18/10/2011 Newsnight

If we told you five years ago that inflation would hit a 19-year high,

the Bank of England would respond by printing still more money, all

to the cheers of a Conservative Chancellor, you would either say we

had gone mad or the world had. But that's where we are. The Government

doesn't care about you if you have saved or done the right thing. It

has, when push comes to shove, it will take the money away from you,

and give it to other people who they decide needs it more. The man

from the Treasury is here to defend himself. In the tented city in the

heart of the City, the talk is of a long drawn-out occupation.

Camping on concrete is the new form of global protest. What do these

protestors want? The fame Micker, Michael Moore,

joins us from New York, to - film maker, Michael Moore, joins us from

New York to tell us what Occupy Wall Street is all about.

Gus O'Donnell, stands in judgment on Liam Fox and finds him wanting.

The Israelis swap 1,000 prisoners for a single one of their soldiers.

What does the arithmetic tell us? After a slap-up dinner, the Booker

Prize is announced. Julian Barnes for The Sense Of An Ending. We will

be talking to Julian Barnes. Any money you have, any debts you

have are worth quite a bit less than they were a year ago. The

latest inflation figures show it is running at 5.2%, way ahead of the

rate at which wages are rising. As a result? Misery. The Bank of

England's job, by the way, is still formally to keep inflation at 2%.

Our economics editor, Paul Mason, is here. These are pretty bad

figures? 5.2% CPI inflation is the highest for 20 years. We will see

in main the detailed impact it is having on real people's life. For

now, let's just consider the political problems it creates. They

are two fold, first of all, it is helping, this level of inflation is

helping to push the recovery off track. Mervyn King, the governor of

the Bank of England, admitted today in a speech that it is off track.

It is taking spending power out of the economy, at a rate, which I

don't think the Government or George Osborne, understood would

happen when they set out a year ago on the austerity plan. Problem

number one, it is hampering the recovery. Problem number two,

closer to home for the politicians, is it is hitting the middle-classes.

If you consider 5.2% CPI means pensions and benefit also go up

next year by 5.2%, wages are rising at about 2%, for those in

employment. Transport costs, 12%, energy costs 18%. Now Mervyn King

says, in the long-term, it will probably fall back, and our real

worry is we get a collapse in the economy, not a rip roaring

inflationary problem. But whoever invented the term "squeezed middle",

it is skweegs the middle. We have been - squeezing the middle. We

have been looking at where the inflation is coming from and who is

affected most. Included in the basket of goods

used to measure CPI inflation, is daily cup of frothy coffee. Even

though the cost of our skinny mugochino is going up, we are

trying to stay calm and hang on to our little treats. Coffee is not

the only thing going up. Energy prices have risen 18.3%, after the

big three raised gas and electricity prices three times this

year. Anyone commuting to work on anything other than two legs will

have noticed the rising cost of doing so. Transport is up nearly

13%. Supermarket shoppers will tell you that the bill at the till is up,

6% according to the ONS. While all these things have been going up,

average earnings haven't kept pace, they are up by only 1.8% over the

past year. I think there is a real issue about

the fact that real disposable incomes are being reduced, first

because of tax increases and then because of the price increases we

are seeing now. Which means the take-home pay is considerably

reduced. What can people do about it? They will not spend as much.

They could dip into savings and carry on spending, they are all

worried about the debt and they are trying to repay debt, as we know,

over the last couple of years. Of course, if they are not going to go

out and spend, and instead they save. There is a serious issue

about what happens in terms of the impact on the retail sector and

loads of other sectors relying on the consumer going out and spending.

There is a school of thought that high inflation is tolerated by

policy makers like central banks and Governments, because it is the

only way of distributing debt reduction evenly throughout the

economy, without the political pain of raising taxes or cutting

spending. So now that we have high inflation, who the real winners are

and losers? The main winners are those who owe

money. Inflation erodes away debt. So mortgage holders and big debtors

benefit, especially if interest rates are at a record low. And

because the Government has a massive debt mountain, it gains too.

Of the losers, today's RPI inflation, as opposed to CPI, came

in at 5.6%, that means retailers will have to pay 5.6% higher

business rates from next year. But the biggest losers from high

inflation, will doubtless be savers and pensioners. Although the state

pension will rise a bit faster next year, their savings, usually a

bigger sum, will be eroded away by the same amount. Ironically, as

well as being a winner, the Government is also a looser, as it

has - loser, as it has to pay the higher benefits. I would advise the

current Government not to ignore the needs of pensioners. And to

take their suffering seriously. Older people, older generations,

not just those already retired, but now increasingly those coming up

for retirement, are in deep trouble. And through no fault of their own.

