Well, the socialists will be pleased!

On Tuesday the Sun newspaper commented on changes in the pattern of employment during the Brown years.

The Sun newspaper, 25.11.08

The growth in purely private sector jobs, 1998-2006, and the growth in predominantly public sector jobs over the same period.

Region	Growth in private sector jobs	Growth in public sector jobs
North East	5%	25%
Yorkshire & Humberside	3%	26%
East Midlands	2%	18%
East Anglia	4%	27%
London	3%	19%
South East	4%	18%
South West	8%	29%
Wales	9%	27%
West Midlands	Minus 2%	25%
North West	3%	22%

The source of the data and calculations is unknown, as is why the data finished in 2006. The figures are percentage changes, all positive, i.e. growth, except one.

The conclusions are:
1) Although public sector employment grew at a faster rate in all regions, it doesn't mean that there are now more people are employed in the public sector then in the private sector, merely that the rate of growth was (much) higher there.

2) The paper gives few absolute figures, except to record that over the period 2.2 million jobs were created. Of them 1.3 were in the public sector, or 59% Among women the public sector was even more of a magnet. Of 1.07 million extra jobs filled by women, 963,000, or 90%, were in the public sector. This last result may reflect the presence of extra nurses, child minders and teachers appointed during the Brown Splurge. Brown used to boast of how many jobs he had created. Now we know the pattern of employment.

3) It may be that extra jobs have been created in the private sector since 2006, but in 2008 in a contraction period 50,000 extra public sector jobs have been created.

The worrying feature is that the public sector jobs are part of Heffer's "Client State", that is the people who depend for work, income or benefits on the (Labour) government. These people are more inclined to vote for Brown as a consequence.

Public sector jobs are difficult to reduce, because of the votes, and because of the strength of unions there. The government has talked of "savings" of £10 billion. It is difficult to see where these will come from, given the extreme reluctance to make staff redundant. There is not much saving in using fewer paper clips!

The public sector jobs are not only more secure than those in the private sector, they also pay index-linked final salary pensions, with absolute security. This commitment means that the country in a difficult period has an added burden of paying for all the extra pensions. (This may be the reason why Cameron and company are now talking about the possibility of putting public sector pensions on the same basis as those in the private sector, where the pension is determined by the total amount contributed.)

All this, except the Cameron suggestion, must be very pleasant reading for the socialists, - a further heave in their direction without any revolution. The problem for the rest of us is that many of the jobs will not increase national wealth or output, - as monitors, pen-pushers and bureaucrats they may advance the socialist ideal but they do not produce marketable or exportable output. They may actually hinder it! We are ultimately impoverished by their appointment and activity.

What we were not told

The dust has settled, and we have more or less got our heads round the size of the debts our government will have incurred. They are truly astronomical, and make us look like the banana republic we are beginning to seem.

How will they be repaid? This we were not told, merely that the size of successive deficits will diminish up to 2013. Whether they will continue after that and by what amount was not revealed.

No suggestion was made about repaying the debt, as sundry governments have tried to do at intervals. Even leaving out some liabilities such as guarantees to banks, PFI commitments on schools, hospitals and other infrastructure, as well as the truly enormous obligation to pay gold-plated public sector pensions, what remains is approaching £1 trillion.

This debt must be serviced, that is have interest paid. If the government is able to borrow at 5%, then we must pay £50 billion upwards each year in these interest payments, which is equivalent to over 10p on the standard rate of income tax!

The government has made a gesture.

We know about the restoration of the full 17.5% VAT rate after one year, and it seems certain from a published document that this would have been increased to 18.5% after the election.

We know that tax allowances will be frozen in 2011 for at least one year, which will bring many people into the 40% band.

We know that the government has been looking at what assets it could sell. There are not many left.

We know that National Insurance, a tax in all but name, will increase by 0.5%, which will not help much to promote employment, being a tax on employment.

These will not go far in reducing future budgetary deficits, even if all are taken together. If, in addition, the chancellor's forecasts are wrong, - he and Brown have underestimated recession and over-estimated growth on a regular basis, then the deficits will be larger and longer lived, and his so far announced attempts at financing them will prove even more inadequate.

The chancellor may be right, however, with recovery beginning next summer (third quarter). Most experts find it difficult to believe. If is is right and they are wrong, than we have at best 7 years of large budget deficits.

There is one further factor. The government has claimed to find possible savings, and factored these into their prescriptions. These are difficult, not least because they often involve making public sector workers redundant. The government this year, despite the difficulties, has appointed 50,000 additional civil servants, and made the Guardian newspaper prosperous in the process. The PBR presupposes that yet more will be required, to help lending to business and to deal with the growing army of unemployed.

It is difficult to see Brown & Co. making cuts among public sector workers, especially at a time of high unemployment. So they are left with freezing posts, not replacing those who retire, or transferring in others from elsewhere. They have not been very successful at this hitherto.

Sop the way is open for the Conservatives to show us something more positive, as they cannot go on merely criticising Brown indefinitely. It will be interesting to see what they come up with. Immediately they could release civil servants to replace retiring colleagues elsewhere, by abolishing many of the vast number of quangos, and especially the regional ones, by cancelling the ID card scheme and the national database, which are both enormous white elephants and suspected to be such by an increasing number of citizens.

In the medium term the Conservatives could engage in a full reformation of education and health, and ensure that services are not cut in any way but are performed more efficiently by removing a vast army of pen-pushers.The bureaucrats thus displaced could them be transferred elsewhere or allowed to leave for the private sector in the by then recovering economy.

So far we have the situation of temprorary tax cuts to be followed by tax rises which are permanent. We can see that the government has taken the opportunity to increase duties on fueld, tobacco and alcohol. We do not know what further "bombshells" await us, as clearly on the government's figures they have not covered the earlier deficits and any inability to pay interest out of taxation must perpetuate the period of deficit.

The Pre Budget (p)Ropaganda

Any normal person would expect and hope that something as serious as the chancellor's autumn statement would be clear and open. It seems that we are wrong.

Its purpose is not to inform but to obscure, not to deal with the economic problems but to secure political advantage.

