14/02/2012 Newsnight

The average punter in the UK thinks unless you're making some

nanotechnology Stealth bomber you shouldn't be making it in the UK.

Whilst there is potential with a seriously high end in engineering

and manufacturing, don't underestimate what's possible with

something as simple as a bike that we make and there really is

potential for many businesses to be exporting more of their products.

In many ways this bicycle company is a poster boy for the Government

to rebalance the economy towards manufacturing and exporting. The

problem is, though, that that transition is proving quite painful

for some. That's especially true for many households that are

spending a lot more for day-to-day items but whose incomes have been

flat lining. That's a pay cut in real terms and the worst fall in

living standards in decades, so today's inflation statistics will

be welcomed by many of them. They show that prices are still rising,

but now at 3.6% - that's still almost twice the 2% target but

considerably smaller than last year which peaked in October at 5.2%.

There are clubs where people try to keet their budgeting down to �50 a

week... But there was some relief in Watford where the Prime Minister

was visiting Mum's Net's archrivals, Net Mums. Inflation is coming down.

That's good news because inflation is the most important issue to

families. Moody's placing England in negative

outlook - Moody's said it was a downgrading of the UK economy and

its ruling coalition. Moody's achieved a terrific double today of

apparently pleasing both the Government and the opposition,

which I doubt was what they intended in either case. I'm amazed

that the politicians take this so seriously, and have as a policy

objective maintaining particular rating, which is something they

cannot possibly control. The rating agencies at the moment are somewhat

following the market I think rather little market reaction. You've got

rating agencies taking different views on different countries as

well, so I really think that this should be downgraded in importance.

Nonetheless, there is considerable evidence that Britain may have

dodged an economic bullet. The services sector, which accounts for

almost three-quarters of the entire economy is expanding quite well.

Exports are also up. Only yesterday the CBI painted a much more benign

picture than it had only three I think we're at a furning point. I

think the economy is it a bit stagnant at the moment. That's what

the recent quarterly growth figures show, but when you've been

declining you need a period of stability before you can start

rising again. So the fact that many of the surveys are looking more

positive, the fact that the housing market has stopped declining seems

to be also at this kind of turn around, indicates to me that

probably the next few quarters will look better than the last few.

That assumes that the eurozone crisis abates. Even tonight, that

was not assured as eurozone finance ministers still said they needed

more eassurance from Greece. Back here, we await the quarterly

pronouncements of the Bank of England in topbl's inflation report.

That could signal that Britain is a few centimetres to being on the

right economic track. Even if that means a decade of wobblably Japan-

like rough. With me are the Treasury minister, David Gauke and

the Shadow Chief Secretary, Chris Leslie Once the strip out the VAT

question, it is true that real incomes are still shrinking?

fact is we are going through a difficult period. There's no doubt

about it and the Government are doing what they can to help. That

why we prevented rises in fuel duty, which would have happened next

month. And some freezes. But people are still worse off. It has to be

said that the fall from 5.2% to 6% is moving in the right direction.

The Bank of England is saying that inflation will be down at the 2%

target by the end of the year, so that is an improvement, but we

recognise it is better. If this is good news, I would hate to think

what bad news was. The spin we're getting is that prices are falling

and people are better off. And in terms of council tax and fuel,

those costs are still extremely high. 3.6%, the cost of living

increase is nearly twice what the Chancellor himself is setting. And

certainly twice what wage increases are. So real families and

households up and down the country are finding it very difficult to

make ends meet. We accept, and indeed one of the difficulties the

economy has faced over the last 12 months has been high commodity

prices. The independent Office for Budget Responsibility highlighted

that one of the reasons why growth last year was disappointing was

because of high commodity prices. We accept that, it is difficult.