Most of them have saved, tried to look after themselves, have been

prudent, and everyone else is seeing that what's happened is,

despite the fact that they have done all that, they are not doing

well. The message seems to be, the Government doesn't care about you

if you save, the Government doesn't care about you if you have done the

right thing. But is today's high inflation figure as bad as the

headline numbers suggest? If you look at the official measure of

inflation. CPI - If you look at the official

measure of inflation, CPI, it is up and twice its target since the

start of the year. If you strip out indirect taxes such as the rise in

VAT and excise duties, the resulting inflation rate, known by

the boffins as CPIY, has been much closer to the target 2% over the

past two years. And the rate at which average wages have been

rising is also much lower than the headline CPI rate. When inflation

is largely imported, it is much more volatile and much less easy to

predict, than when it is dependant on domestic factors. When it is

domestic wages you can make a pretty good guess at inflation and

how high it will be. With commodity prices they go all over the place.

In these circumstances anyone who thinks they are certain about what

is going to happen is probably telling you a lie. There is a not

so cheery economic barometer, called the "misery index", linking

inflation with unemployment. It says for every 1% rise in

unemployment, it equals a 1.7% rise in inflation. It basically says

people tolerate inflation a lot better than unemployment. The

problem is, they are both going up. As inflation - has inflation peaked

for now? Probably. That is what most economists think. The economy

may have to chug along for a bit longer in these straitened times,

until the wind blows in our favour. Here now to discuss today's figures

are the Treasury minister, David Gauke, and The Shadow Line dough

chief Secretary to the Treasury, Rachel Reeves. Are you going to sit

there and say there is nothing the Government can do about it?

recognise inflation is high and having an effect on people's living

standards, that is why we have reduced fuel duty, and petrol is 6p

a litre cheaper than it was. It is why we are freezing the council tax

and increased the personal allowance ahead of inflation. It is

a difficult time. We don't deny that. We have limited room for

manoeuvre because of the state of the public finances. You have done

what you can, and you have failed to get it very good? It is a

difficult time. We accept that, but the fact is, we have public

finances in a mess, we have inherited that, we are trying to

get our way out of that. We don't have a lot of money to throw at the

problem. If it is true, as everybody says, that much of the

driver of this is higher energy costs and higher food costs, there

isn't really that much they can do about it? Well, we have now the

highest inflation rate in Europe, apart from Estonia, so there are

particular things going on here in Britain, it is not just imported

inflation from overseas. It is little relief for pensioners and

families right now to think that inflation may come down in the

future, when they are struggling right now with rising food prices

and energy bills. There are things that the Government can do, for

example, Mervyn King has said, that the main drivers of inflation,

right now, are the VAT increases and the increases in energy prices.

Labour have suggested a reduction temporarily in VAT to help families

and pensioners, �450 extra for an average family. If Mervyn King says

he expects the rate of inflation drops next year, what is the point

of a temporary cut in VAT now? know thainflaigs has overshot both

the Bank of England's - that inflation has overshot both the

economists and Bank of England's forecasts over the last few months.

But if you cut it it is immediate money into people's pockets. There

are many people and pensioners struggling to make ends meet, and a

cut in VAT will make a big difference. You have a feeling a

different analysis, - uch a different analysis to the Bank of

England, you don't think inflation will drop next year? I hope it will,

but for families suffering now. disagree with Mervyn King? No, I'm

saying for families right now struggling with rising prices and

many of us turning our heating on this week, energy prices going up,

and pensioners feeling the squeeze as the winter nights draw in. A

temporary relief and a cut in VAT can do that. You expect a drop in

inflation next year? That is what the Bank of England predicts and

most commentators, the IOF and the FOCD, they think so. What is the

guess in the Treasury l it drop next year or not? The position the

independent office of budget responsibility has taken, is

broadly in line with the Bank of England. So, yes, there is an

expectation that inflation will drop next year. On the specific

point of benefits, linked to the rate of inflation in this set of

figures, that would mean if inflation drops next year that

those on benefits will get some sort of gain from the fact that it

is pegged to this number. There is talk of you trying to peg it to

some other date maybe in the new year or some sort of average, are

you going to do that? The September number, which is what we have today,

is the number which is used. will stick to that? That is the

policy. You are sticking to it? That is the policy, it remains the

policy. You will stick to it? the policy, and that's where it is.

