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Now on BBC News it is time for HARDtalk. | :00:10. | :00:15. | |
Here is the good news. The Greek election did not plunge Europe into | :00:15. | :00:19. | |
economic and financial meltdown. The bad news is that no-one in | :00:19. | :00:23. | |
Europe believes the combined currency, banking and sovereign | :00:23. | :00:28. | |
debt trauma is over. Right across the Continent politicians are | :00:28. | :00:32. | |
struggling to answer a question. How does Europe find a way back to | :00:32. | :00:37. | |
sustainable economic growth? Today my guest is the opposition Labour | :00:37. | :00:42. | |
Party's top business spokesman, Chuka Umunna. He says active | :00:42. | :00:46. | |
government cannot revive and reshape capitalism. Our business | :00:46. | :00:56. | |
:00:56. | :01:17. | ||
leaders or the public ready to Chuka Umunna, welcome to HARDtalk. | :01:17. | :01:22. | |
Good to be with you. Any economic discussion of any country in Europe | :01:22. | :01:26. | |
right now has to begin with the context of the eurozone crisis, | :01:26. | :01:29. | |
what it means for individual nations. The Governor of the Bank | :01:29. | :01:34. | |
of England calls it a very big dark cloud hanging over the British | :01:34. | :01:39. | |
economy, the world economy. Do you agree? I think so. I think it | :01:39. | :01:43. | |
presents a number of challengers for us as a country. Our bands have | :01:43. | :01:48. | |
a degree of exposure to European sovereign debt. What happens in the | :01:48. | :01:50. | |
eurozone affects business confidence in this country, with | :01:50. | :01:57. | |
most of our exports going to the eurozone. And of course if we do | :01:57. | :02:03. | |
not resolve these issues then businesses will not be confident to | :02:03. | :02:08. | |
invest in particular. So you would accept the proposition coming from | :02:08. | :02:12. | |
Chancellor George Osborne that in the end the eurozone crisis is very | :02:12. | :02:16. | |
much constraining what can be achieved in terms of the British | :02:16. | :02:21. | |
economy? He says the recovery is being killed by what is happening | :02:21. | :02:26. | |
to our neighbours. Do you accept that? The recovery actually in the | :02:26. | :02:30. | |
UK is stalled really in the early stages of this government. We have | :02:30. | :02:35. | |
seen the economy contract by 0.4% since the Government announced its | :02:35. | :02:40. | |
spending review plans for the duration of its term in government | :02:40. | :02:45. | |
in October 2010. But I think it is fair to say that for some time we | :02:45. | :02:51. | |
have seen no growth in the economy. I am getting to the point that the | :02:51. | :02:55. | |
Chancellor says, and it sounds like you agree, that given the enormous | :02:55. | :02:59. | |
difficulty posed by what is happening to our near neighbours, | :02:59. | :03:03. | |
our biggest trading partners, it is very difficult for the economy of | :03:03. | :03:10. | |
Britain to grow. It was our exports to the eurozone that kept us out of | :03:10. | :03:13. | |
recession in 2011. We have yet to see the full effect of the eurozone | :03:13. | :03:17. | |
crisis feed through to our economy. It is was to think of the fact that | :03:17. | :03:22. | |
we're in a double dip recession in the UK. France and Germany closely | :03:22. | :03:26. | |
missed going into recession. The point is the argument that we have | :03:26. | :03:30. | |
made as an opposition in the UK is that you need to provide solid | :03:30. | :03:35. | |
foundations to withstand the storm when it comes. The problem the | :03:35. | :03:37. | |
Chancellor has... He is right in saying the eurozone will affect our | :03:37. | :03:41. | |
economy... But he has put us in a very poor position in terms of | :03:41. | :03:46. | |
withstanding that storm when it comes. It is hardly a poor position | :03:46. | :03:49. | |
to be a AAA rated No nation by all of the agencies when so many others | :03:49. | :03:55. | |
across the European Union are not. It is a sign of the confidence that | :03:55. | :03:58. | |
international markets still have in the UK economy as run by the | :03:59. | :04:02. | |
Conservative-led coalition. The G20 is meeting this week. The only | :04:02. | :04:08. | |
other country had has experienced a double-dip recession is Italy. The | :04:08. | :04:14. | |
