Fraser Nelson

Why won’t the banks pass on the rate cut? Because there isn’t anything to pass on. And for the life of me, I can’t work out why they don’t point this out. The Bank of England base rate simply doesn’t mean the Bank of England is lending to banks at 2 percent. The plumping doesn’t work that way, not no more. British banks aren’t hoarding anything. They have no net assets. They have to borrow every penny they lend. Once they borrowed from the wholesale market, which has seized up. What cash is available comes at a hefty price. By means of illustration, the banks had to pay 12 percent to for the latest injection of government cash. Barclays went to the Arabs instead and paid 14 percent. Until banks can borrow cheaply, they can’t lend cheaply.

After the rate cut, one question presents itself: is the British economy turning Japanese? Now rates are at 2%, it makes you wonder how low they can go and whether we are approaching a zero-rate like Japan after its economy blew up in 1990, leading to the “lost decade”? To answer it, let’s get a doctor to take a picture so we can look at the UK economy from the inside as well (*) The market expects rates to bottom at 0.75% next spring and then rise slowly. So those lucky few on a variable mortgage will be in the money for the foreseeable future – like Japan, where rates never quite picked up. The Brown bust had the same characteristics of Japan’s: a debt-fuelled asset boom followed by painful recession and demand slumping so low that we get deflation.

So it was all Jill Pay’s fault. That was Michael Martin’s verdict. He didn’t know. The Serjeant At Arms should have asked for a warrant and she didn’t. Nor did he shrink from dumping on her. He’ll grant a debate on Monday and set up a committee of grandees (just as he did with the expenses furore).  Here are the key points from the Speaker's statement. --“Parliamentary privilege has never prevented the operation of criminal law” – except when they’re dodging expenses fraud, or voting to exempt themselves from their own FOI laws. -- “On Wednesday last, the Met informed the Serjeant at Arms that an arrest was contemplated.

Those of us in favour of “fiscal autonomy” for Scotland have been sent homewards to think again by the Calman Commission (pdf, here), which looks at the asymmetrical mess which calls itself devolution. But it’s not all bad news. It had been expected to dump on the idea, but is fairly clear about the need to abolish the Barnett Formula which is even denounced by its author, Lord Barnett. This is what the commission has to say: “With no substantive tax raising power, the Scottish Parliament is funded by a block grant, needed to address a near total vertical fiscal imbalance. Voters are not exposed to tax and spending decisions at the margin, meaning that a degree of political accountability for the taxation which supports spending decisions is missing.

You don’t need a cat-stroking authoritarian to damage democracy and erode liberties. You just need to sit back and talk as if the system is a law unto itself. I believe Gordon Brown is being honest when he denies knowledge of the Damian Green arrest. No10 knows there will be an inquiry, and it will come out who knew what. But ignorance is no defence. System overreach is one of the gravest possible threats to democracy, and it is precisely by tolerating it that we lose the open society which a couple of generations ago so many died to defend. In my News of the World column today, I say the Green arrest is an allegory for what has happened to Britain.

Conservative backbenchers were in  good voice on Monday, and by prearrangement. The whips had sent around the message that there was to be raucous heckling as Alistair Darling read out what used to be called the Autumn Statement. Duly, there were roars of indignation at the Chancellor’s claims that Britain was best-prepared for a downturn, howls of protest as he claimed to have reduced debt. But then this yielded to unexpected quiet as it slowly became clear that Mr Darling’s giveaways included something the Tories would never have dared dream of: the surrender of everything New Labour once stood for. David Cameron had been at George Osborne’s house the day before, nervously preparing for the surprise tax cut which they suspected was in store.

Word is that Michael Martin has hit the roof today. He was informed about the Sergeant-At-Arms' (deplorable) decision to let anti-terror police forage through Damian Green's office (I gather they're still happily at work stripping his constituency office bare). As Speaker, he had to be informed but did not have to give his permission. The Sergeant-At-Arms did. I suspect Martin didn't take in the gravity of the situation until last night, and the full constitutional implications of this will now have dawned on him. Why were counter-terror police involved in a common law offence? We don't know. It does seem that neither Gordon Brown nor any minister was informed, which is in itself incredible.

A devastating blow against Brown's "tax the rich" plan from the Institue of Fiscal Studies today. How much will the new 45 percent tax rate for those over £170,000 raise? "Approximately nothing" says the IFS and adds that "HM Treasury would raise more with, eg, a 44 percent rate". This reminds us why most developed countries have cut their top marginal rate: it discourages risk-taking. After the briefing, I asked why a higher tax could fail to collect more revenue. Mike Brewer from the IFS replied: "People will contribute more to their private pensions. Convert more income into capital gains. Emigrate. Work less." I asked him if, then, Brown's 45 percent tax rate could be described as "futile" and he just smiled.