Do you think it is fair to working people? Well, I think it is a

difficult time all round. We don't deny that. That wasn't my question,

is it fair? I think we don't want to, we heard in the report talk

about the impact of pensions. Pensions are hit by inflation, we

don't want that to happen. We need to look in the surround. We don't

want to try to get the deficit down on the backs of the poorests.

is going to happen. You have told us twice, it is the the policy. The

benefits will go up at the time that inflation goes down? Let's see

when we are nearer the time as far as where inflation is going to be.

We do want to protect pensioners who have seen inflation go up.

you think that is fair to working people? Let's have a look at the

circumstances at the time. You can have a view on whether it is fair

or not, without waiting for the circumstances at the time?

depend what happens with various trends as far as inflation is

concerned. The important thing is that we have, and I just want to

come back to something that Rachel was saying, the idea that we can

just cut VAT and that would be just a win-win, we have to bear in mind,

if we lack credibility in our fiscal plans, what you would see is

interest rates going up. We have one of the lowest interest rates in

Europe. As a consequence, that has a squeeze on mortgage s. What you

see at the moment is the Government borrowing �46 billion more over

this Parliament, because the cuts that we are seeing are resulting in

higher unemployment and lower growth. The Institute of Fiscal

Studies have said today that the increase in inflation will mean

�1.8 billion extra this year on benefits payouts. It is clear the

Government's policy isn't working at the moment in bringing down the

budget deficit. There is a slowdown in every country you look at. The

Americans had a fiscal stimulus and a lot of money thrown at it, their

growth is lower than our's. There is a slowdown across the world,

there is a crisis in the eurozone, that is damaging confidence

everywhere. In the past nine months the British economy hasn't grown at

all. The only economy to have grown more slowly is Japan, hit by an

earthquake. The only countries in the economy growing less slowly are

Greece and Portugal. There is something about the economic policy

being pursued here that is hitting growth and jobs and pushing up

inflation at the same time? We can play the game of choosing a

particular period, and if one looks over six months the answers are

different. The fact is, there is a slowdown across the eurozone, in

the UK and the US. And the Government's policy hasn't changed

at all to changing global circumstances.

Many of the drones pouring in and out of the City of London this

morning and evening had to survive the scorn of protesters, camped out

in front of St Paul's. They are part of a movement, it would be

wrong to call it an organisation, which began with the campaign to

occupy Wall Street in New York, it has spread to other cities, where

citizens have found their lives poorer by the greed of bankers and

their friends. What, apart from venting anger, are they trying to

It did not start with Wall Street. All this year protestors have been

occupying squares, in Cairo, in Athens, and in Spain. The whole

world is watching! But the Wall Street occupation, and the

associated protests, have now given birth to a worldwide movement. The

protestors claim to be the 9%, as opposed to the 1% who - 99%, as

opposed to the 1%, who they say own most of America's wealth.

It is this that struck a chord with the environmental groups, the trade

unions have backed it and politicians noticed it.

protestors are giving voice to a more broad based frustration about

how our financial system works. In London, since Saturday,

protestors have been camped outside St Paul's Cathedral. They include

students, environmentalists, the guy fauks masks warn by the Hacker

Group, anonymous. The days are filled with meetings and

discussions, the aspirations, huge. Why are they here? Because they

feel powerless, politicians are ignoring their demand, people here

no know the cuts aren't necessary, they know the banks gambled and

lost in �850 billion pumped into the banks, it is unfair for us, the

general population to be paying that money back by losing our

services, our jobs, by losing our welfare benefits. People here know

it is wrong. What is new about the movement here and across the world,

is its intention lack of connection with mainstream politics. Faced

with this global occupation movement, what the mainstream media

and politicians tend to ask is what do they want from us? For many

people here, that is the wrong question, many of the protestors

think they are here to create something completely alternative,

and separate from the political processes they think have failed.