situation in the UK at the moment is unemployment at 8.7%. We have | :04:14. | :04:19. | |
over 2.6 million people out of work including one million young people. | :04:19. | :04:22. | |
You are sidestepping my point. There is a fundamental point when | :04:22. | :04:28. | |
we are looking at Europe, Britain's place in Europe, about conference. | :04:28. | :04:32. | |
Britain has retained the confidence of not just the bond markets but | :04:32. | :04:38. | |
also of people like Christine Lagarde and the OECD. -- confidence. | :04:38. | :04:45. | |
They all say that Britain's current fiscal situation makes sense and is | :04:45. | :04:48. | |
the right direction to be travelling in. It's I am not sure | :04:48. | :04:53. | |
that is the position of the IMF. One thing that fisting the guards | :04:53. | :04:56. | |
said is that in order to have a credible fiscal policy unit growth. | :04:57. | :05:00. | |
We have not seen roads for a long time. If you look in the overall | :05:00. | :05:08. | |
context of the UK's historically, we have had historically low term | :05:08. | :05:13. | |
borrowing rates. We benefit from the fact we control our own | :05:13. | :05:17. | |
monetary policy. We can have a policy which is more appropriate | :05:17. | :05:25. | |
for the UK economy. But to argue to your average person in the street, | :05:25. | :05:29. | |
in my constituency in London, that somehow we are in a safe situation, | :05:29. | :05:34. | |
that is not what it feels like for people at the moment. But what | :05:34. | :05:38. | |
matters is of course what people feared on this -- feel on the | :05:38. | :05:41. | |
street, but also what the bond markets can do two countries. You | :05:41. | :05:45. | |
only have to look at what is happening to Greece, Spain, | :05:45. | :05:49. | |
Portugal, to know that it matters to retain confidence. One point is, | :05:49. | :05:53. | |
this government has retained confidence. When you criticise so | :05:53. | :05:57. | |
heavily as you do in your party the Government's current fiscal | :05:57. | :06:02. | |
policies, it is not worth bearing that point in mind? Firstly I would | :06:02. | :06:05. | |
say that it is a fallacy to compare us to Greece or these other | :06:05. | :06:13. | |
countries. They don't have control of their own monetary policy. Also, | :06:13. | :06:17. | |
the term of payment on their debt is often shorter than ours, which | :06:17. | :06:23. | |
is an average of 13-15 years. Secondly, in terms of retaining the | :06:23. | :06:26. | |
confidence of the markets, several of the credit ratings agencies have | :06:26. | :06:32. | |
put us on negative watch during the last few months. The big worry | :06:32. | :06:38. | |
about people have about our economy is the prospects of future growth. | :06:38. | :06:42. | |
Because the growth forecast for our country has come down, more people | :06:42. | :06:47. | |
are out of work. The Government has had to revise up its borrowing | :06:47. | :06:54. | |
estimates by over �150 billion. That in the long-term will create | :06:54. | :07:01. | |
worries in the market about our ability to repay a debt. I don't | :07:01. | :07:04. | |
think any in the current government would argue that this is the place | :07:04. | :07:08. | |
they would like to be in. They happen to be in. They would argue | :07:08. | :07:13. | |
about what is happening in Europe. But if we get to your | :07:13. | :07:16. | |
responsibilities in politics, which is to represent the Labour Party | :07:16. | :07:19. | |
when it comes to finding a strategy for growth and business growth in | :07:19. | :07:22. | |
this country, is it not true to say that the most important single | :07:22. | :07:28. | |
thing you need to start off with his confidence? Yes. Without | :07:28. | :07:32. | |
wishing to rehash the Arden, if confidence is there right now, | :07:32. | :07:38. | |
George Osborne does have the state to begin to pull some rivers, to | :07:38. | :07:41. | |
put more money to the economy, to guarantee to business that he has | :07:41. | :07:47. | |
business from the infrastructure based prospects. He is in a decent | :07:47. | :07:51. | |
position, isn't he? The first thing to say that is since he announced | :07:51. | :07:55. | |
his spending plans for his time in office in this Parliament, | :07:55. | :08:02. | |
confidence nosedived. That has had a knock-on effect on demand. In the | :08:02. | :08:07. | |
