The Opposition front bench believe the Coalition Government has exaggerated the problem in the public finances. “Too far, too fast” is their easy, guiltless mantra.

In a culture – media and political – that has become used to “solving problems” with public money and leaving future generations to pick up the bill, every step the Chancellor is taking to reduce the deficit is met with varying degrees of hyperbole, with predictions of disaster ahead or fairness undone.

In truth, the concern should be that by focusing on deficit reduction rather than debt reduction, the Coalition government has not yet gone far enough in creating the conditions for stable, long term growth. The greater imbalance in the economy is not between sectors, it is between what we demand and our ability to pay – an imbalance between generations.

Twenty years of living beyond our means

If there is one chart that should guide our country’s thinking about our economic situation, it is the one by McKinsey, a global consultancy, on the debt of leading nations in the period from 1990 to 2010. In this chart, reproduced below with permission, you can see how the total indebtedness of the major economies – that is government debt and household debt, plus corporate debt and financial sector debt – grew over the period.

The stunning feature of this chart is the distinctive trajectory of the United Kingdom over the period from the late 1990s until 2008 – a period where the United Kingdom uniquely pursued policies of gorging ourselves with debt to satisfy our immediate needs.

For twenty years we have been living well beyond our means. The idea that somehow the results of this policy can be “fixed” in two years, or one Parliament, is an ambitious expectation to put it mildly. It will take a long period where we “expect less and produce more” to free us from the burdens of this debt.

There is a second aspect of the chart that should also make UK policy makers ponder. Look at the trajectory for Japan, which entered the period with debt already at 400% of GDP, and despite various policies found reduction of its debts stubbornly difficult to achieve.

Restoring our nation’s financial health is a journey which the Government has only just begun. The end point however is not only to achieve the elimination of the deficit, it is to achieve a substantial reduction in our debts, both public and private – and that needs a longer period of time, and a thorough rethink about the role of credit – and likely, the state – in our economy. Over the twenty years of excess, powerful vested interests have developed and without a stronger, clearer message, they will be hard to dislodge

Latent Risks from the Unwinding of QE

When, in 2007 the music stopped, in such spectacular fashion on our debt fuelled nation, the immediate concern was maintaining liquidity in the economy. For many years now, the UK government has pursued an aggressively expansionary monetary policy, quantitative easing (QE), in part using the Bank of England’s Asset Purchase Facility to buy the Government’s own debt (gilts).

However, this strategy only provides breathing space for corrective action and that breathing space comes at a cost. At some point soon, QE must stop – as even Robert Mugabe found out – and then someone else must start buying our debt – almost inevitably at higher rates of interest.

How significant is this threat? Purchases via the Asset Purchase Facility have been so significant that by September of last year the Facility represents 18% of all the nation’s gilt holdings (see chart above), or £315bn. In February of this year, the Bank of England authorised a further £50bn of gilt purchases over a three month period. As total gilt issuance for 2012/13 is forecast at £168bn, this represents a significant share of the annual appetite for UK government debt.

Those concerned with the probity of public finances will want to know what the impact will be on the economy of halting, and unwinding, QE. If the Government’s demand for credit remains high at the end of QE the interest rate risk could severely damage the recovery. The Government has a responsibility to spell out how it will further reduce its need for credit as QE is unwound.

A Future Fund to reduce debts for future generations

After correctly focusing on debt rather than deficit reduction and after successfully halting and unwinding QE, there remains a third issue that those concerned about our debts should confront: the cost of public sector pension liabilities. This previously “hidden” part of the government’s debt now exceeds £1 trillion and, as the chart below shows, this liability has increased significantly over recent years.

The Hutton review of public sector pensions and subsequent Government negotiations with public sector unions are establishing a fairer basis for public sector pensions that may well restrain the growth of these liabilities. However, the Hutton review ruled out a change that would have significantly unburdened future generations from a major debt – a move to a fully funded public sector pension scheme.

In Australia this is called a “Future Fund” and rightly so. Following the most commercial of investment principles, and with a focus on long term infrastructure investment, the Future Fund seeks to achieve a fully funded basis for all the pensions of Australian public sector workers by 2020. In so doing, the Future Fund will improve infrastructure for the next generation of Australians and lighten their taxes from the pension fund obligation. This comes at a price, and that is an annual contribution from public funds to provide the investment capital for the Fund.

