Westminster blog

Earlier this week Lord Heseltine aligned himself with Vince Cable by signalling his opposition to the Beecroft reforms, which would make it easier to fire workers.

Last night made a speech at the Whitehall and Industry Group where he compared Britain with Germany in terms of their economic strengths, pointedly warning that the Germans have long had an impressive “industrial strategy”: “In terms of industrial policy (in the UK) there are serious deficiencies,” warned the former deputy prime minister.

The Tory peer went on to make a wider argument about how the Germans have not succeeded through deregulation. This is a pointed criticism of many in the coalition who believe that cutting through red tape will provide the solution for economic ills.

“Germany has not succeeded through deregulation. Regulations provide benefits and opportunities for business as well as adding to costs and workload,” he said. Heseltine quoted a McKinsey survey which showed that almost as many companies regarded new laws as positive as those who saw it as negative.

“There have been many deregulation initiatives but I can’t think of one – including mine – that has achieved significant success. There aremany reasons. Modern governments represent sophisticated, self-interested and relatively prosperous electorates who value many of the services guaranteed by regulation,” he said.

“Try tinkering with maternity arrangements when mumsnet gets going in an election campaign.”

Heseltine then claimed that regulations had actually created industries, for example the production of crash helmets.

“Of course I believe that we should get rid of outdated red tape. I welcome the government’s one-in, one-out initiative, but I also think we should be looking at every new piece of regulation and asking if it can be turned into the UK’s industrial advantage.”

To some in the Tory fold this kind of talk is tantamount to heresy; which makes it all the more interesting to hear.

Any idea that the British government could afford to take its eye off Libya was dashed today by news of an imminent report by the United Nations suggesting some 7,000 detainees are being held in the newly liberated country.

The report by the UN secretary-general, Ban ki-Moon, says the prisoners include women and children. There are also many black Africans who have been tortured for their skin colour as suspected Gaddafi sympathisers. The report, due to be published on Monday, suggests that many prisoners have been held in private jails not under the control of the interim government. Prisoners lack access to legal due process and many courts are “not fully operational”

All eyes in Westminster are currently on the economy ahead of next week’s growth review. This report, however, is a reminder to Downing Street of awkward obligations in North Africa which will not go away easily.

I revealed a few weeks ago that the government is considering paying families “cashback” of £150 to take up the Green Deal, the flagship energy-saving scheme. The deal begins in October next year and lets people spend thousands of pounds improving their home insulation; the cost then comes off their (lower) bills gradually over the ensuing years.

I’ve just been told that the Treasury (in the form of Danny Alexander) is about to announce £200m for the project as part of next week’s growth review.

The money is significant and could fund various types of incentive to help the government hit its very ambitious target of 14m homes by the early 2020s. Cashback is the one that we know about; but others – such as rebates on stamp duty or council tax – have not been ruled out either.

Richard Lloyd, executive director at Which?, is among those sceptical about the 14m homes target. (Sainsbury’s offered free insulation to 150,000 staff this summer and only 200 took it up).

He says: “It’s crucial that the Government gets the fundamentals of the Green Deal right. If it’s not good value for consumers overall, short term incentives will not be enough to guarantee that this scheme will be a success.”

The reason the Green Deal matters is that if it is unsuccessful then fuel bills are set to rocket by some £280 a year by 2020: Only by insulating homes – and thereby cutting bills – will consumers achieve the £94 cut in bills heralded in the Commong yesterday.

George Osborne wants to channel billions of pounds of pension fund money into big infrastructure projects such as rail, road and energy projects.

This is the premise of Monday’s “infrastructure review”, in which the chancellor will update us on progress on getting this big plan off the ground – along with a list of 40 or 50 “top priority” infrastructure schemes which we should see happening quite soon.

The curious thing, however, is that pension funds already pay for infrastructure projects, and not only through PFI schemes. This is because they regularly buy tens of billions of pounds of government bonds (gilts) which are then used to finance general government stuff: including capital investment.

Investors in infrastructure schemes usually expect more income given that risk is perceived as higher than supposedly risk-free gilts (although the Eurozone crisis has put a dent in that concept).

So why would Osborne want to borrow in this more expensive way? Could it be a rather less visible way of accumulating government debt than simply going to the capital markets? That was of course one of the true rationales for the now controversial PFI system.

Here is the government spiel:  The World Economic Forum ranked the UK at just 33rd in the world for the quality of its infrastructure, down from 9th in 2005. The government anticipates that some £200bn needs to be invested in UK economic infrastructure over the next five years, with most of that spent in energy and transport. The coalition believes that previous governments failed to produce a coherent view of the long-term needs for British infrastructure.

Ministers are determined to lever in private sector investment and reduce the cost of capital for projects and programmes – and officials have been working for months on “efficient and effective funding models“. Key to this is encouraging participation by pension funds also overseas sources such as sovereign wealth funds.

