The news that Britain has just crawled out of recession deserves at least a cheer. We were the first country into recession and the last one out. It is hard to agree with the Prime Minister that we were better prepared for the recession than any other country.

Most of the commentators have centred on how this sickly figure will affect the major parties at the polls. Almost no comment has been made about how this will affect those who have lost their job or, have taken pay cuts, to keep their job. Nor has there been any comment on what these figures tell us about the danger that has stalked the economy since we entered into recession.

The growth figures are not good news for those who are unemployed and seeking work. The unemployment total, thank goodness, has not risen to a record level - this is after all a record recession - largely because employers and employees have done deals on holding back real wages. Indeed some people have taken real cuts.

But the danger to the country is clear once we break down the total that gives the 0.1 per cent growth rate for the previous quarter. Performing disproportionately well have been those sectors affected by the VAT reduction and the car scrappage scheme. I was sceptical about both moves.

At best they bring forward consumption - they do not boost consumption permanently. My fear is that goods that might have been bough in January/February were bought before VAT returned to its 17.5% rate. Likewise people have brought forward car purchases to make use of the hefty subsidy tax payers were offering to individual buyers.

There is therefore every likelihood that the next set of figures, made worse by the length of the cold weather, may show a fall in output. And uncommented upon is the fact that this month sees the end of the Government printing money to buy its own debt.

The Treasury is clearly in panic over the Government's fuzziness over its expenditure cuts that are urgent and how this will affect gilt buyers when the Government has to go to the market to borrow. My guess is that Ministers will try and duck this issue until the election.

I guess we will see another round of printing funny money to buy Government debt. I also guess we will see the FSA directing banks to buy more Government debt as a way of (hopefully) shoring up their balance sheets.

Poor old country.

In May, I expressed my worries to the Pensions Regulator that the pension fund custodians, far from protecting pension funds, were gambling with assets committed to their safe keeping.  In December the Pensions Regulator reported back to me on their survey of Trustees and on Friday published a statement accepting the need for much more stringent control on the safety of fund and therefore pension assets.

Robert Maxwell "borrowed" assets from the pension funds of the firms he owned and failed to repay them plunging funds into crisis.  Parliament responded by establishing custodians of funds so that no owner could misuse the assets of pension fund members.  Some custodians are clearly running rings round safety measures Parliament put in place which have probably resulted in pension fund losses.

The specific case I referred to the Pensions Regulator was of a medium size pension fund that was using a high street bank as the custodian for its pension funds.

Unknown to the Trustees the bank was lending out both shares and gilts owned by this pension fund.  In spite of current pressures on UK gilts, they are one of the safest bets in the world.  In return, however, the pension fund was being given gilts from third-world countries which, while they had the nominal value of the UK gilts, would have proved almost valueless had the bank gone under and the pension fund tried to sell the replacement assets.

Pension funds were being paid for the risk of lending their assets but the returns were miniscule.  Some figures cited to me was a return of £900 in every £1M pounds lent.  The bank, I believe, was pocketing practically the whole of the fee it gained from lending out the pension fund shares. 

I also asked the Pensions Regulator to refer to the FSA a practice which I thought was going on whereby the pension custodian was lending assets to its own bank so that they could appear on the bank's asset register so that in this way the bank would be meeting FSA asset requirements although not owning the assets themselves.  The Pensions Regulator's and the FSA's letters are attached.

That new guidance is coming into place shows the Pensions Regulator is concerned about the safety of pension assets.  I believe these regulations should be mandatory and have tabled an amendment to the Financial Services Bill currently going through Parliament.  Lord Vinson has echoed this amendment in the Lords providing cross-party and cross-legislature action to protect the safety of pension fund assets.

How do we explain why social mobility has been on the decline? I look at part of this debate in my Liverpool Echo column today. The term ‘social mobility' is used in at least two ways. The first is how I have used it in the article - meaning how many people from a less advantaged background move into more advantaged positions. The immediate post war period was marked by a big increase in the welfare state and middle class jobs. This made upward mobility a lot easier.