There is a cry sifs political representation. People have seen -

crisis of political representation. People have seen time and time

again that their needs and interests are not being represented

at the level of state. And to the contrary, the austerity measures

being pushed through are harming them and taking away their

livelihoods. Therefore, that is what the crisis of political

representation is. They have seen the interests being offended and

pursued at the level of state are those of a minority with access to

wealth and power. If people want to show by silent clapping if they

agree. To the uninitiated the methods look strange, and some

worry the counter culture is too weird to involve the majority of

problem. The other thing is, as the nights get cold, how long do you

stay and how do you know you have won. Joining us now from New York,

the film maker and author, Michael Moore. Michael Moore, how

significant do you think these protests are? I think they are

quite significant. I think this is something that is certainly

spreading all over the United States. There are new occupy

movements beginning in towns and cities every day. Now it has spread

across the world. It has really touched a nerve. What your

correspondent said about, that it may seem weird, because you have a

lot of young people there, in the park. It is only weird in the sense

that all movements for justice begin with people who are not, who

are willing to be out there on the edge a bit. Somebody in the

feminist movement burned their first bra and that shocked

everybody, and everybody thought that was weird and crazy, then we

had a feminist movement, and things got a bit better. That's how things

go. When women wanted the right to vote, 100 or so years ago, talk

about being weird. They were completely ostracised, everybody

who starts a movement is talked about in this way, this is how they

are being talked about now. It is much, much larger. In the campaign

for woman's sufferage, the methods and tactics, the objective was to

get votes for women. It is unclear, in this case what the objective is,

what it would take to get the campaign called off. Do you

understand what it is for? Yes, I do. It is, there are a whole bunch

of reasons that lead back to the greed of an economic system that is

built around n this case, in our country, around Wall Street. People

are fed up. We have 50 million people in the United States that

have no health care. 50 million. We have millions who have lost their

homes, due to foreclosure. We have 46.2 million living in poverty.

That is at least 13-18 million kids every night going to bed

malnourished. People, millions of people have been abused by the

system and they have had it. I think it is enough. Remember, we

are in the first 32 days of this movement. It is enough that people

have just gotten up off the sofa and gotten involved. It is enough

that people have pushed through their despair to say, you know what,

I'm not going to sit by and do nothing. First you have to get up

and move. That is what people have done, we are in the first phase now.

This will grow into something with various political demands to up end

this system that has caused so much pain for so many people. You say up

end this system, is the objective to reform capitalism or end it?

depends on who you ask. As far as I'm concerned it needs to be ended.

It is an evil, evil system. I'm talking about 21st century

capitalism. I don't want a lecture about what Adam Smith intended or

whatever. I'm talking about a system now that is set up so that

the richest 1% get 40% of the pie. A system where the richest 400

Americans have more wealth than 150 Americans combined. What do you

want to replace it with? Well, it is not about replacing it with

something, or going back. Here is what is confuse, especially some

people in the media, - confusing, especially some people in the media,

they are thinking why aren't they joining in the political system

that has always been done? But it hasn't worked. They are not

interested in pass ago bill in the Senate or a Congressman saying the

right things to them. You have told us this will end up with political

change. How will you get political change if not by political action?

We will have to see what happens, right. You are watching the birth

of a massive worldwide movement against the banks, against Wall

Street, against the City. People literally have had it, they will

not take it any more. And things are going to happen. We just don't

know it now because we are really in the actual birth of this

movement. So, what do you imagine will

replace capitalism at the end of all this, if the movement is

successful? I think what people would like is a democratic economic

system. If we say we live in democracies, we should have

economic systems where the people have a say in how they are set up

and run. The pay should be divided fairly amongst the citizens, and

those who have more are taxed more, so that they have to pull what is

their fair share of the weight. That is ultimately what people

would hope. You know, when I was a kid, people really weren't mad at

rich people, because the rich people built the factories and it

was kind of like, OK, they gave my dad a job, now we get to have a

house and car, and the kids get to go to college. That is all gone now.

There was never really enough for the rich, they had to keep, they

wanted more and more. Enough is the dirtiest word in capitalism. We

need an economic system that is fair, just and democratic, that is

not what capitalism is now. I'm afraid this isn't just me saying

this, the people have had it. They want something new, and maybe

something new will have to be invented out of this.

