Lord Heseltine - British deputy prime minster 1995-97 HARDtalk

Pakistani troops inside Indian territory on Tuesday. Pakistan

denies the incident even happened. A senior US State Department

official says it is in the interest of his country that Britain keeps a

strong voice in the EU. He also expressed concern of the prospect

of a referendum. He said they often turn countries inwards.

Halfway through its parliamentary term, Britain's Conservative-led

coalition government has a growth problem. The economy is flat,

possibly heading for a triple dip recession. But how does a

government committed to fiscal austerity wrap things up? My guest

is Lord Heseltine, the former deputy prime minister, who was last

year commissioned to come up with a growth strategy on a range of

issues from economic management to Europe. Art today's tory leaders

ready to heed this voice of Lord Heseltine, welcome to HARDtalk.

Nice to the back. You were very frank in a report on growth that

you wrote for prime minister David Cameron last year. You said the

government urgently needs to develop a strategy for growth and

wealth creation. Do you see signs that they had heeded your message?

The response from the Chancellor and the prime minister has been as

encouraging as I could expect. Not only have they welcomed it and said

nice things but they have also said that by the Budget time in spring,

they will do a full response. On the single biggest recommendation...

You did say it was urgent. That did not sound like an urgent response.

For the government to absorb BT9 recommendations and said they will

respond is pretty good. -- 89. They have gone further than that. They

said on the principal recommendation, which is that we

embrace the enthusiasms of Britain's provinces and get them

more involved in the process, they are going to move the timescale to

what I recommended and start financing it from April. I come

back to the point of urgency, given the state of the economy, which is

flatlining, it does not seem very urgent to take onboard your main

recommendation, to put a lot of body that was going to be sent --

spent by central government in two cities and regions, but only begin

to make that happen by 2015. That doesn't seem terribly urgent.

as quick as you can do it. This is capital money and the availability

of that capital money will not free up in the economy until about 2015,

because it is now already committed in terms of contracts which have

been met and negotiated. There is not a short-term fix. The

introduction to this programme talks about Britain's lack of

growth. What is happening in the principal markets? China and India

are slowing. Slowing from double digits... They are slower than they

were. The opportunities are smaller. Europe is flat mining. America, --

cliff edge. Anybody who says there is no opportunity is deceiving. We

have a world economic crisis. -- there is plenty of opportunity.

What this government is doing and what I have accepted they should do

is recognise there is no more money. We know that. We have to use what

we have got better. It is broadly capital investment. Most of the

available money is already committed. It does not start being

available until about 2015. But you have a plan and so you start

planning this year to how you use the money more effectively, when it

is available. If the economy is an ocean liner and it takes time to

turn into round and put it in a better direction, does that mean

that in the short from the people of this country should expect this

sort -- this sub-zero growth or even the possibility of a new

contract have to take place? Are you saying there is nothing the

government can do to avoid the triple dip? They can do a lot,

which they are doing, which is to address the fundamental problem of

too much debt. You need to pay down the debt and until people have done

that, they will not be an escalation of comfort. Surely they

have to Gillett -- get the balance right, of addressing the fiscal

problem and adopt a management of the economy that encourages growth.

Of course. Is the balance right at the moment? They are changing it.

Of course they would not have asked me to do the report if they thought

it was all right. But to be clear, we are not talking about the

creation of this government, we are talking at the least about the

inheritance of this government. But it is more serious than that. It is

about the way we manage this economy over decades. If we start

looking at the wheel inhibitors to group, not the simple headlines

that if false impressions, but the real inhibitors about changing

education standards, making skills available, you can't do that except

in the medium to long-term. This government has embarked on that

journey. In every recommendation I made, broadly, I am saying the

government go further and faster. What I am not saying he's changed

direction. I am interested in if you are self -- philosophical

underpinnings of your message. seemed to have a deep suspicion of

the ability of central government to understand and -- understand how

to stimulate the economy in all of its perversity, the different

regions and cities of the nation. You seem to suggest the only way to

do that is take a big chunk of money, up to nearly �50 billion,

and take that out of the hands of central government departments and

put it in the hands of councils, local business leaders, enterprise

partnerships and have then make the spending decisions. That is of

course how we made this country, if you think about where the greatness

of Britain came from. It came from local leaders, industrial leaders,

the gears with their feet on the ground and local experience. Can I

explore the words you just use. They are the secret behind it all.

