20/03/2012 Daily Politics

Afternoon folks, and welcome to the Daily Politics. There's more

fevered speculation over the contents of George Osborne's budget.

The Daily Politics understands we can expect a change in the 50p rate

of tax and plans to raise the tax free allowance to �10,000 earlier

than first promised. We'll bring you all the details.

The top team in both the Liberal Democrats and the Conservatives all

seem happy with the Budget, but what do their MPs think? We'll get

the thoughts of two backbenchers. Both the Chancellor and Shadow

Chancellor had lots to talk about this morning as they waited for the

Queen's Address to Parliament. We'll bring you highlights of the

speech. And the NHS bill could finally clear all it's

parliamentary stages this evening, but what actual difference will the

bill make to patients? We'll speak to a health minister. All that in

the next hour, and joining us for the first part of the programme, we

have two wise men. I'm afraid BBC cutbacks meant we couldn't afford

three. The former Scottish Secretary Michel Forsyth and former

employment minister Jim Knight, welcome to the show. Earlier today,

as part of her Diamond Jubilee celebrations, the Queen addressed

both Houses of Parliament. To mark the occasion, the Queen was

presented with a specially- commissioned stained glass window,

donated by members of both Houses. Here are some highlights of the

Apology for the loss of subtitles for 44 seconds

You have become too many of us a kaleidoscope Queen of a

kaleidoscope country in a Since my accession I have been a

regular visitor to the Palace of Westminster, and that the last

count have had the pleasurable duty of treating with 12 prime ministers.

During these years as your Queen, the support of my family has,

across the generations, been at beyond measure. Prince Philip is, I

believe, well known for declining Compliments of any kind. But

throughout he has been a constant And the highlights from this

morning, a very grand occasion. Michael Forsyth, they understand

you were there. Describe the atmosphere. We have seen the

pictures of Westminster Hall, the oldest part of the Palace of

Westminster and it did look amazing. I sat there thinking this is the

same place that Queens were tried, and you have a sense of history,

and then the Queen arrives and addresses were given by the Lords

and Commons, but in her address she made some very pertinent points in

a subtle way about the importance of continuity. It was the best

argument I could think of for not having the presidency. It brought

everyone together. No one was sure when to end the applause. We wanted

to keep applauding but we were interrupted by the Speaker

presenting a petition. It was interesting to see all former prime

ministers, she mentioned that she has presided over 12, familiar old

faces there as well. Nice to see some of the old faces. These are

occasions that we do well in this country. The Queen is certainly a

class act and has it really well. That sits well with how well we do

big state occasions, and the jamboree and pomp and ceremony.

sign of her retiring any time soon. She said she would read dedicate

herself to the service of the great country and its people and in the

years to come, she is 86. That was the best bit of the speech. An

affirmation of the importance of monarchy as an institution which

continues. There is no question of her abdicating at any stage. I

think that is essential to the whole nature of the office. There

is a lot to be said for having an apolitical head of state. She does

that really well. I think the nation is very happy if she wants

to carry on and will be delighted with the message she gave today.

And a special tribute to Prince Philip who has not been well over

the last few months, but interesting to hear her make

special reference to him at a personal level. In some ways we

have an affection for Prince Philip, for all of his gaffes for as much

as his good behaviour, but she values him as a lifelong partner

and pays tribute to the support he gives her, and quite right she

should do so. What was he on about, the kaleidoscope Queen and the

kaleidoscope country, a kaleidoscope Commonwealth? What was

that about? I have no idea. But when the Queen said we have had

many changes over the is the one thing has remained the same, the a

foul of the arms services, she was underlining the importance of

continuity as well as change -- the about service of the armed forces.

So what did it actually mean? The Lords and the Commons have no idea

Well, in just over 24 hours' time, George Osborne will emerge from

Number 11 Downing Street with his red box to deliver his third Budget,

although you have to wonder whether he needs to as most of what's going

to be in it has already been leaked. One journalist asked the Prime

Minister if there was anything but hadn't been leaked in the Budget,

and he just smiled. There will be new measures on tax and spending on

the margins, but there budget will be fiscally neutral, in other words

they will be no overall boost to the economy. But then maybe things

are looking up a little bit anyway? Behind the door at Number 11 there

have probably been a couple of late nights as the Chancellor and his

aides put the final touches to the Budget. But what is the broader

economic picture? This morning we've had some good news on

inflation, which fell from 3.6% in January to 3.4% in February. There

might also be some good news on growth tomorrow. In the autumn

statement last November, the OBR forecast that growth this year

would be 0.7%. According to the Financial Times that figure will be

revised slightly upwards to 0.8%. The slight upturn in growth means

there could also be some better news on borrowing. In November,

borrowing was expected to be around �127 billion for this financial

year. But some reports suggest it could be more like �120 billion.

