in power: it continues to this day. Some applicants claim to hail from countries they've not even visited and whose languages they can't speak; others traverse Europe, ignoring numerous safe territories where asylum could safely be claimed, in search of the jackpot that is the UK; still more manufacture or exaggerate allegations of mistreatment in the hope of being granted the right to remain.

It happens that I know someone who has worked in the asylum system and I'm aware that sane voices within the system have, from the outset, highlighted two very simple ways to reduce the number of fraudulent claims:

1. Introduce a system of pre-grant review of all asylum decisions, not just the negative ones. As things stand, workers in the system have an in-built incentive to grant in doubtful cases: only those that are declined are subject to review, so they can only ever be criticised for undue diligence, rather than leniency;

2. Pursue a rigorous policy of prosecuting both applicants and their legal advisors in cases where applications are clearly fraudulent. I stress that I'm not advocating charging people whose applications are declined, merely those who have knowingly made claims that are demonstrably untrue. It's essential to include in any criminal actions the army of solicitors and advisors who make a good (taxpayer-funded) living from 'helping' claimants - assistance that, all too often, extends beyond helping them to state their claims, instead straying into the sphere of assisting them to fabricate or embellish the same.

The reason why I believe that Government must take a hard line on those who abuse the asylum system is two-fold:

1. As long as the system is weighed down with doubtful or false claims, less time can be spent considering each application. As well as risking being inhumane, this also introduces the terrible risk of occasionally making the wrong decision, in haste, in genuine and extreme cases;

2. As I've written here, many people in the settled, mainly (but not exclusively) white working class, believe that new immigrants receive preferential treatment in the allocation of social housing. It would be terrible if, at a time of economic hardship when demand for subsidised housing is likely to rise, social cohesion was threatened by the tensions created by this perception. The Government therefore owes people of all ethnic origins a duty to control immigration, and limit the asylum channel to those with a genuine fear of persecution.

VAT reduction fails: maybe that's the plan?

2009-01-09T12:41:00.009Z

The past 24 hours have brought confirmation that the horrifically expensive temporary cut in VAT hasn't succeeded in slowing the UK's economic collapse, from two people well placed to know: former trade and industry minister and CBI leader Sir Digby Jones, and the boss of Next.

What worries me is that neither they nor many commentators have yet picked up on three further problems with the Chancellor's rushed policy decision:

1. In the second half of 2009, the biggest risk to the UK economy will be deflation. Many of the items in the basket used to calculate inflation carry VAT. So a year-on-year comparison between, say, October 2009 and October 2008 will show the former to be lower, due to the reduction in purchase tax, even without the deflationary pressures brought about by reduced consumer confidence, swingeing unemployment and the collapse in credit availability;

2. The VAT cut was introduced with little notice, just before Christmas. Do we really believe any Government wanting to be re-elected would dare put prices up in the present-buying season? Precisely. So it's likely that any return to the 17.5 percent rate will have to be postponed, increasing the already horrific tax burden created by the original cut

3. One day - let's pray - the economy will improve. That's the time to phase out any stimuli introduced in the downturn. But putting VAT back up when confidence, credit and hence demand and therefore also prices are on an upward trend risks adding to inflation - which could mean interest rate rises to come. And Gordon said he'd put an end to boom and bust...

So the Government has planted three enormous landmines in its own path for the period between summer 2009 and summer 2010 - about the time of a possible election. Either Brown and Darling are even less smart than they seem or, just possibly, they plan to go to the country in the first half of the year after all.

At risk of sounding like a conspiracy theorist, I even wonder whether those at the top of the Labour Party would like an early election, and wish to lose it; or, at least, know they'll lose, and are busy laying unpopular traps for their successors.

Whoever is saddled with fixing the dog's dinner the current administration has created will have to wrestle with the worst combination of economic difficulties in generations: defation, rising unemployment, a dying mortgage market. Solving these woes will require radical measures, some of which will be hugely controversial. Who's to say New Labour would rather not carry that particular can?