But within the constraints we have, we have taken out fuel duty and

council tax. Moody's now is interesting, we heard it dismissed

there. Some people say you can forget about it. The trouble is the

Chancellor has gone on and on about this triple rating. How strong he

is because he's managed to secure this, and now this must be a

serious defeat, mifpbt it? No, if you look at what Moody's have said,

they've praised what the Government is doing, but their concern is

there going to be the political will to follow through, and will

there be a fiscal grading. And in those circumstances, will it

continue? But the this has to be a set back? The fact is the analysis

of the credit rating agencies, as would appear to be the markets

generally is we have to have a credible plan to get the deficit

down and the likes of the IMF are saying we have a credible plan to

get the deficit down and in those circumstances, we have low interest

rates which is a huge help to businesses and households.

there is no comfort for you, is there? I don't think anybody can

take comfort in the fact that they're saying that the prospects

for growth are weak and weakening. When you think we've been flat

lining for a year, that is pretty scary. But they're talking about

any further fiscal deterioration. If the Government were controlling

borrowing, you could give them credit, but unfortunately it's more

than last year. And one of the tests that the Chancellor set for

himself on growth, well we know a year ago, they had a big plan for

growth in their budget. That hasn't been a success, private sector jobs

were supposed to fill the vacancy, we got the unemployment figures, a

17-year high. And when you start to look at the relyons on the credit

ratings, and even the agencies are abandoning the Government, so the

Chancellor is on negative outlook here. By your own standards?

big question the country faces is how do we deal with the deficit.

You can take our approach that you have to get it down and you have to

have credit rating. Or you take the approach that Chris's party has

which is keep on borrowing more, it's not a problem and we'll deal

with it in the future and what Moody's have highlighted is that is

a very, very dangerous thing. growth is crucial to reducing the

debt. But you won't do that by borrowing more. If you cut the

Future Jobs Fund and refuse to put a bonus tax on the bankers to get

the 100,000 youth jobs created, no wopbtd we've got no consumer

confidence and growth is slipping' way. How much of this is really in

your hands? The European finance ministers meeting is not going to

take place tomorrow, for various reasons, something to do with

paperwork in Greece. But you're not fully in control of your own

destiny, are you? There are international factors that play

into the economy and that is why growth has been lower than

predicted. It's nothing to do with deficit reduction, it's to do with

commodity prices, it's twood the euro prices. But it must be

disappointing that the finance ministers can't get it tomorrow to

meet? It is, because it is necessary for the euro countries to

address it. That's where the responsibility lies. It is

disappointing. But what can we do? What can we control? We can control

the fact that we have a credible fiscal plan and we set out plans

that are praised by the credit agencies. It's not working. That we

ensure we keep interest rates low. If we give that up, as Chris argues

then I'm afraid we will face a very difficult future. Thank you very

much. We've ask three economists to join us and give us their

assessment and bring with them their favourite statistic at the

moment on the British economy. They are Julie Meyer, founder and CEO

are a nadyee Capital; Stephanie Blankenberg, lecturer at SOAS and

Megan Green from Roubini Global Economics. Now, what have you

brought with you? This is one of the few indicators that have

started looking up in December and January and that's the purchasing

managers' index. It made me more positive about the UK economy and

made me think we may actually avoid a technical recession. But many

people won't have heard of it, why is it important? You'll notice

there is a line as 50 and anything above 50 shows an expansion in

industry. In 2009, for example, we had a massive contraction. And

we've just got above the 50 line. So that's an improvement. Is this a

reason to become bullish on the UK market, absolutely not, but it may

mean the UK will start to avoid a recession. Stephanie, you've been

saying the Chancellor should have a plan B. What have you picked for

us? I've picked consumer confidence. Which should appear. That's clear.

It's going down. I think it is rather clear, unfortunately. So I'm

more interested in the cause rather than the effect. In the end,

production will go up or down, depending on what people can sell.

What does consumer confidence measure? Does it measure the way we

think things are going to go? measures people's ordinary economic

factors, it measures unemployment and loss of income and overall

perceptions of where the economy is going. Julie, you're an

entrepreneur, what have you picked for us? Nesta have done some

research on 6% of all UK firms. So we're trying to find 20% growth or

more. 6% create more than 50% of all net new jobs. So we're

concerned about net new jobs and creating the industries of the

future so we need to pay attention to the vital 6% of the high-growth

countries. For instance, yet, Monti -- Monitorise gave their figures

and they're growing. We need thousands of companies. But is that

underpinned by the fact that banks are prepared to lend or not lend.

