12/09/2011 Daily Politics

Afternoon, folks, and welcome to the Daily Politics. The government

welcomes proposals to reform the banking system, but will changes

damage the UK economy? The union's call for co-ordinated strikes over

cuts to pensions. As the TUC conference begins today, we will

hear from the general secretary. And it is musical chairs as 50

parliamentary seats are abolished. MPs prepare to fight their

That should be quite a fight, I bet! All of that in the next half-

hour, and with us for the duration is former ambassador to the S --

the US, Sir Christopher Meyer. The Prime Minister is on a whistle-stop

visit to Russia. Later today he will meet Kremlin leaders,

including his counterpart Vladimir Putin. It is the first meeting

between Mr Putin and the British prime minister since the murder of

Alexander Litvinenko in London, a killing blamed by Britain on the

Russian security services. David Cameron has been urged by four

former foreign secretaries in yesterday's newspapers to raise the

issues of corruption and human rights when he meets the Russian

Prime Minister. Both were mentioned in a speech at Moscow State

University this morning, when Mr Cameron also called for greater co-

operation between the two countries. We face a choice. We can settle for

the status quo, where into many areas we are in danger of working

against each other and therefore both losing out, or we can take

another path that is open to us, to co-operate, to work together and

therefore both women. Today I want to make the case that the mess...

Let me try this again, carefully, Like me, the Prime Minister did

economics at university and not languages, which I think is quite

apparent with both of us. Can we talk tough to the Russians and

expect to do more trade with them? We can expect to do both, and we

should do both. You were in the Russian embassy. I was there in the

1960s, the depths of the Cold War, and I went back in the 1980s, still

Brezhnev, hanging on by a thread. He died while I was there. They all

died in a row. Do you remember the phenomenon of funeral diplomacy?

Everybody went out to the funerals of these chaps, and it turned into

a huge international meeting. Communist or Putin-Medvedev Ciara,

you have to be very strong in dealing with the Russians. I kind

of agree with that letter which was signed by the four former foreign

secretaries in the Sunday Times. is a tough balancing act. The

Russians are notoriously sniffy about the British when we criticise

them. Many people will wonder, given recent events in Libya,

should we be asked to do business with what many people think is a

gangster state? If you only do business with that country's, you

end up doing very little business at all. That is one of the

realities. But the Russian foreign minister called for the British to

take a pragmatic approach to relations with Russia, forget all

the human rights staff, but it is difficult to be pragmatic if there

is not a proper rule of law, including contract law, for British

businesses who invest. Cameron must press the tough but in here.

would you categorise Anglo-Russian relations? This is the first time a

British Prime Minister has been in Russia since 2005, and they have

not been cosy in recent years. I mean, Tony Blair tried to create

a cosy relationship with Putin, and it existed at a verbal level.

tried to have a cosy relationship with everybody. It did not add up

to very much with Russia, that he sure as hell. Looter gave him a

kicking. President Assad did the same thing. I had a very great head

of department in the Foreign Office when I was dealing with Russia, who

said to me that the natural condition of relations with Russia

is a cool one, and I think that is true. I think it is true today,

whether it is a capitalist Russia or communist Russia. Very

interesting, good to have your expertise for the rest of the show.

How do you prevent a repeat of the financial meltdown of 2008? That is

the question put to John Vickers and his Independent Commission on

Banking. He has been thinking about it for more than a year. Their

final report is published this morning. It is expected that the

report recommends that the UK banks ring-fence their retail banking

from the rest of their business. Above all, the riskier investment

operations. And that they increase the amount they keep in capital,

sort of in the bank as a buffer against future shocks. The Vickers

report says that all this will cost the banks. It does not shy away

from this, between �4 billion-7 billion, and he was the reforms to

be in place by 2019 at the latest. That is read international changes

come into banking regulation, too. That means that much political

wrangling lies ahead. Banks and many Tory MPs will be lobbying

George Osborne for a slower pace of reform, while senior Liberal

Democrats have made it clear they want to see the changes pushed

through. This is what the Chancellor said this morning.