The slight improvement in the economic landscape gives the

Chancellor a bit more wriggle room. With that in mind, the Daily

Politics understands tomorrow's Budget will be dominated by two

major announcements. Firstly, the tax-free allowance before income

tax kicks in will be increased more quickly than the Coalition

agreement currently envisages, reaching �10,000 in April 2014, a

Secondly, the top rate of income tax will be cut from 50p to 45p,

but not until April 2013. Joining me now is Simon Hayes, chief UK

economist at Barclays Capital. Give us your reaction to the inflation

figures first of all. The inflation figures were mildly encouraging but

the fact is the fall in inflation was less than we expected to say,

and this is a concern that we have for the rest of the year. It is

important inflation falls as households were squeezed last year

and there was a week pay growth which accounts for the weakness in

the economy we saw last year but there are things like higher oil

prices and higher commodity prices meaning inflation might not fall as

fast and as much as we hoped this year. So you do not think it will

reach the target being put forward for the end of the year to, much

further down? If the Bank of England expects it to fall below

the 2% target by the end of the year and we expect it will fall

closer to the target but remain above that level of 2%. That should

provide some support for households as there is less of a squeeze but

the boost will not be as strong as some forecasters expected. What

about borrowing? The indication is that the Chancellor's figures might

be slightly better and the mind after borrow quite as much. No one

wants to talk about green shoots, but does it indicate a slight

upturn? Fighting the way to characterise it is that the

situation doesn't look as bad -- I think the way to characterise it.

Last November in the last three months of last year the economy

actually contracted. The early indications are in the first

quarter of the year we will see some return to growth although the

euro area is in recession, so there are difficulties ahead. The bad

news we were factoring into forecasts at the end of last year

maybe isn't quite so bad, as it stands now. Simon Hayes, thank you.

Let's see what our guests make of the current economic situation.

Whether the OBR thinks growth will be 0.7 or 0.8% is neither here nor

there. The Financial Times's splash on that I thought was April Fool's

Day. The idea that anybody knows by one percentage point, a 10th of a

percentage point is irrelevant. Growth will be in Munich and

inflation is still high at 3.5% and unemployment is forecast to stay at

2.7 million. It is still grim. agree. The fundamental problem is

that the government is spending too much, about half of what the entire

Earl of -- country produces. While it continues at that level it is

hard to see how good levels of growth can be obtained, because

growth is created by small and medium-sized businesses selling

goods and services competitively. If there is a huge tax burden upon

them and regulation it is hard for them to do so. That there is no

great change in the Government's strategy, as it won't cut tax.

Every cut will be balanced by a tax increase or a spending cut, so it

is fiscally neutral. Even in the tax changes it makes it is not

planning any transformational tax changes that would give a new lease

of life to the businesses you speak of. I agree with you. When we were

in opposition and I did the tax commission for George, his manager

was a lower, fairer, flatter taxes and stability. -- is mantra. I do

not know if they're going to do anything about pension relief.

understanding is not. Well, that is a big step forward, because it is

important to have stability in an area like long-term saving and

pensions. But is it fair that at a time when we are all in this

together that the vast bulk of pension tax relief should go to

those on higher incomes? What we want to do is encourage people to

save and encourage investment. can still save �50,000 a year.

face-saver less there will be less money available for investment and

less money all round. That if you can put �50,000 in your pension pot,

if you can afford it, but the wealthy can and deducted. You can

get tax relief but only at the basic rate. The problem is his if

government keep changing the rules. Gordon Brown started it with the

tax on dividend income as for pension funds. If they keep

changing the rules people will not pass to be -- will not have faith

in what has to be a long-term stable environment and they will

not put money into pensions which is bad for investment. The Labour

critique is obviously different. It is cutting too fast and too deep,

we have heard that many times, and on the face of it should be popular

because you are trying to spread the pain out over more time, but

some Labour columnists say that more than one senior figure is said

to have met Ed Miliband privately to air concerns about Labour's

dwindling credibility on the economy. Why's that? We have to

continue to focus on the problem of jobs and growth. Two years ago when

George Osborne went into Number 11 we had growth returning to the

economy and unemployment was coming down, and his policy failed. Yes,

there are areas where we need to cut spending, but the principal

problem is a lack of income coming into the Treasury, Prince of lust

and the City and we need to grow that again. -- principally lost

from the city. We need to see growth from small and medium-sized

businesses but with the Merlin initiative to lend more money to

small and medium-size enterprises has not worked. Hold on, it met the

targets. It was only 1 billion less for small businesses. He let it hit

74 billion rather than 74 billion - - and the 5 billion, and if the

government hit those targets, we would be away at the races.

would be, but they are failing every step of the way. George's

policies are not delivering the growth and the growth he needs in

terms of revenue coming into the Exchequer to reduce the deficit.

Over the five-year cycle, his borrowing will be about �120

billion more than the predicted. For the problem of the critique is

that when it comes to spending but -- cuts, the massive cuts made so

far are affecting the economy are actually almost no different from

the size of the cuts that Alastair Darling proposed. So it could be

that the early growth you had was really a dead cat bounce, as many

economies came out of that they all I believe we need some short-term

stimulus, that is what we did in 2009, 10 to get the economy growing

again, to get people off benefit into work, paying taxes rather than

receiving benefits. That is good for redice -- reducing the deficit.

