Notwithstanding the turmoil at Westminster and in the financial markets, I find that I am inundated instead by a host of emails demanding to know why I voted to allow sewage to be discharged into our rivers. As I said in this column almost exactly a year ago, I haven’t. On the contrary this is the first Government to set a clear requirement for water companies to reduce sewage discharges. Water companies are having to invest £3.1 billion now to deliver 800 storm overflow improvements across England by 2025, which will reduce discharges by 25%.

The fact is that we previously had little idea how much foul water was being discharged, because it simply wasn’t being measured: In 2016, only 5% of storm overflows were monitored. Following the action of this Government, almost 90% are now monitored, and by next year 100% of all storm overflows will be required to have monitors fitted. This new information has allowed regulators to take action against water companies. The Environment Agency and Ofwat have launched the largest criminal and civil investigations into water companies ever, at more than 2,200 treatment works, following the improvements that have been made to secure the monitoring data. That follows 54 prosecutions against water companies since 2015, totting-up fines of nearly £140 million.

It is now a legal requirement for companies to provide discharge data to the Environment Agency and make it available to the public within an hour of the discharge. That’s what I voted for.  The Environment Act that will clean up our rivers and restore our water with tough new duties to tackle sewage overflows for the first time.

Ofwat is currently working up proposals that will enable it to take enforcement action against companies that do not link dividend payments for shareholders to their environmental performance.

Last month the Government laid before Parliament the storm overflows discharge reduction plan which starts the largest investment in infrastructure ever undertaken by the water industry: an estimated £56 billion of capital investment over the next 25 years, with strict new targets for water companies to reduce sewage discharges. 

By 2035, water companies must ensure that overflows affecting designated bathing waters meet strict standards to protect public health.
Why so long?
Because just banning discharges, as my correspondents demand, without first building the very significant infrastructure necessary to make accommodate the foul water, will ensure that it -with nowhere else to go- backs-up into out toilets and drains. Then the s—t really will hit the fan.

In this column last week I acknowledged that the sheer level of ambition of the Chancellor’s ‘fiscal event’ might spook what John Maynard Keynes called the ‘animal spirits’ of the  markets. Well, it certainly did, though calm has now returned, for the present at least. As I write Sterling is trading at a better rate than it was before the Chancellors statement. The reality is that Sterling has been falling throughout the year, together with so many other currencies, losing 20% of its value against the US Dollar, which is about the same as the Euro has lost. It has rather a lot to do with the virility of the Federal Reserve’s response to inflation, something that the Bank of England might learn from.

In the midst of the criticisms of the Chancellor’s plans, the International Monetary Fund piped up with its own critique. This is the Same IMF that denounced George Osborne’s spending cuts in 2011, telling us that they would result in mass unemployment. It didn’t, on the contrary, we achieved record low unemployment.  Last week the IMF’s commentary was about our tax proposals giving rise to greater levels of inequality. If I recall correctly my days as an economist, income distribution is measured by the gini coefficient, and UK has one of the most even distributions amongst developed countries.

Our problem really isn’t to do with the lack of equality, it is lack of economic growth.  It is exactly this that the tax proposals are designed to address. Equally important is the need to raise more tax revenue through that economic growth. Given that fully one quarter of all our income tax revenue is raised from the top one percent of tax-payers, it is precisely this top one percent  that we most need to encourage to maximise their initiative, enterprise and effort in order that, by paying a lower rate of tax individually, they pay even more tax collectively.

Parliament has been in recess since the very day that the Chancellor made his statement in the Commons. As a consequence, the only plotting of which I am aware is what I’ve seen reported in the news media. Frankly, I’m pretty sceptical about these stories of Tories conniving with Labour to defeat the tax proposals. Rarely does anything turn out to be quite as reported. Were it to be true however, any such plotters should remember that voting against a budget measure is a confidence matter, which should properly be repaid by withdrawal of the party whip. They should be warned.

In 1984 three hundred and sixty four  economists wrote to The Times to denounce Mrs Thatcher’s economic policy and predict disaster. Events proved them wrong.
I certainly hope that the same fate awaits all those economists, forecasters, pundits and journalists who have been almost hysterical in their denunciation of Kwasi Kwarteng’s Economic Statement to the Commons last week.

Previously in this column I have expressed my misgivings about the Government’s largesse and, most recently, its willingness to pay our energy bills (though I am persuaded that politically it had no alternative. Equally, the economic damage of recession as businesses and consumers retrenched in the face of their rising bills, would have been much greater than the costs of the relief package).