have a commitment now to legislate to get the rules in place while

this government and this Parliament is sitting, and then it will take

some time for the four rules to come into effect, but that is what

John Vickers himself recommends. I think that gets the balance right

between showing everybody we are doing it whilst giving everyone

time to digest the details and put the changes in place. I enjoyed by

David Ruffley, Conservative MP and a member of the Treasury Select

Committee, and by the Liberal Democrats former Treasury spokesman,

often regarded as the voice of Vince Cable on this earth, Matthew

Oakeshott. Let me get this straight, a good or bad thing? Overall, good.

Bankers need sorting out. Two problems, is is going to increase

the amount of corporate lending to businesses? That is the big

question. With the higher cost of capital, it looks like it will be

more difficult. The second thing is that his regime is the first of its

kind in the western hemisphere. It has never been tried before, and we

have to work out whether, if Britain moves first, we are going

to be at a disadvantage compared with France, Germany and the Far

East. He is sounds like it is good with serious caveats. Those are two

powerful question marks, but the thrust is good. Good or bad? Very

good. John Vickers has issued a strong prescription, and now we

have to make the banks take their medicine. Bank lending could not be

worse for businesses than it is now, so we absolutely must have reform

and radical reform as he has come out and recommended. Why are we the

only ones doing it? No other country has been down this road.

Other countries are thinking about it. We have to do it because our

back crash was worse than others. Our Paul banks are four times

bigger in the economy. -- -- our banks. We have a monopolistic

sector were the only four big players. People are not getting

proper competition. We have to do it. The things that they have done

in East Asia, loan-to-value restrictions, restrictions are the

amount of loans you can get proportionate to your income, that

is what the Far East and East Asian countries have done. That is

without the rather radical regime which is going to push at the cost

of capital, which means people going for mortgages and small

businesses, in the short run at least, will see an increase in

their costs. No other country is doing it. Under the Basel III

arrangements which will come into force, it will up the capital

requirements anyway. Even without the reforms! That is true, but it

is coming over a period of time. is this. These capital requirements,

capital adequacy requirements are higher, and though, than Basel III.

A much better way, many of us think, is to go in lockstep with the other

countries over the next five years so that we are not an outlier.

we wait for this, we will be waiting a long time. We have got

far bigger immediate problems. This is the British, the first item in

the coalition agreement, which we both signed. I do not think he

signed it! It is to reform our broken banking system and sort out

unacceptable bonuses. We have an immediate problem that we cannot

leave until then. You could do bonus legislation... The important

thing is to get the structure sorted out now so that the banks

never bring the British economy to its knees again. The timetable in a

minute, but maybe the reason we need tougher rules is that the

American banking system, which went into meltdown along with ours, its

combined balance sheets only account for about 60% of American

GDP. The combined balance sheets are banks account for 400%! It is a

lot more. For that very reason, don't you need tougher rules?

think there are ways that you can sort out the problem. The disgrace

of bankers being paid for a year, that is obscene, we all understand

that. It is still going on. How do stoppered by regulation? You have

to break it up so the gambling people are not running the main

bank. There are good things in this independent report which tackle

that, but the key question must be, financial services are big in this

country, and they pay for a lot of public programmes, and it was a

cash cow which has done this country very well. Now, and not a

defender of Bankers... You are doing quite a good job. I am

defending what I consider the national interest. Why should we be

an outlier when the rest of Europe, although it has different problems,

why should we be implementing Basel III before we have to? That brings

me on to the timetable. Bankers have served this country well, we

are all sitting here... Not in a last few years, we are sitting here

with a �2,000 tax bill each for bailing out banks. It used to

account for 25% of revenues and paid for the increases in spending

on schools and hospitals that your party called for. It used to, but

as the commissioner said this morning, what we have had to put in

to bail out RBS would have paid for our universities for five years. We

need proper regulation and a proper insurance policies so it never

happens again. What is the timetable as far as you are

concerned? We need to get on with legislation as soon as possible.