Over the medium to long-term we reduce the overall spendling

figures so we can get into balance over that period. The Liberal

Democrat, if the Daily Politics the right and we will move to the

10,000 threshold before you pay tax by 2014. My understanding is what

is already in the pipeline will stay for this year, and for 2013

own the current target they wouldn't hit it until 2015 so they

will double up at 2014. I know the Liberal Democrat also dine out on

that and say we did that, we did that, but your report on tax, it

recommend the same thing, so how come your party is -- party is

allowing the Liberal Democrats to get the credit. I don't know. To be

fair, our report also said that it was important to cut the marginal

rates of tax because that has a more dynamic effect. That is

difficult to sell. One option top story the Chancellor would be to

raise the thresholds on the top rate of tax which I would favour.

What are you calling the top rate of tax. The 50 pence. When your

report came out it was 40 pence. was. You wanted to cut that. Indeed.

Shows you how times have changed. When George became Shadow

Chancellor he was in a favour of a fat tax. That is when he was

talking about sharing the proceeds of growth. I thought that is great,

everybody can pay 20 percent. I don't think that is what they meant.

Labour has a problem here, it is a, given the mess Gordon Brown made of

the 10% band, denying that there was any impact on poorer people,

when the rest of his party including backbenchers said it was,

taking people out of tax is a popular thing to do. It is, but,

the lessen from Gordon's mistake is you have to be careful about

announcing thins in a hurry and think you will get away with it T

Government is seeing with the work tax credit change, this April f you

are earning less than �17,500 a year and working you will lose �70

a week. I understand that. But that wasn't what, it is an important

point, not the point I asked about. My point was it is going to be

difficult for Labour to oppose going to a situation where the

first 10,000 of your income isn't taxed. Of course. We have to make

sure that it pays people to get into work, and the lowest earners

gain the most. That is why we think there are fairness issues attached

to cutting the top issue of tax. Even if it meant there was nor

revenue and you could do more. think the jury is out on that one,

we will have to wait. Before we move on, can we agree, although the

headline impact if we when you take, increase the threshold when you

start paying tax is to take a lot of very low wage earners out of tax

all together, the vast bull of course the billions this cause go

to middle income earners. It is not a secret but maybe a hidden tax cut

for middle income. That is why I prefer the tax credit subpoena, we

will be replaced by the use versele credit. I support what the

Government is doing on that, but they have to be careful how they

introduce it. Maybe a Liberal Democrat conspiracy to get tax cuts

to the middle because that is who vote for them. I think that I think

the leader of the opposition was right when he talked about the

squeezed middle. People are finding it hard, if they are not within the

benefit system, and they are subject to pressure. I mean the

fundamental problem is that Government is spending too much,

and borrowing too much. There is only one way to deal with that, and

that is to reduce the amount that Government takes. It is not growing

enough either. That is because the Government is spending too much.

There is a circular here. Let us leave that as an unbroken circular.

We will let these hang on the table and people can make up their own

minds. If you are the Chancellor, keeping your own MPs happy with

your budget plans is hard enough, but having to keep someone else's

happy is an almost impossible task, there have been reports of tense

meetings between the Quad of Nick Clegg and Danny Alexander and David

Cameron and George Osborne on the other. As the two side try to

thrash out a deal. While the party hierarchies might be satisfys what

about the backbenchers ch joins me is John Pugh from the Liberal

Democrats and Matthew Hancock from the Conservatives. Welcome to both

of you. John Pugh, can I start with you, how will you and your

colleagues feel if the 50 pence top rate of tax is scrapped, without

meeting your party's key demand for a mansion tax? We lock at the

budget in the round and we will consider what the overall effect is.