What would it take to persuade you that it was not necessary to have

this campaign any longer? You mean what would need to happen to stop

me occupying Wall Street? Yes. of a number of things. A fair tax

rate so that the rich pay their fair taxes. Bring back the controls

and regulations on Wall Street, so they won't be able to do what they

did in 2008 and before that again. There is a whole bunch of specifics

that I would be happy to see happen. But ultimately, I don't think that,

we have a political system where essentially now our candidates can

legally be bought by billionares, money has to be completely removed

from our political system. There is a declaration, if you go on-line to

the Occupy Wall Street, there is a declaration that the general

assembly voted on down there. You can see 19 or 20 different points

that people are concerned about. It is not that people haven't

expressed these concerns. It is just that it is not like the old

way, where it is let's get somebody elected President, let's get that

bill passed in Congress. We are way beyond that now. We are not into

fixing or reforming or tweaking. This is simply has to end. The way

of doing business, as we know t has to come to an end.

It is only nine and a bit pages long what it lacks in length it

makes up for in strength. The Cabinet Secretary's report into the

relationship which led to fox folk fox's ris nation last Friday, as

Defence Secretary, is pret - Liam Fox's resignation last Friday as

Defence Secretary is pretty straight forward. He was told of

the risks to the relationship and he chose to ignore the warning. We

watched the birth of today's report. Waiting for the judgment of God, in

Whitehall, God denotes the initials of Gus O'Donnell, the head of the

Civil Service. As close to an ominousent being as any mere mortal

could be. It is him sitting on in wise consideration of the since of

Liam Fox. He took his time, and some began to doubt his existence,

some wondered if Oliver Letwin had put the report in bin. When it

finally came it was not handed down on tablets of stone but it is clear

cut. This report by Gus O'Donnell is so cit calf Liam Fox, - cil

critical of Liam Fox, if he had not resigned when he did he would have

to know. We knew plenty about the case. Liam Fox's former flatmate,

Adam Werritty, met him on 22 occasions in the MoD building and

17 overseas. Sometimes the President of Sri Lanka was present

and others. Adam Werritty was funded by rich donors keen to voice

their policy concerns. At least one donor, Jon Moulton, suggested that

Liam Fox himself solicited these donations. When Dr Liam Fox

resigned last Friday, it was because he knew today's report was

critical of his conduct. The report concludes that security had been

compromised. Not national security, but the disclosure outside MoD of

diary details about future visits overseas posed a degree of security

risk, not only to Dr Fox, but also the accompanying official party.

Sir Gus goes on to condemn Liam Fox's frequent meetings with

foreign dignitaries and contacts with Werritty present and no civil

servant. This, says Sir Gus, should not have been allowed to happen.

The report concludes that the contact damaged the proper conduct

of Government business. Dr Fox's close and visible association with

Mr Werritty in the UK and overseas, he says, and the latter's use of

misleading business cards, has fuelled a general impression that

Mr Werritty spoke on behalf of the UK Government. The risks of Dr

Fox's association with Mr Werritty were raised with Dr Fox by both his

private office and the permanent secretary. Dr Fox took action in

respect to the business cards, but clearly made a judgment that his

contact with Mr Werritty should continue. It is obviously a serious

situation where a minister of his experience did breach the

Ministerial Code. And also, put the security of other ministers and

officials at possible risk, because Adam Werritty had access to his

diary. We have had the official report, the minister has already

resigned, surely an end to the matter? Possibly not. For a start,

this afternoon the speaker, the Commons Speaker gave a powerful

hint he's minded to go with Labour's question of an urgent

matter request tomorrow. Labour suggesting this goes beyond

one minister and one so-called advisor? David Cameron said last

week he would answer all unanswered questions, clearly it hasn't. In

terms of the relationships that Mr Werritty and Dr Fox had with

funders, and also organisations such as Atlantic scam bridge, which

also involved at - Atlantic Bridge, which involved at least four

serving ministers. Tomorrow there will be a Government statement on

the report in the Commons. It won't be the Prime Minister making it.

But the leader of the Commons, Sir Tony Young. There are questions

about other ministers, and whether this network of contacts around

this organisation, Atlantic Bridge, raises any more questions about

undue influence on ministers. Are you clear in your mind that there

hasn't been that? One of the recommendations in the report is

the moment you become a minister, in addition to declaring that your

financial interests, you should declare the sort of friendships and

acquaintances mentioned in the report. Anyone with an interest in

policy and contacts revealed to the permanent secretary. If we

implement that recommendation, and the Prime Minister has said he's

minded to, that will address the particular issue you have just

talked about. On a question of process, is it right you will be

talking about this tomorrow in the Commons, if there is an urgent

question? The Prime Minister has asked me to make a statement giving

their response to this particular report. As leader of the House I

have a broad range of responsibility, the Prime Minister

has asked me to discharge this one. This is putting your broad range of

responsibility at its broadest? Liam Fox dismissed two of the

serious allegations against him, that he made money, or jeopardised

national security in his relationship with Werritty. God is

expecting to be receive with heads slightly bowed, but many don't

believe this is the end of the matter.