last few days he announced plans to put new liquidity into the banks | :08:07. | :08:11. | |
and threw them into small businesses. Is talking about �80 | :08:11. | :08:14. | |
billion worth of cheap money. think you are referring to the | :08:14. | :08:18. | |
funding for lending scheme. That is an admission of failure of the | :08:18. | :08:21. | |
different things he has announced up to this point. We were told in | :08:21. | :08:24. | |
2011 that the Government's Project Merlin accord with the big bangs in | :08:24. | :08:29. | |
the UK would get lending to our small businesses. We have seen a | :08:29. | :08:34. | |
net contraction in lending to small businesses in this country. There's | :08:34. | :08:40. | |
a big problem there. Project Merlin did not work. He then introduced | :08:40. | :08:45. | |
credit easing. Unfortunately the problem with that... It is not bad | :08:45. | :08:49. | |
necessarily... But it is reducing the cost of borrowing but it is not | :08:49. | :08:56. | |
getting money out of the door to profitable businesses not able to | :08:56. | :08:59. | |
access fineness of the mind. That is the problem. This is the reason | :08:59. | :09:03. | |
we have seen the recent announcement by the Bank of England | :09:03. | :09:09. | |
and... That is right. Do you welcome that? It is potentially a | :09:10. | :09:16. | |
huge injection, �80 billion, and if it works well it will get a lot of | :09:16. | :09:19. | |
liquidity into small and medium- sized enterprises. I wanted to work. | :09:19. | :09:23. | |
I hope that given the failures of the past these measures will work. | :09:23. | :09:27. | |
We will see over time their effectiveness. But I want them to | :09:27. | :09:31. | |
work. The key is, will it get money to businesses that cannot access | :09:31. | :09:35. | |
finance at the moment, as opposed to simply reducing the cost of | :09:35. | :09:43. | |
borrowing? You also think that the other measures are a step in the | :09:43. | :09:46. | |
right direction? Planning restrictions eased for construction | :09:46. | :09:49. | |
companies. A national infrastructure plan which is | :09:49. | :09:52. | |
designed to get pension funds to put money into the capital projects. | :09:52. | :09:56. | |
We have also had things like tax breaks for the hi-tech audio-visual | :09:56. | :10:06. | |
:10:06. | :10:08. | ||
sector. The Government now Boban -- the government appears to be many | :10:08. | :10:11. | |
of the things that you wanted them to. It is doing some of the things | :10:11. | :10:16. | |
we called for. You referred to the video games tax relief that we | :10:16. | :10:18. | |
introduced in government which has helped port bow video games | :10:18. | :10:24. | |
industry in a place where it is one of the best in the world. When the | :10:24. | :10:27. | |
Government came into power it scrapped it. It admitted it made a | :10:27. | :10:32. | |
mistake. That is a good thing. is not about point-scoring. We are | :10:32. | :10:38. | |
one economy in recession amongst eight Continent in a deep hole. I'm | :10:38. | :10:42. | |
sure that you would agree it is not a time of point scoring, it is | :10:42. | :10:45. | |
finding the best strategy so the Government and productively help | :10:45. | :10:50. | |
business to grow into it -- in a way it has not grown in the last | :10:50. | :10:57. | |
five years. Whatever you call it, the current government seems to be | :10:57. | :11:01. | |
turning the wheel a little bit toward a more expansive policy. It | :11:01. | :11:06. | |
seems to me that is something you ought to be welcoming. It is still | :11:06. | :11:10. | |
refusing to change its basic fiscal position and go for a more | :11:10. | :11:14. | |
responsible, and Escrick, less a deeper deficit reduction programme. | :11:14. | :11:19. | |
That would actually allow the economy to grow. In terms of the | :11:19. | :11:23. | |
recent things we have heard which suggests they are moving towards a | :11:23. | :11:28. | |
bit more of an expansion attitude, that is to be welcomed. The point | :11:28. | :11:33. | |
is, look at the gravity of the situation we're faced with. Two | :11:33. | :11:37. | |
quarters of negative growth. Many economists predict that in the | :11:37. | :11:40. | |
second quarter of this year we will also get a negative figure. We need | :11:40. | :11:44. | |
