21/10/2011 Daily Politics

Afternoon, folks. Welcome to the Daily Politics, which is now going

to be presented by me on a Friday. So please don't switch off.

Celebrations on the streets of Tripoli as a tyrant is slain but

what does the future hold in a post-Gaddafi Libya? It is crunch

time for the Eurozone but Germany and France have already postponed

the crunch from Sunday's summit to another one on Wednesday? We'll be

asking Shadow Chancellor Ed Balls how he would tackle the problem.

They'd keep sterling, the BBC and the British Army. It's been called

Independence Lite but will the And with me today are Janan Ganesh

of the Economist and Vincent Moss of the Sunday Mirror. Welcome to

the programme. There are new and disturbing images this morning and

we have decided not to show them. It seems that he was captured alive

and could have been deliberately executed. The transitional council

is claiming he died in a firefight. This will matter little to the

people of Libya. They are celebrating after 42 years of

despotic rule. There are big questions about whether the

National Transitional cancer can establish a stable government. --

National Transitional Council. To Philip Hammond was asked about this

this morning. There is some optimism that can be achieved. It

is a relatively wealthy country. There is some oil. The Libyan

people have shown restraint over the past few months. Most people

who have been to Tripoli in particular have been complimentary

about the way that life has returned, quite significantly, to

normal in areas of the country that were liberated. There is reason for

optimism. We will be looking to provide any assistance we can to

the NTC and in showing that transition is smooth. Are you as

optimistic as the new Defence Secretary? I think it is less bleak

than it was in Iraq in 2003. It will be less compulsive. It poses a

huge risk. It is a political risk for David Cameron. He has gone

through an extraordinary journey. In January he was worst place than

any other Western leader. -- placed. He has been criticised. I think he

was unfairly criticised for pursuing narrow, British, economic

interest. That is a legitimate part of foreign policy. He has gone from

that position in January of being seen as too dry and cynical in his

foreign-policy to where he is now - being seen as one Western leader

who is ahead of the curve. Potentially a year from now, he

will be presiding over at a distance the more chaotic picture.

At the moment I are more sanguine about Libya and Iraq and

Afghanistan. -- I am more sanguine. He never quite know where things

will go. He will probably say it is worth the risk. It is. This is the

simplest part. It is about controlling the people and unifying

them into a military that works under civilian control. Just hope

that you can build the nation. is very tribal. There was a talk of

a lot of Al-Qaeda based in Libya and there is a Muslim Brotherhood.

It is not necessarily plain sailing, is it? That is the prospect of

political risk. At the moment David Cameron will be quite happy. So

will other members of the British political scene. That is not just

his victory. It is a victory for William Hague. His basic appetite

for the job was being questioned. Did he ever find his major?

seems to have. A year ago, there were questions as to whether he

would remain in the job for much longer. Does it give them an

appetite to do something else? is always the risk. There is no

doubt that David Cameron took the risk. It could have been disastrous

for him. He has problems with the economy and with his backbenchers

on Europe. I expect that Liam Fox hopes that he had been around for

another seven days to have overseen S. I expect the dictator's Union is

feeling a bit fragile, after seeing what happened to Saddam Hussein and

Colonel Gaddafi. There were European Union flags being shown in

Tripoli last night as Libyans celebrated the key role European

nations played in the over broke of Colonel Gaddafi. The flag-waving in

Europe has been a lot more muted. The eurozone crisis now unfurled at

the summit of European leaders in Brussels on Sunday. This was meant

to be the big weekend for Nicolas Sarkozy and Angela Merkel -

Europe's odd couple. They have to patch up their differences over

expanding the euro rescue fund and dealing with Greek debt if there is

to be any chance of a plan emerging. The E F S S has got 440 billion

euros capacity. The bail out cake will have to be enlarged if it is

to do with the growing threat to Europe's banks and even to big

economies like Italy and Spain. Nicolas Sarkozy and Angela Merkel

disagree over how much it should be expanded by and in what way. The

French want to turn the fund into a bank that can offer of two trillion

Euros of its own loans. The Germans, who feel they have to pick up the

tab, would prefer the fund to act as an insurer - with the trillion

Euros of eurozone debts. Nicolas Sarkozy is resisting pressure from

Angela Merkel to cut Greek debt. He feels that such a move would hit

French banks hard. They have a lot of that debt and billions in bank

capital -- bank recapitalisation and it would threaten their credit

rating. The differences between France and Germany are still so

great, after all these talks, there will have to be another summer -

not on Sunday - that will go ahead but on Wednesday to try to get an

agreement. Will any plan make a difference if Greece cannot deliver

on its austerity programme? Ireland also had to push through spending

cuts and tax rises. Things seem to be going a little better over there.