The statement will not take place until 3.30, and the press will not be given a copy until about 4.30. They then have to digest something which is deliberately constructed to be obscure and misleading in time for the press deadlines. This is very difficult - see the excellent posting by Fraser Nelson on the Coffee House Blog today. The same difficulty confronts the opposition.

This is built upon by two further ruses by the Government:

1) To relegate very important items and qualifications to hidden footnotes, to delay the discovery of the mendacity. The devil really is in the detail.

2) (Increasingly) to leak false trails, red herrings and the points which will receive prominence anyway, in the hope of deceiving press and opposition alike.

Of course, as in the case of the 10p debacle in 2007, Brown received momentary acclaim which was reduced within 24 hours when all the small print had been studied, but he had gained , until it all blew up in his face after a few weeks, when MPs and others realised that they had been conned.

So this evening, while press and opposition have time to concentrate on only the items which have been leaked in advance or fully displayed during the presentation in parliament, expect Brown to tour the TV studios basking in glory. The fact that the the full implications may take a few days to emerge, the deceit to be unravelled, and the idol shown to have feet of clay, does not matter so much. Brown will have gained a political advantage and bolstered his image as the world's saviour, and these may take some time to be reduced.

It's a sad reflection that a statement which is so serious for the nation's economic well being should become instead an attempt to gain narrow political advantage. It is all the more galling, because it is practiced by someone who is so quick to condemn his opponents on the shakiest grounds of doing the same.

Democracy in general and politicians in particular deserve something better.

...like a sieve

So many sources are coming forward with the assumption that in tomorrow's PBR there will be a temporary reduction in VAT from 17.5% to 15%, that you have to ask why the government is leaking like a sieve. It has to be a deliberate policy .

After all, it alerts and prepares the Tories. It's difficult to reply to the chancellor's statement, but to give advance notice makes it easier to prepare rebuttals. It seems that the proposal, which would raise about £12.5 billion on this one element out of supposedly £15 billion altogether, is the central plank.

Or is this a case of setting a trap, of sending the Tories off on the wrong track? Or are Labour trying to drive a wedge between Ken Clarke and others who proposed the VAT reduction and Cameron who has set his face against it? Or both, and perhaps other objectives as well?

Some comments on the VAT proposal.
I didn't consider the VAT proposal in a blog recently, for a number of reasons:

It will impose additional costs on retailers and others, as they have to re-set software and print new publicity and price labels.

As a consequence, some sellers may simply absorb the gain themselves, rather than increase their costs, or they may wait to see what happens.

Will the reduction have much effect? The declared aim is to put money into the hands of the poorest in society as they are more likely to spend it. However, much of their expenditure is on items which are either zero rated, - food, children's clothes, etc., or expenditure on items where VAT is 5%, - energy for example. In both cases there will be no change in price and no extra money left in the consumer's pocket. The major effect will be expensive luxury items where the small percentage change could amount to many pounds.

If this is right, than the policy seems likely to benefit wealthier members of society more, and they are more likely to save any advantage than poorer people are.

How great a stimulus? Since the reduction is of 2.5% on the pre-tax price, the price reduction facing a consumer will be much nearer 2% in the overall price facing him. If something would have been £100 in price before any tax, with a price of £117.5 including tax, then a reduction of £2.50 to £115, is actually a reduction of 2.1%. Given that retailers are already making sweeping reductions, of 30, 40 or even 50 percent, is a change of this magnitude going to add very much in attracting a purchase? Calculations on shopping baskets suggest that households could be better off by somewhere between £5 and £8 per week. This is welcome, but will not add very much. It could, however, add up over a month and make it slightly easier to make a monthly mortgage repayment. But this repayment is not what G. Brown wants, - he wants them to spend it.

If extra spending is generated, how much will be on imported goods, again defeating G. Brown?
There is a suspicion that much go on foreign wine or food, or on other luxury gifts which are in stock and cannot be expanded in output very soon.

Some goods which could enjoy a spur include one or two which are "bads" although good government revenue raisers. Among these are alcohol and tobacco products.

Leaving aside questions of how long the temporary reduction in VAT will be, and how much the increase will be afterwards, the general conclusion seems to be that the response could be muted for many of the reasons above, and slow. Most of all, this part of the PBR proposal will be of much more benefit to wealthier people than poor people, - very strange coming from Brown.

We can only assume, after all the thought by many experts over so many days, that the other parts of the PBR proposals will redress this effect, perhaps an increase in the various benefits, perhaps something for those who have still lost out over the 10p tax band fiasco, but not a general raising of the threshold tax level unless we have been mislead about the size of his fiscal stimulus.

What is Brown hoping to achieve?

The answer, of course, is re-election, or he faces virtual political oblivion because of failure.

What does he hope to achieve immediately?

He clearly needs some glimmer of recovery, which could be as little as the rate of increase of unemployment, re-possessions, or bankruptcies showing signs of diminishing. It could be very little indeed, "Unemployment increased by only 5,000 this month, so our policies are working."

You can imagine the Labour spin department switching from smearing the Tories to building a skyscraper on any small scrap of positive evidence.

So my guess is that he will be prepared for a June 4th, 2009 election, with the fall back for an autumn election. He will also be watching the opinion polls in the mean time. It is possible that if any rays of hope emerge before the end of 2008 he could even pencil in an election in the spring of next year.

How soon could we see the green shoots of a real or false new dawn?

Given the plans for staff reduction and mortgage and other arrears, much are already in the pipe line., not soon. There may be others not already firm, as lenders and companies wait until after the Christmas period to see if there is relent in the gloom.

If this scenario is right, then the following will probably happen.

1) He has dropped enough hints to suggest this his aim is to put money into the hands of poorer members of society, and possibly pensioners, before Christmas, in the belief that they will spend it all soon. It is unlikely to be by raising the tax threshold, as this will benefit all taxpayers and he will have to recoup this somewhere else, say by reducing the threshold at which the 40% rate kicks in. The problem here is that all those paying merely at standard rate, and there are still millions, will all benefit.

In the case of pensioners, some of them pay significant amounts of tax, so many would be better off but will not spend the money, which is his objective. The same applies to the (much easier and cheaper) change to the £10 Christmas bonus or the heating allowance.