Obviously, the exact rate at which he pays in the capital requirements

is fine. Vickers is saying that the backstop date is 2019, but he is

clearly saying that we want to make a start as soon as possible. I

believe the obvious place to see as much of this as we can kiss in the

Financial Services Bill next year. It has got an expert committee

which already looks good to me. You cannot do financial regulation

without including the banks, show we should start next year of the

legislation. When you say next year, it is a big deal. Exactly when?

Financial Services Bill is waiting to go. Obviously, there is time

to... It does not include any of this. It is already quite big.

telling you the point. When Vickers has been clever is that the smoke

out objections in the interim. We have 100 pages here are because

dealing with the bank's' objections, sorting that out. That job has been

done. We do not need the bankers rattling their begging bowls.

agree with you. My plea is simply this. The broad thrust is fine, but

we should not get ahead of our international banking competitors

in Europe and elsewhere. If we do, there is a threat to London and all

the revenue that it breaks -- brings into this country. Where are

you honest? Wearing my tiny hat as a philosopher-historian, I look

back to 1933 and see the introduction in the United States

of the Act which is not an exact parallel... It actually separated

rather than ring fence. You cannot be a retail bank and an investment

bank until Mr Clinton said he could. 60 years later, the wheel turns and

Mr Clinton says that you can do these things. Here we are in the

United Kingdom, contemplating an Act of Parliament which may well be

right, which will restore some of these restrictions. The question I

ask is whether 60 years from now, someone will pop up and say, the

banks are terribly restricted in the business they can do, let's

undo some of the stitches. thing is for sure, unless there is

an amazing breakthrough in science, we will not be here to talk about

it. At small businesses cannot wait 16 months, never mind 60 years!

the purposes of this, we will call it roughly-no shot. That is roughly

better! Traditionally, this would be the week when journalists like

myself would pack our bags for four weeks at the British seaside. I am

still doing it for three, but in the old days, when dinosaurs ruled

the earth, it all kicked off with the Trade Union Congress conference,

the TUC conference, and in these austere times the TUC does not go

anywhere. They're holding a scaled- down conference in their HQ in

London. A bit of a pity, really, but there is nothing scaled-down

about the gender with several trade unions threatening co-ordinated

industrial action this autumn over reforms to public sector pensions

and the cuts in general. And joined now, it used to be from Blackpool,

Brighton or Bournemouth, but from the conference, by the TUC general

secretary, Brendan Barber, in downtown London! Does the TUC

Some of the my colleagues have been talking of that as part of the

campaigning that will be done in the coming period. We've seen some

examples of that in recent times, of course, things like UK un cut's

protest to highlight the issue of tax avoidance, the billions that

the rich aren't paying into the tax system, which they should be. So,

that might be a part of the mix. Will it be TUC policy? Last year,

you told us that civil disobedience would be counterproductive. I think

we're always careful to think threw these things. Of course, our

objective is to win broad public support for the powerful case that

we're making for a very different approach to running our economy, an

approach that delivers fairness, that gets people back to work, that

gets growth moving again. That case will be more powerful the more

we're able to demonstrate we have broad based public support. Do you?

If you had broad-based public support, why have you lost half of

your membership in 30 years? Only 15% of people in the private sector

are unionised. Less than 20% of 18- 29-year-olds are in unions. I mean,

you are quite seriously declining institution. Well, we certainly did

lose membership, in particular over the long period of Conservative

Government. Very much less so over the period of Labour Government

that we had. It still fell. Look, I absolutely acknowledge that our

membership has not kept pace with the changing shape of the labour

market. We're determined to tackle that problem. We have to reach out

in new ways for sure. But look, it's only a few months ago that

over half a million people came out onto the streets of London to show

powerful broad-based support, not just trade unionists, people from

every section of the community, powerful support for our case for

an alternative. We need to build on that and to take our campaign into

every community in the country. That's what we're determined to do.