the Government to be doing a lot more than it is at the moment. I | :11:44. | :11:49. | |
think that this speaks to a wider debate which is going on around the | :11:49. | :11:53. | |
world about the proper role of government is to be the private | :11:53. | :11:57. | |
sector and the extent to which they should work in partnership. There | :11:57. | :12:02. | |
is an old retro view that says the best thing government can do is to | :12:02. | :12:06. | |
simply step aside. If you like that is the orthodoxy of Ronald Reagan | :12:06. | :12:09. | |
and Margaret Thatcher. He should step aside and let the market to | :12:09. | :12:13. | |
the world FT -- do the work. Another opinion says, actually, | :12:13. | :12:18. | |
there are many things the market cannot do. It does not | :12:18. | :12:22. | |
automatically and naturally operate in an entirely efficient way. It | :12:22. | :12:27. | |
cannot provide strategic direction for particular national economies. | :12:27. | :12:30. | |
It cannot identify where you have got a competitive edge and a | :12:30. | :12:34. | |
comparative advantage. So you need government to work in partnership, | :12:34. | :12:37. | |
not in a kind of pop down overbearing way with business, but | :12:37. | :12:41. | |
in partnership with business to grow business. That is what has | :12:41. | :12:47. | |
happened in Singapore for example, Germany. It has a national | :12:47. | :12:57. | |
:12:57. | :12:57. | ||
architecture with it. Indeed,... did not happen under the dozen | :12:57. | :13:01. | |
years of the Labour government, but you argue it could happen now? | :13:01. | :13:05. | |
is right. We have to be humble enough to say, yes, we got lots of | :13:05. | :13:08. | |
things right in government. When we left them that we were racked by | :13:08. | :13:12. | |
the World Bank as the fourth best place in the world to do business. | :13:12. | :13:16. | |
But we should have been prosecuting active industrial policy is far | :13:16. | :13:22. | |
earlier. The important thing is... Active government strategies, you | :13:22. | :13:28. | |
say. How does that fit with Ed Miliband's key speech where he | :13:28. | :13:31. | |
introduced the idea of defining the private sector as essentially full | :13:31. | :13:36. | |
of good businesses and bad ones? Worth while producers, or creditors, | :13:36. | :13:44. | |
he said. Is it the case that Ed Miliband led Labour Party policy on | :13:44. | :13:49. | |
business is to try to reshape the nature of the private sector, to | :13:49. | :13:53. | |
stamp out predatory capitalism and simply encourage those that are | :13:53. | :13:59. | |
defined in your terms as the work while producers? I would not quite | :13:59. | :14:04. | |
put it that way. That is the way you put it. Let me answer your | :14:04. | :14:09. | |
question this way. What we are actually looking at here, and you | :14:09. | :14:16. | |
are talking about the subjective politicians... A politician's | :14:16. | :14:20. | |
imposing a subjective view. But we should be led by business. What | :14:21. | :14:26. | |
we're talking about is, what are the business practices, models, | :14:26. | :14:30. | |
behaviours that are successful? What is the consensus view within | :14:30. | :14:40. | |
:14:40. | :14:42. | ||
business on that? There are lots of The British Chambers of Commerce | :14:42. | :14:48. | |
said that in response to this view of capitalism, all organisations | :14:48. | :14:53. | |
that create wealth and comply with the law are by definition a good | :14:53. | :15:00. | |
companies. Do you accept that? not disagree with that. But do you | :15:00. | :15:04. | |
agree or disagree with that simple concept about what makes a good | :15:04. | :15:10. | |
company in the UK I would not necessarily... That would not be my | :15:10. | :15:13. | |
comprehensive definition of good business models and behaviours. Let | :15:13. | :15:18. | |
me explain why. There is a question as to whether you are delivering | :15:18. | :15:21. | |
value in the long-term or whether you are just looking at increasing | :15:22. | :15:28. | |
profits in the short-term. The quick buck, if you like, in stead | :15:28. | :15:32. | |
of long-term fund new creation. I have spoken to him about this and | :15:32. | :15:36. | |
there is a lot of common agreement. If you look at the different | :15:36. | :15:40. | |
practices and behaviour models that work, they are businesses that | :15:40. | :15:44. | |
