12/09/2011 Daily Politics


12/09/2011

Andrew Neil has the top political stories of the day including proposals to radically reform the banking system. Andrew is joined by former ambassador Sir Christopher Meyer.


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Afternoon, folks, and welcome to the Daily Politics. The government

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welcomes proposals to reform the banking system, but will changes

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damage the UK economy? The union's call for co-ordinated strikes over

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cuts to pensions. As the TUC conference begins today, we will

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hear from the general secretary. And it is musical chairs as 50

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parliamentary seats are abolished. MPs prepare to fight their

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That should be quite a fight, I bet! All of that in the next half-

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hour, and with us for the duration is former ambassador to the S --

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the US, Sir Christopher Meyer. The Prime Minister is on a whistle-stop

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visit to Russia. Later today he will meet Kremlin leaders,

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including his counterpart Vladimir Putin. It is the first meeting

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between Mr Putin and the British prime minister since the murder of

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Alexander Litvinenko in London, a killing blamed by Britain on the

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Russian security services. David Cameron has been urged by four

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former foreign secretaries in yesterday's newspapers to raise the

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issues of corruption and human rights when he meets the Russian

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Prime Minister. Both were mentioned in a speech at Moscow State

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University this morning, when Mr Cameron also called for greater co-

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operation between the two countries. We face a choice. We can settle for

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the status quo, where into many areas we are in danger of working

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against each other and therefore both losing out, or we can take

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another path that is open to us, to co-operate, to work together and

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therefore both women. Today I want to make the case that the mess...

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Let me try this again, carefully, Like me, the Prime Minister did

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economics at university and not languages, which I think is quite

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apparent with both of us. Can we talk tough to the Russians and

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expect to do more trade with them? We can expect to do both, and we

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should do both. You were in the Russian embassy. I was there in the

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1960s, the depths of the Cold War, and I went back in the 1980s, still

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Brezhnev, hanging on by a thread. He died while I was there. They all

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died in a row. Do you remember the phenomenon of funeral diplomacy?

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Everybody went out to the funerals of these chaps, and it turned into

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a huge international meeting. Communist or Putin-Medvedev Ciara,

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you have to be very strong in dealing with the Russians. I kind

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of agree with that letter which was signed by the four former foreign

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secretaries in the Sunday Times. is a tough balancing act. The

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Russians are notoriously sniffy about the British when we criticise

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them. Many people will wonder, given recent events in Libya,

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should we be asked to do business with what many people think is a

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gangster state? If you only do business with that country's, you

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end up doing very little business at all. That is one of the

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realities. But the Russian foreign minister called for the British to

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take a pragmatic approach to relations with Russia, forget all

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the human rights staff, but it is difficult to be pragmatic if there

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is not a proper rule of law, including contract law, for British

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businesses who invest. Cameron must press the tough but in here.

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would you categorise Anglo-Russian relations? This is the first time a

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British Prime Minister has been in Russia since 2005, and they have

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not been cosy in recent years. I mean, Tony Blair tried to create

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a cosy relationship with Putin, and it existed at a verbal level.

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tried to have a cosy relationship with everybody. It did not add up

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to very much with Russia, that he sure as hell. Looter gave him a

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kicking. President Assad did the same thing. I had a very great head

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of department in the Foreign Office when I was dealing with Russia, who

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said to me that the natural condition of relations with Russia

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is a cool one, and I think that is true. I think it is true today,

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whether it is a capitalist Russia or communist Russia. Very

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interesting, good to have your expertise for the rest of the show.

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How do you prevent a repeat of the financial meltdown of 2008? That is

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the question put to John Vickers and his Independent Commission on

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Banking. He has been thinking about it for more than a year. Their

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final report is published this morning. It is expected that the

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report recommends that the UK banks ring-fence their retail banking

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from the rest of their business. Above all, the riskier investment

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operations. And that they increase the amount they keep in capital,

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sort of in the bank as a buffer against future shocks. The Vickers

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report says that all this will cost the banks. It does not shy away

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from this, between �4 billion-7 billion, and he was the reforms to

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be in place by 2019 at the latest. That is read international changes

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come into banking regulation, too. That means that much political

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wrangling lies ahead. Banks and many Tory MPs will be lobbying

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George Osborne for a slower pace of reform, while senior Liberal

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Democrats have made it clear they want to see the changes pushed

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through. This is what the Chancellor said this morning.