Council shopped for creating £100,000 'non-job'

2009-01-06T21:27:00.002Z

Every once in a while the press siezes on an example of a 'non-job' created by a Labour local authority, NHS Trust or left-leaning quango. There's one today that has angered me more than most.

On the day on which Experian announced that it believes one in 10 High Street shops could be boarded up by the end of February, casualties of the ongoing carnage being experienced by the UK retail sector, Labour-run Lancashire County Council has announced it plans to hire a 'recession guru' - earning £100,000 a year.

What annoys me is not just the obvious futility of the role - what can a local authority do to fix the economy? - but the perversity of loading this extra cost onto residents and local businesses at a time when many are close to financial breaking point.

At a time when many individuals and local businesses, in Lancashire as elsewhere, are finding it hard to make ends meet, including shopkeepers small and large battling to pay their rates, it'd be nice if local authorities could do their bit to help - by reviewing their own spending, including non-jobs such as this £100k pa role, enabling them to reduce the council tax and business rate burden.

Spending £37bn of someone else's money? Best do it right...

2009-01-04T16:13:00.006Z

There has been media speculation over the weekend that the Government is working on a second bail-out of the banks, which could take the form of further equity investment, or plans to take greater control of our financial institutions to force them to get loan funds moving again.

It seems to me that banks don't actually need injections of capital right now, because only time will tell how much of their loan books and the loan notes and other rubbish they bought during the boom will turn bad, so giving them more cash simply reduces the chances of them being insolvent, rather than giving them the ability to lend, confident in the knowledge that they have sufficient capital reserves. Nor is exhortation or coercion likely to result in more mortgages or commercial loans being granted - not when the structure of the banking system simply doesn't make it possible.

As I wrote in a previous blog, banks are busily calling in the overdrafts of small businesses and fighting shy of granting residential and commercial mortgages because the Government has set them a five-year deadline for bringing back onto their balance sheets sufficient cash to repay the loans granted to them last Autumn.

In the past, they could also borrow money from other institutions on the wholesale money market, but this source of funds effectively dried up in August 2007. The Chancellor could restore it, by offering to guarantee the bonds backing such loans. He was advised to do so by Sir James Crosby's independent report into the mortgage market, which warned that 2009 holds in store yet more misery for UK house prices unless swift action was taken, with net mortgage lending set to become negative on a dramatic scale.

Crosby reported back in November; given that the country is entering potentially the most serious recession for a decade, driven by a lack of financial liquidity, you would have thought it'd command top priority from those in power. Yet I understand the Government will take until at least April simply to respond to the report; heaven only knows when they'll get round to actually doing anything...

So here we have two measures - extending the deadline for the repayment of loans and backing inter-bank bonds - that would be relatively inexpensive to implement, and yet the Government seems obsessed with proposals that are either monstrously costly at a time when taxpayers can least afford it (yet more equity investment) or mere spin (hectoring the banks some more, perhaps adding a handful of cronies to their boards).

There's an old saying, presumably promoted by the manufacturers of angling goods, that goes thus: Give a man a fish and he'll eat well tonight; give him a rod and teach him to fish and he'll eat well for life. There's something vaguely reminiscent of Tebbit and bicycles about this adage in its emphasis on self-reliance. When applied to the banking system, if the Government gives the banks money, it may, possibly, if we're lucky, lend it out, but the maximum sum they'll be able to lend is what they've been given; if, in contrast, it fixes the crucial problem of inter-bank liquidity, banks will lend to each other indefinitely, so the benefit to the economy is uncapped. And in the current climate, that means providing capital to the handful of already-liquid institutions, or setting up new ones, rather than throwing it into the potentially bottomless pit that is the current clearing banks.

