10/07/2012 Daily Politics

Hello and welcome to the Daily Politics. And the finger-pointing

continues. Labour call on George Osborne to apologise for claiming

that Ed Balls was involved in the bank-rate fixing scandal. A Tory MP

agrees. But William Hague says the Chancellor has nothing to apologise

for. So who's right? Nick Clegg's dreams of an elected

Upper Chamber are in doubt as MPs prepare to vote on the Deputy PM's

cunning plan. We've got the latest on the parliamentary manouverings.

Conservative backbenchers demand the government takes back powers

from the EU. We'll hear from one of them.

And David Cameron rolls out the red carpet for French President

Francois Hollande. But will a slap- up meal and a cosy chat in Downing

Street make up for the PM's decision not to meet the socialist

candidate last time he was in town? All that in the next hour. And with

me for the whole programme today is the former Conservative Chancellor,

Norman Lamont. Welcome to the Daily Politics. Let's kick off with the

suggestion from the Conservative backbencher Nick Boles that the

Government should consider cutting things like winter fuel payments

and free bus passes for well-off pensioners. Mr Boles - tipped by

many as a future Government minister - put forward the idea in

a speech this morning. Is that something you would agree with him

on? It is very difficult politics, it would meet a lot of opposition,

but I do agree with it and I myself have been eligible for the winter

fuel allowance for quite some time. I have only taken it for two years.

And a bus pass? Yes, I do have one, which I do use, but I don't think I

should. Do you think it was a mistake for David Cameron to rule

it out? I was watching on television the other night an

audience of pensioners and when this was put to them there was

complete unanimity - we have paid our taxes, but actually it isn't

rational or entirely fair. Do you think it should be part of the

calculations post 2015, presumably because it would be too difficult

now for David Cameron to go back on his word? I don't think it can be

done in the short term, I doubt if the coalition would agree to it,

but we are talking about means testing and it would mean poorer

pensioners would still get the hell. If as you say, politically very

dangerous territory, particularly for a Conservative-led government

one might argue if they win a majority next time? That's right.

The problem is that once you give the benefit it is extremely

difficult to take it away. Should George Osborne apologise to Ed

Balls? The answer depends on who you talk to. Labour say yes, as

does the Conservative backbencher Andrea Leadsom. Allies of the

Chancellor say no, that he's got nothing to apologise for. What's

the row all about? It's the allegation George Osborne made in

an interview with the Spectator magazine that Ed Balls was clearly

involved in discussions about reducing the LIBOR interbank

lending interest rate. Yesterday, the Bank Of England's deputy

governor Paul Tucker was given the chance to give his side of the

story. Did Jeremy Hewitt or any other person encourage you to lean

on Berkeley's or and the other bank? At a looming not. To do any

government minister encourage you to lean on Berkeley's or any other

bank to lower the LIBOR submissions? At a moving not. --

absolutely not. If I may add one thing, what's more, I don't think I

spoke to the treaty throughout this period at all. Did Ed Balls ask you

to lean on a bank, or any other government minister? No, No. Last

night, Andrea Leadsom, a Conservative MP, was asked whether

she thought George Osborne should apologise for his allegations about

Ed Balls. Yes, I do. Obviously he made a mistake and he should

apologise but it was a very valid discussion at the time about who

knew what and it is now being completely squashed by Paul Tucker.

It is a valid conversation to have hard, and now at a personal level

he probably would want to apologise. We've been joined by Labour's

Shadow Business Minister Pat McFadden. I am pleased to be here

but I am not the shadow business minister. You were once? Old habits

die hard. Should he say sorry to Ed Balls? We can spend time chasing

the Chancellor but he should reflect and the government should

reflect on the way they conducted themselves in the last week. These

were serious issues. Barclay's put out this information which was

intended to have given the impression they were meant on in

some way by the Bank of England to change the LIBOR raids. In the

evidence from Paul Tucker we are clear that no official from the

last government asked him to lean on Berkeley's. The whole impression

there was some government jiggery- pokery from the last government

going on has been completely squashed. Am I taking from that

that he should apologise to Ed Balls? He has certainly been wrong.

I specifically asked Paul Tucker about Ed Balls and his denial was

as emphatic as any other minister, and this reflects on the Chancellor

because rather than focusing on the issues in banking he has chased a

political hair and tried to make a political point. But so have you by

asking him to apologise. He it has backfired because it has not been

borne out by the testimony. What do you say to that, Norman Lamont?

didn't much like the scenes in the House of Commons last week and I

didn't think they reflected very well on Parliament. If there is an

allegation Ed Balls intervened, it doesn't stand up. There is an

allegation between a minister, if he or she were to say to a bank

there is a public policy reason we would like rates to be lower, that

is different from making private gain out of misleading information.