He has a fondness for his own creatures such as pension or family credit. The trouble with these is that it would be difficult to overcome the slow grinding bureaucracy, and the money could well not be spent before Christmas, and many who would qualify do not claim either because of previous experience or natural pride.

Would he dare to pay welfare recipients a lump sum, with the warning that minute examination of their situations might require repayment? This is unlikely, partly because recipients might hang on to the money until it has been validated, and partly because repayments cause annoyance in a period leading up to an election.

2) Despite earlier talk 0f bringing forward large infrastructure projects, and Boris speaking of doing something similar in London, I would be surprised if much happened in this direction. They are slow to get off the ground, employ workers and disperse income. These could be more useful to achieve something late in 2009 and on into 2010, at the earliest.

He needs urgent, quick results to his policies, and these massive schemes would be delayed, and might not be of much benefit to his election hopes in 2010, even.

So what can we expect in the Pre-Budget Report on Monday? Darling knows that as a result of attacking past Tory policy prescriptions with the words "unfunded" or "can't be afforded", anything he proposes will be minutely examined, and he must show how the massive hike to borrowing will be re-paid.

As he wishes to get extra spending before Christmas, for presents and the sales afterwards, Brown/Darling will suggest only changes which are subject to ministerial adjustment and not debate in parliament, as the latter would eat into precious time. This would seem to rule out anything startlingly new. So expect increases in the various allowances, - pension, family, job-seekers, invalidity benefit, etc. But, then what do I know

Justice for whom?

This week, in response to a question from Labour MP Sandra Osborne, it was revealed that the number of women giving birth while in prison over the past four years has been on average somewhere between 100 and 110.

Some additional information would be useful, such as for what offences the women were committed, whether they were pregnant at the time of trial, and in how many cases a non-custodial sentence could have been possible and why this was not adopted.

There is the question of the innocent baby being put at disadvantage. If pregnancy means avoiding imprisonment, does this make discrimination as against men, if women are less likely to be be imprisoned for the same offence.

It could be said of being born in prison that if the mother is on drugs or otherwise of impaired ability to nurture a child, then in special prison circumstances the baby could fare better, if the length of imprisonment is brief.

On the question of inequality of treatment between the sexes, we already have a considerable variation of punishment in general between offenders for the same offence . This is partly due to judicial variation, but also in considering the effect on third parties, - a driver retains his driving licence because his old mother needs him to visit and public transport is impossible, or his company will not survive and others will become unemployed. It is not difficult to think of many more instances, even in serious cases such s rape where it is not clear whether consent was implied.

At last, by error..

The Government, in a leaked document, apparently has conceded that there has been a significant increase in serious crime.

Serious crimes (murder, serious assaults and rape have increased since 1997-98, when there were 14,000 recorded, to 16,000 in 2007-08. I calculate that means a 14% increase in 10 years.

Expect the usual attempt to explain this away- methods of collection or definition have changed, or other reasons make the two years not comparable. (It's funny that we do not hear of these qualifications when results support NuLabour!)

Who'd be a banker?

They can't win. Brown and Darling are gunning for them because we are not yet awash with new credit. Even George Osborne is suggesting remedies because they are not doing what the country needs. On Monday in the PBR, expect Darling to make threats. There is a threat of complete Nationalisation, even.

This morning on the Toady programme we heard the other side of the situation from the banking spokeslady. What she had to say was very interesting:

- The Banks have honoured their commitment and have been lending at the same level as in 2007, as requested by the government.

- There is no question of them taking the government's shilling and then not delivering. They have not yet received the promised money.

- They have to restore their balances in order to pay the government back soon at high rates of interest.

- They have to repay international lenders from whom they borrowed previously.

- Their own cost of borrowing from other banks, etc, - LIBOR, is still at a high level, because of uncertainty and suspicion, and lack of confidence, because of possible weaknesses still not declared in balance sheets. This means that the wholesale price for them is still high.

- Some other non-banks in mortgage and other lending have left the market, so there are fewer lenders than before.

- At least one bank, Barclays, elected not to take the government's shilling. How do the government presume to dictate to them?

- In the present difficult times they have to be very careful about the risks they take on. That is, they must scrutinise more carefully than before the situation of potential borrowers in a time of recession. This may delay response to requests.

It seems to me that the impatience of the government, while understandable, is not actually very reasonable if all the above are true.

George Osborne, in an interview with the Financial Times, spoke of the need to get credit flowing to firms and families, and agreed that the flow is disappointing at the moment. He proposed that confidence could be improved if the government made direct loans, as seems about to happen in the US, or by insuring loans and so increasing banker confidence.

This will involve further government spending and also risk. The latter, he pointed out, could be reduced by charging an insurance premium.

Osborne pointed out that fiscal policies to counter the recession are fraught with uncertainty as to outcome, (See my blog yesterday on "who gets the new spending power and what will they do with it?", but monetary policy is powerful in influencing the situations of ALL in debt, families or firms. The Bank of England, concerned about fiscal diarrhea, has left scope for further reductions in interest rates if the fiscal nostrums do not seem to be working. Osborne and the bank are surely right!

Reasons to doubt Brown's proposal - 4

Yesterday the Dizzy Thinks website provided a useful service. It listed Brown's forecasts of budget deficits for immediate and more distant years.

Forecast Budget deficits 2003-211, by date made

			Forecasts	£ billions
Year concerned	2003	2004	2005	2006	2007
2003	27
2004	24	34
2005	23	33	34
2006	22	29	32	37
2007	22	28	29	36	35
2008		24	27	30	34
2009		24	24	25	30
2010				24	28
2011				23	26

I have produced his figures in tabular form, where he has graphs.

What emerges in both cases is that Brown as a forecaster consistently under-forecasts future deficits. He is either an optimist or a deceiver.

Consistently future years' deficits are revised upwards as we get nearer. We would expect to be more accurate the shorter the time period, as things change and information becomes available.

The consistent undervaluing of future deficits, and need for revision upwards is very marked, however. Could it be that things had gone downhill much earlier than we thought, and Brown couldn't see it?