If the broader shoulders bear the most, we can reconcile ourself to

any individual detail in the budget. There is a drive on our part to

make sure the rich pay more, and hopefully that will be fulfiled by

the budget. Would you like to see a mansion tax on the well hi thi in

return for the scrapping of that top rate of tax? There are

difficulttys with the mansion tax, one advantage is the rich can't

hide their mansions, Lord Oakeshott said trying to tax the rich is like

trying to nail jelly to a wall. The one thing they can't disstkpwies

where they live and the man sthains live in. Taxing that is an idea one

has to look at. I would be prepared to consider a tycoon tax. It don't

look as if mansion tax is going to happen. So a promise to clampdown

as every politician promises to do on tax avoidance, is that enough to

get the superrich to pay their fair share? I don't think we can accept

hard wired changes in the budget that make life easier for the rich

and some promise we will clampdown on tax avoidance as a counter

balance to that. We look for centre measures to make sure that people

pay their proper level of taxation. A cut for the biggest earners will

send a message we are not all in this together? Let us see what is

in the budget. Very much agree with what John said, in terms of taking

the budget in the round, and it being, no, and this is an important

point, and it being a budget for working families there is very

strong Conservative support for raising the tax threshold, that is

something Conservatives tat last election campaigned for, Liberal

Democrats campaigned for it too, and it is something that so far has

started to be delivered, so this is something where actually it, I

think it is the Government acting together and dare I say it in the

national interest, rather than looking at... The Liberal Democrats

are very much claim this as a Liberal Democrat initiative they

have had to almost put upon whether it is true or not on to George

Osborne, so you don't agree that it is a Liberal Democrat initiative,

this raising the threshold? it's a Government policy at the end

of this Parliament, when the... will be judged on Government

policies. We will be judged on the coalition gith Government and you

will have whatever is announced tomorrow, you will have a

Conservative Chancellor announcing it. It is not like the

Conservatives can distance themselvess from a huge and

positive and beneficial policy like taking millions of people out of

tax. So it is huge and beneficial, hugely beneficial, but the

Institute for Fiscal Studies say if it is raised to 10,000 by 2014, the

point at which you start paying tax, will it cost the Exchequer �6.5

billion a year, now changes to date they say have cost �5 billion a

year, is that the best use of all that money? Certainly making sure

work pays, and especially reducing very strongly the marginal rates of

those earning sx, seven, 8,000 a years mostly part-time worker, the

majority women, improving the, how much you take home from that is a

big step forward economically, as well as money in people's pockets.

John Pugh, doesn't it help people further up the income scale more

than it does those people at the bottom end, and of course it is not

as progressive as for example you might argue tax credits? I think

tax credits were overblown in the sense they went to people who I

think shouldn't have been getting them in the first place. This

measure is not perfect. No measure is perfect. What we can be assured

of is it will be good for the economy. You do admit it helps

people further up the income scale more. That is self evident.

Although raising the tax threshold as oppose to a cut in the basic

rate gives the same amount of benefit to everybody, which is the

proportion of your income is bigger the further down the income scale

you are, so, you know it is the people who are taken out of tax all

together that as a proportion of their take home pay get the biggest

advantage. Do you agree the policy on child benefit is anti-family and

anti-success? The anomaly has to be dealt with and the Prime Minister

is, has said that, you know, a number of times, but, I do think

that it is important that people earning small amounts, and on low

incomes, aren't paying tax, to give benefits to the very well-off. I

think that is an important principle, in terms of child

benefit, and it is one that obviously has to be, you know, the

government's promised to deal with, and the question of how you make

the policy work we will find out tomorrow. OK. We will indeed. Thank

you. We are joined now be Dick Newby. Welcome to the Daily

Politics. Thanks to the Liberal Democrats, this whole budget

process has leaked like a colander, great for journalist, not sure the

Treasury Shapy, but has it worked as a strategy to get you away?

Budgets have leaked over recent years I seem to remember Gordon

Brown was a dab hand at leaking. wouldn't even tell the Prime

Minister what was in the budget. told the Sunday Times very often I

seem to remember. You may come to regret saying that. Has the

strategy worked? I think in terms of Liberal Democrat priorities for

the budget it is obvious the key thing we wanted to do was

accelerate the raising of the tax, income tax threshold which looks as

if it is going to happen. information is rather than

happening, getting to 10,000 by 2015 it looks like he will go and

get there now by doubling up in 2014 and he hits it then, a year

before the election. Will that satisfy you? That is a very good

move, for the reasons you have been discussing. Will you, the Liberal

Democrats be taking credit for that? Well, it is a policy that we

have been pushing very hard, but we as part of the Government will be

taking credit. The Government will take credit because the Government

has done it. You won't take credit in the sense if the Liberal

Democrats had not been in this coalition this would not have

happened. We will say this is one of the things happened partly

because we put hard for it. What do you say Michael Forsyth? I saw the

lowering of the threshold is important because it helps people

who are paying the highest marginal rates, people on low incomes can

find 95% of what they earn disappearing. That is the substance

for doing it. What I am saying are the Liberal Democrats right to be

cake -- taking the credit for this? I think they have supported this

policy nce. It is a policy we enunciated in opposition, and they,

they have embarked, think irresponsibly in the budget process

by making arguments in public, and trying to show they are different.

I think their best chance of survival at the next election is by

seen to be part of a team. Nothing the Government has done couldn't

have been done without the Liberal Democrats. So privatising police

forced, the break up of the National Health service all the

things they try and deny are the fault of the Liberal Democrats as

much as the Tories. Can we stick to the budget, because it is tomorrow

and we have done these issues before and we will come back to

this before. What, well, hold on irresponsible? I don't think it is

irresponsible. I think in a coalition the way you do Government

is different in a single party Government. Part of that is having

more arguments in the open, between the different parts of the

coalition. I think it helps the electorate understand what is going

on. Every discussion is leaked to the newspapers, people won't have

discussions. I don't think people could say there haven't been Frank

discussion. But they have been in public. I follow European politics

closely f you look at the coalition Governments in Germany or Sweden,

to take two gamles, you don't see, they don't have single budget

statements but they have economic policy announcements and all the

lobbying, all the argument within the coalition is done behind closed

door, it is not done in this public way, which you, the Liberal

Democrats have made. Well, I think that, we are getting used to

running a coalition, I think that the way that Nick has done it,

Vince has talked about other tax policies, is a grown up way of

doing it. The old budget procedure in the UK was undually secretive.