That's where it all comes from? is much more important than lending

because Monitise got where it is because of exceptional

entrepreneurs. How can we get more? Small companies subsidise big

companies. Big companies can get out of paying tax and restructure.

Small companies are stuck here. If we really believe that the 50%

drive the 6% net new jobs, these guys should be paying extremely low

taxes. One of the things that most politicians agree with is where is

the growth going to come from? How do you get there? The UK is trying

to stage its recovery from shifting demand to export and that's where

the UK is extremely exposed because 40% of exports are going to the

eurozone and that's embroiled in a crisis. So that's a risk for the UK

economy. Where do you see growth coming from? I would see it coming

through a long-term industrial policy for this economy. The UK for

many decades is vulnerable on the side of its external trade and

exports and, certainly, as Megan is saying, right now in terms of what

is happening in the eurozone. The only long-term view out is a

substantial industrial policy that will help precisely in my view the

small and mem-sized enterprises, but go beyond it to some extent.

The world is not top down any more, it's bottom up. The good news is

that the businesses are being set up and are taking off like wildfire.

You can dictate tax policy, that's one thing we can control. And we

should, if we believe the 6%, we should be making sure that these

companies exist in a frinctionless surface. But who is right about

cutting too far and too fast, where do you come down on that? It's a

fine line to walk. I always thought that the UK's package should mean

it bit much later so you have a chance for an economic recovery

before they bite. But, as I said, I think we'll avoid a recession, so I

don't think it's been catastrophic. So on balance, too far, too fast?

That's right. What do you think? think it was wrong from the start.

There clearly was a recession because of systemic failure of the

private financial sector. So you're saying austerity leads to austerity.

It leads to be poverty of most people. I think there is a mis

conception that jobs created in the private sector and the public

sector are equal. You can only afford 4% of GDP. But this is a

luxury we can't afford. So I may want to go shopping at Harrods but

I can't afford it, it's not autsyert, it's called living within

your means -- it's not austerity it's called living within your

means. And what about living with the euro? It's not good for the UK.

I don't think it will enraffle now, it think it start next year. Which

could give Britain a window to work on. The longer we can buy time on

the euro, the better it is for the UK. But there was good news from

the United States, January employment figures, things are

looking up? Correct, preSicily because they have not adopted

austerity policies. I think the Government is a necessity when

you're in trouble, because the private sector failed. Where did

the housing crisis come from? This came from Clinton in the mid-1990s,

Government policy changing and saying every American should own a

home. It was Government intervention in the mortgage

industry that drove that boubl. not going into that, but this is

entirely incorrect. We're continuing with our reports one

year after the Arab Spring, tonight with Bahrain. It has not gone away.

Protesters, largely from the Shia population have continued to show

defiance and anger against the Sunni elite. In an attempt to calm

the protests, a former member of Scotland Yard, John Yeates has been

called in. Mainly clashes in the tiny kingome

of Bahrain. Every night people go out on the streets calling for

freedom and for the down fall of the dictators in Bahrain.

majority Shia are calling for change in a Sunni rule. Growing

sectarian tensions here have the potential to plunge the country and

the region into unprecedented violence. Driving through the

wealthy heart of Manama, the capital, there are few signs of

unrest. It is easy to miss the deep divisions in the society. But in

the year I've been away, this country has been torn apart. It's

exactly a year to the day since the Arab Spring. Within days there was

a bloody response in the capital. The square was cleared but

protesters returned. Under intense pressure to stop the revelation,

the King brought in the troops. But he appointed a panel of

international human rights experts. The head's report galged systematic

torture and excessive use of force and the sacking of thousands of

workers. Almost all the victims were Shia.

And this is why the Government is keen to reassure its allies.