My guests are with me now. This is damming report, and yet

last week you were all defending Liam Fox? He resigned, because he

knew he had broken the Ministerial Code. You were defending him up to

that point I don't think people were defending him to that point.

What people were saying about Liam Fox was that he had done a very

good job as the Defence Secretary. He had clearly made very serious

errors of judgment, and then the next question to be asked, which is

what the report was all about, was had he broken the Ministerial Code.

He knew he obviously had, he paid the ultimate price for making

serious errors of judgment. No financial impriority, no threat to

national security, that is important as well. This isn't an

end to the matter as far as you and your colleagues seem to think?

report would have been unsurviveable if Liam Fox was still

in a job. He jumped before he was pushed. He acted honourably?

doesn't touch pont issue of money or the issue - touch upon the issue

of money, and which other people met Dr Fox. Two members of the

Government, two defence ministers met Mr Werritty. We can understand

why Liam Fox let Mr Werritty, because he's his flatmate and best

man. What bu what are other ministers doing meeting a shadowy

figure, it is perplexing. What do you think? I don't think it is

finished. Were I advising the Prime Minister, I would say you need

further processes here. Perhaps Gus O'Donnell should be asked to

broaden his inquiry with a different remit. Because there is

the question of ministers, to which reference has already been made,

and also there is this general question about access. One of the

things which I believe is we ought to have a register of lobbyists.

But, of course, Mr Werritty wasn't a lobbyist, and therefore would not

have appeared on that register. We need a different system, which

allows both transparency and scrutiny. The Liberal Democrats are

calling for the extension of Gus O'Donnell's investigation? I am.

You are a Lib Dem? You were leader once? You are not an insignificant

voice, I would imagine? That is kind of you to say. But if I may

coin a phrase, I'm not an advisor to the Prime Minister. It is not

your formal policy? It was our policy in the general election.

is in the coalition agreement that we will have this register of

lobbyists. He make as good point. It is taking a long time to get to?

The transparency last been put into place, ministers have to give

details of their expenses and foreign trips, and meetings they

have. All of these things, which was not introduced by the last

Government. There is a transparency that has come into it. Mr Werritty

was on no-one's books, not a lobbyist or registered in any way

whatsoever. David Cameron said sunlight is the best deterpblgent.

Let light shine on these issues to clear these things up. The public

are being kept in the dark, this is a ten-page report, very superficial,

we need to look wider at the issue of money and ministers. Who gave

money to Mr Werritty and his networks, what did they get in

return, we need that answer. language is typical economics Civil

Service, but actually it is a very powerful report, it is not a

superficial report. Everyone says it is very strong. If you don't

mind, hang on. What does it tell us about the nature of this Government,

and that it can find itself in this sort of mess. It reveals something,

does it not, about the nature of coalitions? I don't think that's

the case, they reveal something about the way in which Liam Fox

fulfilled his responsibility. Nobody had the faintest idea of

what was going on? I think they did. That is one of the points in the

document, is there had been conversation, there had been

concerns, and he had not taken advice. The Permanent Secretary in

his department did. No-one did anything about it? Can I ask either

of you. He did do something about it, he resigned, we keep for

getting that. After the event. any other minister know about any

of this. I don't know the answer to that. I think your question, to try,

if I may say, to make political capital out of this, is really not

acceptable. Let me just finish. an opposition politician, what do

you expect? It is about the honourable point he makes. To ask

about Werritty, you ask questions about him. But it is not the job of

Gus O'Donnell and the Prime Minister and anybody else to ask

the questions of someone who has no locus. You would rather a broader

inquiry Not particularly. I genuinely believe. That everything

that needs to be found out has been found out? The things he has done

wrongly, in his position, as defence secretary, has been

examined in that report. No impropriety and he has resigned.