What do you make, it is changed days from Gordon Brown: I regret

the end of collective cabinet responsibility. It is a sign of

insecurity from the Liberal Democrats, that they see their

popularity dwindling away so they want to be defining their

difference from the Tories. So you want to talk about the politics, so

let me remind you there are 2.7 million people unployed in this

country, under a Conservative led coalition, average wages are rising

by 1.5%, prices by over 3.4, higher on those prices ofs we all have to

buy, so living standards are being squeezed like mad, there is almost

no growth in the economy, and the latest poll shows the Conservatives

3% ahead of Labour. What has gone We have had a spate of opinion

polls that have put us ahead. George Osborne once told me that he

expected by the spring of 2012 to beat 15 up to 20 points behind.

What happened? I think the period during the leadership election

allowed George Osborne and his conservative friends to land the

argument that this was all the legacy of a Labour government, but

the reality of course was because of a global financial crisis, in

the same way that George says some of his problems are because of the

euro crisis. You can't have it both ways. He me he was too stupid to

understand the truth. I just Vicky has to accessibly landed the

argument and it has stuck in people's mind -- I just think he

has successfully landed the argument. When will we see the sun

lit up plans that Mr Cameron is talking about? The when the

government reduces the tax burden and makes it easier to employ

people. So not in your lifetime? live in hope. We are talking about

income tax, and no one is begetting an important part of taxation which

is National Insurance and the cost of employing people there, you can

raise the threshold and take people out of tax but they will still have

to pay National Insurance. Would you support a cut in National

Insurance to encourage younger people to be taken on by small

businesses? I would support a cut in income tax or national insurance

because I think the government is spending too much and is creating a

sclerosis in the economy. That is one at a five-hour a five-point

plan for job growth. Just remind you that the Chancellor in the

autumn Budget statement did float the idea of getting rid of the

pretence that national insurance is attacked by another way and merging

the two together. Would that capture the Lib Dem imagination?

sounds a technical thing, but virtually no one understands or

national insurance is. -- what a National insurances. It is the bit

of income tax we are told not to think of as income tax.

challenge for all the parties is, if suddenly, what is seen as the

headline rate of income tax increases hugely then this is a

political challenge to explain it. It is a communications challenge,

even though it makes sense in terms of the tax system. It would be a

disaster if it was made explicit just how much the government was

taking. Is that a good idea, do you think? I can't argue with it. They

are being transparent about what government is doing. That is to out

of five, almost! -- two out of five. Gentlemen, thank you very much for

being with us and we will see what the Chancellor delivers tomorrow.

George Osborne is a busy man and would be, and you think the day

before the Budget he would be putting the finishing touches to

his speech or maybe having a rehearsal. But this morning the

Chancellor has been promoting the Government's credit easing scheme.

The plans will see �20 billion worth of taxpayers' money to

guarantee funding for UK banks, provided the money is lent to small

businesses. Here is what Mr Osborne had to say. This is all about the

government helping small businesses in Britain to get cheaper loans,

helping them to expand and hire more people and create jobs and we

are using a good reputation that the government has got in the world

by getting control of our debts and passing on the low interest rates

we can borrow money at to small businesses around Britain so they

can create jobs. Let's get some more details on this with Robert

Peston. Robert, is this credit easing scheme going to do what

George Osborne would like it to do? It will certainly get marginally

cheaper loans out to small businesses. Small businesses who

apply for the subsidised loans that will be made available by the Royal

Bank of Scotland, Santander, Lloyds, Barclays and some small specialist

lenders. They will get loans at about one percentage point lower

rate than they would normally have to pay. In the first batch of loans

going out, that would represent �50 million worth of subsidies to small

businesses, and over the course of the two years where the �20 billion

of loans will probably be made available if all goes to plan, that

is a �200 million annual subsidy for small businesses. If you are a

small business struggling against some difficult economic conditions,

getting a subsidy of that sort of scale, that is not trivial. It is

quite useful. But will it actually lead to a big stimulus for growth

in that sense? It is far too early to make that kind of calculation.

I'd be surprised if it was a massive stimulus to growth but it

could turn out to be useful. It could be useful in two ways. There

are lots of businesses out there who believe that the banks have

almost shut up shop when it comes to lending to them and in a sense

this is quite allow at first that the banks have got this money and

that the government is looking at them to make sure that they provide

it. That said, one of the things that many of the critics of the

banks would say is that they have become to the risk averse. As you

know, in the boom years, up to the great crash of 2007/08, the banks

took crazy, reckless risks and now people will say they have gone in

the other direction. They are too prudent, not prepared to take

enough of a chance on young, growing businesses. But nothing

that the Chancellor has announced will encourage the banks to take

additional risks. So the kind of businesses that may have lots of

potential but are in their early years and have risks, they are not

going to get the money and they won't be helped by this. Robert,

I am pleased to say joining us for the rest of the shote is the Co of

Ariadne capital, and also Mike Cherry from the Federation of Small

businesses. We are having taxpayer subsidise loans to small businesses.