It might be legitimate for ministers to intervene, but the

evidence is that they didn't even do that. We will come on to that,

because as you say there might be real reasons for the government to

talk to banks at the time of the crash. On the basis of that,

wouldn't draw a line under this whole saga if the Chancellor just

said "I'm sorry". I think possibly he did overplay his hand and I

didn't like the atmosphere in the House of Commons. This is a very

serious issue and I think it is very clear ministers did not

intervene in any improper way. Judge -- George Osborne said

ministers had questions to answer, which is not quite the same thing.

Yes, and various and ambiguity as to who precisely was referring to.

As in all these things it is a question of connecting two

sentences. Do ministers have questions to answer? Labour

presided over that whole culture. Whether ministers were involved or

not, and Paul Tucker has said they weren't, are there other questions

to answer about what went on? phrase "questions to answer" Has

been thrown about in a desperate way to leave an -- and nasty smell

in the air. There was a world of difference between legitimate

policy concerns and what we were talking about with Paul Tucker. Was

liquidity getting back into the market? These are legitimate

questions. That is a world away from the allegations made. On that

basis, it has not been proven so far if the government intends to

pursue it. Let's talk about government ministers or civil

servants in the Treasury talking to Barclays and the Bank of England

because they were concerned about the lending rate. Wouldn't you

expect them to be doing that at that time? There was concern

because the Barclay's rate seemed to be an out runner and they were

worried it would illustrate or prove to be the case that Barclays

could not fund itself. That is what ministers were worried about.

it look to some people suspicious that those conversations and e-

mails were going backwards and forwards to find ways of bringing

rate -- LIBOR down. Does this come close to crossing the line? It is a

difficult issue. Ministers might for example with a floating

exchange rate say whether they wanted it up or down. LIBOR is used

for contract as well, and it is both a policy and regulatory issue,

it is very complex. Why haven't Labour, out more strongly in terms

of making the case that this is what ministers at the time were

doing, these are legitimate concerns and they require that sort

of correspondence to go on? I think they have. They have said they had

concerns about liquidity in the market. The Jeremy Heywood e-mails

you refer to our about policy. They are about we have put this scheme

in place, why hasn't it had the effect we thought it would? They

are legitimate concerns. There are legitimate policy concerns, and

there is telling a bank to do something dishonest - they're very

different things and the second did not happen. It is difficult when

the public can't listen to transcripts... He is an educated

man who knows very different. you have the text of an e-mail, is

there an implication not that they are trying to manipulate but

finding ways to bring it down? There is no need for any confusion.

Confusion here is deliberate. Of course people wanted liquidity in

the markets, they wanted a policy package, but that is very different

from any indication to a bank that they should do something dishonest.

Norman Lamont, are you pleased Bob Diamond won't be taking most of his

bonus? Yes, although I think most people will be astonished that he

gets any bonus. We have got to be very careful with this whole debate,

how we conduct ourselves in the future. Undoubtedly this was a

scandal, there was wrong doing, but we must not flagellate ourselves so

much that would discredit the whole UK banking system in perpetuity.

There were things that have to be put right, but we have got to

remember that you can't just banish the banking system and have growth

in our economy. You have got to be pragmatic about this. It is an

important industry but what has been brought out through the

regulators reports is that there is a cultural problem in that bank

which has seen this and other regulatory breaches, and what I

would want to see it is evidence that the bank takes its cultural

problem seriously and changes the culture to restore trust. A group

of Conservative MPs have published a "shopping list of requirements"

today on what powers they want the UK to take back from the European

Union. The Fresh Start project includes Conservative MPs such as

Andrea Leadsom, George Eustice, and Chris-Heaton-Harris. Amongst other

policies on their lengthy list of possible renegotiations, they think

Britain should insist on a veto for EU financial services regulation or

perhaps push for regionalisation of the Common Fisheries Policy. They

suggest stopping the use of the Strasbourg seat of the European

Parliament, and allowing Member States to impose an income

threshold on immigrants from other EU countries. The MPs float the

prospect of withholding contributions to European

development funds if they are not reformed, and they think there

should be radical reform of the Common Agricultural Policy. We have

been joined by one of the Conservative MPs who wrote the

report, just in the nick of time. Can I start with you, George

Eustace. I have had a brief look at the things you would like

repatriated. You offer a series of options - green, amber and red -

but the red options would have to be withdrawal entirely, do you

I do not agree. This is a green paper, there are a lot of different

proposals in there. We are saying, this is setting out a series of

alternatives. Some of them do not require any negotiation with the EU,

some of them would require some renegotiation. And the red options

are areas where Britain could, if it wanted, take unilateral action.