Formula One is massive here. Because of the unrest, last year's

race was cancelled. 29 Shia employees at Formula One were

sacked. This man who runs the Formula One

here says mistakes were made here but it is time for the country to

move on. These charges were dropped and His Majesty ordered them to be

taken back. We opened our arms with full confidence and we welcomed

them all back and they are back. But the trades union movement,

parolling here outside the Ministry of Labour, disputes the account

given by the Formula One chiefs. It says five were not invited back and

they were not the only sackings. 3,000 workers lost their jobs.

still have more than 1,000 workers dismissed and suspended. All

workers, both in private and public sector should be reinstated without

any kind of condition and a dignified reinstatement.

The country's security forces were heavily criticised in the report

but the police are keen to give us their of the story. We were invited

to follow an elite unit. They have thrown the gas.

police took us to several villages where they encountered makeshift

roadblocks and angry young demonstrators. Five police officers

and nearly 60 civilians have died since the upridesings began. 12 of

the deaths have been attributed to the heavy and inappropriate use of

tear gas.. How can we beat them? We just have our shields and the gas

and we have flash bangs, that's all what we have here. But this woman

in a Shia village tells a different story. This is fire, all the house

will be full of gases. She said her mother died after the police threw

tear gas into the home of her mother, which she shared with two

other families. She was lying here and we tried to cover this area so

no smoke would come inside, but no use of this. She already passed

away. The police told me if it happened it was an accident. They

would not deliberately fire tear gas into a house. Deliberate or

otherwise, this incident and others like it have scarred relations

between the police and the people. Pictures are all that Amina has

left of her 18-year-old son, Mahammed. He was arrested on 25

January. A few hours later he was dead. The police say he died of

natural causes. His family say it was because he was beaten,

something that the police strongly object, but there was no

independent autopsy. TRANSLATION: told them I would wait for my son

to take him home because he was tired. And the police said they

would take him to the hospital. I said I would take him to the

hospital, why would you want to take him to the hospital, I'm his

mother. He said it is not possible. We would take him to the police

hospital and he just told me to go home. I was not expecting it to end

in his death, that my son could buy. I've been brought in to add vuz viz

the king king. In a surprise career move, John Yeates arrived in

Bahrain last month to help reform the police. I think the Government

have made excellent progress here in terms of doing some things

immediately, but the other issues will take time and you cannot

expect wholesale reform to take place in a matter of weeks. Some of

this stuff, human rights training for 20,000 police officers is an

immense undertaking. I've spoken to people who have told me that this

has happened in the last couple of weeks, they've been pick the up and

taken to -- picked up and taken to unofficial sites, or not officially

recognised, beaten, tortured, they say and I can tell you the sites

exactly. Bahrain youth hostel. Municipal buildings, and the racing

club. This is happening, they tell me now. So it's present. You're

lobbying those things to me now and if those things have happened,

there is a proper procedure where they need to make their complaints

and it will be addressed and investigated. There's an awful lot,

I'm not doubting what you just said, but there is an awful lot of

mischief on these social media sites. On a plot of ground that the

protesters call Freedom Square, the crowd are demanding that the King

step down. The leaders of the main Shia opposition party urge

restraint. Many wonder if they can contain the

anger. But to understand the depth of that anger, you need to leave

behind the glittering towers of Manama and head into poor Shia

villages. Communities like Sitra. It's known

among activists as the isles of murderers, because many who died in

the uprising have come from here. If you want to understand the deep

divisions that exist in this country, you come to a place like

this. This is a poor Shia community, the streets are strewn with rubbish,

the walls are plastered with anti- Government slogans. This one says,

"Down with King hopld." Zainab's father was jailed for campaigning.

What is sectarian about Bahrain is the Government that is trying to

divide and conquer. This revolution is demanding Democrat see and

freedom for everyone. But the Government is saying, "Sit down and

talk to us" why not? We have done that before, but these are

dictators and every time they make promises and break them and we're

still suffering from sitting down and talking with them in 2001. And

the people want to see change. Friday prayers, the country's most

senior cleric calls for a peaceful protest. But his sermons are

ratcheting up the tension. "Our souls and blood we sacrifice for

you" they chant. Bahraini Shia are seen as the enemy.