A more radical view of social mobility is to measure movements both up and down the occupational/income ladder. Can children from middle class families fall in the hierarchy with their places taken by those from poorer homes? In this sense social mobility can work even if there is no expanse in more prosperous jobs.

I suggested that a key reason not yet considered in trying to understand why social mobility in the first sense has stalled is a dramatic change in parenting, particularly in some poorer homes.

A tough love approach appears to be highly beneficial in developing cognitive skills in children and it is these skills that make it easiest to learn.

My Liverpool Echo column is here and so too is the address I gave on Monday when the think tank Demos launched its commission on character.

Balanced Migration's aim is to stop Britain growing its population by immigration. We have advocated two major policies. The first is to break the link between people coming here to work and automatically becoming citizens. The other policy has been simply to reduce significantly the number of immigrants being granted citizenship places.

Before Christmas, Alan Johnson, the Home Secretary, seriously engaged with Balanced Migration in breaking the link between coming here to work and automatically becoming a citizen. The Home Office is investigating how this is can best be achieved and we expect an announcement soon.

This was one of the key policy proposals Balanced Migration has put forward as a means of achieving its goal. The other means is to cut significantly the numbers of people settling permanently in this country.

Over the weekend David Cameron's statement suggests that he is now seriously engaging with the Group's, and more importantly the public's, concern about immigration. He has given a commitment that a future Conservative government would reduce the numbers of net new arrivals to this country to the level of the early 1990s. That means a reduction from about 150,000 to 180,000 a year net in migration to one in the very low teens.

Balanced Migration welcomes both these two initiatives. Our aim now must be to get both parties to make binding commitments on both policies in their election manifestoes.

I have just returned from Demos' launch of its Commission on Character.  David Cameron, Camila Batmanghelidjh and I spoke in support. 

Character used to be central to Labour politics.  It was the cornerstone of building up a culture of respect and self-respect. 

Our characters are first nurtured for good or ill within families.  The address that I gave - which is can be found here - gave emphasis to the teaching of good parenting in schools. 

Good parents can affect our life chances whether we come from rich or poor homes.  Good outcomes at school can cut the supply routes to life-long poverty.  We should therefore judge how pre and post-natal services, Sure Start, as well as schools are achieving that objective.

I would suggest that instead of having league tables on exam results - which are massaged - we should begin a debate on the following outcomes.

How is each school, each year, achieving the goal of

Reducing to nil the number of young people leaving school who do not go into either education, employment or training;

• Increasing the numbers and percentage of young people leaving school who go into skilled employment; and,
• Reducing the numbers of young men and women who begin families before they are 18.

 Let the political debate on the importance of character recommence.

The House of Commons yesterday debated the Government's Fiscal Responsibility Bill. The Bill's aim is to cut the size of the Government debt over four years.

I probably sounded the most grave warnings of anyone in the debate. I am not against the Bill, but I think it is too little and far too late. I've been on about this issue following the 2008 Pre Budget Report.

The one action I greatly regret in my thirty years here was not to press the Government on what they would do on day two after invading Iraq, which I supported. I thought there were enough brown-nosers in this place without me joining them asking such an easy question.

I believed it was inconceivable that the Government hadn't thought out a plan once Saddam Hussein was toppled. We all know that such an obvious question had not been answered.

So the main point of my contribution yesterday was to make a plea for the Government to have plans for a whole series of days two. As long-term interest rates begin to rise, (which they will as the Government tries to float a record amount of debt each year for goodness knows how many years) what actions will the Government take to stop this move triggering a full-blown crisis?

With long-term interest rates rising, we may have our credit rating threatened. What actions have the Government got up its sleeve to prevent this happening?

And then, heaven forbid, what actions are the Government planning for the worst possible scenario - of one week the Government Debt Office reporting it simply cannot sell the Government debt. At that point the Pound would collapse.

I didn't expect answers to these questions as they would simply as the answers would simply add to the panic. But the Government now needs a counter-crisis strategy and, for all our sakes, I hope it is being formulated.