How can you do that, he's a private citizen. How do we know who else he

has seen? He may have been a private figure but he's a public

figure now. It is not a difficult question. The Prime Minister

confused about how Government does these things. The Prime Minister

should ask all of his ministers did you meet Mr Werritty and why. And

publish that list tonight. Werritty is publishing his own list.

That is the parliamentary protest, anybody ask questions of any

minister. We will be back on this tomorrow.

Extraordinary scenes in Israel and Gaza today as one Israeli corporal

and many hundreds of Palestinian prisoners returned home. That one

captured 19-year-old can generate such commotion, speaks volumes

about Israel's attitude to its citizens, a massive military

operation against Gaza failed to find him. The winners in all of

this are obviously Mr Shalit, the many Palestinians released, Hamas

and Egypt, which acted as broker in the deal. The losers, that slightly

more complicated. The return of Gilad Shalit required

a political journey. And for this young soldier, that odyssey took

five years. Shrunken and pale from his ordeal,

the young man fell at last into the arms of his father, who had

campaigned, tirelessly for this day. Gaza, meanwhile, the first buses

carrying freed prisoners were rolling in. Many heading for family

reunions too. The city had turned out to celebrate, 200,000 at the

main rally, and to give the men a hero's welcome. We thank God for

this big party, and we thank the parties here, Hamas and all the

other parties, for what they did and do. We feel very happy.

But if the political benefits of this to Hamas and the Israelis were

so apparent today, why the years of machinations, why so long.

My involvement in this has been since the third day after the

kidnapping, five-and-a-half years ago, almost when someone from Hamas

called me and said, gerb shone is being bombed, the electricity is

off and we have to do something. From that moment three days after

the kidnapping in June 2006, I have been trying to bring people

together behind channels to pass on messages. I believe this could have

been done a long time ago. Serpblgt Shalit was seized nine months after

his arm - Sergeant Shalit was seized nine months after his army

unit had pulled out of Gaza. In the summer of 2007 Hamas took control

of Gaza. There was encouragement across the world to boycott the

Islamic movement. With Hamas taking over Gaza, it was harder for Israel

to have intelligence there. Israel had no idea where Gilad Shalit was.

Thomas Merton, as Prime Minister, he was so - Ehud Olmert, he was so

concerned with the moves made in Gaza, he wasn't willing to go in

for a long time and try to get him out militarily, or make a deal for

him that would result in hundreds of terrorists being released.

So were they trying to get him out? With political will lacking, little

energy was put into finding them. Rather with rockets falling on

Israel, Gaza was pounded, and indeed, invaded early in 200,

making meaningful negotiation impossible. But the release of a

video of Shalit, several months later, and campaigning by his

father, started to change the political equation in Israel. 18

months of negotiation and haggling ensued, so the question is, why

now? Israeli negotiators say that Hamas, at last, was ready to reduce

its demands, and that's what finally brought the two sides to

agreement. On July 14th we worked out a document that talked about

finality, the closing of the agreement, we talked about the

principle that Israel would select from a list of 30, between 25 to 30

of the most difficult names, something the Germans called the

VIP category, and the Palestinians agreed most of them would be

deported forever. By its choreographing of today's

celebrations, Hamas has sought to derive maximum political wealth.

TRANSLATION: I swear to you, that hiding Gilad Shalit inside Gaza is

something we are proud of today. The Palestinian military mind has

defeated the Israeli mind that is supported by all the Secret

Services and intelligence apparatus and means.

Inevitably there are many asking what next? Does the ability of

Hamas and the Israelis to agree on this open the way for positive

change? Or will it just prompt more hostage taking?

As he travelled through Egypt this morning, Gilad Shalit expressed

this hope? TRANSLATION: I hope this deal would help the conclusion of a

peace between the Israelis and the Palestinians.

I hope that co-operation links between the two sides will be

consolidated. There may now be further steps to ease the Gaza

blockade, perhaps creating a more normal life there, and in

surrounding Israeli towns. Today's deal, could also improve the

atmosphere for the resumption of some kind of peace talks.