Falconio is condemned as a country that will turn the country over to

Iraq. We're just Bahrainis. We want reforms in Bahrain. We want reforms,

but we want the Government to change. We want to live in peace.

America is anxious, Bahrain is a strategic defence partner. Unrest

here would be a serious threat. United States has considered

Bahrain an important ally. This is a region where we have real

security concerns. That relationship needs to go forward in

a constructive and a positive way. But we also want a stable society

here and one where people are functioning freely in the society.

I spoke to the country's Justice Minister and asked if the two sides

in this conflict can be reconciled? His Majesty already said that the

doors are open. Now there are lots of work going on to bring people

together. And it is unfortunate, really, why these positive gestures

that have always been dissimulated since the beginning of the problem

and calls for dialogue have been boycotted and there is even

provocation that amounts to a crime of incitement to violence. As night

falls, the daily ritual of protest and violence in the villages starts

up all over again. The police say they've taken on board the

criticisms levelled at them. In one year on, as the anger builds, time

is running out for this tiny country sitting on a dangerous

sectarian fault line. Tomorrow night, Sue Lloyd Roberts continues

our series looking back on the Arab espionage, looking at female

genital mutilation in Egypt. Take me to prison if you want to. Take

me any where, but I will continue to circumcise girls. I want the

money. All that tomorrow. Now, the British way of life, indeed that of

all of Europe is threatened by militant secularisation. This is

similar to the anti-lipblious fervour from Stalin and Hitler and

other tote tall tarrian leaders. These are the views of Baroness

Warsi in a trip to Rome. Baroness Warsi is one of Britain's best-

known Muslims. But has she got a point. Our sovereign lady the Queen.

With the Monarch at the head of the church as Defender of the Faith,

Bishops in the House of Lords put the Church in Parliament too. But

some see the proimp of secular values, with Christian hoteliers

forced to take gay guests, and the wearing of symbols at work. And

this prompt ed this from Baroness Warsi tonight. My fear is that

we're so afraid of going backwards in history to the days when

religion was imposed on people by despotic regimes that we have got

to the stage where aggressive sack larynx is being introduced by

stealth. Politicians are often reluctant to do God when in office.

David Cameron, however, has expressed views by chime with

Baroness Warsi's. It's easier for people to believe and practice

other faiths when Britain has faith in its Chris ant. Three-quarters of

Christians believe religion should not influence public policy and

half believe there should be no state religion. So, beyond pomp and

nostalgia is Christianity in Britain really in deep trouble.

With me is Professor Richard Dawkins, Bishop Michael Nazir-Ali.

And Ruth Gledhill. Do you think the Baroness has a point when she talks

about people about like you, who are militant secularists? I think

that's a bit strong, second yarists include many religious people. Many

of the great secularists have been religious all they wanted to do was

keep religion out of politics. That religion people are free to

practice in their own way, but not impose is on other people. The

Founding Fathers of the United States founded it in secularism,

because they were mindful of the tyre niece they fled from.

that's interesting, because religion is stronger in the United

States, because they were founded, it's nothing to do with militant

secularism. No, we must distinguish between the Church in state and the

Jew dayeo Christianism in the state. I whole tenor of public life in the

US is governed by the Jew dayeo Christian..So Do you think the

Baroness is broadly right? Yes, because if you start with the Magna

Carta and The Bill of Rights and the end of slavery and the former

nursing profession. These are all explicitly Christian inspired

movements that have given us the kind of life we have today.

really don't think these good things that the Bishop has

mentioned are Christian inspired. The slave trade? Of course, in

historical times everybody was religious so there's no question

about it. That's not the point. The point is, it explicitly involves

God. The Magna Carta is based on a Christian view of God. Ruth?

think militant everything is increasing. And when I started

writing about religion for the Times in 1989 everybody predicted

it would be a dying subject and past the millennium it would die.

But here we are talking about it. And we're seeing a consequence of

the growing battle between the atheism, the new atheist, as we

call people like Richard Dawkins and the religious leaders of today

and everyone is fighting their corner with more and more

aggression. One of the interesting things about the Baroness is that

she talked about her daughter in Rome and she sent her daughter to a

Roman Catholic convent and in a way, people such as Richard Dawkins have

provided a service to the faith in that they've brought them together

in battle against the atheists. So they've created a new horm knee.