Doling out taxpayers' money is a blunt tool; likewise, in the current climate, interest rates. Reducing the cost of borrowing may give some headroom to companies and individuals currently experiencing cashflow difficulties if - and it's a big if - cuts are passed on, which, as we've seen, they seldom are, because of the absurd five-year deadline for banks to improve their balance sheets, which requires lending to be abnormally profitable in the short to medium term. But there's no evidence of businesses or consumers holding off making purchases or borrowing money because the cost of money is too high, so it's hard to see what will change if the Bank of England drops the base rate again this week. And plunging interest rates act as a vicious penalty on saving: a prudent practice that, had it been encouraged rather than penalised by New Labour, might have averted, or at least lessened, the current crisis. These are different times, and different solutions are called for.

When New Labour, in the heady first few days of its 1997 administration, announced that the Bank of England would henceforth set its own interest rates, the announcement met with almost universal praise. I believe the time has come to question whether the policy should change, and if it shouldn't, whether it at least needs amending.

Rate-setting alone isn't going to get us out of this hole, and the panoply of other measures that can and should be taken - reducing the supply of Treasury bonds, printing more money, any Keynesian stimuli - should be considered only in tandem with interest rate policy. Indeed, overly low interest rates could, in isolation, cause problems, given the quantity of Government bonds that are going to have to be issued to fund Gordon Brown's borrowing spree. Will banks be able to attract and retain deposits? If not, we could even suffer a second credit crunch.

While I'd be wary of interest rate policy being entrusted to Alistair Darling, a former student Communist I wouldn't trust to run a stall at a village fete, I wonder whether the Monetary Policy Committee should be reshaped as an Economic Policy Committee, its membership revised to include representation from politics and business and its remit extended to consider the full spectrum of measures necessary to safeguard the UK economy.

As Obama has said in the States, when economic conditions get this bad, the best minds should be brought to bear on the question of how to get things back on track. And that means doing a lot more than blindly slashing interest rates, handing out more taxpayers' cash, accompanied by the usual rhetoric exhorting banks to lend more.

Who benefits?

2009-01-02T18:37:00.005Z

Critics claim the Daily Mail portrays a Britain that's going to Hell in a hand-cart. Who can blame them? Good news doesn't sell newspapers; more than that, the fourth estate owes society a duty to seek out examples of complacency and injustice and publicise them, in the hope of instigating change.

Today they've been publicising David Cameron's comments about a Civitas report (Individualists Who Co-Operate), which highlights the many perverse and unfair incentives and penalties built into the benefits system.

There's a link here if you'd like to read the article; if not, the key points are:

1. Parents on modest incomes are penalised for remaining together (or telling the authorities the truth about their cohabitation status)

2. In some cases, if they intend staying together, they can be better off not working than by taking jobs

In my first blog I wrote that I believe the first duty of Government is to create an environment in which citizens are free to achieve their maximum potential. Incentivising people not to work conflicts with that objective, as does disadvantaging children by encouraging their parents to split up.

While I think it would be wrong to reintroduce the Married Couple's Allowance - it's no business of the state whether a couple marries or cohabits, and I believe the divorce laws generally treat men so badly it's wrong to pressurise them to wed - I think the benefits system needs reinventing from the ground up to ensure that couples don't come off worse than singles and there's always a clear incentive for people to work, and once working, to increase their incomes by earning overtime, getting promoted or starting or expanding their own businesses.

Any such rethink should all forms of state support, including the criteria for entitlement to the full range of benefits-in-kind, ranging from free school dinners to prescriptions to the biggie, council and housing association accommodation.

Which brings me to another Government report receiving publicity today. As an aside, am I being unduly cynical or is it no coincidence that damning reports are often issued at a time like this, when few people are reading the papers or watching news bulletins and the heavyweight political correspondents are at home, nursing hangovers?

According to a report commissioned for the Department of Communities and Local Government's National Community Forum (the kind of quango that, come the revolution, may not be long for this world...), many white, working-class people believe they're disadvantaged in competing for social housing against recent immigrants.