There is clearly in the country serious concern about the impact of

the cuts. Many people in the public sector are worried about the impact

of changes on their pensions too. You don't have to be on the extreme

left or anywhere else to be worried about these things, but isn't there

a danger of your case being put, so many of today's trade union leaders

are on the far left, on the extreme, they're hard line, way on the left,

tot left of the Labour Party. Why are they so left-wing in the 21st

century and doesn't that undermine your case? I don't recognise that

description that you give of the current generation of union leaders.

Bob crow, Mark sn serwotka, Christine Blower. Yeah, but Andrew,

the trade union movement has always had powerful perplts as you well

know. Look, I mean, we are all facing the gravest crisis that our

economy has endured for generations. That banking crash in 2008, the

effects are still being felt. At the moment, our economy absolutely

flatlining. The growth that the coalition promised us that would

come, private sector jobs to replace public sector jobs and so

on, our growth is utterly negligible. More and more people

are recognising we might actually have that double-dip recession that

I forecast some time ago, as a real risk. Even the IMF and the World

Bank are saying we need more stimulus and less austerity. It

really is time the Government started to listen You miss the

seaside? I'm sorry? Do you miss the seaside? Being by the seaside?

miss the seaside? Of course! I miss the seaside but we're having a fine

time here in Congress House. Come down and see us. I will. Thank you

very much. You must be delighted that the trade unions are going

into battle for your gold plated pension. They're not going into

battle for my gold plated pension. I think they are. I'm lucky. I am a

relic of the old regime before these things happen. You mean, you

have a hell of a pension? Fplgts I have a defined benefit pension.

Mind you I contributed, handsomely too. So.rest of us too. It's a good

pension. So did the rest of us. That's the way it works. Was I

going to be the only person contributing to my pension. You're

the only one here today who's got that pension. I have been looking

round the BBC today and I have seen fatter pensions than my own. Not in

this studio. Maybe not. Just one point briefly, I've just come back

with Greece, I had a bit of a holiday, on my pension! They've

rioted there, they've done civil disowe beadence. They've torn

Athens to shreds, but the brutal realities of the economic situation

don't change a jot for that. Some similar message has to be sent to

our trade unions. We shall see. It will be the issue of the Autumn I

suspect. Now if you're an MP with a constituency in England, it's only

England at the moment. Scotland and Wales are later. You might be

feeling anxious this lunch time. Just landed on the desk is a report

telling them whether their constiltwaepbs is due to be

abolished or the safe seat will become more marginal. The changes,

which will be public tomorrow, are being made in order to reduce the

number of MPs from 650 to 600. Why not, the Senate only has 100. David

Thompson has been investigating. There are times when you think this

place should be cut down to size. Well, you're not alone, because MPs

are being asked to shrink the House of Commons. The plan is simple: Cut

the number of MPs from 650 to 600, try to make sure that almost all

constituencies have roughly the same number of voters and make sure

no-one feels too hard done by. Good luck with that. Why? Well, if

you're a Conservative, because you think it will save money, and

because you also believe that the current system favours labour. If

you're Labour you think this is a plot rip the electoral map against

you. If you're a Lib Dem, because this was part of the deal that gave

you the AV referendum. The fun part will be watching MPs fighting for

their political lives. There may be some juicy scrap as head. In

Cheshire there's George -- George Osborne and Graham Brady. One is

the Chancellor the other argue able the backbencher. Then there's Danny

Alexander who could be against Charles Kennedy. Tricky. And in

Yorkshire, the gloves could be off behind Ed "bruiser Balls and

Hillary Ben. How brutal could it be? You must think of it as musical

chair was machetes. When the music stops there will be a limited

number of seats and there will be large numbers of members of

Parliament. They will be grabbing each other round the throat. It's

madness. It's crude politics. It's an accommodation for the liberals.