It would technically put us in breach of some of the EU treaties.

That in itself would become a catalyst for renegotiation.

Somewhere, we have to cut this Gordian knot, where people say it

is impossible to renegotiate with the EU, what if they say no? The

answer to that is not to say, therefore we will leave and give up,

the answer is to say, we will take action through Parliament to

unilaterally set aside certain areas, to bring them to the table

and encourage them to negotiate. I think there are a lot of potential

for us to make many changes. Some examples, like withdrawing from the

Common Fisheries Policy - make is that an Indian itself, or is it a

negotiating tool to get a whole range of things for you? I think

the Common Fisheries Policy is a good example where the Government,

through negotiation, has made some sterling progress over the last

nine months. If the commission put through what is currently proposed,

we're actually going to have a repatriation of fisheries policy in

all but name, and you will have groups of national governments

taking their own decisions. What makes you think you will get what

you want? If it had been that easy, one presumes these things would

have been done by now. Is it not the case that Britain does not have

partners with whom it can negotiate in the EU, because of what has gone

on over the last year or so, they will just say no? No, the case is

that nobody has actually tried to renegotiate yet. Not only this

government, but in the last 10 years, we had a Labour government

which wanted to continue to hand powers over. I agree with a lot of

what you're saying, but one important thing is that our

relationship with the European Union is changing, and the nature

of the eurozone is changing. It is becoming much more integrated and

will become more so, and those changes require Britain's agreement.

We have got to wait until those things come forward, and when that

happens, we have a chance to say, we want a different relationship

with Europe, because that relationship is going to be

different, come what may. How long do you think that would mean

waiting? I think it would be wise to wait before doing most of the

things which George is suggesting. This will happen in time, but I

think the Prime Minister is right, that the idea of a referendum now

long would be completely wrong. But a referendum in which there were

three options, in a few years' time, would be the right course. Are you

prepared to wait to? Absolutely, I am prepared to wait. A referendum

would come at the end of the process, not at the beginning. I

think there are some things we can do in the short term. But I accept

that a lot of things we will need to get in our manifesto, to do the

more fundamental renegotiation after the next general election.

some extent, they are taking over your territory here, if they are

promising not just Tory MPs to be part of this group, but also the

Government, to renegotiate, to repatriate powers, at the end of

which there may be the prospect of a referendum, what has UKIP got to

offer? The poles say that people want a yes or no question, as

simple as that. The point I would like to make would be that many of

the things you are talking about would require unanimity. You would

have to get 26 member states to agree to them. It is cloud-cuckoo-

land. This is a set-up job to try to kick this into the long grass.

No, that is nonsense. I reject this defeatist idea. But how do you get

over unanimity? The point is that even if you left the EU, you would

have to renegotiate some kind of re-entry to that single market.

Norway accepts 75% of the laws which come from the EU, but has no

say on their formulation. So we have better negotiate from inside

rather than from outside. Norman Lamont is saying, we have a stick

with which to threaten the EU, in terms of getting what Britain would

like. It says clearly, I have got it in front of me, this article of

the Lisbon Treaty says renegotiation can only happen after

we have handed over control. So, you're doing it the wrong way round.

We should have the referendum first, then we start the negotiation, not

the other way around. How much of a chance do you think the Government

house of repatriating powers? Norman Lamont is saying, we could

use the threat of not agreeing to close the fiscal union for the rest

of the EU? I have got some time for Norman Lamont's point. It is

absolute cloud-cuckoo-land to think that at the moment, we can pick and

choose what we want from the European Union. The unanimity rule,

and other rules, will stop that process. It is a two-way process.

When Ted Heath joined the European Union, whatever it was called then,

Fisheries was something he gave away for New Zealand Agriculture.

It is give-and-take. So, they will want things from us. If they do

move towards fiscal union, if they do, then you will see the fact that

there will be negotiation by Britain about its relationship with

that union. I would hope that at some stage we will join that, I

don't think we can live as an offshore island indefinitely. Our

job is to keep the economy up with the Germans and the North Sea

economies, otherwise we will sink into the Mediterranean abyss.

do you say to that? When we joined the European Community, back in

1972, it made up 30% of global trade. It is now 15% and shrinking.