A number of correspondents have sought to goad me with the charge that the Government has now found the ‘magic money tree’ notwithstanding having denounced Jeremy Corbyn on account of his belief in its existence. I reply by pointing out to them that our scope to borrow eye-watering sums to address energy bills, is based on our comparatively healthy debt to national income ratio. And that this relative health is entirely the consequence of the fiscal restraint of the 2010-2015 Coalition Government which inherited an economic basket case and fixed it. They really did fix the roof, even though the sun wasn’t shining. It hurt but it worked.

I share entirely the free-market ideology that underpins the Chancellor’s statement. I support his vision for enterprise and investment to drive economic growth.  My only reservation is that reduced taxation should be matched by reductions in government expenditure: A bigger role for free enterprise ought to be matched by a smaller role for the state.

There are risks: The higher borrowing might spook financial markets and drive up the costs of servicing our debt. The tax cuts might, with so many supply constraints still present as an overhang from the pandemic economy, add fuel to inflation, to which the Bank of England will respond with further interest rate increases. Nevertheless, alternative courses were hardly attractive with the prospect recession and stagnation. The Chancellor was right to be radical.

What particularly upset my correspondents was the abolition of the cap on banker’s bonuses. I am glad he grasped this socialist nettle. It is grotesque to limit the pay for people simply because we do not like them. It’s like cutting the pay of Premier League footballers just because we think they earn too much. We’d soon regret it when they went to play elsewhere. The Financial crisis of 2008 was caused by a confused and ineffective regulatory environment and not by bonuses. We want successful bankers to come back to the City of London, earn here, make a success of it here, and pay their taxes here. I rejoice at the two fingers the Chancellor has raised to socialist dogma and envy.

I did reflect at eight o’clock this- evening. Indeed, I did so for longer that the mere minute that was officially encouraged. I confess however, that my mind wandered, and I found myself thinking about my own life rather than that of Queen Elizabeth II, an act of pure self-indulgence, please forgive me. My excuse is that she is part of the constant backdrop to my entire life, having been born four years into her reign. Everything that I can remember happened whilst she was our Queen: Her broadcast was part of every Christmas Day.

 I swore my allegiance to her on ten occasions.  As my mind ranged over the years, I recalled my Grandparents. They were enthusiastic Royalists. One granny had collection of coronation mugs which now adorn my office at Westminster. My grandpa, a soldier of the first world war , who saw the angels of Mons, had a photograph of the young Queen displayed in the ‘back room’ , he would always refer to her as “my Queen” and would stand to attention when the national anthem was played at the end of the evening’s broadcasts – yes! the telly -a very substantial item of furniture- stopped every night and didn’t resume till late afternoon the following day. There were only a couple of channels, and they were just black and white. Do you remember the Test Card with 359 lines?
After the national anthem the image on the screen would disappear into a white dot in the centre and a high-pitched whine would continue until it was switched off.

They never had a fridge: they didn’t need one; the cupboard in the front room was quite cool enough. The front room was only for entertaining, I only ever recall it being used once a year for ‘Hogmanay’ which was also my grandpa’s birthday. Life during the day was lived in the ‘scullery’ (a sort of annex to the kitchen) in which a coal fire was lit first thing in the morning.  After tea in the evening, life would move into the ‘back room’ where another coal fire was lit.
In the mornings my brother and I would scratch designs into the frost that had formed on the inside of the windowpanes. We would be sent down the street to fetch Granny’s “messages” (her shopping). This could be quite confusing because she would always refer to shops by the names that they had been known by years previously, when they had been opened by former Italian Prisoners of war that had decided to settle in the town.  There were  no supermarkets, you queued at each shop and asked for what you wanted at the counter. On our way to and from the shops we would rush up the footbridge if a train was passing and stand enveloped in smoke.
Even the money was different: We were given a threepenny bit to put in the collection on Sundays. We got two shillings pocket money (called a ‘florin’, now replaced by 10P) and if you got a ten bob note  (50P) on your birthday you were a wealthy boy – or even a postal order, remember them?

There were no mobile phones, no constant noise of social media, no tyranny of email. If you wanted to telephone someone you had to ring the exchange and ask to be put through to their number. Remember button A and button B in the telephone box?
Of course, the downside was that if you were travelling and were planning to meet someone, you had no way of letting them know that you would be late, or even not going to make it at all,   potentially ending a relationship when you had arranged to meet up with your girlfriend in Rome.