In the UK the level of infrastructure investment is estimated to be under 1 per cent of pension fund assets compared to 8-15 per cent in Australia or Canada. Officials and ministers want to change this.

So far, so straightforward.

The key is to lower the cost of capital, which increases as “risk transfer” increases. For example building a toll road is high-risk

If you read Grant Shapps’ statement today the housing minister gives the distinct impression that housebuilding is bouncing back from its recent historic lows.

“Housebuilding in 2010-11 was 29 per cent higher compared to 2008-9, and compared to 2009-10, it was 17 per cent higher,” the minister declared.

On the basis of housing “starts” (where work has begun on a site) that is the case. They rose from 80,550 to 88,690 to 103,750 over those three years.

Yet if you look at actual “completions” – ie when a home is finished – the figures tell the opposite story. In fact there were 142,680 completions in 2008, 119,070 in 2009 and 103,300 in 2010. (The periods are not quite compatible but are similar enough.)

UPDATE: A spokeswoman for the communities department says ministers have used the “start” figures as they are a “better and more immediate” indication of levels of activity in the housebuild market. “Completion figures tend to lag behind current trends and ministers would also point out that at present still largely reflect housing market conditions under the previous administration.”

David Cameron is poised to announce a flagship scheme to underwrite hundreds of millions of pounds of mortgages for new-build homes in an attempt to boost the ailing housebuilding industry, according to numerous sources.

The mortgage indemnity scheme is set to be unveiled by the prime minister on Monday as the centrepiece of a wider housing review. The government will underwrite a small percentage of each new loan on newly built property, leaving taxpayers on the hook if there was to be a severe housing downturn.

But under the proposed structure the state would not be first in line in the event of a a default, or even necessarily second. Instead, homeowners would still lose their deposits before the government suffered losses, which would be shared with the initial bank lender.

Homebuilders are reeling from a toxic cocktail of rising unemployment, planning sclerosis and – most damagingly – banks’ reluctance to lend to all but the most creditworthy.

Banks are demanding a typical deposit of 20 per cent on loans to first-time buyers. By underwriting a portion of the loan, the government will in effect be shifting that “loan to value” ratio so that the borrower needs a smaller deposit. That would lead to more demand and provide a boost to the construction industry in terms of sales and employment.

A similar idea is being explored in Scotland where the homebuilding industry is working with the Council of Mortgage Lenders and insurance broker Jardine Lloyd Thomson to devise a mortgage indemnity scheme.

John Cridland, director-general of the CBI employers’ organisation, made “jump-starting” the housing market one of the CBI’s key recommendations for the autumn statement but had not held out much hope that the government was going to deliver the mortgage underwriting that house builders had hope for.

Gordon Brown’s last government was an enthusiastic generator of numerous “shared equity” schemes where the government encouraged home-buyers, some with more success than others.

Yet the scheme may raise fears that the government is encouraging “moral hazard” by spending public money propping up the housing industry.

“There are good reasons why lenders are currently demanding high deposits from first-time buyers – because they think there’s significant risk of continued house price falls,” said Ian Mulheirn, director of the Social Market Foundation think-tank.

“Using taxpayers’ cash to try to reflate the lending bubble is a terrible use of public money. It will entice young buyers into an overpriced housing market, jeopardise taxpayers’ money, and most of the financial benefits will fall to mortgage providers rather than buyers.”

The housing review will also see the government announce a sharp rise in the number of plots of land put forward by Whitehall departments for homebuilding. The figure has risen from 50,000 at the time of the autumn Tory conference to more than 83,000 today.

There was a moment earlier today when Nick Clegg appeared to draw the curtains on any imminent deal on party funding.

The deputy prime minister told the Commons: “This is not the right time to ask our hard-pressed taxpayers to pay out more to political parties at a time when they are having to deal with so many cuts and savings elsewhere.”

That is a strong signal given that extra state funding is the key to unlocking a deal between the three parties over the issue – which has foiled the efforts of some very bright people in recent years.

A key report is due next week which will signpost reform of the party political funding system; to be published by the “committee on standards in public life”. Its recommendations would mean the requirement of an extra £100m of state funding for political parties over a five-year term.

Interestingly, there is already disagreement within the committee with questions over whether there will be a unanimous report or a “majority” one, I’m told.

Leaks of the report suggest that there would be a £10,000-a-year cap on donations as well

Ministers have proposed increasing the threshold by which e-petitions have a chance of generating a Commons debate amid a flurry of high-profile campaigns.

The e-petition system was created last year by David Cameron to make politics more accessible to the public. There is now a common public assumption that any e-petition with over 100,000 signatures will generate a Parliamentary debate – like the one taking place right now over fuel duty.

In reality, however, a petition that receives more that 100,000 signatures is sent to the Commons’ backbench committee of MPs, which then decides whether or not to hold a debate on the issue.  But the committee can also schedule debates on any issue proposed by other MPs – with or without petitions.

Its two most high-profile debates so far have prompted big rebellions for Mr Cameron; one