How will that work. I think it will help certain businesses. It is

certainly not going to help access to finance. The government says it

will put up 20 billion. It may well be putting up �20 billion but it is

only a very, very small amount when you look at the 1% decreasing costs

of any loan that the business applies for and succeeds in getting.

Is it worth the candle or not worth the candle? It is an initiative to

be welcomed at this stage but it is not going to produce tremendous

results overnight and we need to be looking at other forms of

alternative finance. Such as what? Peer-to-peer lending. What does

that mean in English? Business to business lending. There needs to be

equity finance for small businesses and all of these need to be better

promoted than they are at the mind. A Julie, what do you make of it?

There are companies which are peer- to-peer lenders. That is nothing to

do with the government. No, but they are good development. The new

programme is a signal and it shines a spotlight that this is what the

government intends to happen, and whether it is Santander with 200

new bank managers or Barclays who say they are loading every minute,

who knows whether the statistics are measurable. But the point is it

shines a spotlight and says this is a signal that the government

intends for small businesses to be backed and it is a national

imperative to get the capital up to the companies. Santander is only up

for 500 million of this. That is peanuts to them. That is why I

mentioned Berkeley's as well. These banks are unable to escape the

spotlight that the government is shining -- Barclays Bank. But the

government is shining two contradictory spotlight on them.

The government and international institutions have been forced far

higher capital reserve targets on bank balance sheets. You have to

keep a lot more cash and the near cash in the form of low risk assets

on your balance sheets. That limits the amount of money that banks can

lend because of government action. So the government, having done that,

it comes to the other door and says you're not lending enough, so we

will subsidise your loans. What is the point? The problem you have got

is that you have the reserve ratios, and there is no doubt that our

feeling is that will restrict the amount of money that the banks are

able to lend. I think what this does give is a message that the

banks need to be looking more closely at how they support small

businesses, but also we would very much like the report to be adopted

in full tomorrow by the Chancellor and the recommendations that came

out on Friday. And this is the problem with government action. It

moves one way to inhibit lending, and many things we better do

something and rather than easing up on the reserve criteria, it says we

will find another way of using taxpayers' money to subsidise it.

They're always unintended consequences. The more that the

government acts in business there are always an intending --

unintended consequences. You have two contradictory things, increase

your balance sheet, but lend more. But we cannot go back. All I'm

saying is that it is an important signal to educate society to the

role of those small and medium terms enterprises. The growth, jobs

and wealth in the economy comes from those guys, not big business.

What would you like to see in the Budget tomorrow? If you have the

Chancellor sitting here and there was one thing to say to him that

would make a difference to the SMEs, putting aside income tax or

fairness issues, but as a businesswoman, what would you

saying? In terms of a high-growth technology enabled start-ups, the

ones that will create the future semiconductors, the future internet

businesses, make it frictionless. Strip out any kind of tax. It is

the largest fixed cost the business have until their prop Tau, which

could be five years down the line, but it is such a small amount of

money to the Treasury but is the biggest fixed cost. Eliminate that

in the first couple of years and let the companies grow into

billion-pound giants. At the point that they are able to pay large

amounts of National Insurance that is fine, but let's create the

Giants first. Wait until they are the big guys. Those sort of

companies are the ones that will not get those subsidies. They are

not going to take the risk. That is right. A high risk companies you

are talking about, they will not get the loans. They won't qualify,

and most people don't understand that if you are created a future

tax, these companies at the beginning they might only have

�10,000 worth of National Insurance, but that is a lot of money at the

beginning and almost nothing to the Treasury. We would certainly like

some reduction in National Insurance contributions, but we

would also like the government to seriously look at putting in a

proper structure for the medium term around the idea of a Small

Business Administration. OK, we will leave it there. We are going

to hold you hostage, but we will release you. There are rumblings of

independence north of the border, claims that the parliament is too

distant and out of touch and a threat to go it alone. But I'm not

talking about Scotland, I'm talking about the Shetland and Orkney

islands. The two Liberal Democrat members of the Scottish Parliament

for the region have submitted a report to the UK government's

consultation on Scotland's future suggesting the Northern Isles could

be given more powers. And this could mean the oil-rich islands

take control of the revenue from North Sea Oil. One of those MSPs,

Liam McArthur joins us now from Edinburgh, and Angus MacNeil from

Let me guess Edinburgh first. What is you have in mind? -- let me go

to Edinburgh first. What we set out in the submission to the

consultation is, in a sense, a view that whatever Scotland decides

whether the referendum takes place that the distinct and different

views of the islanders need to be reflected in that. We are realistic

and understanding that in terms of votes the views of those in

Shetland and Orkney aren't necessarily aren't going to tilt

anything one while the other, but then he's to be a focus from all

sides including the one the first miniature -- Minister has placed on

the future of energy resources. Therefore we need to use that

influence to have, as we said in the paper, as much of a bearing on

the future power and control that we have in Orkney and Shetland.