They lived modestly, but my grandpa always took pride in his appearance. I’ve inherited his morning suit and top hat. I wore them to every audience I had with Her Majesty when I was her Vice-Chamberlin, and I wore it to her lying in state last week

Had we an elected president, who then died in whilst in office, undoubtedly there would be proper respect and ceremony to mark it. I doubt however, that there would have been displays of public grief and affection in the way that we have seen in the last few days. Would crowds of well-wishers have flooded to the presidential palace and to the presidential country retreats?
Would there have been such ceremony, even in the midst of the mourning, to mark the inauguration of a president’s replacement?

I was out very late on Thursday night walking along the Mall and watching the crowds thronging towards Buckingham Palace, some with flowers, others just to stand, wait, and reflect.
On Saturday morning I walked up the Mall again, this time on my way to take part the Accession Council at St James’s Palace as a member of the Privy Council. The crowds were out in even greater force to witness the Proclamation of our new King with a great shout of ‘God Save The King’ followed by a rousing three cheers.

Unlike relatively short presidential terms, a monarch provides something of a backdrop for a lifetime, providing a constant presence and reassurance. We may imagine that we have been almost familiar with our monarchs simply because it seemed that they were always there, an ever constant presence. 

 I was Vice Chamberlain to our late Queen from 2012 to 2014. I cannot claim to have known her better than any other of her subjects, but one of the rare privileges had by the Vice Chamberlain is private audiences with the Monarch when a humble address is sent by the Commons to the Sovereign. These take place following every State Opening of Parliament, they mark important events like royal marriages and births, but they are also used for more mundane business, for example, where the Commons wants a particular individual appointed to a job that is in the gift of the Crown.
On these occasions the Vice Chamberlain is entirely alone with the Monarch, nobody else is present. My experience was that once the formal business was concluded, the Queen would relax and we’d have a brief chat. She had quite a sense of humour.
I’ve told a story in this column before, but I think it bears repetition: When I presented my first humble address to the Queen at Buckingham Palace, I was briefed beforehand by a courtier about the proper etiquette. In particular, he insisted that on no account was I to observe the ‘former custom’ of walking backwards so as not to turn my back on the Sovereign when I left the room. He said that this sort of ‘flummery’ had been abandoned for good.
So, I presented the humble address, I enjoyed our chat and then, when I was about to take my leave, with a mischievous smile the Queen asked me “ now, are you going to walk backwards?”.
I replied that I had been ordered not to, but if she’d like me to..?
She chuckled, saying it that she didn’t mind at all either way, but she just had the impression that I might be a stickler for tradition. I said that, if it was really all the same to her, then yes, I would like to walk backwards.
She smiled and said “just make sure you don’t trip up, or I’ll be in real trouble”

Family life is the bedrock of Society
The proportion of children born outside marriage has doubled over the last couple of decades to 40%.  This matters because children born inside a marriage stand a significantly better chance of not having to live through the experience of their parent’s relationship breaking up: By the time they turn five years of age, over half the children of cohabiting parents will have seen their parents split up, but only 15% of the same age cohort among children of married parents will have to live through that experience. 

One of the worst things one experiences as a Member of Parliament is the petitions from parents seeking assistance in what has become a war with their former partners in which access to children has become one of the weapons.
Recent law reform delivering ‘no fault divorce’ is designed to remove the adversarial aspects of splitting up, together with the anger and blame that goes with it. If it is successful in doing so, it will be at the very margin.
Yet, the impacts are much wider:  Irrespective of whether couples are married or just cohabiting, splitting -up is the swiftest route to poverty. Of the problems that are regularly brought to my ‘surgery’, whether they be debt, housing, schooling or whatever, once you scratch the surface, in nine out of ten cases, the underlying cause is family breakdown.
 A quarter of our families are now headed by a lone parent, nearly all of them women (90%). Half of all the children in England now have to live across more than one household.
These sobering statistics compare very poorly with our neighbours – for children in single parent households they are twice as bad as the European average. 
I’ve often said in this column that there are few levers that governments can pull to solve our problems and that we need to take greater responsibility for our own lives. Nevertheless, the economic and social costs of this disaster in family life should prompt the new PM to ask, ‘to what extent government policy in the design of the tax and benefit system has placed the traditional two parent household under financial strains that are much greater than in similar jurisdictions?’ 

In essence the answer is that we place a much greater tax burden on them. 