Friday 11th December 2009

8:45

With an 8.45 start, I met the education boss of Wirral, Howard Cooper, with Cllr Phil Davies who is the council's lead spokesman.  Where to site Birkenhead's new Academy was one issue we discussed. 

I was anxious not to use the Park High school site as this threatens the long term existence of Ridgeway.  But there aren't many other suitable sites - the best one is off Borough Road, but we are told by two activists that the Resident's Associations here are adamantly opposed.  If we are to get the money for the school before the clamp down occurs ahead of the election we simply don't have time to challenge how representative these views are.  I have dug in and insisted that the University of Liverpool is the lead sponsor. 

10:00

Photo courtesy of JAMES MALONEY/LIVERPOOL ECHO

By 10 o'clock I was at Birkenhead Timber Supplies in Campbelltown Road.  Almost two years to the day the business was burned out of existence, but Barry Pilgrim has brilliantly fought back and rebuilt the business with his son keeping together the staff during this wretched period.  It was wonderful to salute his spirit and determination to maintain jobs in Birkenhead. 

11:00

Photo Courtesy of Jill Quayle, Tranmere Community Project

Just as poor education results are likely to lead to permanent poverty, so does very young single parenthood.  The Tranmere Community Project would take some beating as the most innovative voluntary group in the country.  Here I am discussing with Jill Quayle what young mothers have told her with respect to being in families as a teenage parent, as well as beginning to plan how parenting can become part of the national curriculum.

12:45

By 12.45 I was visiting the residents in Over Leasowe in Eleanor Road.  This property was donated to Age Concern who then sold it on to a Housing Association. The Association now wishes, possibly, to redevelop the site.  It illustrates that, what was seen originally as a new arm to the housing movement which would attack the bureaucracy of local government administration, these programmes are now in danger of becoming as bureaucratic as the body they replaced.

13:30

Then on to the Noctorum Pensioners' Christmas Dinner, although I'm not pictured eating my share of the spread.  Some of the Ridgeway pupils were on hand supplying an entertainment which stretched through the generations.

14:00

It was then off to Wallasey to meet Jon Ward our area police commander.  We discussed the changing nature of anti-social behaviour, from a small number of lads being out of order to one which is now more cruelly operated by neighbours from hell.  Jon, as always, gave me a number of ideas which I shall try and turn into legislation.

15:15 

The next stop out was to meet two tax credit officials, Darren Snowball and Anne Cadman, and a constituent who has been sorely messed around by tax-credits' inflexibility.  My constituent who is in the TA and fought twice in Bosnia and also served in Iraq deserves a first class service rather than the shabby treatment that has been handed out.  I will be doing the appeal with my constituent.

16:00

I was in the same building for my next meeting with Brian Simpson who heads Wirral Partnership homes.  It was interesting how WPH is reinventing the wheel.  They have found that there officer in Noctorum, working along with the police and confronting parents with the yobbish behaviour of their offspring, has had a dramatic effect.  These two agencies working together have simply informed parents that if the yobbishness continues their tenancy is at risk.  This is the way housing authorities used to behave. 

17:00

Then on to my surgery in the Treasury Building.  This used to be known as the Golden Tower. It proved itself unsafe and now all that remains is the little stump of the building in which I hold my surgery.  At WPH I learned they were taking down another tower block in Birkenhead. 

19:30 

The day finished in the Metropolitan Cathedral of Christ the King for SAMM (Support After Murder and Manslaughter)'s annual memorial service.  Linda McDermott and Roger Phillips read the list of those murdered and who came from the Merseyside area.  The list was painfully long, and with each name was a devastating tragedy for each family.  As the list was read I couldn't but reflect on the trendy prison reformers who keep asserting that the murder rate is dropping!

Here are some of the candles lit for those whose lives were wickedly snubbed out.  

Afghanistan

What must have gone through the mind of British and America troops in Afghanistan yesterday when reports came through of the British Prime Minister and the American President signalling a time limit to the Afghan War?