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have a commitment now to legislate to get the rules in place while

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this government and this Parliament is sitting, and then it will take

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some time for the four rules to come into effect, but that is what

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John Vickers himself recommends. I think that gets the balance right

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between showing everybody we are doing it whilst giving everyone

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time to digest the details and put the changes in place. I enjoyed by

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David Ruffley, Conservative MP and a member of the Treasury Select

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Committee, and by the Liberal Democrats former Treasury spokesman,

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often regarded as the voice of Vince Cable on this earth, Matthew

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Oakeshott. Let me get this straight, a good or bad thing? Overall, good.

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Bankers need sorting out. Two problems, is is going to increase

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the amount of corporate lending to businesses? That is the big

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question. With the higher cost of capital, it looks like it will be

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more difficult. The second thing is that his regime is the first of its

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kind in the western hemisphere. It has never been tried before, and we

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have to work out whether, if Britain moves first, we are going

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to be at a disadvantage compared with France, Germany and the Far

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East. He is sounds like it is good with serious caveats. Those are two

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powerful question marks, but the thrust is good. Good or bad? Very

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good. John Vickers has issued a strong prescription, and now we

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have to make the banks take their medicine. Bank lending could not be

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worse for businesses than it is now, so we absolutely must have reform

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and radical reform as he has come out and recommended. Why are we the

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only ones doing it? No other country has been down this road.

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Other countries are thinking about it. We have to do it because our

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back crash was worse than others. Our Paul banks are four times

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bigger in the economy. -- -- our banks. We have a monopolistic

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sector were the only four big players. People are not getting

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proper competition. We have to do it. The things that they have done

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in East Asia, loan-to-value restrictions, restrictions are the

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amount of loans you can get proportionate to your income, that

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is what the Far East and East Asian countries have done. That is

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without the rather radical regime which is going to push at the cost

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of capital, which means people going for mortgages and small

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businesses, in the short run at least, will see an increase in

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their costs. No other country is doing it. Under the Basel III

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arrangements which will come into force, it will up the capital

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requirements anyway. Even without the reforms! That is true, but it

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is coming over a period of time. is this. These capital requirements,

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capital adequacy requirements are higher, and though, than Basel III.

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A much better way, many of us think, is to go in lockstep with the other

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countries over the next five years so that we are not an outlier.

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we wait for this, we will be waiting a long time. We have got

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far bigger immediate problems. This is the British, the first item in

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the coalition agreement, which we both signed. I do not think he

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signed it! It is to reform our broken banking system and sort out

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unacceptable bonuses. We have an immediate problem that we cannot

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leave until then. You could do bonus legislation... The important

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thing is to get the structure sorted out now so that the banks

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never bring the British economy to its knees again. The timetable in a

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minute, but maybe the reason we need tougher rules is that the

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American banking system, which went into meltdown along with ours, its

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combined balance sheets only account for about 60% of American

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GDP. The combined balance sheets are banks account for 400%! It is a

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lot more. For that very reason, don't you need tougher rules?

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think there are ways that you can sort out the problem. The disgrace

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of bankers being paid for a year, that is obscene, we all understand

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that. It is still going on. How do stoppered by regulation? You have

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to break it up so the gambling people are not running the main

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bank. There are good things in this independent report which tackle

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that, but the key question must be, financial services are big in this

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country, and they pay for a lot of public programmes, and it was a

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cash cow which has done this country very well. Now, and not a

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defender of Bankers... You are doing quite a good job. I am

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defending what I consider the national interest. Why should we be

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an outlier when the rest of Europe, although it has different problems,

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why should we be implementing Basel III before we have to? That brings

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me on to the timetable. Bankers have served this country well, we

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are all sitting here... Not in a last few years, we are sitting here

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with a �2,000 tax bill each for bailing out banks. It used to

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account for 25% of revenues and paid for the increases in spending

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on schools and hospitals that your party called for. It used to, but

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as the commissioner said this morning, what we have had to put in

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to bail out RBS would have paid for our universities for five years. We

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need proper regulation and a proper insurance policies so it never

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happens again. What is the timetable as far as you are

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concerned? We need to get on with legislation as soon as possible.

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Obviously, the exact rate at which he pays in the capital requirements

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is fine. Vickers is saying that the backstop date is 2019, but he is

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clearly saying that we want to make a start as soon as possible. I

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believe the obvious place to see as much of this as we can kiss in the

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Financial Services Bill next year. It has got an expert committee

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which already looks good to me. You cannot do financial regulation

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without including the banks, show we should start next year of the

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legislation. When you say next year, it is a big deal. Exactly when?

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Financial Services Bill is waiting to go. Obviously, there is time

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to... It does not include any of this. It is already quite big.

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telling you the point. When Vickers has been clever is that the smoke

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out objections in the interim. We have 100 pages here are because

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dealing with the bank's' objections, sorting that out. That job has been

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done. We do not need the bankers rattling their begging bowls.