In the UK context, that might mean finding an additional £20bn a year for twenty years. While we are running a budget deficit, that would be tough, but Government could signal its intent to do this – shifting the goal line for deficit reduction and finding a further £20bn of current public expenditure reductions to provide the capital for the fund.

Bring on the debt hawks

Each of these measures – a clear commitment to debt, not just deficit, reduction; a strategy to manage the potential interest costs of unwinding QE, and a future fund for public sector pension liabilities – would be bold for any Government, particularly as growth is proving elusive, but action on each of these would set the tone for the rest of the nation that a balanced economy means being honest and fair to future generations by properly dealing with the debts of our own generation.

Richard and Marion Cottier officially open Beds Blue Raiders' field

Richard recently attended the opening ceremony of the newly named Phil Cottier Field next to the International Athletics Stadium on Barkers Lane, home to our very own American Football team, the Bedfordshire Blue Raiders.

Phil Cottier, who tragically died last year, was a League official for 20 years and the Blue Raiders’ first youth coach.

After a few words by Richard, the team’s honorary president, the field was officially opened by Phil’s widow, Marion, ahead of the team’s first pre-season game against the Ipswich Cardinals.

Last week, Richard was interviewed by Year 8 students at St Andrew’s School in Bedford for the 2012 BBC News School Report.

During the interview, Richard was asked some challenging questions about government policy on pensions and gangs, among some more light-hearted ones about the UK’s participation in the Eurovision Song Contest.

To view the report, please visit:-

http://www.st-andrews.beds.sch.uk/news1201.htm

Richard secured an adjournment debate in the House of Commons last Wednesday night to discuss the safety of private hire drivers and their passengers.

Richard called for the debate following an incident in Bedford town centre in January in which a Kempston taxi driver was attacked and killed and another in which a taxi driver was assaulted when the passengers would not pay their fare up front.

During the debate, Richard called on the Transport Minister, Norman Baker, to consider using the “Proceeds of Crime Money” to introduce CCTV or screen shields in taxis and for the government to track more formally the statistics on criminal attacks on private hire drivers in order to use the information to make improvements in the sector.

 Richard said:

“Private hire and taxi drivers are a vital part of our public transport system, and when it comes to their physical safety and the safety of their property, they deserve to be afforded the same protection as our bus drivers, airline staff and railway employees, but they are not.”

Citing the FoI request by the Bedfordshire on Sunday that showed that there had been 93 recorded assaults on drivers in the preceding twelve months, Richard noted that the local authority had estimated this was 2% of drivers being assaulted each year, stating “very few jobs have such a high rate of unprovoked violence.”

Richard added:

“Legislation on taxi licences dates from 1847 and 1976, so I welcome the Law Commission review and will be talking with them during their consultation.

 “I was very pleased that the Minister, Norman Baker, had such a positive response to my calls for more to be done for driver – and passenger – safety. I hope the review of the legislation will suggest some initiatives to make our private hire and taxi sectors a respected part of our transport system, which is a status that both the drivers and the public deserve.”

For Richard’s full speech and the Minister’s response, please visit:

http://www.theyworkforyou.com/debates/?id=2012-02-29a.399.0&s=speaker%3A24787#g399.2

Prospective investors were introduced to the Advisory Board of The Bedford Business Fund at an event at Colworth Science Park last Tuesday.

The Bedford Business EIS Fund, which will be managed by the FSE Group, will seek to raise £500K to invest in businesses in the Bedford area over the next two years.

The Advisory Board, which will provide the local input and knowledge to guide the fund managers, is made up of Bedford business leaders. At the event, the Board members were introduced by Chairman, Justin Phillimore. They are:-

• Justin Phillimore – Group Finance Director, Charles Wells Ltd (Chairman)
• Dougie Hunter – Chief Executive, Aircraft Research Association (Deputy Chairman)
• Ian Carlisle – former Managing Director, Autoglass Ltd
• Nick Kier – Founding Partner, Lane & Holmes Estate Agents
• William Naylor – former Commercial Director, Gibbs and Dandy Group

Justin said:
“We believe the Bedford Business Fund is an important initiative to address the financing gap so many small companies are experiencing. Bedford is a great location to start a business and we think there is an important role we can play as a local community to support the next generation of business owners.”