Whatever the explanation, it is worrying, and raises the question of what value his forecasts have. Take the forecasts for 2006, for instance. In 2003 he forecast a deficit in 2006 of £22 billion, in 2004 of £29 billion, in 2005 of £32 billion, and in 2006 itself of £36 billion. The figure was well on the way to doubling over four years. It is clear that reading down the columns the figures become smaller, suggesting either an eternal optimist - things will get better, or someone who does not like to admit the truth.

Dizzy does not record the actual budget deficits, and I do not have the figures, but upward revisions suggest that even for the immediate year his forecasts are not very accurate.

All this from our economic wizard, who forecast for 2008 a deficit of £34 billion, but which is now turning out to be anything up to £100 billion,

How much faith can e put in any of his figures?

Reasons to doubt Brown's proposal - 3

What happens elsewhere in the economy as the result of extra borrowing by the government?

The government will greatly expand the borrowing it has been undertaking for a few years already. This will mean a capital inflow, as the only real source of such large borrowing is foreign. We are here talking about adding up to £100 billion for the present tax year, to cover the widening gap between Government income and expenditure, plus a similar figure next year, plus his give away of possibly £30 billion. Such money has to be borrowed abroad.

Will Brown be able to achieve this without paying higher interest rates and a risk premium to cover any future further depreciation of sterling? Possibly, but at a cost of making it more difficult for British commercial borrowers. Some describe this as "displacement" or "crowding out" of the private sector. Firms already have credit difficulties, and they could do without this.

The government is sailing blindly. The Treasury economic forecasting model, (- a set of some 200 mathematical simultaneous equations which link a similar number of variables), will not be much help in these "unusual times", as relationships between variables will have changed. Steering the economy has just become a lot more difficult because forecasts will have become less reliable.

The Bank of England report on the situation suggests that they withheld a larger base rate cut when they recently cut the rate from 4.5% to 3.0% until they see what fiscal splurge Brown has decided upon. There seems to be a caution of the need to make subsequent changes, rather than an all-in effort with no fall back or further stimulus. If so much is tried, with disappointing apparent result, and nothing further can be done, then confidence would fall catastrophically and we would be in severe trouble.

In the longer run we know that if the Government borrows something like £250 billion in addition to its accumulated budget deficits, then we are looking like an annual extra revenue need of £7.5 billion merely to service the debt, assuming very generously that the government can borrow at 3%. This comes out at very nearly 2p on standard rate of income tax, and unless the government can actually increase taxes during a prolonged recession this interest due will begin to ad to the accumulation immediately. If an attempt is made to pay back some of the loan, then still higher taxes will be needed.

Whatever happens, we are in for a hard time for several years to come. It becomes all the more necessary to cut out government and other waste, to enable us to continue to grow our central services. It should be pointed, as well, that several American studies have shown that, for their situation at least, whenever government expenditure increases economic growth is reduced slightly and unemployment rises. But we have Wizard Brown!

Reasons to doubt Brown's proposal - 2

Who is to have the extra money in their pocket?

Is it to be firms ( as in the Tory proposal- N.I. holiday) or is it to be families? (Of course if families have it, and if they spend it, it will become the income of firms.)

If firms receive the tax boost, it could delay further sackings and retrenchment. It could prevent the firm going out of business if the recipient is a small company. It could help cash flow and tide them over for a few weeks. It could also mean that the firm resists creditor demands for a little longer. It could reduce its borrowing at the bank, or the need for fresh borrowing.

Result: Firms may retain labour that would otherwise be laid off, or there may be little difference in this if firms decide to use the money to ensure the longer term future of the firm, by settling with creditors, repaying loans, and so on. In the former case there could be a slight employment benefit elsewhere. In neither case would government revenue, a.g. VAT, be helped.

Alternatively, the money may be put in the hands of households. Brown has hinted that this will be the case, presumably helping the lowest paid most. What will they do with the money? The answer is not clear.

They may decide to reduce their indebtedness, to avoid future risk or to try to keep their house.
This will have little effect on the economy, other than increasing the availability of credit to be extended elsewhere, although at the moment lenders seem reluctant.

Alternatively, and especially with pensioners, they may decide to restore difficult cuts they have made - especially in the area of heating and food. Spending more on heating will not do much to generate economic activity, and at this time of year extra spending on food will do little. In fact with companies generally holding high stock levels, retailers in readiness for Christmas, any extra sales could produce no extra production even if it produces or saves some incomes.

Britain is a trading nation. One difficulty wherever money is put into pockets a significant proportion of spending goes on foreign goods and services, which will generate employment and incomes abroad. This is why Brown is desperately trying to get all nations to adopt similar policies, or else his "fiscal stimulus" (gamble) will merely aid recovery abroad.

It has to be said that there is a large risk that much of the spending will go abroad, on imported goods, including food, fuel, overseas visits and holidays. Brown seems to have calculated that Santa Brown will be remembered at election time for his monetary present just before Christmas, and that at Christmas we are likely to spend the extra money on presents and conviviality.

He may have just got something right!

Reasons to doubt Brown's proposal - 1

In general he is applying a vaccination. We have a recession caused by an excess of debt, Government and private, so he is advocating a further dose of debt to cure the problem!

The "never-had-it-so-good, permanent-boom-without-bust" decade under Brown ultimately destroyed a healthy economy because it was built on a bubble which could not last. In the end it was the sub-prime over-lending to people who could not afford to repay, by President Clinton, and others in this country who overreached and forced up house prices when interest rates were kept low, which gave the illusion of well-being. These are the cause of our problems.

Everything has now collapsed, or is rapidly doing so. His remedy is likely to cause stagnation for many years to come, partly through distortions which he has introduced and partly because extra government debt will hang round the neck of the economy like a great millstone.

For the moment, let us just reflect that Japan tried the Brown nostrum in in the early 1990s and had very poor growth for years afterwards in what had been one of the world's star performing economies. The present US government has increased its spending by over 11 per cent in the past twelve months, and pushed its budget deficit to $455 billion in the process. This is a Brown fiscal stimulus, but it has had as yet little noticeable effect on the US economy. Indeed the motor manufacturers are asking for yet more, - to be pumped in their direction.