We should be tying ourselves to an area closer to home, not to the

slowest growing economic bloc in the world. The more there is no

firm promise of a referendum, do you not think it is driving people

into the arms of UKIP? Not at all. We need to prepare for that

renegotiation. This paper is about starting that detailed heavy

lifting work. It is very lazy just to talk about having a referendum.

What we really need to do is to work out the kind of relationship

we want with the European Union. As Norman Lamont said, things are

changing, there is a fork in the road. Whether or not some countries

leave the euro, or whether or not they integrate further, it is going

to be forcing change, and we should be there, ready with proposals..

But do you accept what this might mean in terms of relationships with

France and Germany, that it will make those more difficult, even

with the threat of what might happen in terms of closer fiscal

union? Britain would be seen very much to be on the outside? I think

heads of government are grown-up people, they know that Britain,

culturally and historically, has never been an enthusiastic entity

in favour of integration. They know that. They accept that. Britain is

very important to the European Union in certain areas, like

foreign policy, for example, what happened with Libya, though it was

not strictly speaking an EU thing. They know very well that Britain

has a special position and a special attitude. I think they

understand that perfectly well. terms of the plan that you're

putting forward, it is no different to David Cameron's, is it? It is in

terms of saying that there are things right can do right now. They

have started on some of the coalition commitments, and I think

it is highly likely that they will exercise the opt-out from the

justice and home affairs laws. And I think they have done well to

safeguard our interests when it comes to things like the budget,

where they have pressed for a freeze. And the Government are also

examining the regulatory cost, the cost on the economy, and this is a

very important point, that the burden of regulation ought actually

to be quantified, so that we know what the cost of membership is.

Essentially, the Government cannot agree on any development in

relation to the European Union. We have got a range of opt-outs, and I

think the relationship, and I do not agree with Norman Lamont on

this, I think the relationship is getting worse. We are having this

debate, the eurozone are having a debate about whether they are going

to be able to continue or not, but I think that for Britain to raise

this question is a bit like, I mean, William Hague's analysis that the

euro is a house on fire with no exit doors, and if there is a house

on fire, we are arguing about some boundary fences down the bottom of

the garden. We are not saying we should disrupt the process and a --

disrupt the process now. We are saying that once they come up with

some proposals for fiscal union, which will be some years away, that

is the point at which you put your demands on the table. We have

waited 37 years, if you're under 54, you have not had a vote on this.

What we originally voted on was for trade, but it has now turned into

the embryo of a European superstate. What we are actually saying is, why

did this house catch fire? Let's make sure it does not catch fire

again. But you have been calling for closer union. We are actually

calling for the EU to go in a different direction. All of these

proposals are about taking back some powers from the European Union.

We talk about disagreements between Britain and the EU, but there are

plenty of disagreements within the EU. The relationship between

Germany and France, the relationship between Germany and

Greece and Ireland, for example. Do not get so obsessed about our

relationship. You will have more time to talk, but I'm going to say

goodbye to George Eustice, so, thank you very much. It was the

year that Windsor Castle burned down, bill Clinton was elected in

the United States, and the UK suffered its worst-ever financial

crisis until, this one. Norman Lamont brought Britain out of the

exchange rate mechanism, and arguably any chance of joining the

euro when it came. Giles Dilnot has been finding out why Lord Lamont

might feel that in the end he did the UK a big favour. A decade ago,

it launched at midnight on New Year's Day.

NEWSREADER: In Athens, where history dominates the skyline...

With irony like that, it is no surprise Euro-sceptics have often

suggested that Europe has been living with a hangover ever since.

Why? Because they fully believe the euro was not an idea that went

wrong, it was an idea that was wrong. Imagine if we said that

every motorist driving in Britain had to drive their car using

exactly the same gear at the same time, it would be ridiculous. Some

would be stalling, some would be driving too fast, some would be

ending up in the ditch, yet that is pretty much how monetary union

works, it says that the dear settings within each economy, the

interest rates, have to be set at the same rate. So countries like

Ireland, they overheated and stalled, other countries which

could have done with higher interest rates could not get them.