It's the coalition. Is it though? We won't really know until the

Boundary Commission publishes its initial proposals rgs starting with

England tomorrow. Some experts think it's not the big boy who's

have to worry. Proportionately the Lib Dems will be the biggest losers

as far as the parties are concerned. They've only got 57 MPs at the

moment. So if, as I think they will, changes, that's very serious for

that party. Conservative and Labour are both down as well, of course,

but because they start with more MPs the impact is less serious.

have to agree these changes by October 2013, if they're to happen

by the next general election. It's not a done deal. Because by that

time, another little row might be brewing. If the coalition is on the

rocks in 2013 when it comes back tot Commons, a lot of Lib Dems will

say why on earth should we do this. Deal breaker? If the Lib Dems veto

it, I think the Conservatives will be so angry it could be. Shrinking

the mother of parliments was always going to be tough. Is it a good

idea? That might come down to your point of view.

Indeed it does. Let's get some points of view. To discuss the

changes, Rennard, and Sir Peter Bottomley the Conservative MP for

Worthing west. He used to be the MP for Eltham in London before

boundary changes in 1997 meant he went often the chicken run I think,

as we used to call it. Good or bad, cutting the number of MPs? Fplgts

it's in the national interest. Andrew turner on the Isle of Wight

can look well over 100,000, I don't see why the rest of us can't as

well. 50 seems a small amount. would do it by 10%, each boundary

change until either the people say they want more representation or

something else squeals. It's wrong that some MPs have little more than

50,000 voters. Some MPs over 100,000 voters. It's fair to make

the change. Perhaps we could have made these changes though in a

better way. Why did your party agree to this deal, which we've

just heard will result in the Lib Dems proportionately losing more

seats than any other in return for an AV referendum that you lost?

don't know the consequences yet. A lot depends on whether Lib Dem MPs

stand again at the next general election. They're very effective

campaigners. If their constituencies become very

different some of them might stand down. If they stand again, people

will recognise how good and effective they have been for their

community and will vote for them good. -- again. Will there be

problems with this. There's always a row with boundary changes?

think for the Conservatives and Labour there's likely to be less

problem than for the liberals. Both have a tradition of people moving

to different areas. The liberals don't have that They're often

locally based with deep roots in the community. Have or appear to

have. There are few examples of liberals successfully moving from

one constituency to another. that a worry? We have to consider

this is based on a massive misapprehension that the

Conservative Party thought this would be to their advantage and it

won't really be. It won't? Labour Party feared they would lose

hugely from this and they won't particularly either. That only

leaves you. If the Tories aren't to make great gains and Labour isn't

going to make great losses, that leaves you, of the national parties.

Almost all constituencies will be changed by this review. That will

change things for a lot of MPs much it's not just the Liberal Democrats.

A lot of people will ask why have all this change for no political

reason. Everyone looks at self interest. The reason for the

changes are the national interest. Is it better that this country has

600 monies in the House of Commons rather than 650? Yes. Will the

costs go down? Yes. If MPs are selected and then elected will we

behave bet sner yes. If we will still have 600 monies at the end

this, plus about 800 and counting in the Lords, last time I looked

the Senate had 100 members in the United States and the House of

Representatives is 430, something like that. 435 and. Yes and that's

a continent of 350 million people. They have state legislatures as

well. We have Belfast, Edinburgh and Cardiff so far. Yeah, I think

this could have gone more radically than the intention. 435 US members

of the House, 100 senators. Look at the House of Lords, stuffed tot

gulls. You can't fit them all in. I would have been, although it's

politically impossible, I would have been more radical. We have to

leave it there. You're not on the chicken run this time, are you?

don't dispute your expression before, I would look at it more

kindly. It was called that because to get a new seat they had to take

lots and lots of chicken dinners. You're not in the unelected part,

it doesn't bother. It does bother you. I meant personally. They're