But as to a meaningful peace process, that's still a long way

off. In the warriors he' reception given to the detainees today, there

are the unmistakable signs of two people still locked into an

intractable conflict. It is posh bingo, the phrase

doesn't spring to mind, but Julian Barnes did it. The Booker Prize has

come out, this time there is a row about whether it is infiltrated by

books people might want to win. The winner gets �50,000 and a boost to

sales. The six finalist, publishers, agents and hangers on, have been

troughing at Guildhall tonight. Gavin is with him. Here in the

Guildhall I'm joined by the 2012 winner of the Man Booker Prize,

Julian Barnes. It has been a long time coming? This is the fourth

time I have been shortlisted, I know the ins and outs of not

winning it, now I know the winning of it. You once said this was posh

bingo, I know the judges are now impecable, is it still true?

point I was making is the book has a tendency to drive people it

touches mad. Writers are more susceptible than others, it does

drive judges and some publishers mad. The way to protect against

this is treat it as posh bingo unless and until you win, then it

is the decision of the wisest judges in the literary world. That

is what I maintain at least for the next 24 hours. On that point, there

has been a bit of a fuss this year about the question of readability

and literary merit, as if they are sometimes mutually exclusive, which

they aren't, what are your thoughts? It is a false argument

and people are going mad on both sides. Jane Austen, what is she if

not readable, Dickens incredibly, in the modern age, Graham Geem, pen

Nell lop pee Fitzgerald. All good righters - PenelopeFitzgerald. All

good writers are readable, or you go to fin begin's Wake and it is

unreadable. This prize may drive people mad,

but does it change you, given where you are in your career, you have

this track record of amazing books in the past as well. Does it change

you or is it not that important? won't change me in terms of what I

write, or how I view the novel and the world. But I hope that it will

bring new readers to me. There will be people who think they will have

a go at that, and then if they like they will discover there are quite

a few more books in the bookshop. That is what I hope for out of it.

And of course, it is very nice to receive a large cheque from the Man

Booker Prize. The book, The Sense Of An Ending,

which I enjoyed immensely. I found it on many levels and will read it

again, it is very short and very subtle. I wonder did you spend a

long time on it or not. Is a short book a quick write or not? It was a

clear, I don't know if you call that quick. Do you call it quick?

It is funny, my previous shortlisting was for something that

was 450-pages, I wrote that in 12 months. You could say this is a

more leisurely 12 months. I think 12 months for 150-page book is

about right. I tend to have a sense when I'm starting a book of how

long it would take. When I started my first novel it took seven years

to write. He I was bored with it by the time I finished it. As you

learn how to write you get a sense of how much time you will be alive

in your head with it. So I think I have got that, I have got that

licked now. Just a final thought, again on the

book. I find it whistful in places, and in one or two places - whistful

in place and in one or two places laugh out loud? That is great, a

start. Humour is part of your writing? Yes, and being funny is

often a good way of being serious. Congratulations to Julian Barnes,

the winner of the Man Booker Prize. Tomorrow morning's front pages, now

the Financial Times, Mervyn King's speech saying the recovery has gone

a bit off track. Also the lead in the Telegraph, above a picture of a

gorgeous, alleged pouting Russian That's all from Newsnight tonight,

at the end of a day in which the financial BMOF Goldman Sachs said

instead of its usual guzzling, it declared a loss already. It was

Rolling Stone magazine that described the firm as a great squid

wrapped around the world. This is what the vampire squid does in

trouble. The vampire quid from hell. Disturb it, and it only retreats a

little distance. Luminous bacteria shine from pockets on its arms, to

confuse predators, a bite there would leave the head unscathed. The

threat diminishes and the vampire It is cold out there, isn't it. It

will stay cold as we go through tomorrow. Showers tomorrow, showers

in different places compared to today, they will drip down into

southern parts of the UK. One or two sharp ones. Further north, for

northern England and the Midland, dryer and brighter. But chilly,

wherever you are. Temperatures struggling for double figures.

Sharp showers across the south-east as we end the day. Hail mixed in.

Most of the South-West will end the day on the dry and bright notes.

One or two showers left behind across the north and west of Wales.

Not as frequent or heavy as they would have been earlier on in the

day. The breeze will keep the temperatures down. 10 degrees will

be typical. Northern Ireland will have much more sunshine than in the

last couple of days. Things settling down, that is the case for

most of Scotland, wintry showers continuing across the high ground.

Looking further ahead into Thursday, a change in the weather for the

more north western parts of the country. Clouding over with rains

for western parts of Scotland and Northern Ireland. The wind picking

up too. Further south and east, things settling down for a time.

After a frosty start on Thursday, plenty of sunshine, and the wind