Until recently our Subprime Minister was quoting Keynes, - he has not done so recently, perhaps because of the criticism he encountered. Keynes wrote out of the experience of the 1930s, but his nostrum was applied after the start of the world depression in the early 1930s.

Did the Keynesian solution work, that is throwing yet more money? The answer has to be that if it worked at all it was really only after a number of years, and perhaps it was WWII which really did the trick.

Of course Brown & Co could always say, "But things could have been even worse without what was done!" That is always true, but I am not sure that the Japanese would see it that way, and Brown can't prove that things will have been better because of his enormous gamble.

but it wasn't George Osborne

Few people with any sense believed the Prime Mentalist that George Osborne had actually caused the decline in sterling. Apart from anything else it had lost much of the current fall before he spoke, but then Brown can't ignore any opportunity to smear and sneer.

So why has the sterling exchange rate plummeted this year?

There were two reasons;
1) For the past three or four years our balance of payments situation has deteriorated, easily passing the previous record deficits on the Trade Account. This year Eurostat reveals that from January to August the UK had the largest trade deficit of all the 27 countries of the EU, of 82.2 billion euros. During the same period our exports fell by 2 billion euros, or about 1%. It should be said that many other countries recorded an export growth, - Holland 11%, Germany 6%, France 5% (and even Italy the same!). In fact only one other country recorded a fall in exports, - Ireland.

So with so many foreigners receiving sterling from us, over so many years, and wanting it converted into foreign currencies, sterling should have plunged under the forces of supply and demand. That it didn't until now was that many were enticed to leave their export receipts here as sterling deposits, attracted by the relatively high interest rates here. The situation has changed recently, and they have repatriated their money to some degree now.

This brings me to the second reason:
2) People will leave their money on deposit in foreign countries if the interest rate they enjoy is good and if they feel its value is secure. Increasingly this year, with our financial problems and the bungling attempts to deal with them at least until recently, sterling does not seem so safe as it once was.

Interestingly many of the deposits withdrawn were re-deposited in the US. The Americans have also been running deficits, but the dollar was reckoned safer than sterling!! A trickle in a few months became a flood of deposits leaving the UK.

Clearly foreigners and their advisers do not rate Wizard Brown as highly as he rates himself.

Is he still here?

Abu Qatada came to this country on a forged passport in 1993. (We can't blame Gordon Brown for this one!)

Fifteen years later, after how many attempts and how much money spent by this country, he is still here. Why?

The answer is the Human Rights Act and judges jealously guarding and observing every possible way in which to exercise power.

Where is the common sense? This man arrived fraudulently and illegally. In normal circumstances he would have no right here, and other countries would not accept the situation.

This was predicted when Blair signed the act and committed us. Those who read the wording realised that rights depended on the fact that European Union could redefine anything which favoured or did not favour the Union, and leave it to unelected and unaccountable judges to do the dirty work. Promoted by the barely democratic in Brussels and enforced by the unaccountable judiciary, we no longer are masters of our own fate.

There is support for the act - especially among those who profit from it - the human rights industry, extremists, immigration cheats, and others, but the vast majority of us must put up with the danger of violence and fraud, and show tolerance of illegality and other things.

People like Abu Qatada who certainly do not intend our good, and who have spent millions of pounds of our money in avoiding the penalty of their wrong-doing are casting a sneer at us.

It is an affront, and they and the Human Rights Act should go. The concept of justice has been damaged in this cynical way, and democracy has lost much of its meaning.

Those evil banks....

They are not passing on to their customers, or at least to their borrowers, the full recent drop in the Base Rate, or Bank Rate as Governor Mervyn King prefers to call it.

At least they hadn't until the past few days. After the half percent cut in October for weeks there was a small cut only. The rate fall in the average two-year fixed mortgage, the most popular with borrowers, was only by 0.06 percentage points.

The banks explanation is that the rates on the wholesale money market, where the banks raise most of their money, had remained high. As the result of the half point cut the Libor rate fell from 6.31 to 5.78, but this took a few weeks. It could be that last week's cut will take a week or two to show real downward progress.

There seems to be a mixture of reasons for the delay in adjustment:

1) There is still a fear and lack of trust. Some lenders bought financial instruments from other banks only to find out later that sub-prime lending underlay them, and they had to write down massive "bad debt" losses. This, rather than the mortgagees who defaulted in repayments, has made them unsure. There is also a more thorough look at potential borrowers, to try to reduce risk of default in the future.

2) There is a prospect of still further reductions in Bank Rate, to a point where bank margins would be slashed to the point where there was little return to cover risk of default and administration costs. All this if borrowers would be off in search of better conditions elsewhere after two years. This may explain why many banks have withdrawn tracker mortgages and relaunching them at higher margins above Bank Rate. They are also demanding larger deposits by borrowers towards paying the purchase price - gone are the 125% mortgages and even the 100% mortgages. This seems wise.

3) There is probably an attempt to rebuild reserves which have been savagely attacked by the credit crunch.

Mr. Darling threatened them and called in leaders for an uncomfortable meeting. Newspapers and individuals were baying for the evil banks to do the decent thing. Some of the banks which have taken the government's largess will doubtless come under pressure. All, except Northern Rock, however, are commercial organisations not charities or social bodies, much less agents of government. Shareholders (including pension funds) have had a bad time, and tend to be forgotten. The banks owe it to these "savers" to try to restore their position, - to restore margins and protect "owners" interests.

The big advantage of the financial markets is that they are, at least in theory, competitive. This was the reason for liberalisation in the 1980s. When once trust in other banks is re-established, we can expect competition to drive down rates. If demand is short because so many families have been dispossessed, we would expect the banks eventually in their own interests to gain borrowers to cut margins. That clearly is not the case at the moment.

Who said it?

The "chief short-termist mistakes of the 1980s" were "unfunded, unaffordable tax cuts." Can you guess? - answer below.

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Mr. G. Brown in his budget speech in 2001. He has certainly changed his view since then. It's a pity that Cameron has not challenged him as to whether he still holds this view.

They just do not understand the word "No"!