While there may well be some truth in this - such accommodation is normally prioritised on a points system, and people who've just landed in the UK and have no friends or relations nearby they could live with, and no jobs, score more highly than those bunked up with a mate, lodging with parents or, heaven forbid, engaged in gainful employment - I fear it misses the bigger issue, namely that the basis on which the state encourages people to compete for council and housing association tenancies is fundamentally perverse.

As long as the undeniably precious benefit of a lifetime tenancy of a subsidised-rent property, possibly with the option to buy it at below-market price at a future date, is awarded on the basis of the seeming hopelessness of a person's circumstances, a large section of the population is forced to do all it can to worsen its situation until awarded a gilded tenancy. Successful strategies include:

- Have as many children as possible, preferably without the means to support them
- Be single rather than part of a couple - especially if your partner is employed
- Avoid work, at all costs
- Go to jail and/or have drug problems: there are specialist housing associations that'll send you to the top of their lists
- Don't try moving to a different part of the country to find work or cheaper accommodation: most housing associations prioritise people with local links

Iain Duncan Smith's Centre for Social Justice recently produced a report on housing poverty and social breakdown which touched upon these issues; perhaps because of the state of the economy and concerns about the private, mortgage-supported housing sector at the time, it didn't lead to the breadth of debate I feel it deserved.

Bravely, it highlighted the fact that the basis on which subsidised rental property is allocated has changed and pointed to the social ills that can result. A generation ago, council houses were relatively freely available and many people who considered themselves working class but were in well-paid, productive work chose to live in them. Children growing up on such estates lived in close-knit communities in which most of the parents had themselves been raised in the same locality, there were a great many two-parent families and fathers in work. Today, a high proportion of successful applicants for social housing in many parts of the country don't have roots in the UK or English as their first language, and those who do are likely to suffer from obvious social disadvantages, purely in order to qualify for such accommodation.

IDS' think-tank raised a number of controversial suggestions, of which I think the most important are these:

1. People who can't afford to rent or buy property on the open market should receive short-term help with accommodation costs, in homes not stigmatised as 'social housing', rather than a cut-price tenancy for life;
2. The state should focus on resolving the underlying causes of individuals' inability to fund their own housing;
3. Councils and housing associations should exercise greater flexibility in determining the criteria on which social housing is allocated

The report also touches on another issue that has been in my mind for some time: the gap that exists in the UK housing market for private sector rental housing owned by institutions, rather than individuals. Most buy-to-lets are owned by amateur landlords, who may choose to sell when prices peak or be forced to sell (or suffer repossession) in more difficult times. It is therefore not a consistent, long-term source of accommodation.

Where there a much greater supply of institutionally-owned rental property, there would be little or no need for the state to provide rental properties, whether through local authorities or housing associations. The advantage to institutional ownership is that the rent is set at market levels, with individuals receiving temporary subsidies via housing benefit.

This mechanic provides the incentive for social mobility the CfSJ seeks: once a person's circumstances improve, it is worth their while to vacate the property and become an owner-occupier. Barriers to geographical mobility are removed too, as the state subsidy is attached to the rent rather than the property, freeing the unemployed to seek better jobs elsewhere in the country and encouraging those in work to relocate in pursuit of better pay or prospects.

Individuals and couples who work hard, pay their taxes and take little or nothing from the state often and understandably resent what they see as over-generous hand-outs to those who are not net contributors. An enlightened take on the institutional rental property initiative might be to provide incentives for citizens to invest in funds owning such properties. For instance, they could qualify as an asset class to be held within personal and company pension plans or Individual Savings Accounts.

With a significant proportion of the yield coming from the Government and the income from the fund being primarily distribution of the rental proceeds rather than opportunitistic selling of individual properties, it would be a lot less risky and volatile an investment than direct ownership of buy-to-let property, and with significant tax benefits.

I don't have the resources of a think-tank so am not able to cost this proposal, or others that I'll make in future blog posts, but I hope that someone involved in policy-making will read my ideas and consider them worthy of further examination.

