02/12/2011 Newsnight

Tonight, hard times, how might ten years of austerity change the face

of Britain. We have exclusive new research mapping whether where you

live will be hit hard or one of the towns best placed to withstand the

tough years ahead. Is the road to recover to be found in the

Chancellor's love of new infrastructure projects. Richard

Watson spends an interesting day on the A14. In my previous job I was

doing boardroom level presentations using power point, now I'm

delivering parcels, demeaning but an income. Will we pull together or

pull apart, a dismal decade or lasting reform. We will talk to the

author of Austerity Britain, and the Bishop of Durham.

Britain's ambassador to Iran, relives the moment when the embassy

was invaded. Diplomatic property ransacked and diplomatic ties

shattered. These are buildings of historic significance, not just for

Britain and the world, but Iranian history too. That doesn't seem to

have inhibited those who got into the building in vandalising the

portraits, tearing the portrait of Queen Vicoria, and cutting out the

head of Edward VII. Good evening, the mood from the

Bank of England, to the Treasury, to Ten Downing Street this week,

seemed to involve various novels from Mark Dixon, Bleak House, Hard

Times, but not as far as we know, Oliver Twist. We have had austerity

Britain before, despite ups and downs, not the sustained period of

economic misery this week's Autumn Statement forecast for as you you

will. We have been looking at a study exclusive to Newsnight, by

Experian, that reveals which areas will be hit hardest. How did they

find out which are the most vulnerable areas? They are looking

at the effect of the spending cuts and job cuts that flow from them.

This is the first analysis that has been done since the Autumn

Statement. It takes into account not only the austerity we already

knew about, but also the further austerity that came in with the

Autumn Statement. The big real term pay cut, and the 1% pay cap, twice

as many public sector workers nearly as we thought would lose

their job, 7 10,000 of them. It looks in England, looking at local

business, how they are doing, and also how vulnerable local people

are to a drop in income. Top, as you can see is red car and

Cleveland, second, Hartlepool and Middlesborough. Those three areas

are within ten tiles of each other. The pain is not very -- ten miles

of each other. The pain is not very If they are most vulnerable, there

are some areas less vulnerable? course they are, those aren't very

well spread either. If you look at They are the commuter belt.

Surrey, and St Albans, it also co- relates with the industries

involved. The most vulnerable industries at the moment, according

to Experian, are things like engineering and chemical, typically

concentrated in places like Teeside. Banking and shuerpbgs, in spite of

the crisis, not vulnerable, -- insurance, in spite of the crisis

not vulnerable, spread in the south of England. What about income

groups? In the next graphic we have a breakdown on how the effect of

austerity, how austerity will effect the different income groups.

It is not actually the poorest there who are affected worst.

Perhaps, partly because, for example, unemployment benefit is

going up by 5.2%, so are state pensions. Working Tax Credit. The

sorts of benefits that are relied on by the not quite the poorest,

but the next poorest, are being cut back. Obviously austerity will bite

there. Most of all, if you are working as a nurse, a teacher,

local Government worker or central Government, you are facing a real

terms pay cut. What this research really shows is if there is pain,

it is not very well spread. In fact, it is quite concentrated,

particularly in areas like Teeside. I'm joined by Ian Swales, the

Liberal Democrat MP for Redcar, the I can't remember considered, as we

have been talking about, as the most vulnerable to the years of

austerity ahead for all of us. How concerned are you to represent that

kind of area? I don't share the pessimism of this study. The

Government's determined to rebalance the economy towards the

manufacturing and the real economy, and we can already see in our area

the effects of that. I think the study is tending to rate sectors

like banking and insurance, and underrate the revival we will see

in manufacturing. The Government's determined to back that. No doubt.