Relief perhaps that the nightmare might now have an ending. But no doubt incredulity too.

The Taliban have proven themselves to be determined fighters, but it is surely an own goal to assume they cannot read or listen to broadcasts. Talk about shooting oneself in the foot.

The Taliban now know that the political leaders of most of NATO's effort in Afghanistan want out at a certain date. Taliban tactics will change. If they can survive the next few years they know they will win unless NATO ceases to count voters at home that think this war can be over quickly.

Both British Prime Minster and American President have caved into domestic pressure in talking about an end date, and have therefore increased significantly the chances that troop sacrifices will prove futile.

Of course a political leadership needs to have an end-strategy in mind - it would have been useful to have had one before we went in to Afghanistan. But to announce the date raises huge questions about the people that are advising both men.

Both are surrounded by advisors who have never fought in a war themselves and therefore do not bring to any discussion the practical - as opposed to the technical - knowledge crucial for conducting successful warfare.

This crude political pandering sadly swamps the good news in the President's strategy. He sees the war as one of countering insurgency and that mean the NATO strategy is now one that might lead to a successful conclusion if not a win.

Parliament

Another bullet went into the foot of the House of Commons authorities almost as soon as they announced an appeals system for MPs feeling aggrieved over the arbitrary Legg judgements imposed upon them.

Sir Thomas Legg was commissioned by the Prime Minister to carry out a an audit on the expenses of Members over the past five years. The good Sir Thomas simply went about his task making up his own rules.

The House Authorities obviously realised what a clanger they have made here and have therefore wisely instituted an appeal process.

Reading the note about the appeal process and the press release and you could be forgiven for thinking that at last and for the first time the House authorities got onto the front foot on this whole issue. But immediately the lobby reported that the Speaker's spin doctor was spinning like mad that the appeal was merely presentational and that it was really to clear up queries about Sir Thomas' inability to add up correctly. Indeed MPs failing to pay the Legg fines will have reductions made to their salaries or pensions.

None of that appears in the official statement so here is another wonderful example of the Speaker shooting himself in the foot. Wouldn't a better approach have been to say that the House Authorities accepted that there was a need for an independent appeal but that it hoped those MPs using the appeal process would bind themselves in to whatever conclusion the judge - Sir Paul Kennedy - comes to. This might have voluntarily brought a conclusion to the whole issue.

Instead the nasty little spinning operation was at work feeding the media with the sort of rough talk they love to report.

It was of course a huge error for the Speaker to even think about appointing a spin doctor. If there is one group more despised than MPs it is spin doctors.

What the public wanted was a Speaker who would talk directly to them. Needless to say the appointment of a spin doctor never came before the House, it has never been approved, and was appointed arbitrarily by the Speaker.

So instead of getting on to the front foot on this issue, this front foot now bears another brilliantly crafted self inflicted bullet wound.

For some time now it has been possible to see the four horsemen of the apocalypse on the horizon. Most economic commentators ignore their existence and the potential damage that could be inflicted on our economy if they all swept through at once.

Horse one symbolises the ruinous state of public accounts. The government first claimed the deficit to be around £85bn. This was revised in the pre-budget report then revised again to £175bn in the budget itself. I argued that these estimates looked conservative and the latest guesstimates on the deficit this year come in at £200bn and maybe even £220bn.

This sum has to be borrowed this year, and for the foreseeable future. Whether there are any lenders out there who will lend to this tune we do not know.

The government has busily been printing money and practically the whole of this funny money has been used to buy government debt.

So those economists employed directly by banks, or those dependent on bank contracts, again mislead when they prattle on about long-term interest rates being held. We simply do not know to what level long-term interest rates will go once the game of printing money stops.

Horse two is the harbinger of inflation. It simply isn't possible to increase the money supply by 300% and for there not to be a megadose of hyperinflation built into the system. Inflation is the cruellest of redistributors taking away from those who have saved and penalising most those on low earnings who have limited or non-existent collective bargaining powers.