Having a single interest rate for all of Europe was inevitably going

to end in recession and disaster. So, why, if it was so clearly silly,

would Europe have embraced such an economically flawed plan? I think a

single European state is what has been in the process of construction

since the 1950s. The euro was an extension of that. It can be made

to succeed. Unfortunately, or fortunately perhaps, it cannot

succeed with all of the current members. It is perhaps no surprise

that having stood on the abyss, Lord Lamont, who had to announce

mechanism, is no great believer in the euro. But should he accept a

bit of blame? I think another problem with the eurozone project

is that it tried for too long to make it possible for Britain to be

a member. For a long time, the British dangled a bit of ankle,

saying we might join, we might not, and I think that process retarded

the political integration within the eurozone, which might have

meant that it would not have been facing the same problems today. I

think we are much more likely to see a eurozone in which Germany

sends money every year to weaker parts of the eurozone to raise

their growth. We are much less likely to see one in which Germany

agrees to guarantee everybody's debts. We need to admit that the

grand designs of the elite are colliding with reality. It is

coming into collision with the laws of maths, and so we will always

come off second best. The sooner we recognise that and unwind the

position we are in, the better for John Monks, the Labour peer is here,

Aziz and Norman Lamont. If it wasn't for Black Wednesday, do you

think we would be signed up to the euro? No, I don't. Membership did

not imply it was a glide path towards the euro. Nigel Lawson was

a strong opponent of the euro. I have always been against the euro,

but I think Britain's exit from the currency arrangement with the euro

might think strengthened public opinion against the euro and I

actually think the whole event was overblown economically. But

politically its consequence was to harden opposition against the euro.

Do you agree with that? It has certainly hard and some of position,

but most will be to illuminated our problems since the Second World War

in particular, witches that our economy does not keep pace in

productivity terms with Germany and the other North Sea neighbouring

countries, the Nordic countries. We have to devalue periodically -

Norman was in charge during a major problem. Was it built on a false

premise because people don't have economies that move at the same

time? They is may be true, but if there was no euro now and we are

hit by this financial crisis, the currencies would be going up and

down all over the place. Can you run a single market on that basis

of massive currency valuations? Just after Black Wednesday, the

French did think about putting import controls on some British

goods because of the British devaluation and people will start

responding. It is not an easy option, not having the single

currency. How would countries have responded if we had had separate

economies? A trade would go on, and I don't believe the single market

requires a single currency. I don't think there was any real evidence

that exchange rate fluctuations inhibit trade. If you look at where

trade is growing fastest in the world, in the Far East between

Asian countries, all of whom have separate currencies. I don't

believe that currency fluctuation... I think they are a necessary means

of adjustment. If you had national currencies in the last five years,

what has happened in the eurozone would have been a lot happier.

that basis, if you think it was ill-conceived from the start, this

idea of a single currency, was it that or was at that it didn't have

the political union following it? few had a European state, the

European government, and fiscal transfers automatically every year,

then it might work. You would still have the problem of differential

inflation rates and productivity rates, which is at the bottom - at

the heart of the problem. The fact that southern Europe can't compete

with Germany. Do you think Germany needs to bail out those countries

in order to bring the imbalances closer together? That logic will

not be followed. Because Germany doesn't want to do it? Exactly.

a not shell, what has Europe done for the working man here? Europe

was always about healing the scars of the 20th century and the world

wars, and that is what the ever- closer union phrase was about as

well. I think Europe has brought prosperity and peace to a large

part of Europe. Those hearts outside to the east have not done

so well and it has brought democracy to countries which didn't

have it before, so don't knock Europe. There is a danger many in

Britain will throw everything out of the window. I think it is

ludicrous to do that. Our interests are with our neighbours. I would

like to be in the North Sea Premier League rather than the

Mediterranean Second Division, but at the moment we are in danger of

being in the second division. you would like Great Britain to

join the euro at some stage? And you would like to be in northern

Europe? That is where we have got to be. Our destination is to get

into those countries that can compete and do well with the rest

of the world rather than relying on quantitative easing, all of which

are about debasing the currency. Thank you.