But why is the Church not raising this? I have been for several years.

I'm very pleased that the Baroness has used the words and many of the

sentences I've written about in national papers and indeed on your

programme so I welcome what she is saying. But if you feel you're

sidelined, the Queen and thousands of church schools, what is marginal

about that? What is it you would like that you're not getting?

it is the paraphernalia, as it were of establishment does not actually

mean that Christian faith is at the centre. I'm not asking for a

privileged place for the Church, I think what is most important is the

Jew dayeo Christian religion in legislation for instance, when it

is about the human person or, indeed, policy making. But recently,

didn't a judge say our law was nothing to do with Jew dayeo

Christianism. But I thought they were judges of the Crown? Let all

the Bishops resign from the House of Lords if the Church is not

asking for privileges. That's up to them. My point is that the Jew

dayeo Christian religion in the Bible is extremely important today

for policy. But it is true with things like abortion and stem cell

research that the Jew dayeo Christianism does form a lot of

that debate. Absolutely and that's one of the problems. The survey

that my foundation has brought out this very day, the people who tick

the Christian box in the census, we did it the very week after the

census took place. People who recorded themselves as Christian

and we found out that not only has the number of Christians dropped

since the previous census, but those who still counted themselves

as Christians no longer believed in lots and lots of things that the

religion is supposed to and in particular, things like abortion,

things like assisted euthanasia for the terminally ill. They very, very

strongly support, in the opposition to their professed Christianity.

Ticking the Christian box, in other words many people are normally

Christian but it doesn't mean very much? I think that's always been

the case in Britain. Christianity is a very broad Church and people

have often taken the core beliefs, but not all the doctrine of the

Bible. Very few people are fundamentalists, as sometimes in

the things you've done, you think all people who call themselves

Christians are fundamentalist, whereas they're not and as your own

survey pointed out, 64% didn't even believe in God, who called

themselves Christians. That's exactly the point because we've

found that the people who call themselves Christians, 40% said,

"Oh, by Christian means I try to be a good person." But there's nothing

wrong with that. Of course not. But if you accept that those people are

to be labelled Christian just because they want to be a good

person. But define themselves as that. Let me finish. If you accept

that people who call themselves Christian on such Nablus grounds as

that, that's thrutly fine but what you cannot then do is hijack these

people and say "these are Christians therefore we Bishops and

priests can count these people as though they voted for us in

implementing policy." You cannot have it both ways. But I'm amazed

at what your survey shows. 44% of people believe that Jesus Christ is

the Son of God and the saviour offer the world. 62% believe in

heaven. These are your figures. What kind of commonality are you

talking about. But those are percentages of the people who said

they were Christian. Which is 70% or something. If our survey is

right it has dropped to 54%. will see. A look at tomorrow

morning's front pages. The Guardian says the new NHS Bill could harm

patient care. And the Times says MPs talk lands

visit. They will inspect British defences and the Greece rescue

package is in doubt. And the Independent has a report on hunger.

And the Dalely Mail has cheap booze to be outlawed. This week is the

50th anniversary of the first shoot'em up game space wars,

created by four students at MIT. It Good evening. It stays cloudy and

breezy overnight and tomorrow will be little changed. We'll see

brightness develop through the day, the best of the brighter skies to

the south-east and northern England. The coasts of Cumbria, Lancashire

and Merseyside and Yorkshire it may remain grey and there will an

threat of drizzle in the breeze throughout. But most of the country

will remain dry but again, closer to the coasts of Cornwall and

western and north parts of Wales the westerly breeze will feed in

some light rain and drizzle. The best of the brightness in Northern

Ireland with be in Omar and Down. The Western Isles will hold on to

the cloudy conditions throughout. Wednesday into Thursday and we

start to see changes across Northern Ireland and Scotland.

Thicker cloud will bring outbreaks of rain. But England and Wales will