Our correspondent is in Dublin. The Irish are beginning to see a little

light at the end of the tunnel and it is not an oncoming train. Yes,

Andrew. You are philosophical. If you want to find out about stoicism,

instead of going to Athens, come to Dublin. They are what the Financial

Times's Court -- called the role- model for austerity. They are

getting on with it. They have seen taxes increase and pay packets

reduce. In spite of all of that, with unemployment now over 14%,

they are not riots in the streets. There is a small protest near the

Central Bank but nothing on the scale we are seeing certainly

increase or other cities across Europe. They are getting on with it

because the economy is growing, because of exports. They hope to

return to the markets and borrow like other company -- countries

within a year or so. Is there a feeling among voters that there is

a sense that maybe they could be through the worst? A long way to go.

Maybe the worst is over and there is some growth coming into the

economy. Yes, certainly there has been growth in terms of exports.

They are concerned about the world economy affecting that. There has

been growth in the domestic economy but it has been squeezed. Whether

people think things will get better or not, I'm sure. There is a Budget

coming in December. The Government is debating whether they cut

something like 3.6or 4.4 bn euro out of public spending. Yesterday

they had their homework marked by the troika, the EU and the IMF.

They said Ireland was doing very well. The nuances of what they were

saying was that they were suggesting that Ireland could ease

up a bit. They are concerned they could engender the revolution on

the streets we have seen in other parts of the world. We will have to

come over and see. Thank you for being with us today. Instead of

going to Dublin will join from Sheffield by Ed Balls. Welcome to

the Daily Politics. If you were heading for the Brussels summit

this weekend, what would you be advising our European partners to

do? I think there are three things you need. You need a plan, critical

agreement for the plant and it has to work. None of those things are

in place. There is not a plan, the politics is very divided and no

decisions can be made. I fear the danger is the plan will not be the

right one. You have to say to the European Central Bank, you have to

do whatever it takes to show Italy and Spain will be supported by the

collective in the eurozone. The quid pro quo has to be that in

Italy there has to be a clear political deficit reduction plan.

You will not have stability unless you say collectively we are going

to stand by each other in the eurozone for now and that means a

very substantial commitment to inject billions and billions of

pounds of resources, if necessary. Without that the markets will doubt

whether or not there is a real political commitment to hold this

together. That is where the contagion, the tensions, low growth

and market worries come from. There also has to be a commitment to a

balanced plan. If you tried to go too quickly, it does not work. In

Ireland, as we were just hearing, they have cut VAT recently

temporarily. There is a debate about moving to a more balanced

plan. Unemployment is high. Markets are not lending yet to Ireland.

Navigating your way through is very difficult. The need to have

political agreement and a plan for jobs and the economy. Without that

you cannot make progress. No one is following your advice. They are

cutting the deficit much more quickly than we are cutting hours.

The Germans and French are also cutting their deficits. You seem to

be a lone voice. No one else seems to want these policies. The deficit

will be reduced more quickly. You're just hearing troika saying

to the Irish, you may need to ease off and move to a more balanced

plan. What you have to do is have a credible plan for the deficit. It

has to be one that works. If you have flat lining growth and

unemployment is rising, the market is saying it is not working and the

debt will be going up rather than dam. Borrowing is under pressure.

In Italy, with the level of debts they have - twice as high as ours

plus high interest rates - debt gets worse. You need those plans.

If you say you will do it with austerity, that will not work. The

other part of the problem is you have to have collective political

commitment in the eurozone. Until France and Germany can reach a deal,

I have to say David Cameron - in my view - should have been in Berlin

and Paris this week saying to people in the interests of Europe

and Britain, get this sorted out. He has been stuck in an internal

party wrangle. You are a lone voice in theirs. You are in isolation.

Angela Merkel does not agree. She wants to cut the deficit at a

higher rate. Even the French Socialist candidate wants to cut

the deficit. Who agrees with you? When we see the chaos of the summit

not reaching agreement, you are saying I should be following a pass

being prescribed by Angela Merkel. I'm not saying you are wrong. You

are right. It has happened before. He agrees with you? That would be

quite a punt to take. The eurozone is going into what is the biggest

political crisis of our lifetimes. It is incredibly dangerous.