When I set out my prejudices about energy price in my blog on 11^th August …There’s a war on (desmondswaynemp.com) , I made it clear that whilst Ukraine is in a lethal war with Russia, we are in an economic war. Whilst Ukraine must put up with death and destruction and economic hardship, we have only to put up with the economic hardship.
As energy prices rise exponentially, of course, the Government will have to come forward with more schemes to assist the most vulnerable. The war however, demands a sacrifice from us in terms of significantly reducing our energy consumption. It will be painful, but the notion that we can carry on consuming and expect the Government to borrow the money to pay our bills is the economics of the madhouse.
Recently constituents have emailed make their own suggestions to me. Here are three:
“The Government should ‘freeze’ energy prices”. This is a bit like King Canute trying to stop the tide coming in.  If we froze prices consumers would be paying £30 billion in total for energy, but the energy suppliers would be buying it on international markets at twice that amount. They wouldn’t last very long. We’ve already had to pick up the bill for all those that went bust because they were paying more for it than the capped price consumers were paying last year.
Another suggestion is that we nationalise the supply companies. Nationalisation changes the ownership from shareholders to taxpayers. It does nothing to alter the price they will be charged for the energy and the price at which they sell it. The economics won’t have altered even if the ownership has. All we would have done is saddled ourselves with the cost of nationalisation and the ownership of the companies as they become bankrupt.

Whilst the costs of extracting oil and gas have risen with general inflationary pressures, the price at which they sell these commodities has risen very much faster. The suggestion is that it is only fair to have a windfall tax on their profits where they operate within our jurisdiction. I’ve already set out my objections to this policy in my blog of 24 March Windfall (desmondswaynemp.com) and 4 April Energy Bills (desmondswaynemp.com). It is a short-sighted policy that jeopardises vital investment in internationally competitive markets.
Third, The Government could reduce its own contributions to our energy bills – VAT and green levies. It could indeed, but this reduction in tax revenue will increase government borrowing, so we will only be deferring the bill at a time when out debt is already alarmingly high and interest rates are rising.

So, in the end it comes back to this: Hard times. Hard, because we chose to confront Putin’s aggression with economic warfare, but have we the true grit to see it through?

 With respect to their proposals for relieving rising energy prices, the focus of the Conservative leadership contest has come down to a difference between Truss, who favours tax cuts, and Sunak, who favours direct interventions. 
 Whilst one can argue about the technicalities of how effective tax cuts or direct cash interventions can be when addressing the needs of stressed consumers facing exponential increases in their bills, ultimately the consequences of either will be inflationary.  The proper response to a price rise is to reduce consumption. The purpose of the proposed tax cut, or cash rebate, is to maintain consumption at the higher price level. Given that both of them will have to be funded by borrowing, the consequence will be to put even further pressure on prices, prolonging inflation.

The increase in energy and food prices is driven by the war in Ukraine. At the outset, I warned that sanctioning Russia for its invasion of Ukraine also meant sanctioning ourselves and that the public needed to understand the consequences that would follow.
Winston Churchill said in his history The second World War, that the British people were resilient and could endure enormous hardship if they understood why it was necessary. What they would not forgive however, was being taken for fools, being given false hope, promises that could not be delivered.
I hope that this fortitude and resilience has not deserted us in the intervening years. We need to understand that we have, with our allies, declared economic war on Russia because of its unprovoked attack on an independent democracy. This was the right course of action to secure peace and our future security. We have learnt from the mistakes of the policy of appeasing dictators that preceded the Second World War. But the consequence is our current economic hardship, which is bound to intensify over the coming winter. We need to resolve to steel ourselves for it and rise to the challenge.

As to false hope and promises that cannot be delivered, surely the notion that the Government can and ought to pay our energy bills for us has to be among the more ludicrous of them. Where on earth do we imagine the money is to come from?
It has to come from cutting expenditure elsewhere, or from borrowing which will have to be repaid -with ever increasing rates of interest- by higher taxes later which will stifle hopes for economic growth.

Perhaps the only even more ludicrous notion is that we should just refuse to pay our bills and carry on consuming. Nothing would be more damning for our reputation as a country in which to invest, let alone the longer-term consequences for our energy security. It would be a national disaster, an act of sheer madness.

Whilst we are not ourselves being bombarded and subjected to a brutal assault, we have chosen to stand by Ukraine. The price of our support in this endeavour to defeat barbarism, are the hardships we now have to endure: …There’s a war on.