If we came to Redcar, we would not recognise the study, we would see

the sunny uplands, we would not see an area most vulnerable to this, as

Experian says. You would not see the sunny upland, the area has real

problems, the Government recognises that, the Regional Growth Fun was

added to by a billion in the Autumn Statement this week. That helps

areas like Redcar. I have three enterprise zones in my constituency

alone. In this week's statement, they are now going to get 100%

capital allowances, because the Government's determined. This

Experian research was conducted after the Autumn Statement, it

doesn't seem as if the Autumn Statement has done anything at all,

except neglect kwhrief, for your constituents? It has done three

positive things, the Regional Growth Fun has been expanded, my

constituency has been doing very well out of that fund. There has

been help for energy-intensive industries. That is very important

to our area. Of course, as I said, enterprise zone, which are already

all over Teeside now, are getting 100% capital allowances, which will

enable people to invest. We can already see people investing, in

fact, it is interesting, just last night, a house builder came to

Redcar and said they were investing in the town because they could see

it bucking the trend and it could actually be an area of success. I

think the local picture is a bit different, partly because of the

backing from the Government. In an attempt to boost growth, the

Chancellor, George Osborne, this week, targeted various parts of the

country, with more Government spending on infrastructure projects,

things like roads and bridges. He talked about plans to improve the

A14 in East Anglia, is that the road to prosperity. We went to find

out. It has been very trickery over the

past four years, to keep myself fully employed. I have been

managing to do part-time work here and there, through agencies, and

I'm currently working as a courier. I'm probably, after my expenses,

I'm probably earning about �800 a month to clear. That's nowhere near

enough. 52-year-old former sales executive, Ian Miller, spends a lot

of time on the A14, delivering packages on a freelance basis.

Following redundancy, he's grateful for work. It is far from the days

of a salary man. I have never had this problem before. I have always

thought I would be in full-time employment. It is very difficult to

survive, really with food bills increasing all the time. The cost

of heating, of house, mortgage, every week we struggle. So the

Government has announced plans to spend millions here improving the

A14. But will this trickle down to affect the local economy. Britain

now faces at least two years of austerity. I spent the day around

here speaking to local people about their employment prospects.

The A14 corridor, Cambridge to Huntingdon and beyond, has been

identified by the Chancellor as a priority for investment. Part of a

Keynsian stab at the economy. Ian Miller lives bang in the middle in

the village of Swavesey. We accompanied him to his local car

wash, staffed up by eastern Europeans. There was no queue, the

owner said the 30-car-a-day business was in decline. I have

watched one car turn up, how is business? Business has gone down.

It is no good. There is no money, everybody no money, no money, no

money. People haven't the money to spend? No, nothing. Have you

noticed a big difference? Big, big difference this year, to last year.

A big difference. Employers say that freedom to hire

and fire is the key to surviving any downturn. These workers are

probably viewed as fully flexible. But one person's flexibility is

another's casualisation, and two years of austerity will further

rode the traditional view of employment. What do you think about

the political classes, if I can put it like that at the moment. Do they

offer any solutions to these problems? I can't see that at the

moment, no. Do you have any faith in any of the parts? -- parties? No,

I don't. They all team to be doing, singing from the same song sheet,

all the time. Nothing inspires me to think things will get better in

the short-term. Not everyone is suffering, though, those who can

squeeze the lemon harder stand to make cash. We ran into this man,

who specialises in equipment fitted to commercial vehicles, which

tracks employee performance. It is a good place to be at the moment.

Is that because business is keener to press down on costs? Absolutely,

operationally, fuel costs, vehicle insurance costs. I don't think if

you are able to prove that by spending money you can reduce money,

there is still good business to be done. Bonus? Absolutely, one that's

picking up the cost for a round the world trip that I'm embarking on

tomorrow morning for a month. Roughly how much? Just short of

�20,000. �20,000 in this tough economic time? It is one of the

businesses that doesn't seem to be adversely affected by the recession.

Back at Ian's village, we caught up with a family friend, who has

experienced redundancy himself. This skilled commercial welder and

former labour manager, mentors 700 apprentices and 450 until full-time

construction students. The A14 improvements will allow a new

housing development, which isn't too far from Cambridge to go ahead,

really to push this one on, it has been sitting in the back for about

four or five years now. The A14 will have that knock-on effect, get

this town or village started, employ local labour wrecks hope.