Austerity is not working. The ECB is mooted. There is no way of

standing behind Italy. In Britain, we have a deficit plan and we have

a political agreement to deliver it. It is the wrong plan because it is

going too fast. In need to look at an employment and growth. The idea

you can look at the eurozone and said Britain would be better to

follow their plan, good grief! asked a much simpler question that

people can follow. It seems your position is that Ed Balls is right

and everyone else is wrong. Angela Merkel does not agree with you and

nor does Nicolas Sarkozy. The Spanish do not agree with you. The

Irish do not agree with you. The French socialists do not agree with

you. I simply ask again, who does agree with you? We did not join the

euro, Andrew, what a good decision that was! You have taken credit

endlessly for that. It seems to me, as I say again, you may be right or

you may be wrong. As you sit in Sheffield, you are an isolated

figure in the European debate. Sometimes you have to have the

strength to make an argument which is right. And the outside the

consensus. A year ago, I said if we cut the deficit in Britain this

fast it would be bad for Britain. The Conservative Party and many

commentators said we would get growth, unemployment would come

down and borrowing would come down. There has been a year of flat

lining and markets a doubting whether Britain will get the growth

we need. It looks weathered the optimists of the year ago have got

it wrong. In Britain we have to change course and Europe needs to

change course as well. Austerity and a lack of political direction

are not working. Let's assume that Ed Balls is right and the rest of

the world is wrong. Let me ask you on this. It would seem to me, and

you're right about the failure of leadership in Europe. It has been

kicked into touch again. It would seem that, in the longer term, the

only way the have to go is to break up the eurozone and take out the

weaker members so you have an optimum currency area in the north

or you have, as the British government is proposing, a much

stronger fiscal union with transfer payments and eurozone economic

I personally think that you can make a larger monetary union work

across an optimal currency area, plus if you have got the political

commitments. The problem is, Italy is probably OK if it gets its

deficit sorted out, but the others have got to stand by the Italians

and that is not working. I am for political integration, and I am for

the things which need to be done to make that happen. The problem this

weekend is that the French and Germans cannot face up to that. Our

government is sitting in London not doing the diplomacy we should be

doing and it is going to end up with jobs and investment lost in

Britain because what happens in the Eurozone matters. I understand that

but if you, like the Government, are urging deeper fiscal unions for

the Eurozone countries with massive transfer payments and an economic

policy for the Eurozone, by definition that redefines our

relationship with Europe. It would then change. We would face a 17

country bloc, which would out vote us on every major issue. Wouldn't

we then have to change our relationship but the logic of your

policy and Mr Osborne's policy was followed through? The logic of the

Monetary Union is deeper fiscal integration. Of course that means

that that changes over time and Britain has to deal with that. The

thing I find worrying about the Conservatives is they seem to think

that the only way to sort out Europe and a relationship with

Europe is essentially for Britain to walk away. That is so defeatist.

That is not government policy. is the view of very many

Conservative MPs who will be rebelling next week. It is pretty

much what George Osborne hen sat in the House of Commons. He should be

leading the arguments through Europe, not walking away. The

single market, the labour market, financial services matter across

the whole EU area, not just the Eurozone. Us not being in those

debates is incredibly dangerous. Stay with us. Let me get some

reaction from our guests. If we are urging the Europeans to do what we

would not do ourselves, doesn't that changed our relationship over

time with Europe? I think a 17 country core Eurozone area would

effectively be the European Union. That would set the terms of

economic and fiscal policy and even business regulatory policy for the

European Union as a whole. You can imagine in the longer term, British

membership coming into question. Its interests would diverge from

the core. Ed Balls is right. The ultimate solution to the Euro

crisis is some kind of fiscal harmony. That will not happen for a

long time. It will not involve us. And it would be very difficult for

the existing Euro countries to get there. What is your take on it?

think people are very depressed by the lack of political leadership.

People need unity of purpose and they're not getting that. It does

not reassure the markets. The think the British could make a

difference? I think people would listen if the Conservative Party

were not split down the middle. We have the potential for 100 Tory MPs

rebelling on Monday. And quite a few Labour MPs. It is a bad message.