Our political masters decided to ignore the democratic wishes of the British people, who voted clearly against regional government, by allowing some or most of the regional assemblies and administrations set up before they asked us to continue in "operation". Vast sums of money are being spent on offices, administrators and elected councillors with the no function at all, except possibly to interfere where they are not wanted. More recently the regional development quangos have extended their tentacles deeper into local matters.

The Daily Mail reported a day or two ago that the effrontery is to continue still further, with a further £1.5 million to be spent. The money will finance regional committees to oversee the regional councils and grand committees for each region outside London.

These jobs for the boys will allow some MPs to increase their earnings on pointless bodies.

It is difficult to think of anything more insulting to the nation in general and to those in personal financial straits in particular, when the government can waste so much money on mere talking shops. Perhaps their purpose is to think of wheezes to make us more kindly disposed towards regionalism!

It is certainly in line with their notion of democracy which takes power increasingly away from people to remote and inaccessible functionaries, at the regional capital, at Westminster or in Brussels. They wonder why people choose not to vote. Their local council is steadily losing power and becoming more and more an agent of central government or one of its quangos. Above all money is being spent as if there is an unlimited supply from the cash cow, - us.

You couldn't invent it, could you?

Lifeguards at a pool in Northumberland are apparently claiming that floats used to help children learn to swim are dangerous and should be banned. It seems that the owner of the pool has agreed, and has also introduced the ban at other pools nearby.

Some have suggested that it is because bacteria could be passed from child to child. This is odd as the water is supposed to control microbes. If it doesn't, should the pools be used? If it does, will the chemical not control the microbes on hand, arms and bodies and also on the floats?

Whatever the reason, we have the ludicrous situation that a child's safety could be compromised, either because he tries to learn without aids (- some pools have beams with trailing belts, presumably these would be banned as well), or because he gives up the attempt to learn.

This is surely the most blatant example of health and safety gone mad!

Gestures and regulation

The government has won Brownie points at intervals by extending the time a mother or father can have off work after the birth of a child, causing significant extra costs to employers and probably making them less likely to employ a woman of child bearing age, and confl;ecting with other legislation designed to promote womens' prospects.

There is a second and related problem, which the government will doubtless attempt to solve by laying still great burdens on companies.

The following official figures were released recently. In 1996 there were102,600 registered child minders in England, but by August this year the number had declined to 63,600, meaning a drop of 38%. So at a time when families are given longer to stop at home, and also when mothers are encouraged to return to work as soon as possible afterwards, we find that the number of registered child minders has almost halved.

The implication is that more and more women will be chasing a dwindling number of child-minders. Enjoy your time off work with the new child, because it will be expensive to find child care afterwards!

So why is the number of (legal) child minders declining, and defeating the government's attempts to regulate the profession as "clandestine" and illegal arrangements are made? We don't really need to ask mothers and child-minders, because we can guess.

It is almost certainly due to the fact that the watchdog Ofsted has acquired more powers and regulations. This in turn means that mothers and childminders have more forms to fill in, pay higher fees and are subject to monitoring visits. Many child minders have decided that it is just not worth the hassle involved. They have voted with their feet.

The government's desire to control and regulate everything and everybody has reduced their ability to persuade young mothers back to work. Do government departments actually speak to each other? Do they actually discuss the new powers they give themselves almost daily?

Democratic government?

The spectacle of Messrs. Brown and Darling this week uttering vague threats to the banks that if lending rates were not dropped immediately..... All this despite the assurance that even those banks nationalised or partly nationalised would not suffer governmental interference.

We are accustomed, and generally acquiescent, to government diktat and decree on all manner of things as they gradually extend their control over our lives. After all, we live in a democracy and we elected this particular bunch and the opposition and press, etc, will keep an eye on them and call them to account. We do not even complain or react when our prime minister says "I will not have this" or "I will personally solve your problems".

This is true, but there have worrying developments.

Firstly, most legislation pouring out of Westminster in fact originates in Brussels, and we have a tradition of "gold plating" the legislation to make it as harsh as possible, it seems.

Secondly, with our signing up to the Human Rights Act, the old simplicity of "government makes laws and judges interpret them" has gone. We now have the situation that unaccountable judges have to overrule parliamentary decisions through the Act. Thus we are obliged to keep undesirable foreign citizens here even though we do not collectively want them.

Thirdly, the notion of a government in parliament is becoming less and less true. Government is increasingly by a small group called the cabinet, and even within that by a very small group which includes the prime minister. The cabinet are informed of what the executive has decided, and vote for it because their continued seat on the gravy train dictates it. Parliament is informed, sometimes after a press release, and the whips ensure that the government side pushes it through. Only the House of Lords, briefly, can hold up the implementation

The evidence for all this is the frequency with which bills are guillotined, by the refusal to indicate which bills come from Brussels and must be accepted and by the curtailing of parliamentary sessions.

We had the recent announcement that next year parliament will sit for only 128 days, or just over a third of the year, - the shortest sitting in a full non-election year since 1945. Our Sub-Prime Minister apparently commented that "if the House of Commons can do its business efficiently in 128 days, then that is the right course of action." It is a big "IF", with so many ill-thought-out bills, heaped upon others, which means that scrutiny is perfunctory. The result is that, especially in the area of criminal law, there can develop a morass of legislation where interpretation is difficult because of the inconsistencies and contradictions.

We have had a perfect example recently. Parliament was not recalled when the recession (sorry BBC, the downtown) became obvious. There has been no debate and Brown/Darling have simply announced decisions to the media. This clearly suits Brown, as it has restored his reputation to some extent.

Do you recall the words of Brown on replacing Blair? He promised to restore the power to parliament and to decentralise government. The opposite has happened, with the result that MPs spend much of their time dealing with matters which local councillors ought to be doing, rather than in debating the great issues of our day, and MPs are seen as less and less relevant.

Zero interest rates?

This morning the BBC programme Toady wheeled out Vince Cable to talk about the cut in base rate this week. (I wonder why George Osborne misses out on these invites so often....?)