For many British workers, then, the immediate outNew Looks bleak, the

crucial question is -- the immediate outlook looks bleak. Or

will -- What will be the effect of years of austerity, how might is

reshape our lives. My guests are here to discuss this, we are joined

by the Bishop of Durham in our Newcastle studio. David how do you

think we will be affected and it might reshape our lives, facing

this austerity? I think we might be profoundly affected, our historical

parallel, both with the immediate post-car period, and the austerity

Britain period, more like the 1930s were like now, the shortage of

money, coming out a period of mass unemployment, I don't think we can

feed off historical experience for future projection. The nature of

British society has changed so fundamentally in the last half

century, I would be wary of that. One of the things that people look

at is to Greece and Italy and the failure of political elites and

lack of confidence in them, do you think that could happen here?

Probably not, no. I'm much more worried, frankly, about the

austerity that will be imposed by an unelected Government in Greece,

particularly, and in Italy as well, because there, the social

consequences seems to me to be really frighten. If you get real

social disruption, -- frightening, if you get real social disruption

and civil disorder because of that austerity, will the army suppress

it in the name of an unelected Government. You are getting into

dangerous territory. What about here, a Government of the left or

right, there was no, even in the 1930s, no appetite for the strong

man, they didn't do well? At least there is a sense here that the

political institutions have not been discredited, the democratic

process hasn't been lost, people may or may not have had their

confidence inspired by the Chancellor's list of road works

last week, but at least there is a sense that this is ameanable, it is

democratically accountable, you could, in theory, vote this

Government out, your confidence may not be inspire by the alternative

either. When it comes out of your reach as an electorate, that you

get the terrifying social consequences. From where you sit,

Bishop, do you see the possibility of unrest, or lack of social

cohesion, or a chance that we might reevaluate the last 20 or 30 years,

become less greedz greedy, less materialistic? That is only going

to happen if there is a real change of heart. The A14 is a long way

from here up in the north-east, your survey showed very clearly

this is the area that will be hit very much the hardest. I think the

trouble with austerity is that, what's a slight chill in Chelsea is

a pretty good Ice Age up here. There is a serious issue about

whether we act with solidarity and people working together or not. For

that to happen there has to be a very significant change of heart

and change of social attitudes. Also a reexamination of values.

much less sanguine than Janet, to be honest, about the necessary

future integrity of our democratic system and institutions, given the

disconnect we now have between people at large, and politics, and

the cynicism, and corrosive cynicism really. That was fine, as

it were, that was a healthy scepticism, if you like, when times

were good, when times get difficult? Where would that go, we

could turn off and be apathetic? Who knows n the 1930s, a terrible

shrufrp, mass unemployment, but social order -- slump, mass

unemployment, more social order was maintained, it was a cohesive

society, people knew their place and expectations were less. All

that has changed completely, plus we have this disconnect. Of course

it depends, wae simply don't know, and predictions haven't -- and we

simply don't know, predictions haven't been accurate, these

predictions may be the same way. don't necessarily have confidence

in the present governing class Oregan racial of politicians. I

have a lot of confidence that the - - Or generation of politicians. I

have a lot of confidence in the democratic process. You have no

danger of a populist ...What, populist what? Coup or movement.

Populisim is an inherent part of democracy, politicians competing

for votes in crass ways can be populisim, or responding to public

opinion, depending on your point of view. Let me bring in the bishop

again, you raise the prospect of whether we will effectively act as

a community or not, or we will be divided amongst ourselves, won't we

also, perhaps, look at some of the great institutions of the society

that we have built up since the war, the welfare state, the National

Health Service, and look at the lack of money, and maybe even those

things, which have almost been beyond criticism for many people,

will be looked at, and perhaps, suffer? The reality is, that it's

three years since the recession hit us, it is over three years, well

over three years now, we are effectively in a depression.

Economically, and in any classical definition. What we're seeing is

that these great institutions, which over the years, have served

us so well and continued it do so, with great dedication, simply are

struggling to find the capacity to do it in the future. That will mean

a lot more people taking part in the life of the community, in

looking to the common good. That's a very substantial change of

attitude. It sounds like the Big Society, doesn't it? Well, that I

really couldn't comment about, I think. The Big Society is something

that the church has known for a couple of hundred years at least.