We can show you some live pictures of the visit from the French

President, Francois Hollande. He is in London today, his first visit to

the UK since he was elected two months ago. We can see live

pictures now of Monsieur Hollande being given a Guard of Honour in

the quadrangle of the Foreign Office buildings in Whitehall. He's

then due to have lunch with the Prime Minister, followed by a press

conference in the Downing Street State Dining Room and an audience

with the Queen at Windsor Castle. Francois Hollande last visited

London in February during the presidential election campaign. At

the time David Cameron refused to meet him and Ed Miliband treated

the socialist candidate to roast beef in the House of Commons

instead. Last month David Cameron said he would roll out the red

carpet for wealthy French people who wanted to move to the UK to

escape a planned 75% tax rate for top earners. Ralph joke was not

appreciated in Paris, I seem to remember. We've been joined by the

French journalist Agnes Poirier. Is it ill-fated, this meeting? It is

the first one. Frankly David Cameron should have received him

when it was quite clear for months he would be elected. So you think

he snubbed him? I think so, perhaps. Francois Hollande is extremely

persuasive. Even a private meeting would have allowed them to get to

know each other so now they have got to do it months later when we

have got such a busy international agenda. So you think it was a faux

pas? Yes, but let's not dwell on it. What about Francois Hollande

himself? How do you think he has been feeling before this visit,

bearing in mind being snubbed, and the joke they didn't appreciate

about French businesses coming over here. It is true, they didn't quite

like that. Will the French billionaire's start taking the

Eurostar to London? I doubt it. They have got so much on her plate,

I don't know whether they will choose today to talk about the

contentious issues because there are a lot of them. There are some

moments for rejoicing, like what they're doing in defence. It is

going very well. On Syria, and some international issues, they share

the same opinion. If you are talking about top rates of tax,

austerity spending, will they get on? It is difficult to say because

they don't know each other basically. I think people get over

these things. I remember when John Major was Prime Minister, it was

alleged that the British government had facilitated access to Bill

Clinton's security records and what he had been up to politically as a

student, and Bill Clinton was supposed to be very offended by

this, but very quickly they developed a relationship because

they had, things to discuss. It is frequently the case that heads of

government are talking to opposite numbers with different political

philosophies from different political parties. Francois

Mitterrand always got on very well with Mrs Thatcher. Really, despite

some of the old wood spats? Didn't he say she had the eyes of Caligula

and the lips of Marilyn Monroe? think that may have been a

compliment! The event its relations may have been strained before this

meeting started, you think in terms of policy they will be able to get

down... Yes, don't forget Francois Hollande has his own differences

with Angela Merkel as well. The Franco-German relationship has been

the powerhouse of the European Union for decades. Is Francois

Hollande just putting on a pretence until the parliamentary elections

are behind him? But he started off with an abrasive approach to Angela

Merkel so he has to mend fences there as well. And that is the more

important relationship, isn't it? No, Britain is always very

important, especially with Europe. Where does Britain stand? It is a

matter of grave concern on the Continent and deep irritation as

well. Will he make that deep irritation known? I think he

already has. He recently said Europe is not a self-service

restaurant, nor is it the cash till. David Cameron could use the

opportunity to talk about repatriating powers, and will he

get a sympathetic ear from Francois Hollande? Probably not. I don't

think he will be talking about that at this stage because David

Cameron's view is that that is a game that should be played long and

we should wait until the relationship between the eurozone

and the rest of Europe has become clearer. What has been fiscally

proposed for the eurozone needs to become clearer before he will put

forward any ideas. There is a handshake, if the journalist will

get out of the way of the shot. They are going into Number 10,

probably for lunch. It's crunch time for Nick Clegg's

Liberal Democrats in the Commons today, as MPs vote on the

Government's plans for reforming the House of Lords. It's the second

day of debate - yesterday the Deputy PM weathered a stormy

session with dozens of Conservative backbenchers denouncing the

proposals. Here's a flavour of yesterday's debate. Mr Speaker, no

one doubt the commitment and public-service of many members of

the House of Lords, but dedicated individuals can't compensate for

flawed institutions and this bill is about fixing a flawed

institution. The in his preamble to the draft Bill, he said the House

of Lords performs its work well. Is he saying it works in practice but

not in theory? As I will come to in a minute, I think it is both flawed

in theory because of its lack of democratic legitimacy and flawed in

practice because the status quo is not sustainable. Well who pledged

today that he will not take their places in the House of the reformed

House of Lords? I am making the case for the government's bill.

People need to feel Parliament belongs to them, so will he give

people a vote on their proposals? think a referendum is not justified

in this instance. Do doesn't he think that people watching this

debate will be been used? In 2010, they voted for three parties which

had House of Lords reform in their manifestos and yet backbenchers

from some of those parties are now trying to block it. People voted

for it in 2010, let's get on with it. I want to repeat what my right

honourable friend has made clear - we want the House of Lords reformed,

we do not want this bill stock in the Commons, but we want the

opportunity to scrutinise, amend and approve the bill accordingly.