After the scenes that we saw following the liberation of Ukrainian towns and villages earlier in the spring perhaps we should have been hardened. Nevertheless, images and reports of the sheer barbarity of some Russian military units continue to shock: whether it be the castration of a prisoner; the targeting of civilians; torture under interrogation, or the insatiable appetite for looting.
War has always had terrible side effects, sometimes bringing out the best in humanity, but often the worst. Notwithstanding, we retain high expectations of the discipline and restraint of our own armed forces. We require thorough investigation and accountability if they fall short.
What is it about the form that Russian forces have displayed in Ukraine and previously in Chechenia, that leaves their chain of command so apparently unconcerned?

 
At the Chalke Valley History Festival in June, I bought a copy of Anthony Beevor’s Russia: Revolution and Civil War 1917-1921. I was already familiar with the history, but I’ve always found Beevor’s accounts refreshing and gripping. Now that we are into the parliamentary recess, I’ve had the time to pick it up and read it. What I was certainly unaware of previously was the role of Winston Churchill -our Minister for War at the time-  and the extent to which he tried to persuade the Prime Minister Lloyd- George and his cabinet to expand our commitment to the  ‘Whites’ in the civil war against Bolshevism.
 What the book also brought home to me is the scale and cruelty of the killing. From Lenin down, there was a promotion genocide as a tool of policy, and of the idea that lives are entirely expendable. Given the mind-boggling numbers of people to be killed, time and motion would dictate that they be despatched as swiftly and efficiently as possible. But not a bit of it: ingenuity and blood-lust dictated that victims be killed in some of the most excruciating ways imaginable. Of course, this investment of time and energy in the means and the reporting of killing improved the effectiveness of terror as a tool of social control and obedience.

The excesses of the civil war were not ended by the triumph of Bolshevism and the creation of the Soviet Union. Stalin’s regime perpetuated the terror, populations were deported, starved, and exterminated. It is significant that when Khrushchev denounced Stalin’s crimes it was only in a secret session of the Politburo. The willing murderers and torturers enjoyed untroubled retirement. As Solzhenitsyn and Sakharov demonstrated, the habits of the regime survived till the very end of the Soviet Union. Putin, who was an official in the Soviet system, has sought to turn back the clock and to rehabilitate Stalin’s reputation.

After the Second World War the Nuremberg trials exposed and punished the servants of the Nazi state. The enormity of the barbarism of the Soviet regime over the last century has never been similarly exposed, denounced, and its operatives held accountable. Perhaps this might go some way to explaining the treatment by Russian troops of their enemies: maybe it’s just the way things are done, it’s “part of the system”.

President Regan described it as the Evil Empire

If only we could solve our problems by cutting taxes. 

Prompted, no doubt,  by the debates between the candidates in the Conservative leadership contest, a large number of constituents have contacted me to suggest their own proposals for tax cuts or to support those being pursued by the candidates.  

I reiterate what I have said previously: I am glad that the focus is on cutting the tax burden. I believe that we know best what our priorities are and how to pursue them, we need to be allowed to keep more of what we earn in order to do exactly that. The quid pro quo however, is that the state does less and takes less from us, but nobody appears to keen to engage in this important element of the debate.
If the burden of taxation is too high and we want to reduce it, then clearly there must be a commensurate reduction in government expenditure equal to the reduction in taxation. Either that, or we borrow the difference in the expectation that our children’s generation will pay off our debts – assuming, of course,  that financial markets would continue to lend to such profligate borrowers. 

The counterargument is that tax cuts will pay for themselves by stimulating economic activity so that the economy grows and generates greater tax revenues. I accept entirely that there are circumstances in which this will be the case, particularly where the tax cuts are aimed at stimulating investment to increase productivity.  The danger lies in the time that it will take for this stimulus to take effect. 

So, is the UK economy in a state that we can contemplate a tax cutting agenda immediately?
 We certainly need to encourage investment to increase our productive capacity because our economy has been dogged for years by low productivity.
In my postbag however, the demand is for tax cuts that will address our ability to spend and consume: my constituents want more money in their pockets now, so that they can restore their living standards in the face of rising prices. Whilst this is entirely understandable and would certainly be popular, it would be a disastrous course to take.

We already have inflation because of a too expansionary monetary policy that was pursued by the Bank of England for too long. This has been exacerbated by the impact on world commodity prices resulting from the war in Ukraine and very from significant problems with supply chains caused by the bumpy international recovery from the pandemic. The UK economy is already at full employment: we have shortages of both skills and key inputs to the production process. Tax cuts targeted at our spending power in these circumstances will do nothing to promote real growth in the economy, they will simply drive prices up further. We’ll be left with more inflation and more debt. 

Beware of any offer of easy answers: If it sounds too good to be true…then it probably isn’t true.