OK, but moving beyond that, to this question of those great

institutions, we may find that Government is simply short of money

and has to be conservative, because they can't do things, they can't

afford it? I think it is possible there will be a re-thinking of the

welfare state, and of its functions and of its scope. I don't think

much will be inherently suspicion or antagonistic to the idea of the

welfare state or volunteerism, or the Big Society, as was so powerful

before the welfare state came along in the 1940s, complimenting each

other, I don't think that is necessary a problem. It came out of

austerity didn't it? Very much so. But, the fact is, that as we are

now structured, the welfare state has huge and own you are inous

responsibilities that are only -- ownerous responsibilities that are

increasing at the moment. It may be the Government may have to re-think

institutions. Welfare reform, the time has come, because it is

necessary to reform T I hope this Government, or whatever follows it

makes use of that opportunity, to think in a constructive way about

reforming it. The entitlement culture has pretty much reached the

point of no return. It will have to bring in volunteerism, we will have

to re-think the entire benefits question. You pointed out the

difference between Chelsea and the area where you are, that would be

even very differently, presumably where you sit? We mustn't talk

ourselves into a state of despair and sit like rabbits in the

headlights. There has to be a clear effort towards regeneration, that

covers areas like this. That's going to have to come from renewed

confidence in the corporate sector, which is the only one that has

significant funds at the moment. And also, by much greater

participation, and use of voluntary support, and the kind of Christian

commitment that comes from the church and from other bodies, which

has historically been one of the great underpinnings of our society,

and holds it together, is something that is becomes seen again as

essential. I think that's all true. One

dimension we haven't pointed out is the question of equity, equity of

pay and suffering, we are all in it together. At times it doesn't

really feel like that, and one can look at aspects of national life,

and some seem far more privileges than others. There have been

shocking figures recently to do with chief executive pay, the 49%

figure, the recent commission's findings over disparity in the last

30 years between normal pay and top pay. Some kind of action, I think,

needs to be taken, otherwise there will be resentment. I think that is

true, the action has to be taken on the part of people with personal

moral responsibility. It would be dangerous idea that the Government

should some how intervene in what individuals are paid, that would be

a dangerous road to go down. Britain's ambassador to Iran has

described to Newsnight the terrible moments when the embassy in Tehran

was invaded by a mob, personal effects were looted. Property

defaced or destroyed. The expulsions of Iranian diplomats,

that took place today, means relations which what is a pivitol

regional power, are at a low point. With me is the BBC Iranian

correspondent, now in London. First of all, remind us what happened?

Tuesday there were demonstration, demonstrators broke into two

different compounds in Tehran, the embassy, where the ambassador and

his staff were in a safe room, and the residential compound where non-

essential staff were sheltering. The protestors were from a

paramilitary volunteer force linked to Iran's Revolutionary Guard, that

reports directly to Iran's Supreme Leader. The feel anything Britain

is this was state-sponsored. What kicked it off? It was sparked in

the latest saga between the west and Iran's nuclear programme. In

November the IAA released a report into Iran's nuclear ambitions n

response Britain decided to cut ties with Iran's banks, that

angered Iran, Iran vote today downgrade ties with Britain. At the

same time an important anniversary was coming up, that of the

assassination of an important nuclear scientist in Iran, and they

say that Britain and Israel za did t they don't have diplomatic

relations with Israel, so anger focused on Britain. It is important

to point out where we are with the nuclear programme, Iran says it is

peaceful but continues to enrich uranium. It is a covert war going

on, a lot of mystery explosions, and talk of cyberwarfare. We

understand there was mazery explosion outside Tehran, 17

soldiers were killed, and one general, the founder of Iran's

missile programme, but the nature of a cyberwar, a covert war, is

nobody talks about it. But the British, in terms of this incident,

are convinced this was instigated by the regime, or they stood by

while it went on? Yes, one of the British points is what they saw at

their embassy, reflects the power struggle that is going on at the

moment in Iran, it is not between the Government and the opposition,

that happened in 2009, the defining conflict in 2011 is within the

conservative movement. On the one hand you have President Ahmadinejad,

he has the support of the working- class, he wants to get clerics out

of politics. On the other hand you have the Supreme Leader, he has the

clerics and the Revolutionary Guard. It was his people, Britain believes,

who went into that embassy. The ayo Tola doesn't travel, he hasn't left

Iran, Mahmoud Ahmadinejad likes to travel, the key point is this,

empty embassies suit the Ayotollay more.