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agree with you. My plea is simply this. The broad thrust is fine, but

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we should not get ahead of our international banking competitors

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in Europe and elsewhere. If we do, there is a threat to London and all

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the revenue that it breaks -- brings into this country. Where are

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you honest? Wearing my tiny hat as a philosopher-historian, I look

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back to 1933 and see the introduction in the United States

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of the Act which is not an exact parallel... It actually separated

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rather than ring fence. You cannot be a retail bank and an investment

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bank until Mr Clinton said he could. 60 years later, the wheel turns and

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Mr Clinton says that you can do these things. Here we are in the

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United Kingdom, contemplating an Act of Parliament which may well be

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right, which will restore some of these restrictions. The question I

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ask is whether 60 years from now, someone will pop up and say, the

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banks are terribly restricted in the business they can do, let's

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undo some of the stitches. thing is for sure, unless there is

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an amazing breakthrough in science, we will not be here to talk about

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it. At small businesses cannot wait 16 months, never mind 60 years!

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the purposes of this, we will call it roughly-no shot. That is roughly

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better! Traditionally, this would be the week when journalists like

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myself would pack our bags for four weeks at the British seaside. I am

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still doing it for three, but in the old days, when dinosaurs ruled

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the earth, it all kicked off with the Trade Union Congress conference,

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the TUC conference, and in these austere times the TUC does not go

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anywhere. They're holding a scaled- down conference in their HQ in

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London. A bit of a pity, really, but there is nothing scaled-down

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about the gender with several trade unions threatening co-ordinated

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industrial action this autumn over reforms to public sector pensions

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and the cuts in general. And joined now, it used to be from Blackpool,

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Brighton or Bournemouth, but from the conference, by the TUC general

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secretary, Brendan Barber, in downtown London! Does the TUC

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Some of the my colleagues have been talking of that as part of the

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campaigning that will be done in the coming period. We've seen some

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examples of that in recent times, of course, things like UK un cut's

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protest to highlight the issue of tax avoidance, the billions that

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the rich aren't paying into the tax system, which they should be. So,

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that might be a part of the mix. Will it be TUC policy? Last year,

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you told us that civil disobedience would be counterproductive. I think

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we're always careful to think threw these things. Of course, our

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objective is to win broad public support for the powerful case that

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we're making for a very different approach to running our economy, an

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approach that delivers fairness, that gets people back to work, that

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gets growth moving again. That case will be more powerful the more

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we're able to demonstrate we have broad based public support. Do you?

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If you had broad-based public support, why have you lost half of

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your membership in 30 years? Only 15% of people in the private sector

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are unionised. Less than 20% of 18- 29-year-olds are in unions. I mean,

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you are quite seriously declining institution. Well, we certainly did

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lose membership, in particular over the long period of Conservative

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Government. Very much less so over the period of Labour Government

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that we had. It still fell. Look, I absolutely acknowledge that our

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membership has not kept pace with the changing shape of the labour

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market. We're determined to tackle that problem. We have to reach out

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in new ways for sure. But look, it's only a few months ago that

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over half a million people came out onto the streets of London to show

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powerful broad-based support, not just trade unionists, people from

:17:27.:17:30.

every section of the community, powerful support for our case for

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an alternative. We need to build on that and to take our campaign into

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every community in the country. That's what we're determined to do.

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There is clearly in the country serious concern about the impact of

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the cuts. Many people in the public sector are worried about the impact

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of changes on their pensions too. You don't have to be on the extreme

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left or anywhere else to be worried about these things, but isn't there

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a danger of your case being put, so many of today's trade union leaders

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are on the far left, on the extreme, they're hard line, way on the left,

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tot left of the Labour Party. Why are they so left-wing in the 21st

:18:10.:18:16.

century and doesn't that undermine your case? I don't recognise that

:18:16.:18:21.

description that you give of the current generation of union leaders.

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Bob crow, Mark sn serwotka, Christine Blower. Yeah, but Andrew,

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the trade union movement has always had powerful perplts as you well

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know. Look, I mean, we are all facing the gravest crisis that our

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economy has endured for generations. That banking crash in 2008, the

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effects are still being felt. At the moment, our economy absolutely

:18:50.:18:53.

flatlining. The growth that the coalition promised us that would

:18:53.:18:58.

come, private sector jobs to replace public sector jobs and so

:18:58.:19:02.

on, our growth is utterly negligible. More and more people

:19:02.:19:06.

are recognising we might actually have that double-dip recession that

:19:06.:19:11.

I forecast some time ago, as a real risk. Even the IMF and the World

:19:11.:19:15.