found you and invest in their workforces. If you have a happy | :15:44. | :15:48. | |
workforce you will have less absenteeism and poor productivity. | :15:48. | :15:52. | |
This is not necessarily what politicians are saying but this is | :15:52. | :15:58. | |
what businesses are saying. This is highly subjective. Any future | :15:58. | :16:02. | |
Labour government is going to have to go into every company and decide | :16:02. | :16:07. | |
whether it has a happy workforce or whether it is doing things in a | :16:07. | :16:11. | |
socially responsible way? How are you going to do this? There is a | :16:11. | :16:14. | |
degree of subjects to the sea but if you look at what businesses are | :16:14. | :16:22. | |
saying, if you go on to the business page of Google, it says | :16:22. | :16:28. | |
people are their greatest asset. They are all sorts of Fraser's. | :16:28. | :16:33. | |
There are many businesses that look at people as simply a cost to be | :16:33. | :16:38. | |
reduced. I doubt they say that in their brochures which you read. The | :16:38. | :16:44. | |
point is, you are quoting a Google and taking at face only what they | :16:44. | :16:50. | |
say. Any company these days issues the right sort of words about | :16:50. | :16:54. | |
corporate responsibility but I first wonder how in government, | :16:54. | :16:59. | |
Labour government is going to make sense of this notion that we have | :16:59. | :17:03. | |
good capitalism and Bad capitalism, this is his you want to promote and | :17:03. | :17:10. | |
businesses you do not want? -- businesses. If I could finish, I | :17:10. | :17:14. | |
was talking about investing in people and investing in a long-term | :17:14. | :17:18. | |
sustainable value creation. We need to recognise the activity that is | :17:18. | :17:23. | |
this carries out its fresh and tensions on the community in which | :17:23. | :17:29. | |
it is carrying it out -- business. If it gets it wrong, in the US for | :17:29. | :17:33. | |
example, it does not only have adverse consequences but it also | :17:33. | :17:39. | |
could have harmful effects on the population. You ask, what do you do | :17:39. | :17:44. | |
as policy makers? I say they are a range of levers that we can use to | :17:44. | :17:49. | |
encourage that which is good. Good business practice. That is | :17:49. | :17:53. | |
successful, which helps provide more jobs. There are a number of | :17:53. | :17:59. | |
things we can do. We can use the tax system. In government, we | :17:59. | :18:02. | |
introduced capital allowances to encourage businesses to invest in | :18:02. | :18:07. | |
plant machinery and the things that help them grow their companies in | :18:07. | :18:13. | |
the long-term. Yes. You can use recruitment. The government in the | :18:13. | :18:20. | |
UK is one of the last as purchases of goods. If you are getting a | :18:20. | :18:25. | |
service from a contractor, let's ask the contractor to help the | :18:25. | :18:30. | |
skills of the economy. There are a number of things you can do to help | :18:30. | :18:35. | |
foster good business behaviours. You have learned that many | :18:35. | :18:40. | |
interesting ideas. Let's put one practical case to you. One of the | :18:40. | :18:47. | |
most successful British companies recently, has been WPP. In recent | :18:47. | :18:51. | |
weeks they have run into a few problems there is a promise to pay | :18:51. | :18:56. | |
the chief executive an enormous sum of money in terms of renumeration | :18:56. | :19:01. | |
for the last few years, �30 million or so. Shareholders voted against | :19:01. | :19:08. | |
it. You have spoken loudly against excessive corporate pay. In your | :19:08. | :19:14. | |
view does this make this company a company that is behaving in a way | :19:14. | :19:20. | |
that is unacceptable? No. What we have seen happening across the | :19:20. | :19:24. | |
board in different companies, we have seen unprecedented levels of | :19:24. | :19:32. | |
shareholder activism and engagement in their companies. This happens to | :19:32. | :19:41. | |
be in the issue of renumeration. This is not a reward for failure. | :19:41. | :19:48. | |
He has pointed out his global competitors, the huge US companies | :19:48. | :19:55. | |
and others, that they give their chief executives more than he has | :19:55. | :20:01. | |
been given. So this is not about success or failure. You are talking | :20:01. | :20:03. | |