We will vote against the programme motion tomorrow night. This bill

ignores the will of the people. Only one year ago we had an

expensive nationwide referendum in which the people overwhelmingly

rejected a proportional representation voting system. Now

the deputy prime minister is ignoring the will of the people. PR

was rejected, so let's bring it in for the Other Place he says. What

contempt. Member of this house can differ on the underlying issues,

but they can't differ on the flaws in the billing itself. It is a

deeply confused and dangerous piece of legislation which will prevent

real reform, reduce diversity and deep expertise in our political

system. It would be a catastrophe for this country if this bill was

After yesterday's difficult session, Nick Clegg will be hoping he can

muster enough support this evening for what is known as the programme

motion, which effectively allows the Government to push the

legislation through. If the Liberal Democrats loos that vote, and it is

looking quite likely, with scores of Conservatives pledged to vote

against, it is not clear whether the bill can survive. We can get

the latest from James Landale, in the lobby, just outside the House

of Commons. What thugs are going to happen later on? There will be two.

First of all, at 10 o'clock, there will be a vote on the principle of

the bill - do you or do you not support the idea of Lords reform?

The expectation is that the Government will win that one,

because they have the support of the Labour Party, which supports

the principle of the reform. Then there will be that crucial

programme motion. Essentially, it is the timetable. The Government

says this bill should have about 10 days of detailed scrutiny. All the

many opponents, from all sides, say, no, 10 days is not enough for a

bill of such complexity or of such constitutional importance. It is on

that that the real battle will be had, and it is this which will

determine whether or not the bill will get there. Talking about the

whipping operation, the party managers trying to get people to

vote with the government, how stern is that looking at the moment for

the Tory MPs? What is interesting is that a line of thought has

emerged that actually, the Conservative whips are soft-

pedalling on this. It was explained to me like this - on the less

experienced MPs, a hard line is being taken, but on more

experienced MPs, like Malcolm Rifkind and people like that, you

have to take a different approach, and it is because of that that the

whips have gone soft on MPs like that, so this is why the idea has

come out that the Conservatives are not really trying hard on this one.

They think they are making some progress, but if you push them,

they do not think they are going to get enough votes. We have been

joined by the former leader of the Liberal Democrats Charles calendar

year. Welcome to the programme. -- Charles Kennedy. How important is

this issue of Lords reform to the party? It is very important to the

party. Given the loss of the AV referendum, it is the other big

piece of constitutional reform to which we are wedded, as a party.

But it is also important to our long-standing analysis of the

failings of British politics, and how it needs to be improved. It is

not just all about the House of Commons and the voting system, it

is also about the House of Lords as well. Why would the balance between

the two Houses of Parliament necessarily be upset by making the

Lords democratic? I think once you have an elected House of Lords, the

people there would regard themselves as more legitimate, they

would feel that the conventions which had governed the two houses,

the restraint which has been shown by the House of Lords when the

Commons has a difference opinion, I think they would feel, we are just

as good as you, we are as legitimate as you, we are as

elected as you, why should we not disagree with you? And I think

there would have to be more ministers in the House of Lords. I

do not see why we should not have the Prime Minister there, or the

Foreign Secretary. We have actually had the Foreign Secretary there

even when it has not been elected. I think the whole balance of power

would alter, just as you can see the way the European Parliament is

acquiring more power, since it has been elected, just as the Scottish

Parliament is demanding and getting, before independence, more powers.

But the Commons would still ultimately be able to get its own

way. Why do you say that? Because they would be able to use the

Parliament act. But you could imagine situations in which there

was complete deadlock on -- complete deadlock. Don't forget,

the political composition of a second chamber might be completely

different, it might have a Labour majority, whereas the Commons might

have a Conservative majority. would be gridlock, wouldn't it?

Whatever systems you go for, you could go for a Washington-style

system, or a continental-style system, but even under the existing

system, it takes goodwill and common sense on the part of the

personalities involved for any system to operate. If we change to

the kind of system which is applied, it will change the dynamic, Norman

Lamont is absolutely right, and the House of Lords could be very

bloody-minded, if they so wished. But they can do so under existing

procedures. So you have got to have a degree of faith in the

commonsense and the goodwill of the politicians involved. But I think

the moderation in the House of Lords at present comes from the

fact that it is not elected. They know that they could be under the

cosh at any moment from the House of Commons if they abuse their

powers, if they go frustrating what is in the manifesto of a party. It

is the doctrine that you do not vote down something which is in a

government's manifesto. All these conventions exist precisely because

the House of Lords is not elected. When I first arrived in the House

of Lords, I remember, I was inclined rather to vote against the

government, and I remember a former Speaker speaking to me, jack

Wetherall, now dead, alas, but he said to me, I would not do that if

I were you, that is not what the House of Lords should be doing.

should we have a second chamber which is full of people who were

appointed? Is it not time to modernise? I reject the idea that

this is more modern. I think there is nothing wrong with an appointed

chamber. That chamber only have limited powers. The powers it has

are merely to advise and to revise. No law can be made under the

current system without the House of Commons being satisfied. What do

you say to that? I do not shirk from the word modernisation, I

think that is exactly what it is. We're sitting here in the 21st

century, discussing a house of parliament which is still

structured essentially on the basis of the 17th century and the 18th

century. I think we need to get a few hundred years up to date.