Bank are saying we need more stimulus and less austerity. It

:19:15.:19:20.

really is time the Government started to listen You miss the

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seaside? I'm sorry? Do you miss the seaside? Being by the seaside?

:19:27.:19:32.

miss the seaside? Of course! I miss the seaside but we're having a fine

:19:32.:19:38.

time here in Congress House. Come down and see us. I will. Thank you

:19:38.:19:41.

very much. You must be delighted that the trade unions are going

:19:41.:19:45.

into battle for your gold plated pension. They're not going into

:19:45.:19:50.

battle for my gold plated pension. I think they are. I'm lucky. I am a

:19:50.:19:54.

relic of the old regime before these things happen. You mean, you

:19:54.:19:58.

have a hell of a pension? Fplgts I have a defined benefit pension.

:19:58.:20:03.

Mind you I contributed, handsomely too. So.rest of us too. It's a good

:20:03.:20:08.

pension. So did the rest of us. That's the way it works. Was I

:20:08.:20:11.

going to be the only person contributing to my pension. You're

:20:11.:20:16.

the only one here today who's got that pension. I have been looking

:20:16.:20:21.

round the BBC today and I have seen fatter pensions than my own. Not in

:20:21.:20:26.

this studio. Maybe not. Just one point briefly, I've just come back

:20:26.:20:32.

with Greece, I had a bit of a holiday, on my pension! They've

:20:32.:20:36.

rioted there, they've done civil disowe beadence. They've torn

:20:36.:20:42.

Athens to shreds, but the brutal realities of the economic situation

:20:42.:20:46.

don't change a jot for that. Some similar message has to be sent to

:20:46.:20:50.

our trade unions. We shall see. It will be the issue of the Autumn I

:20:50.:20:56.

suspect. Now if you're an MP with a constituency in England, it's only

:20:56.:20:59.

England at the moment. Scotland and Wales are later. You might be

:20:59.:21:03.

feeling anxious this lunch time. Just landed on the desk is a report

:21:03.:21:07.

telling them whether their constiltwaepbs is due to be

:21:07.:21:13.

abolished or the safe seat will become more marginal. The changes,

:21:13.:21:16.

which will be public tomorrow, are being made in order to reduce the

:21:16.:21:26.

number of MPs from 650 to 600. Why not, the Senate only has 100. David

:21:26.:21:29.

Thompson has been investigating. There are times when you think this

:21:29.:21:34.

place should be cut down to size. Well, you're not alone, because MPs

:21:34.:21:41.

are being asked to shrink the House of Commons. The plan is simple: Cut

:21:41.:21:48.

the number of MPs from 650 to 600, try to make sure that almost all

:21:48.:21:51.

constituencies have roughly the same number of voters and make sure

:21:51.:21:54.

no-one feels too hard done by. Good luck with that. Why? Well, if

:21:54.:21:58.

you're a Conservative, because you think it will save money, and

:21:58.:22:01.

because you also believe that the current system favours labour. If

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you're Labour you think this is a plot rip the electoral map against

:22:05.:22:10.

you. If you're a Lib Dem, because this was part of the deal that gave

:22:10.:22:13.

you the AV referendum. The fun part will be watching MPs fighting for

:22:13.:22:19.

their political lives. There may be some juicy scrap as head. In

:22:19.:22:25.

Cheshire there's George -- George Osborne and Graham Brady. One is

:22:25.:22:35.
:22:35.:22:36.

the Chancellor the other argue able the backbencher. Then there's Danny

:22:36.:22:39.

Alexander who could be against Charles Kennedy. Tricky. And in

:22:39.:22:46.

Yorkshire, the gloves could be off behind Ed "bruiser Balls and

:22:46.:22:51.

Hillary Ben. How brutal could it be? You must think of it as musical

:22:51.:22:54.

chair was machetes. When the music stops there will be a limited

:22:54.:22:58.

number of seats and there will be large numbers of members of

:22:58.:23:02.

Parliament. They will be grabbing each other round the throat. It's

:23:02.:23:05.

madness. It's crude politics. It's an accommodation for the liberals.

:23:05.:23:10.

It's the coalition. Is it though? We won't really know until the

:23:10.:23:13.

Boundary Commission publishes its initial proposals rgs starting with

:23:13.:23:16.

England tomorrow. Some experts think it's not the big boy who's

:23:16.:23:20.

have to worry. Proportionately the Lib Dems will be the biggest losers

:23:20.:23:25.

as far as the parties are concerned. They've only got 57 MPs at the

:23:25.:23:34.

moment. So if, as I think they will, changes, that's very serious for

:23:35.:23:37.

that party. Conservative and Labour are both down as well, of course,

:23:37.:23:41.

but because they start with more MPs the impact is less serious.