I just clarify what one of the options is? He's one that it

Scotland votes to become independent, but that the Shetland

Isles and Orkney actually voted to stay part of the United Kingdom,

that these islands should have the Our view this debate needs to

happen over the course of not just the duration of the UK Government...

Do you think they should have that option? That option needs to be one

that is laid open to them. I hope that Scotland votes now in the

referendum. Even if it does, I think even if Scotland remains a

part of the UK, I think there is an opportunity here for Orkney and

Shetland to set out very clearly the extent of new powers they wish

to see. Let us not forget when the Scotland Act that brought into

being the Scottish Parliament was signed, special consideration was

given to the needs of islanders not just Orkney and Shetland but that

represented by Angus. Can I ask you too, would you like to see, even if

Scotland voted to stay part of the United Kingdom, you would like to

see the islands negotiate a new settlement with Edinburgh and

London? What I was going on the say Andrew, over the course of

devolution, what we have seen is that the safeguards put in to the

Scotland Act have been eroded over time they reflected by the

Government policies and attitudes, and what we have seen in the last

two or three years is more of a centralisation of power, back in to

Edinburgh, into Inverness, and that runs contrary to the spirit of the

Scotland Act. Let me bring in Angus McNeill. If Scotland votes to go

independent, but the island.En. Which I will, but the islands vote

not to, they street stay part of the UK should they have that option.

1997 we saw Orkney voted for a Scottish Parliament. We are talking

about the tug boats have have been moved from tear. They say it is

null and void, it is the first they have heard from the MSPs. I am not

asking what the convener o the Shetland lands is saying, I am

asking you on a point of principle, if the islands voted to stay part

of the UK, while the rest of Scotland voted to go independent,

would an independent Scotland allow them that right, to stay part of

the UK? Scotland is a nation, that includes all part, that are joined

in 1472. I would throibg see within Scotland... So you wouldn't.

Absolutely... You would not give them, so the OK anys and Shetlands

under an independent Scotland would not have the option of going

independent, or joining with the rest of UK? From a Hebridean

situation, we see the need for uses of service on the mainland. It is...

Not talking about the Hebrides. I know you represent them. I I am

asking you whether if people from the Shetland and OK anys wish to

stay part of the United Kingdom you would allow them to do so. If there

is a big enough drive for self determination that would have for

considered. Would you allow them to do so. That would have to be

considered. People voted for a Scottish Parliament, and if Liam

mechanic arthur, the point s we have seen this idea, the leader of

OK anyand Shetland... In the OK anyand Shetland stayed part of the

UK, how much oil would stay with them? I mean, I think what we are

seeing here a fair fraction of oil. A lot of fraction that is an island

group that have the highest fuel prices in the UK. If the Orkneys

and Shetland decided to stay part of the UK, your whole economic case

collapses. Absolutely not. You are wrong, you are absolutely wrong.

Really? When you look at countries the size ot Scotland without oil

you sigh them thriving. You could have a great future. So Scotland is

going to become a tax haven. Scotland can do loads of things.

And make watches. Good luck to you. Am I missing something, I am far

away from these things, if you live in the Shetland lands you think

Edinburgh is far away, never mind London what do you make of what Mr

McNeill is saying? I think the outgoing convener of Shetland would

have something to say about the suggestion they were to become a

sort of Canton. All we have said, is in relation, in... If you could

sum up your point, we running out of time. We have started to debate,

there is plenty of time, perhaps we would argue too much time for in

debate to take place over the next couple of year, the distinct

approach of the people in Orkney and Shetland is the way they see

their future, it needs to be reflected in this debate. That is

what we have kick-started I hope. We need to leave it there. It is

time I paid another visit to the Orkney and Shetland lands. It has

been a long time. Do you have any idea what they are talking about.