During the evening, the appointed Fund Managers – the FSE Group – presented the fund prospectus and answered questions from the floor about the mechanics of the fund and the organisation’s track record in managing investments.

Summing up the evening, Richard called on local people with an interest to invest to “step up” to make Bedford the “best place in the country to start a new business”.

Richard added:
“Future jobs will come from entrepreneurs employing small numbers of people and we should do all we can to support those who have the courage to start something new and create local employment.”

For the fund prospectus and contact details, please visit:

http://thefsegroup.com/successful-launch-event-for-the-bedford-business-eis-fund/

Priory Lower School in Bedford held a special storytime event with Richard to mark World Book Day.

Richard read Hans Christian Andersen’s ‘The Emperor’s New Clothes’ to years 1-4 during assembly. 

World Book Day, which is marked in over 100 countries around the globe, highlights the joys of reading to local children and was designated by UNESCO as a worldwide celebration of books and reading.

Bedford Sea Cadets and Parents with Richard in Westminster Hall

During February half term, Richard welcomed the Bedford Sea Cadets to the House of Commons. A group of around 40 cadets and parents enjoyed a tour of the Houses of Parliament and then had the opportunity to quiz Richard on his role as an MP.

 Richard who is member of the Royal Naval section of the Armed Forces Parliamentary Scheme said:-

“I was delighted to welcome the Bedford Sea Cadets to London and give them some insight into the life of an MP.

 “The Sea Cadets get the opportunity to take part in lots of fantastic activities; it’s a great way for them to develop skills like self-confidence and communication which will serve them well in later life.”

New data shows that 600 Apprenticeships have been delivered in Bedford & Kempston in the last year, up 70% on the previous year.

Richard, who recently visited Ultra Precision Engineering in Kempston, where they have just taken on two new apprentices from the Bedford Training Group, said that the record rise in apprenticeship numbers shows commitment to helping employers train the skilled workers they need to build a stronger, growing economy. He added that companies like Ultra Precision Engineering are providing a vital role in skills development.

He was also delighted with the Government’s announcement that it will offer cash bonuses to employers for taking on an apprentice aged between 16 and 24 and urges companies in Bedford and Kempston to take up this opportunity.

For more information on apprenticeships, please visit this link.

Richard and Cllr Caroline Fensome with founders Karen Fryc and Sam Price

Richard met with the founders of the Castle Quarter initiative, Karen Fryc and Sam Price, last Friday to discuss their plans for the east side of Bedford.

Karen & Sam talked through their manifesto for Castle Quarter, the area in and around the Embankment, St Cuthbert’s, Castle Road and Mill Street which is aiming to celebrate and promote the quarter to attract people from outside the town to visit.

Richard said:

“My views are completely aligned with what the Castle Quarter group are trying to achieve. A few years ago, I wrote to the then Mayor, Frank Branston, about the town centre redevelopment suggesting that Bedford needed a unique offering that reflected the special characteristics of the town and that we should promote area clusters with their own special identities. This is precisely what Castle Quarter is trying to achieve.

“In tough economic times, with family budgets tight, we need to nurture and support our local shops. Castle Quarter is a great step forward and a model the rest of the town can follow.”

Richard has welcomed today’s announcement that disabled people living in residential care will continue to receive the mobility component of the Disability Living Allowance (DLA) and its proposed successor, the Personal Independence Payment (PIP).

The government had proposed to remove the mobility component of DLA from October 2012. Richard, who has campaigned on this issue for over a year, said he was delighted that since he first raised the issue in Parliament in November 2010, the Minister has taken the time to listen and consult to reach this decision, which allows disabled people in residential homes to maintain their independence.

As part of the listening exercise carried out by Maria Miller MP, Minister for Disabled People, Richard arranged for her to meet with a Bedford constituent, who had the chance to discuss the impact the removal of the mobility component would have on her son.  

The Government’s decision sends a signal that it will continue to protect our most vulnerable members of society, despite the difficult economic challenges we face. Richard thanked the Bedford residents that had contacted him, as well as the Minister for meeting with him on several occasions and listening to the strong arguments put forward by his constituents.