Cable said that rates must fall much further, and that a zero interest rate was a theoretical possibility. I can't believe that he was really serious. With a run on Sterling recently and the Government needing to borrow from abroad to balance its books, a zero or near zero rate does not seem likely. The lady interviewed with Cable pointed out that the Japanese government had attempted this in the last recession and has been in the doldrums ever since.

We do need some stimulus to encourage mortgage and other lenders to start lending, and consumers to spend, but the effect on savings would be disastrous. In real terms, that is allowing for inflation, depositors actually lose value. If base rate is lowered even further, this could become a real disincentive to save and a real incentive to buy on credit, and the banks will have to borrow from anywhere to provide a basis for their lending rather then relying on traditional depositors funds. Alternatively, the government could bail out the banks.

Just a minute! Wasn't this the cause of our troubles over the past few years? Is this what has left Japan marooned?

Like Holocaust denial?

I didn't expect to be on the subject of the BBC again so soon.

Yesterday the Daily Express published an interview with David Bellamy, the Botanist. I was amazed to read that he had not appeared on the BBC for 10 years, after being a regular programme maker and presenter over many years. He has also been shunned by fellow scientists and environmentalists.

I assumed that he had retired, or perhaps was handicapped by a major health problem, but no, the reason he gives for the abrupt end to his association with the broadcaster was his refusal to accept the thesis of man-made global warning.

He certainly did not follow the line laid down by the BBC, - he differed fundamentally on the likely success of wind-farm produced electricity also.

He may be quite wrong, as could be the view peddled by the BBC. The state broadcaster, however, with an almost religious fervour does not wish a balanced debate, presumably because there is not enough proper scientific evidence to convince anyone either way.

What they are doing is to gag a highly respected man who still claims to be "green" and concerned to protect the biodiversity of the world., and still campaigns actively. This may even be counter-productive, as I suspect that there is something weak in a case where honest debate is not to be allowed. I myself have moved from acceptance of the "doomster' view, to one of "Unless I can see the evidence presented by both sides, I am unwilling to commit myself."

Perhaps the most worrying thing is that the national broadcaster, which claims to represent all sections of society, denies airtime to views which its hierarchy do not accept. The BBC is becoming part of the "thought police", rather than an honest and impartial reporter.

Base rate - massive cut.

The Bank of England cut the base rate this morning, from4.5% to only 3%. This is a savage cut compared with earlier cuts of one quarter percent at regular intervals, and similarly with rises.

The implication seems to be, assuming that they have not been leant on in some way by Mr. G. Brown, that they feel that inflation is no longer a major concern, (-it could be if sterling depreciates and import prices rise significantly as a consequence) and that the recession, sorry BBC - "downturn", looks more frightening than we thought.

What can be expected to happen? Some businesses for which it is not too late may in fact survive, and their employees have income to spend. It could work.

In addition the government borrowing costs will have been pushed a little lower, although they are now borrowing so much that there could be upward pressures on the rate. (Unless the Gulf petroleum states are feeling generous and the government runs there like naughty Barclays Bank!)

There will be little incentive to save. With interest rates even before tax below the present level of inflation, there is little incentive to save, and our savings rate is already very poor. The logical thing is to spend by borrowing, if you can do it, as your debt will reduce in real terms through inflation greater than the interest rate. But a large part of the population have had a poor experience of borrowing over the past 5 years.

The conclusion among experts seems to be that if it is managed and not Greenspan-like, it could help to reduce some of the pain of recession. But it cannot remove all pain, because some adjustments need to be made within the economy, and as Japan discovered in the last decade it may merely postpone problems to return again and again.

The future of the BBC

The recent episode of Ross and Brand has reminded us, even if our yearly tax payment is a distant memory of many months ago, that the BBC is supposed to be our broadcaster. It has a long and illustrious history and many of us owe much to it throughout our lives.

The question we must ask, however, is whether something designed in a very different age and circumstances quite unlike our own needs radical change now.

There are features which are of concern.

The first is that it is a monopoly, or near monopoly in many of its areas, but especially in radio news and the internet. Any monopoly will tend to become inward looking and lack consideration for its customers, with a "take it or leave it" attitude. It has found a unique slot for itself. While other broadcasters are completely subject to the regulation of Ofwatch, the BBC Trust does much of the regulation for the BBC, and the independence of the Trust comes under question. Why should the BBC not have the same regulation as other broadcasters?

The second is connected, that it is financed by a compulsory tax. Even if you never watch or listen to BBC output, you must still pay for those outputs. Indeed you can be found guilty of evading the tax even if you never use your TV or computer to receive TV broadcasts. The justification for this right to tax us regardless, apart from the silly one that we wouldn't want to have our programmes interrupted by advertising, would we?, is that it is public service broadcasting. I have listened to experts arguing what this term means, and there seems little agreement other than than it is a good thing to have public service broadcasting. The tax raises over £3 billion a year with little effort, while commercial competitors must struggle to find advertisers.

The third is that it is biased. At the moment it is public service broadcasting because it spouts government messages, while during the last Conservative administration it served the public by trying to undermine the government. The techniques are so obvious in what it includes and what it excludes in its news programmes, how much time and the order of interview and finally the different level of ferocity and aggression with which it attacks politicians from different parties.

A classic case is the Sunday slot with Andrew Marr, - Gordon's slot, to promote him whenever he feels the need. Marr actually admitted the bias, when he said, "The BBC is not impartial or neutral. It's a publicly funded, urban organisation with an abnormally large number of young people, ethnic minorities and gay people. It has a liberal bias."

How then can it pretend to be a public service if it gives undue prominence to certain groups and their values? Above all, why should it have such a monopoly in the provision of news if it is biased? I am glad that the US election is over - we need no longer listen to hours of description and forecast from the hundreds of staff the BBC had in the US for the occasion.

I have to admit that I now miss parts of the radio news because I am asking "Now why did they put it like that, and why did they not mention ........., or why have they elected to interview only ....?" If there was an alternative news service which I could trust as being objective and impartial, I would certainly not listen to the BBC. This is something that I feel has changed during my lifetime and something which has for me destroyed the reputation of the BBC.

I would be happy if
1) the BBC received less of my licence fee, and as a consequence had to drop certain things it does not need to do, such as publishing travel books.