The British ambassador has returned to the UK, and spoke to me at the

Foreign Office earlier. I asked him who was to blame? Iran is not the

sort of country where spontaneously a demonstration congregates and

attacks an embassy. That sort of thing only happens with the support

of the state. There were a number of reasons, with the benefit of

hindsight, it is very clear this was a state-supported activity. The

main organisation involved in holding the rally were the Basig h

students, they are a state organised but very widespread,

almost paramilitary force. They report to the IRGC, who report to

the Supreme Leader, so there is a chain of command that the students

fit into. That goes up to the top of the state. You took quite a lot

of pictures of the damage, immediately around you, you didn't

have much time, but you did photograph it. Perhaps you can

describe some of the things that were damaged. Some of it just looks

like vandalism? A lot of it was vandalism. I was very fortunate

that I was living in one of the great historic residences that the

British Government owns around the world. That doesn't seem to have

inhibited the people who got into the building in vandalising the

portraits, tearing the portraits of Queen Vicoria in two, and removing

the bottom half. Cutting out the head of Edward VII, removing the

picture of our present Queen, and doing willful damage to furniture

and writing graffiti on the walls and smashing up the room where is

they could. It felt like, you know, very spiteful, mindless vandalism.

It wasn't quite mindless. They also renofd anything electronic. --

removed anything electronic, mobile telephones, personal equipment,

computers, and anything that might give information about who you were

talking to, or what you were doing. They went after that very clearly.

Did it ever occur to you, that you might be taken hostage, as happened

to the Americans some 30 years ago? It would be untrue to say that

those thoughts don't go through your mind, of course, you hope

that's not going to happen. I would like to say something about the

northern compound. The experience of staff there was more difficult

than for us. The first aim is to get off the compound as quickly as

you can. Two of our staff managed that. But because the crowd came in

quickly, they blocked off the escape exits for the others. The

others of the staff went to their safe houses, and locked themselves

into what we call our "keeps" the idea is you stay safe for a limit

the amount of time, until the police can turn up and rescue you.

That doesn't work if the police have no intention of coming to

rescue you in the first place. One colleague had locked himself

properly in his keep, he had pressed a heavy safe against the

iron door, and a bed against the safe, and braced himself against

the bed, they came for him because they knew he was there. They are

banging on the doors, you can imagine, they are breaking the

windows and trying to bash the door in. He kept them out for 45 minutes,

at the end the door was broken around him, but the keep had done

his stuff. But there were no rescuers coming to help him. Do you

think you were, in a sense, collateral damage in a big power

struggle going on at the top of the regime? The invasion of the two

compounds was not unconnected with the resolution that was passed two

days earlier, to downgrade relations and expel me as the

ambassador. And the instigators of that resolution were the speaker of

the foreign affairs committee. Both those people have high ambitions,

as you know, one of the principals of the Islamic Revolution of Iran

is that you can do yourself a lot of good by bashing the Brits. They

both said after the resolution was passed to downgrade the

relationship, they said Britain, this is only the beginning. Key

Largo larg said that, and -- Ali Larijani said, that and the speaker

said mark the words, this is only the beginning. Is it your

assessment that there are, therefore, some people in power in

Iran, who would welcome a serious confrontation with the British,

Americans, Israelis, with whom ever, because that will solidify their

political position? I think there is an element in their thinking

that goes along those lines. There is a huge degree and risk of

miscalculation. I tried to say this when I was in Iran talking to the

Ministry of Foreign Affairs people, and to the Foreign Minister, that

they shouldn't underestimate the sense of determination of the west

to deal with Iran's nuclear ambitions. So I think they probably

didn't expect us to send home the Iranian Embassy from London. You

can, reading through the lines, you can see in the way they have

responded to that move, some remorse in having provoked it. I

think that might apply more generally too.

Thank you very much. That's all from Newsnight tonight, join Jeremy

for a major investigation to the causes of the summer riots, in