Horse three warns of a rapidly collapsing tax base. Hamish McRae - one of the few commentators who doesn't buy the current cosy consensus - has been looking at the catastrophic fall in income and corporation tax.

VAT receipts are running 8% lower year on year which is perhaps understandable given the cut in VAT, but taxes on production - mainly income and corporation tax - are down by around 16% year on year.

There is going to have to be a mighty change around in the economy for this falling collection of tax-revenues to be reversed. Falling tax revenue means an even longer period in debt with the budget deficit in this country continuing to be far worse than any of our competitors in the G8.

Horse four sounds a jobless recovery. One of the reasons why thankfully unemployment has not risen to the level the government projected is that employers have been hoarding labour. On all counts this is welcome. But it does mean that when the economy starts to grow again - assuming it doesn't bob around the bottom for too long - employers will be using this hoarded labour to match increased output rather than enter the recruitment market.

The economic and political outcome is too grim to describe if all four horses of the apocalypse swoop down at once.

Failure to convince the markets that UK Ltd is a going concern will initially result in the rising of long-term interest rates. A killer to long-term recovery.

Then we stand to lose out on credit rating. Worse still would be if the government cannot then, even at record long-term interest rates, raise the necessary capital to bridge the huge deficit on the public accounts.

At this point it is a fight to maintain the currency.

That is why the present debate about maintaining the so-called stimulus is so naive. If only the world were that simple.

I believe we need to cut, and cut quickly, if we are to prevent the scenario I have just described coming into full force. It isn't a choice between protecting the recovery by keeping in and cutting at a later date. If we don't convince the market how serious we are about cuts soon, there simply won't be any recovery whatsoever and that is putting out future prospects using the most moderate of language.

David Cameron's speech isn't simply a raid into Labour territory. The speech declares war on Labour's reason for existence.

There have, over the past hundred years, been disputes over what Labour is or should be about. Whatever individual views protagonists have pushed, most have agreed that Labour exists to protect and advance the interests of the poor.

It is this belief in our very being that Cameron attacks by looking at this Government's record. His choice of figures is in a few instances dodgy. The data on those at the very, very bottom of the income scale are not that reliable.

But Labour has spent undreamt sums financing its anti-poverty programmes. Despite this expenditure the programme has in recent years stalled. Labour has been slow to draw the right lessons.

This has given Cameron his opportunity. Read the speech assuming you do not know who has given it.

I guarantee that most people would conclude that this was a speech by Tony Blair who had carefully blended in the best of Labour's left-wing thinking. That is the size of the challenge we now face from David Cameron.

On one track he takes the argument back to the advent of new liberalism. The idea that people should simply be free is not for him.

The conditions for freedom have to be created. And then the new Tory state ‘must actively help people to take advantage of this new freedom'.

Cameron also asks why it is that, when Labour has spent record sums on welfare, the results are disappointing. He cites the Institute for Fiscal Studies, report that the Government's ‘current strategy of increasing (means-tested) child tax credit is effective at reducing poverty directly, but its indirect effect might be to increase poverty through weakening incentives for parents to work'.

A more rounded conclusion would have been more devastating. Tax credit penalises two-parent households and therefore actively seeks to break up the natural social ecology within which children are successfully raised.

Acting audaciously he argues that the alternative to New Labour is first, to make opportunities more equal and then, second, actively, to help create a stronger and more responsible society.

There is a lot here for Labour to pinch in renewing itself. How can Sure Start and education be delivered in a way which most favours the poor while also increasing the power of parents and local communities?

His ideas are thinnest - but then everybody else's are as well - on how the state burns itself up in creating a stronger society. But at least he has started the debate on the role of social entrepreneurs and community activists.

This thinking needs to be taken much further, but it is a wonderfully bold beginning and Labour must rise to the challenge.

Labour's normal stock response of trying to ridicule him simply will not do. Cameron's aim is clear. It is to turn traditional party politics upside down. The time for jeering at Cameron is over. Labour's survival will now entail outmatching his programme.