I am doing an exercise in Birmingham to look at the detail of

this particular option of going much more local. I have got the

chief executive of the John Lewis partnership and wheels of local

authorities. I have got the vice chancellor of one of the

universities. -- leaders. I have a senior accountant in the Midlands

and outside help from very experienced industrialists. That is

the local way of looking at the auction. You quite rightly referred

to central government. What could be the alternative to this local

team? It is an official in the Department of Housing, an official

in the Department of Transport, an official in the Department of

Agriculture. In other words, functional monopolies in Whitehall

of officials. Most of whom have never had experience of creating

wealth in the first place. That is the choice. It's a fascinating

choice. I can't help remembering, as you tell me about this, that you

have served as a national British politicians, working with Whitehall

in the civil service, for many decades. -- politician. He rose to

Deputy Prime Minister after many years in Conservative government. -

- you roos. It seems you think there is something fundamentally

dysfunctional about central government and its call role in

managing the economy. I agree with that. -- its core role. We are

grossly over-centralised. Unlike any other advanced economy in the

world. If you think about Germany, the Department of France, wherever

you look, the work of local economic strengths and build on

that. We take all of the decisions to London and impose solutions. Not

solutions for Birmingham or Manchester or Leeds but solutions

for the local roads and housing, for the local this and that. There

is no other economy thinking it can manage the centre as dynamic -- at

dynamically as building on the strengths of the local economies.

But maybe the difference is that in Germany, for example, there is a

much more well developed tradition of making key decisions at a

regional city and local level. Take one example of why perhaps Britain

is different. This government, the Conservative Party of David Cameron,

has tried to push the idea of spreading elective neighbours

around the country. Getting all of England's cities to have their own

ears. The idea was rejected by nearly all cities. -- Mails. Many

have them now, many of the different police districts, but

only after an election process which was pitiful, with a turnout

on average of 15%. There is not a tradition in this country of making

key decisions at local levels. agree. That is half the problem

because over decades, over probably about a century, we have sucked the

decision-making out of the local communities and told them what to

do. Now, all over this country, people are saying, what does London

want us to do? Can we get permission for this? Will they

finance that? That is installed a fine psychology. We began by

talking about the urgency to inject a stimulus into the car economy.

You are talking about systemic changes in the way we run ourselves

as an economy, which will take decades to unfold. Here we are,

still sitting with an immediate economic challenge. Isn't that the

reason why central government needs to do the pump-priming of the

economy now, which you seem to be avoiding? There is the phrase,

there is no money left. That was the outgoing Chief Secretary in the

last administration. There is no money left. All the posturing of

politician saying do a bit more here, spend more there, it will not

happen. There is no spare money. The only option is to use existing

money more effectively. We have talked about regionalism. There is

another way in which your ideas run up against counter trend inside

your own party. You want new powers for these local enterprise

partnerships. Some would call goes quasi non-governmental

organisations which the current Cameron government has pledged to

put on the bonfire. They want to get rid of that. They created these

people. What they are these basically the strength of them is

the local authority, maybe a combination of local authorities.

But the big resource is within the local authorities. The difference

is that this government was brought -- has brought in the private

sector as partners. Renewed talk about accountability, there are two.

No crime can come from the left without the local authority, which

is democratically accountable, being a partner. A decision can be

taken without the central government, democratically

accountable, approving it. A final thought. You have always said if

you believe in regulation, just of wise and well developed regulation,

coming from the state. There are many in your own party who think

the fundamental problem right now for the British economy is that it

is over-regulated and the push must be to cut suedes of government red-

tape, to deregulate and that is the only way of getting this economy

moving. -- cut swathes. You mean unravel civilised society? Because

regulation does. If you believe in the jungle, you don't have

regulations. Survival of the fittest. What democracy has done is

actually to create a civilised based on which they -- there are

entitlements and responsibilities and certainties. Some of it may be

over down but the idea that you will strip away the fundamental

underpinning of a civilised society and create a new jungle is

preposterous and I don't know any politician who believes it. Many

use the rhetoric. Until you ask them to show the detail...