Modernisation is the word, because it is indefensible for this day and

age to have a second chamber of, in a modern, developed democracy,

where there is not a single person elected in it. Charles Kennedy,

what do you think the impact will be if it fails? I think there will

be initially a bad impact for the coalition. It will be a knock for

David Cameron in terms of his leadership, it will be a knock for

Nick Clegg in terms of his leadership ambitions, and wanting

to drive this proposal forward. This proposal has come from both

sides of the coalition. So, it will have a bad effect in the short term.

I don't think it will end the coalition. It is not a deal breaker.

I think there will have to be, which there would have had to have

been anyway, some reassessment of where the coalition goes next. But

the fact that the coalition remains intact seems to me something that

we can take as read. Do you think there will be Liberal Democrats who

will feel, we did not get tuition fees how we wanted, we did not win

the of a referendum, we did not get Lords reform, so what will be left

for the Liberal Democrats? If you take constitutional issues first of

all, let's saved his runs out of steam, does not go anywhere, just

for the sake of argument, it could be that you might have to say, for

the remainder of this Parliament, essentially, further constitutional

reforms have got to be parked. But that raises the question, what do

you put in their place? Are there other reforms that you can look at?

I have not been part of that brainstorming process. But I hope

that process is already under way, because it needs to take place, for

the second half of this Parliament, which will be very different from

the first half. As we know, the second half of Parliament tend to

go much more quickly. Also, there will be the key Spending Review,

and Liberal Democrats will have to be thinking about further cuts,

perhaps cuts to welfare, which there will have to follow over the

next few years. The Autumn Statement is the next big

parliamentary event coming down the track after the summer recess.

Clearly, when we see how the economy has gone over the next

quarter or so, decisions will have to be taken, I hate these phrases

myself, but is it a Plan A, or a plans something else? As we get

into all of this parliamentary nitty-gritty over Lords reform,

there is the prospect that some MPs might be thinking of devious ways

to torpedo the bill. Heaven forbid. One of the tools that the disposal

of politicians is the ancient art of filibustering. Here is a little

history lesson. This Roman senator was one of the first politicians to

use the filibuster. The rules of the Senate meant that all business

had to be concluded by dusk, so he talk until nightfall to block laws

he did not like. More recently, Labour members of the House of

Lords attempted to do the same thing with proposals to change the

voting system. We will be aware that 650 is the product of three

prime numbers... 630 of course is the product of four prime numbers.

And just for reasons of political balance, here is a well-known

Conservative MP practising the ancient art. When I was a child, I

had a mug, which had some wonderful lines on it. I eat my own chicken

and ham. I have lawns, I have fruits, I have flowers. So, God

speed the Plough, success to the farmer. How very poetic! That was

Jacob Rees-Mogg. I suppose some people are better at filibustering

than others. I don't know why you are looking at me. I was looking at

both of you. Have you ever engaged in that? I don't think I would have

the physical energy. How long did your budgets tend to come in at?

Well, once television came, the budget became dominated by the

television schedules, so one could not be like Mr Gladstone. Do you

think it is a rotten tactic? don't think so. You were laughing,

both of you. Yes, it is like listening to another age, it is

hard to believe that was just a few months ago, from Jacob Rees-Mogg!

That was in the elected House of Commons, modernisation! It is

legitimate. Yes, I think it should be allowed, because Houses of

Parliament, whether it is Congress, whether it is here, whether it is

the ancient Senate, are based partly on the principle of rhetoric.

It is legitimate in that sense. The very first film I ever served on

was the privatisation of British Telecom. There was a retired trade

union general secretary who was an ace at filibustering, and used to

keep the place going all night. this particular motion on Lords

reform is voted down, we may see a lot more of people like Jacob Rees-

Mogg. You will indeed. During the Maastricht business 20 years ago, I

was a European spokesman for the party, and there was people like

Iain Duncan Smith, they were called nightwatchmen. Sometimes people