Here's hoping that the relationship between the state and those who receive benefits, and benefits-in-kind, from it, will earn a higher place on the agenda for political debate in 2009. A generation ago, the Conservative Party won a historic electoral victory on the strength of a promise to grant the working class unprecedented social, geographical and economic freedom by introducing the right to buy for council tenants; thirty years later, I believe an opportunity exists to do the same again.

Why I'm writing

2009-01-01T12:23:00.004Z

Drafting a first post for a new blog is harder than it seems. Like the initial three or four words in a newspaper or magazine article, the opening sentence of a novel or the debut couplet in a song, it has to grab the attention and also introduce the principal theme of the piece.

As a journalist by training (though not by current occupation), citing admirable instances of that craft is too close to home, so instead I’ll quote examples from the two other wordsmiths’ disciplines mentioned above. First this, from George Orwell’s 1984:

“It was a bright cold day in April, and the clocks were striking thirteen”

Thirteen? That one word, deliberately left to the end of the sentence, a delayed drop following a deliberately humdrum choice of preceding phrases, instantly demands attention and sets up the proposition of an environment in which perverse propositions are accepted as normal. Doubleplusungood.

And how about this, from the songwriters’ songwriter, Paul Simon:

“The Mississippi delta/Was shining like a National guitar”

The unmistakeable scene-setting intro to the title track of his 1986 album, Graceland, evokes for me an image of the wide, winding, iconic river, viewed from the air late on a sunny summer’s day, excitement mingled with self-doubt as Simon, reeling from a recent and very public divorce, travels to the Memphis home of the late idol he both admires and, in his own, insecure and self-effacing mind, struggles to compete with.

If the first post in a blog sets up themes for what’s to come then it looks like I’m in trouble: my choice of examples risks setting unrealistically high expectations. This blog is not intended to represent great, or even good, writing. But neither was this the goal of the two writers I’ve name-checked so far: when Michael Parkinson once described him as ‘a poet’, Simon famously became offended, considering the tag an affectation, while for Orwell, writing for purely aesthetic or emotional reasons is an indulgence:

“My starting point is always a feeling of partisanship, a sense of injustice. When I sit down to write a book, I do not say to myself, ‘I am going to produce a work of art’. I write it because there is some lie that I want to expose, some fact to which I want to draw attention, and my initial concern is to get a hearing” (Why I Write, 1946).

Orwell and Simon are two of the people whose writing and music respectively I most admire; emotionally, their work connects with me. Interestingly, both are of the left: Simon is a long-standing Democrat, while Orwell, originally a communist, was, even in later life, when writing his famous anti-Stalinist polemics Animal Farm and 1984, a Labour party member and committed Socialist:

“Every line of serious work that I have written since 1936 has been written, directly or indirectly, against totalitarianism and for democratic socialism”.

Both Orwell’s and Simon’s writing contain evidence of personal reaction to injustice. I can see how such a motivation would drive a caring and intelligent person writing in the dark days of Britain in the 1930s and 40s, or in the unsettled America of the 1960s and early 70s, toward parties of the left; indeed, many people harbouring those sensitivities, myself included, today feel more comfortable with Obama’s Democrats than with the legacy of Bush’s Republicanism.

Back in the 1980s, when I first became conscious of politics, my sympathies were not with the right. While I welcomed the taming of the destructive power of trades unionism I wondered whether narrow monetarism and its decimation of industry was the best solution to my country’s undoubted economic ills and, with the arms race at its most bitter, I was repulsed by the rhetoric used by President Reagan. So I flirted with the left; indeed, the affair was consummated: for a time, to be precise, the time of Kinnock, the red rose, listening and Bryan Gould, I was a Labour Party Member.