Sometimes they are right at the margin or fringe. A practical

example. That is the state intervening to make people put a

helmet on when they are on a motorbike. You will have to explain

that. The thing you where to stop yourself getting killed when you

fall off your motorbike. That is state regulation. A helmet? They

are called Steve Rhodes. Argue seriously telling me that that was

the wrong thing to do and secondly if it was the right thing to do,

can you say how many people are employed and -- in making them for

people on motorbikes? That is wealth-creation. Let's talk about a

different aspect of the relationship between government,

society and the economy. In the last few days, but of the political

oxygen in this country has been sucked up in a debate about

benefits. The Cameron government has passed legislation which will

put a cap, an unprecedented attack, on benefit rises. They will not

rise with inflation in three years and will be capped at 1%.

Unprecedented in 70 years. There are many, obviously the Labour

Party, but many in the NGOs sector who work with the poorest people in

this country who say it is an assault on decency, on basic

British values, and deeply divisive. That is what pressure groups say,

they will believe it. I am saying that people with limited income at

work should actually be taxed at a higher level than is necessary in

order to advance the benefits of those on benefits. I must be

allowed to finish the sentence. Are you saying that those people on the

lowest income should pay more tax in order that the benefits could

rise faster than incomes are rising? That is the judgement

behind the question you are asking me. Are you saying that this

particular initiative, which hits the poorest in the country hardest,

it hits the working poor very hard, is that the right way to respond to

what is a fiscal crisis. Is that fair? Whatever you do people will

say it is not fair. Personally, I will tell you, take away my winter

fuel allowance, any sort of benefits through the tax system.

The politics of it are difficult. I think they should do it. That would

be another example of fairness. I would be the first to support it.

The fact of the matter is, you are left with this question, there is

no money. You have got to make tough decisions. In recent years

benefits have been rising faster than incomes. This government

measure addresses that issue. Not attractive politically. Just look

at some of the statistics. 7 million working families will be

more than �100 worse off every year. That is for the poor working

families of this country. Going back to the debate about the

balance between austerity and growth, particularly in the regions

where most of the poor live. The cities and towns to have talked

about, Manchester, Newcastle, Liverpool. Does it fit with your

vision of how to get growth growing? The idea of getting debt

under control fits absolutely. If we do not, interest rates will rise.

The very people you are talking out will be priced out of jobs. There

is a balance in all of these things. Do you personally think been... To

help the richest people in this country, at the same time as

hitting the ball with his benefits policy. With your long experience

in politics, does it make sense to you? You have raised another issue

and I welcome find it. I thought we had reached a broad feeling that

40% tax was about right. It is quite a lot of money but it seems

fair enough. Just before the last election the Labour Party thought,

we will get it up to 50p. Hopefully the Tories will object to it and we

will pay them in a corner as the friends of the rich. The rich are

the ones who manage the investments and create the jobs. That is swept

aside by the politics. Of course the Labour Party did it quite

deliberately. They know it does not produce much money but it has a

disincentive affect. They put the government into a corner. I believe

that was a very sad thing to do. I thought we had reached a degree of,

you know, compromise about this whole... A final thought on this.