2) some of my tax went to other broadcasters, preferably radio news broadcasters

3) the BBC attempted in some measure to improve taste, rather than merely following it into the gutter.

4) public service broadcasting meant putting on programmes of merit which other broadcasters could not mount, and pulling out of areas of tawdry, banal or bad taste.

5) the BBC was made to sell off parts which merely duplicate what other commercial broadcasters are doing - radio 1, radio 2, etc., or digital channels BBC3 and BBC4 which show repeats and attract low audiences.

The President Elect

I have refrained from commenting on the US election until now.

I have to say that I didn't regard either candidate as someone I would choose for president. I recall Bob Hope talking of an earlier contest with the words , "The evil of two lessers." That was what I felt. As time has gone on I have warmed to the personality of John McCain - it was a pity it did not emerge earlier, but then we were relying on the BBC for coverage. I would still feel that he is too old. Obama is still a complete unknown to me. I know no more than I did months ago.

Barack Obama I regard worryingly. His lack of experience to deal with difficult issues like Iran, the wars and international terrorism makes me anxious. His party jibed that Sarah Palin was only one heartbeat away from power and was inexperienced , whereas he has only to survive until January to have it, and he too is very inexperienced.

Obama has a good rhetorical style, though it does tend to be of one kind - for a crowded open air meeting. What he will be like on the more intimate circumstances of an address on television, I have no idea.

Perhaps my largest single anxiety is that we do not know what his policies will be, apart from asides about redistribution and medicare, all we know is that he is for change.

And the Americans have bought the message of change. They have bought it with their hearts rather than their minds. They really feel that he is going to change the US and also the wider world. In many ways it is 1997 over again, with Tony Blair making vague promises to all and sundry, some promises conflicting, which the British people bought, and to be honest some are still glad they bought. The British electors wanted change, any change, from the disappointing later years of the Conservatives.

So I think that Obama will have a honeymoon period, and with control of both houses he will have little excuse if he fails. The Clintons tried to do something about the poor, - in fact in some ways the sub-prime crisis resulted from his attempts to help the poor, and they tried and failed to produce a universal system of health care. All this over eight years, - Obama will begin with a recession and the fall-out from the credit crunch. If he manages to deal with this reasonably quickly, he must then turn to Iraq and Afghanistan, and then global warning. He would be a superman if simultaneously he revolutionised health care and re-distributed from rich to poor, or rather from middle rich to poor.

I wish him well, but I have niggling doubts whether he will be able to make good his promises. The Democrats in their euphoria, like NuLabour, feel that irreversible change has happened and that they will be in power for 25 years. It will take some solid groundwork by the Republicans to get back in the next 8 years. There was disunity, and McCain the outsider did not always get the support he needed. They will have to re-group from a position of powerlessness.

The War's over then?

That's the war on drugs. Last week the Home Office released what seemed to be very encouraging news on seizures of illegal drugs.

In their headline they declared that in 2006-07 the police and HM Revenue & Customs in England and Wales made a record-breaking 186,028 number of seizures. This was an increase of 15% on the previous year, and continues a trend - a rise from 2004 to 2006/07 of 73%.

You might feel tempted to think that at this rate such drugs will soon by unavailable in this country, and the war will be over. Two things should make you look further - the story that much is being re-exported, and yet there is still enough to be confiscated, and the fact that street prices are not rising steeply, but rather are falling, suggesting that there is still much about.

In fact the deliberate attempt to mislead, by spinning the figures, is that they are quoting the number of seizures rather than the amount seized. (The figures for the latter indicator are hidden away from the casual reader among the statistical tables.)

In fact the quantity of drugs seized has declined in total for class "A" drugs in every year since 1999. In 2006-07 the total amount seized was down by 30% on the previous year. For individual drugs the falls are 64% since 2001 on heroin and from 2003 for cocaine - the peak years for quantity seized.

So the great success announced with a fanfare really says that there were more seizures but they were all on average much smaller. Are the seizures from lower down the chain of distribution, while the Mr. Bigs are not losing their supplies directly?

If the total being confiscated is falling year by year, then the battle is by no means over.

The causes of road fatalities

There is anger on the part of motorists who drive past a mushrooming forest of speed cameras. There is a strong suspicion that they are there to raise revenue rather than to reduce accidents.The cameras do have their supporters, however, and there are even more who wish to reduce speeds everywhere.

The apparent motive for both groups is to reduce the number of accidents and the number of deaths on the road. So the question is what contribution to road safety is made by the various methods of speed control.

This is difficult, as we do not know what accidents might have happened in their absence - this is "unknowable". What we do have is the causes of accidents, as estimated by police and the courts. In many cases there are more than one cause, so we are still short of unequivocal information.

This week on his website "The Waendel Journal", Councillor Tony Sharp, gives the details:
- In 2006, excessive speed was reported in 15% of all accidents and in 26% of fatal crashes.
- In 2007 drink-driving was a factor in 6% of all accidents and in 16% of all road deaths.

So we have the situation that excessive speed and drink-driving are each only relatively minor contributory factors. This is no reason to disregard them, - every death and accident is one too many, but it means that we must do more to identify and deal with the other factors.

The presence of police on patrol on our roads would be a good way to start. At present once past a fixed camera, motorists may be tempted to speed until they know of the "approach" of the next fixed camera. Patrolling police could also stop and reprimand or report inconsiderate or other bad driving, as well as catching those speeding.

Anyone found to be guilty of an accident should be required to undergo a period of re-training, and licence penalty points or insurance premiums could encourage greater concentration and thought at the wheel. These are possible sanctions.

Training and re-training should be more comprehensive. Unlike other countries, we do not insist on training lessons on motorways, in darkness and in other road conditions. All drivers must learn and re-learn that it is a massive responsibility to drive a machine which can kill if attention and concentration is not full at all times. This may apply considerably to young male drivers, who may be persuaded to take risks, show-off, or drive with too much alcohol within them, when they are accompanied by some of their peers.

Councillor Sharp is quite right, there is an excessive concern about speed and drink driving, and a relative neglect of attempts to tackle the other causes of accidents and deaths.