I was a student as the '80s turned into the '90s; the Berlin Wall fell, liberating half a continent, Tiananmen Square was held, but resulted in unprecedented economic reforms for the world’s most populous nation; Nelson Mandela was freed, heralding an end to apartheid but hitting the livelihoods of those who sold the then-fashionable 'Free Nelson Mandela' T-shirts.

The dozen years spanning the mid-1990s to the middle of the current decade was a relatively apolitical time for me: in an era of dotcoms, chinos and cool Britannia I was uncertain whether politics really mattered that much. I became aware of storm clouds gathering from about 2002-4, when the UK began importing labour at a rate that dwarfed any previous migrations and yet the total number of benefit claimants was on the rise. House prices were booming beyond the means of first-time buyers or the valuations warranted by rental yields. The Government was hocking future generations to enormous debt with its fondness for grands projets on the Private Finance Initiative never-never. And we went to war in Iraq on the basis of a lie.

But the defining event that made me realise that politics does impact on people's lives and that, to paraphrase Swift, bad things happen unless we get off our arses and change things, was the near collapse of the global financial system in the final four months of 2008. A little-noticed decision made in the early days of New Labour’s inaugural 1997 administration came back to haunt it: when Gordon Brown gave the Bank of England the power to set the base rate, he also removed many of its supervisory powers over clearing banks, devolving them instead to the Financial Services Authority, much derided by Private Eye as the Fundamentally Supine Authority for its lack of bite.

Staffed by second-rate middleweight ex-bankers, it turned out neither to understand many of the financial instruments that found their way onto banks’ balance sheets nor to have much inclination to probe deeply; when American banks began to have concerns about the number of beneficiaries of sub-prime mortgages defaulting on their loans and it came to light that some UK banks were holding securities based on such debt, there was nothing it could do to prevent a situation occurring in which no bank wanted to lend to another because it could not be sure of getting its money back due to the lack of transparency about its solvency.

The rest is history: taxpayers’ money was used to recapitalise the banks and provide a limited amount of liquidity, but it was not enough to restore the flow of lending for mortgages or to businesses – especially since, buried in the small print of the Government rescue package was an obligation on the banks to repay sums borrowed from taxpayers within five years, which pretty much guarantees that for the next half decade, there will be little bank lending and what there is will be conducted at usurious rates of interest.

The Chancellor has made a token effort - doomed to fail - to stave off recession, but the way in which he has done it has stored up trouble for the second half of 2009. By cutting VAT he has reduced the prices of many of the items used to calculate inflation. This may seem like a statistical nicety but by the summer, the biggest threat facing the UK economy will be deflation. If people get to see things costing less tomorrow than today, they hold off spending as long as possible. Result: a downward cycle of depression. By reducing prices in the last days of 2008, the Government has increased the chances of year-on-year price comparisons made between now and the same point in 2009 showing reductions and triggering the worst possible economic woe.

The cost of recapitalising banks, providing some limited inter-bank lending and the failed attempt to avert recession, combined with the reduced tax take and increased benefits burden that come with a downturn, will weigh heavily on the working population for at least a decade, starting when the recession ends – late 2010, at best. Meanwhile, they face a difficult couple of years, trying to remain in work and keep their homes.

The period from the mid-1990s to today ought to have represented a golden age for humankind: efficiencies brought about by the internet and globalisation led to a rise in the standard of living that should have liberated those in developed countries from fear of poverty and job insecurity, while also bringing a new-found affluence to countries previously excluded from enjoying the fruits of world trade. But complacency on the part of governments and regulators, most spectacularly in the UK, has put paid to that.