You know that in the 1980s and perhaps in the 90s, there was a way

in which a perception developed that the Tories were relatively

economic efficiency managers, but they were the nasty party. Do you

believe there is a danger of the Tories once again being perceived

as the nasty party? I think that is something they will be preoccupied

by. Rightly so. Do I think it will be sustainable? No, I do not. The

judgement will be made in 2015 in the election. In 2015 Cameron will

win and he will win on three arguments. We have begun to grip

the economic balances and to get stability. We have tackled a

century of problem in the education field. Thirdly, we have begun to

tackle this problem of too many people dependent on the state.

cannot look too far ahead now. Long before 2015 there are other key

decisions. I want to get to Europe. It was one of the 80

recommendations you came up with for David Cameron, he must engage a

stable policy for Europe. Nobody could argue that right now British

policy in Europe is stable or predictable. He is about to make a

big speech on Europe. He has given the signal that he wants to discuss

repatriating powers, renegotiating the fundamental relationship

between Britain and the European Union. Do you think he is making a

terrible, even hysterical mistake? -- historical. Something Lady

Thatcher said which I would remind the Prime Minister of, never go

into a room before working out how to get out of it. That is the

problem. I have every sympathy with the Prime Minister. I lived through

John Major's regime. He is under great pressure. Great political

pressure. He has propaganda sheets in the name of national newspapers

are producing the most appalling misrepresentation. He is the

political leader. I have great sympathy for his position. The real

world is that for 1,000 years there has never been a moment when alpha

interest, self- interest, have not been interwoven with Europe. It is

clear that a strong, maybe even majority of Tory MPs, once an in-

out referendum. The idea of a Britain outside the EU holds no

fear. Should they? We are gaining what we can from the facts of

modern life. Not even modern life. It has been there for as long as I

have had any knowledge of history. The idea that the Europeans are

going to abandon their deepest convictions to suit us, is, how may

I put it? A -- a bit of a punt. is not going to work if there are

27-28 categories of EU membership. Many in Europe believe that if

David Cameron pushers for a new relationship he will end up facing

the exit doors. The thing I find interesting about Ireland, the

Euro-sceptics were telling us they were going to have to abandon the

euro. The newspapers are now about how much money they have been able

to raise because they have addressed national problems. Today

people know the euro is going to survive. Do you believe Cameron may

be the British leader who ends up taking Britain out of the European

Union? I do not think we are going to leave the EU. It would be an

extraordinary abdication of British self interest if we were to believe.

In the mid-term of the Parliament there is growing unease which you

see in Scotland, France, Holland and Germany. People are frustrated

by what is happening. This is being exploited by people who ought to

know better into trying to suggest this is a membership of Europe.

Some of those people are Tories. Do you feel desperately isolated in

Europe own party? I think if you get down to it, the majority of the

Europe. Do you really think so? That is not what we hear. It is not

the sound you hear. It is the question of the silent majority. I

think the Prime Minister represents that majority. We have to end there.

Lord Heseltine, famous for being on HARDtalk. Thank you are very much

We are just over one week into the New Year, no wintry weather as of

yet. That is going to change. Some fog patches forming overnight.

Particularly across the Midlands and areas of the West Country.

Things will turn quite murky overnight. Light rain over the

south-west of the British Isles. It is going to be a grey start to the

morning, maybe not 50 Shades of Grey, but a couple. Some thick

cloud heading into the north and east of Scotland. Into England you

can see most areas begin with grey skies. If we have clearer weather,

there will be pockets of frost around here and there. Into the

Midlands and West Country, it is a murky start with fog around.

Visibility below 100 metres, making for some difficult driving

conditions. Rain edging into Cornwall, a few spots of rain

falling in Devon and Somerset. East Anglia and the south-east, a dry

start to the morning. It is going to be grey and quite cold as well.

For the rest of Thursday, parts of the Midlands will see some fog

lingering. We see the thicker cloud bring outbreaks of rain eastwards

into southern parts of Wales and into Somerset, Devon and Dorset

towards the end of the day. Sunshine in short supply. Friday,

we have this weather front affecting eastern areas of Scotland

and England. That is where the thickest cloud is expected.

Temperatures around 4-5 degrees. It is going to be a cool day. A little

bit of sunshine around. With the best of the sunshine, temperatures

up 6-7 degrees. Mild weather hanging on into the south-west.

Things are set to change this weekend. Low pressure works in off

the Atlantic. Snow for a time on the edge of it. Saturday night we

tap into the cold air from the near continent. That will bring a risk

of snow to southern counties of England. Not just over hills, at

lower levels as well. This weekend it is going to turn colder. The