It is like family. We all want to kiss our family goodbye, and yet we

somehow know we are stronger together, right. We will see. He

doesn't think so. I think the Scotland is better with the

Shetland lands, the OK anys. you recognise that tie. I have seen

other people wear it. That is it for that bit. We will move on. Now,

they have another two years of this! The Government's

controversial bill to radically reform the NHS in England is within

touching distance of being passed into law. It was well over a year

ago that the bill was introduced to Parliament and since then there

have been nearly 2,000 amendments agree. A pause for more

consultation and a lot of bitter feeling between MPs. Was it worth

it? We will ask the Health Minister Simon burn what is changes patients

can expect to see once the bill is passed. First here is David

Thompson. It is never dull being Health Secretary. You go for a

quiet walk down Whitehall and before you know it you are the

poster boy for radical change in the NHS. If being slagged off by

medics and campaign groups was an Olympic sport Andrew Lansley would

be going for gold. The Health Secretary insists his plans to

reform the NHS in England will lead to greater efficiency, more choice

and a bigger say for patients. Critic says it will be the end of

the health service as we know it. Will you and I notice any

difference? Having ruled out another top down reorganisations of

the NHS before the election, David Cameron and Andrew Lansley

announced wholesale reform shortly afterwards. The devil's in the

detail but very broadly speaking will it work? Immediately patients

will notice very little difference in the reforms. Most care will

continue to be provided in the same I was it is today, the real issue

in our view is not the change, it is the funding of the Health

Service over the next four to six years, there will be no more money

in the Health Service, other than to allow for inflation. That means

there will be big pressure on doctors and hospitals to maintain

short waiting times to improve the quality of patient care. It will be

a miracle if they can do that and undertake these huge structural

changes in the bill at the same time. There is no privatisation,

people will not be charged. Then there is the P word. Privatisation,

opponents claim this is about injecting the profit motive into

patient care. But is it? expectation is the private sector

will play a bigger part over the next four or five years but to talk

of wholesale privatisation of the NHS is scaremongering, I don't

think in five years' time the private sector role will be more

than a small minority of the care that is provided to NHS patients.

The political pressure got so intense last year the Government

announced a pause in the process, that did lead to concessions, a

bigger say for patient u Health Secretary to be held response for

delivering a service, but most professional bodies remain opposed.

So who is right? I believe David Cameron Nick Clegg and lance when

they say they want to retain the founding principles of the health

vir to make it better. The problem is the reforms are going too far

and too fast in our view, the Government would have been better

advices to go down the route of evolution not revolution and

building on the great success we have seen in the last decade.

if you think this is all over bar the shouting, think again. There is

much more controversy to come, even when the bill get tons statute book.

We are seeing the hard process of making the legislation work in

practise, and what that means is the Health Service will be in the

headlines right through this Parliament and beyond, will

continue to hear stories about patient care, because it is an

issue that matters hugely to the public as well as the staff working

in the NHS. Simon Burns is with us now. After listening exercise, 48

days of debate on the bill and almost 2,000 amendments agreed, are

you convinced this is a better bill than you started off with? I think

we have improved it through the listening exercise where the

independent future forum came one a number of recommendations, and we

accepted all the core once, and through the discussions we have had

with people interested in the health economy, with Liberal

Democrat cross bench and Conservative and even Labour peers,

they have come up with ideas which have, to my mind, improved and

strengthened the legislation. then lends itself to saying the

bill wasn't right, it wouldn't have worked and if you had gone down the

road as was said of evolution, it might not have been such a painful

process. I think with all legislation, it studied as you know

in committee in the commons and the Lords, and that is the area where

one works, to improve legislation. Yes, but this was different. Isn't

it because it is the NHS, that the Government has been talking about

here, the sacrosanct in so many people's minds there has been so

much division and debate and argument over it, and that perhaps

you didn't quite foresee that when you started out? What I didn't

foresee was certain individuals and groups trying to politicise the

issue and turn it into a political football, and even on the

amendments you are talking about and there are a large number, 7 a 6

were changing the name. What will patients see what will be

different? What will be different is there will tht be the day-to-day

political micro management from Whitehall, of the NHS, what we will

see is doctors taking control of commissioning care for their

patients, we will see cutting back on bureaucracy, partly through the

bill but also through the quip programme, so that the money that

is saved can be reinvested in the NHS. Will patient, when they go

most people go to the GP, will they see anything different. Nothing

will really change for them will it? It will. We are increasing the

choice patient also have. At the moment they have had the choice of

which provider they can use. There will be the choice of which

consultant they can use, in time the choice possibly of making it

easier for choice of GP. They will be empowered with more information

about what is going on in their local hospitals, in the local NHS,

so they can see how they can exercise that choice, if they wish

to do so. Politically though, you worried now, as some people have

predicted that anything that goes wrong in the NHS, anything from

sort of GP to hospital level, will all come back to what you have done

to the NHS via this bill, that politically it will damage you?

have no doubt that some politicians, and others, will seek to try and do

that, to score political points, but the fact is, I believe that

what the Will -- bill is doing in liberates the NHS, giving greater

freedoms to clinicians and concentrating on improving outcomes

and commissioning of patient also see the NHS strengthen and improve,

and we are already seeing over the last year or so, that the

performance indicators are stable and doing rather well. Do you agree

Julie that, people who have said that the whole idea of

privatisation and too much competition will be damaging has

been scaremongering and is overblown? Yes, two points to build

on something that Simon said, not only is choice a good thing, we

should reject the concept that anything can come like ten

commandments from on high and never be changed and they are set in

stone. There has to be a process, first of all, doctors who are

extremely educated people are probably the best people to know

how to deliver great care, right, and so if doctors want, maybe local

GPs will implement things you asked about how does this affect the

patient, maybe he will target certain ways of delivering care

through iPads, I don't know what, the doctor knows how to do that.

Thank you very much. Thank you both of you. That is it for today but