How the EU affects Brown's fiscal stimulus

The most effective way Gordon could have cut our tax burden would have been to reduce VAT to zero on domestic gas and electricity. This would have cost the same as his 2.5% overall reduction but would have benefited the old and those on low incomes the most. He did not do this because it was against EU rules to cut VAT below 15%. Why is this? Well a chunk of all our VAT payments goes directly to the EU and the boys in Brussels don't want to see their income drop.

Equally worrying is that the benefit of his 2.5% reduction will benefit our EU trading partners more than us. We do not make as many motor cars people now want to buy compared with Italy, France, Germany etc. So the benefit of our tax cut will simply leak away to the EU

Comments in the last week from both Bank of England deputy governors, Bean and Gieve have hit sterling hard. Interest rates may have to go to zero, we did not appreciate the severity of the banking crisis did not play well on the Forex market. The usual platitude about learning lessons also goes down like a lead balloon. Central bank deputy governors should know what the are doing and not still be at banking school.

One universal characteristic of all busts is that they are always preceded by a huge bubble. The seeds of our current banking crisis were sown during the years of easy credit and low interest rates which pushed up house prices to an unsustainable level. Many of us who worked in the Bank of England at the time knew this but those at the top did not want to listen. You don't get reappointed as Governor or on to the MPC by telling HMG the politically inconvenient truths or asking awkward questions. Come to think of it its the same on UKIP NEC!

It is a sad truth that the ECB have handled the banking crisis better than we have. The ECB was modelled on the Bundesbank which was, and is, a genuinely politically independent central bank unlke the BoE. The reason for this lies in the hyper-inflation Germany experienced around 1930 at the end of the Weimar republic and secondly at the end of WWII. Its a case of twice bitten. If you cast your mind back to when the UK was kicked out of the ERM, Lamont asked the German Chancellor to use German reserves to support sterling. He rightly told Lamont this was not in his power but was a decision for the Bundesbank. The BU refused and sterling left the ERM to our great eventual benefit. Sometimes it is better to leave things to the markets as we shall eventually come to realise as our current banking crisis plays out.

How does this affect UKIP. Well, when the penny drops with the British public that the ECB has done quite well and the BoE/HMT behaved like headless chickens there will be a huge build up of pressure for us to join the Euro. The Tories will oppose this and demand a referendum. They may not get one but public opinion will polarise in the UK for and against the EU. We may be faced with another Lisbon Treaty situation but this time UKIP will have to fight and that fight will be in the UK. We will need a strong grass roots organisation in the UK. Current UKIP party policy on 'rooting out' activists is weakening and destroying our capability for this, the real fight. We have to stop this silly policy now before it does irreperable damage to our core cause.