It echoes the lack of political leadership. It is an issue that

will, on Monday. It is not a party political point, but I would like

to come back to what I have said. It seems to me that if the Eurozone

goes down the route of fiscal integration and economic harmony,

and we are not part of that, whatever British politicians say,

that will enforce a redefinition of our relationship with the EU. Can I

get a final reaction to that? is right. It is a challenge for our

generation but I have to say, millions of jobs and investment in

our country depends upon hour access to that wider market.

that is all covered by WTO rules. You also know that the integration

of financial services and the single market goes way beyond the

WTO. We are negotiating that at the moment and Britain is not punching

its weight. Margaret Thatcher, Gordon Brown, John Major, all of

them would have been demanding to be at the summit, getting it sorted

out. David Cameron has walked away. That is not in our national

interests. We have to shape the debate so we keep investments in

Britain. Ed Balls, thank you very much... SNP politicians at their

conference in Inverness this weekend are, as usual, considering

the wisdom of being part of the UK. They have a spring in their step

now. Their manifesto promised a referendum but now there is top of

another action, independence light -- to Independence Lite, or

devolution max, it depends what direction you are coming at it from.

Still no word on when a debate -- a referendum might be held. John

Sweeney joins me. Before I get on to Independence Lite, can ask you,

your administration has been boasting about how you plan B is

doing better than Mr Osborne's first plan. The Scottish economy,

however, is flat lining as bad as the British economy. The Scottish

economy delivered as much growth in the second quarter as the UK

economy. The growth is modest. The decisive difference is the fact

that unemployment in Scotland is lower than the rest of the UK and

employment levels are higher. 0.2%, almost nothing. State

spending is bigger in Scotland. Before the people that are affected

by being in employment and not being in employment, it matters a

great deal. It is a consequence of the way we have used our investment,

particularly capital investment, to support the future of Scotland.

What concerns me about the UK Government's approach is that they

have reduced capital expenditure in Scotland by 36%. That is a direct

threat to economic recovery. That is why I have boosted capital

spending programmes with the flexibility and already have access

to, to him -- to support employment and growth. If everything is so

great, why is life expectancy widening between Scotland and

England? That is in certain parts of Scotland. It is an issue in

certain parts, and it is about long-term health issues connected

with alcohol and tobacco and poor standards of living. The Scottish

Government is taking measures, such as minimum pricing of argol, to

interrupt the fact that it is deemed acceptable for us to flood

the market with very cheap alcohol, which has damaging consequences for

individuals, and that is why we are trying to tackle that and encourage

people to lead a healthier lifestyle and take more modest

approaches towards alcohol and tobacco consumption. There is a

public health agenda we need to put forward, an integral part of our

economic approach. Good luck with that. B&Q of independence, I know

that has galvanised the conference. -- the issue of independence. Why

not just have your referendum now? Are you what we would call just a

bit feartie? Which I would translate as a chap who was a bit

frightened. I did not need any translation, but I'm glad you gave

that translation. What we set in May is that we would have a

referendum in the latter stages of the parliament. We sometimes get

this from people like yourself, why did you not stick to that things

that you said, why do you not all right you commitments? That is

precisely what we will do. Give us a date for the referendum. When

will it be? Later in the parliament. When? Later in the parliament.

When? It will be later in the parliament. When? We will specify

the date. A will you do it on the anniversary of Blackburn? That

would be a really great decision for a forward-looking country, to

have an independence debate on the anniversary of a medieval battle.

If that is your interesting suggestion, we will consider it.

And you have not. Do you think I came up the Clyde on a banana boat?

We will have our referendum in the latter part of the parliament,

exactly when we said it would be. The one technical point you did not

mention is that our manifesto was endorsed by about 45% of the

electorate in Scotland. It gave us a majority in parliament for the

first time. That is a mandate that I think people in the UK Government

should begin to respect. But you will not give us the debate. Is

this Independence Lite, or devolution max? There would be no

Scottish army under this, correct? I think the concept of another

option short of independence, hear me out, that has got to be fully

defined by those who would argue for that proposition. The Scottish

Government, in our proposals, set out how a model of this could look.

You're right, defence would be an issue reserved to the United

Kingdom under that had a model, but it is for those who advocate the

concept of strengthened powers for Scotland within the United Kingdom,

short of independence, to define that proposition. The Scottish

Government will engage constructively with an increasing

number of people who argue for that approach. In five seconds, you are

still going for the Full Monty? going for the Full Monty. Separate

army, seat in the United Nations, the rest of it? I want Scotland to

be in a position to be a progressive country that is moving

forward, generating wealth and can take its own decisions. For me,

that means independence. Scottish independence now

unstoppable? I don't think it is likely. What you will see in the

next few years is a deliberate attempt by the SNP to drive a wedge

between Edinburgh and London by highlighting issues such as NHS

reform and slow-growth. We have run out of time but thank you for being

with us. That is off raw this week. We will be back on Monday for more