Having frittered away this legacy of affluence I believe the Government owes a duty to those who will pay for its errors to do all it can to lighten that burden. There are three aspects to this:

1. Making the recession as short and as shallow as possible. There’s a lot more it could now be doing to protect businesses from failing and to re-start meaningful inter-bank lending, not least by immediately implementing Sir James Crosby’s recommendations to resurrect the mortgage market;

2. Taking a scythe to public spending in areas where little or no benefit is felt by end users. A clue: any post funded by taxpayers whose job description contains the buzzwords ‘sustainability’ or ‘diversity’ is probably surplus to requirements;

3. Reinventing the social security and public sector housing provision to encourage work and enterprise and discourage dependency. This will re-base the country’s productivity and the cost base of its benefits system for a generation, while also increasing social mobility

Like most people in Britain today, I’m not easily pigeonholed by social class: there are elements of my background that could be seen as privileged, others as deprived. I’ve certainly known what it is to be hard up, for much of my childhood, and my instincts have always been to side with the underdog and the dispossessed against the powerful, especially when the latter abuse their positions.

It’s those instincts that now make me a Conservative, and not only someone who votes that way, but who wishes to shape debate and policy within that party and perhaps, in time, to represent the people as a Conservative politician. Terms such as ‘social justice’ have been annexed by the left to justify policies that have proved to be both socially divisive and profoundly unjust. After almost 12 years of a Labour government, we live in a country in which:

- A child’s quality of education depends almost exclusively on where they live, which is largely based on their parents’ incomes and life choices. Social mobility is lower than half a century ago;

- Public sector employment is at the highest level in history and, for the first time ever, those employed by the state earn more than those in the private sector. There is also a tax time-bomb in the shape of unfunded pension liabilities for these workers

- ‘Affordable’ homes built for housing associations are generally constructed to a higher standard and at a higher cost than private sector properties. ‘Key workers’ (public sector employees) receive priority allocation for many schemes, above private sector workers and the unemployed, irrespective of factors such as income and needs

- The average age of those supposedly unable to work due to illness and disability is 35, and once someone has been ‘on the sick’ for two years, they’re more likely to come out of the system due to death through old age than returning to gainful employment

- Many couples who both work and make no claims on the state find it hard to start families because the cost of childcare, paid largely from taxed income, is so onerous; meanwhile, the benefits system encourages those already dependent on it to have larger families and penalises mothers for remaining with their children’s fathers, despite extensive evidence that this is the best outcome for the children

The above are just a few examples of the injustices that anger and frustrate me about Britain in 2009. The perpetrators are not greedy capitalists but leftist bureaucrats, the victims not the lumpen proletariat but the “hard-working families” of which Gordon Brown often speaks, but whom he so little understands. As Orwell put it, in Animal Farm (1946):

“The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which.”

Coincidentally, the same pig-as-oppressor allegory was borrowed by Paul Simon for his anti-Bush, anti-capital punishment polemic, Pigs, Sheep and Wolves (You’re The One, 2000).

So here I sit, fundamentally a liberal, with a small ‘l’, beginning a blog that embodies my new year’s resolution to be an agent for change through Conservative politics. I’ve titled my blog ‘a fairer world’ because I hope that everything I write and the linking thread to my beliefs is a commitment to social justice.

I believe that the core responsibilities of government are to create an environment in which every individual is free to achieve his or her maximum potential. For this goal to be achieved, the state should sometimes provide a helping hand, while at other times the best service it can offer is to keep out of the way.

While I believe that wet/dry, left/right debates within a given party are unhelpful, I would not see myself at either extreme of Conservative opinion. I’m certainly not one of those who believes in a minimum of regulation: if the events of the past six months have taught us anything, it’s that parts of the economy that are so fundamental to the wellbeing and life chances of a country’s citizens that we all suffer disproportionately if they fail must be policed and supervised effectively. Nor am I an old-school, one nation Tory: for the objective of everyone to be the best that they can be to be achieved, we need to recapture and go beyond the best part of the spirit of the Thatcher years, namely the emphasis on enterprise, self reliance and social mobility.

My apologies that this has been a lengthy post. Subsequent ones will be shorter, and focused mainly on single issues. I wanted my first missive to give some background to who I am and where I’m coming from.

Truth told, I could have written a lot more. But it’s a cold January lunchtime, and the clocks are about to strike thirteen…