about the government intervening in stopping in what you regard as | :20:03. | :20:08. | |
excessive pay. The judgement that needs to be made has to be made by | :20:08. | :20:13. | |
the shareholders, those that control the business. In 2011, the | :20:13. | :20:16. | |
shareholders sustained a loss on their stock and therefore took the | :20:16. | :20:21. | |
view that increasing the pay on the chief executive at that time or | :20:21. | :20:25. | |
above 60% was not something they thought was the right thing to do. | :20:25. | :20:33. | |
It is not right for me to go around and dictate to individual companies. | :20:33. | :20:37. | |
What hope will say is that it should be an issue for the | :20:37. | :20:42. | |
shareholders. -- 5. In terms of the quality and differences between | :20:42. | :20:45. | |
what the chief executives get and the rest of society, if we do not | :20:46. | :20:50. | |
get this right it could be bad for business. Perverse pay structures, | :20:50. | :20:55. | |
and I know this because I used to be an employment lawyer myself, | :20:55. | :20:59. | |
promotes the wrong kind of decision making. People have to be in the | :20:59. | :21:07. | |
driving seat. That is why shareholder activism we have seen... | :21:07. | :21:16. | |
All right, let's just one -- think of one link, the top tax rates. | :21:16. | :21:21. | |
Businesses have sued because the Conservative government has cut the | :21:21. | :21:27. | |
top level of tax from 50p, imposed at the end of the last Labour | :21:27. | :21:32. | |
government, to under 45 P. Would you or any future government want | :21:32. | :21:35. | |
to be part of a government that guarantees the raising of the top | :21:35. | :21:40. | |
level of tax? What I would say is that I would like to be part of a | :21:40. | :21:43. | |
government where we are implementing policies that ensure | :21:43. | :21:48. | |
the broader shoulders bear the heaviest burden. Should you go back | :21:48. | :21:52. | |
to 50p? We have said if there is a lectern in the next month, which I | :21:52. | :21:59. | |
hope so, although the election is scheduled in 2015, then we would | :21:59. | :22:02. | |
reverse the decision the Government has made to bring down the top rate | :22:02. | :22:10. | |
of tax. Why not go further? One way of thinking about the soul of the | :22:10. | :22:15. | |
Labour Party is thinking about France. Cons of Holland is the new | :22:15. | :22:18. | |
president of the Socialist government. He has promised a high | :22:18. | :22:23. | |
rate of tax for top earners. Why is Labour not taking on a more radical | :22:23. | :22:28. | |
few of the share that the top earners should pay? That is | :22:28. | :22:34. | |
something we have to be appropriate in our policy. But you are not | :22:34. | :22:39. | |
dissimilar in economic terms. Why are you not taking on some of his | :22:39. | :22:46. | |
ideas? I am not necessarily just with one system. I am interested in | :22:47. | :22:52. | |
the outcome. The top rate of tax of 50p is the only way that you can | :22:52. | :22:56. | |
insure the ones with the broader shoulders can bear the heaviest | :22:56. | :23:00. | |
burden. You have to make a decision when we get a general election to | :23:00. | :23:06. | |
what we would do at that one. So it could go beyond 50p? I cannot see | :23:06. | :23:12. | |
us having a top rate of tax in the region of 75p, certainly not. That | :23:12. | :23:16. | |
is not something we are going to be making policy on now because it | :23:16. | :23:25. | |
would be irresponsible. We have to look at the Policy Programme at the | :23:25. | :23:33. | |
next election. We want a fair society. One name that has not crop | :23:33. | :23:42. | |
up much of his conversation -- is Tony Blair. He has said that we | :23:42. | :23:46. | |
have even lost our backers, and we do not have feelings we have with | :23:46. | :23:53. | |
is this any more. He expressed deep concern. Are you also concerned? | :23:53. | :23:57. | |
major business person came up for Labour in the last election. As | :23:57. | :24:01. | |
somebody who has advised businesses during my professional life, that | :24:01. | :24:07. | |
is a matter of regret. Tony Blair is right, we have to rebuild that | :24:07. | :24:10. | |
trust in the business community. The starting point in us having an | :24:10. | :24:20. | |
:24:20. | :24:24. |