:23:41.:23:45.

have to agree these changes by October 2013, if they're to happen

:23:45.:23:48.

by the next general election. It's not a done deal. Because by that

:23:49.:23:54.

time, another little row might be brewing. If the coalition is on the

:23:54.:23:59.

rocks in 2013 when it comes back tot Commons, a lot of Lib Dems will

:23:59.:24:05.

say why on earth should we do this. Deal breaker? If the Lib Dems veto

:24:05.:24:09.

it, I think the Conservatives will be so angry it could be. Shrinking

:24:09.:24:12.

the mother of parliments was always going to be tough. Is it a good

:24:12.:24:18.

idea? That might come down to your point of view.

:24:18.:24:22.

Indeed it does. Let's get some points of view. To discuss the

:24:22.:24:26.

changes, Rennard, and Sir Peter Bottomley the Conservative MP for

:24:26.:24:30.

Worthing west. He used to be the MP for Eltham in London before

:24:31.:24:34.

boundary changes in 1997 meant he went often the chicken run I think,

:24:34.:24:38.

as we used to call it. Good or bad, cutting the number of MPs? Fplgts

:24:38.:24:43.

it's in the national interest. Andrew turner on the Isle of Wight

:24:43.:24:47.

can look well over 100,000, I don't see why the rest of us can't as

:24:47.:24:52.

well. 50 seems a small amount. would do it by 10%, each boundary

:24:52.:24:58.

change until either the people say they want more representation or

:24:58.:25:04.

something else squeals. It's wrong that some MPs have little more than

:25:04.:25:07.

50,000 voters. Some MPs over 100,000 voters. It's fair to make

:25:07.:25:10.

the change. Perhaps we could have made these changes though in a

:25:10.:25:16.

better way. Why did your party agree to this deal, which we've

:25:16.:25:20.

just heard will result in the Lib Dems proportionately losing more

:25:20.:25:25.

seats than any other in return for an AV referendum that you lost?

:25:26.:25:30.

don't know the consequences yet. A lot depends on whether Lib Dem MPs

:25:30.:25:34.

stand again at the next general election. They're very effective

:25:34.:25:37.

campaigners. If their constituencies become very

:25:37.:25:41.

different some of them might stand down. If they stand again, people

:25:41.:25:44.

will recognise how good and effective they have been for their

:25:44.:25:48.

community and will vote for them good. -- again. Will there be

:25:48.:25:52.

problems with this. There's always a row with boundary changes?

:25:52.:25:56.

think for the Conservatives and Labour there's likely to be less

:25:56.:26:01.

problem than for the liberals. Both have a tradition of people moving

:26:01.:26:06.

to different areas. The liberals don't have that They're often

:26:06.:26:09.

locally based with deep roots in the community. Have or appear to

:26:09.:26:13.

have. There are few examples of liberals successfully moving from

:26:13.:26:16.

one constituency to another. that a worry? We have to consider

:26:16.:26:21.

this is based on a massive misapprehension that the

:26:21.:26:23.

Conservative Party thought this would be to their advantage and it

:26:23.:26:27.

won't really be. It won't? Labour Party feared they would lose

:26:27.:26:32.

hugely from this and they won't particularly either. That only

:26:32.:26:37.

leaves you. If the Tories aren't to make great gains and Labour isn't

:26:37.:26:44.

going to make great losses, that leaves you, of the national parties.

:26:44.:26:47.

Almost all constituencies will be changed by this review. That will

:26:47.:26:51.

change things for a lot of MPs much it's not just the Liberal Democrats.

:26:51.:26:58.

A lot of people will ask why have all this change for no political

:26:58.:27:01.

reason. Everyone looks at self interest. The reason for the

:27:01.:27:04.

changes are the national interest. Is it better that this country has

:27:04.:27:08.

600 monies in the House of Commons rather than 650? Yes. Will the

:27:08.:27:13.

costs go down? Yes. If MPs are selected and then elected will we

:27:13.:27:18.

behave bet sner yes. If we will still have 600 monies at the end

:27:18.:27:23.

this, plus about 800 and counting in the Lords, last time I looked

:27:23.:27:27.

the Senate had 100 members in the United States and the House of

:27:27.:27:35.

Representatives is 430, something like that. 435 and. Yes and that's

:27:35.:27:40.

a continent of 350 million people. They have state legislatures as

:27:40.:27:45.

well. We have Belfast, Edinburgh and Cardiff so far. Yeah, I think

:27:45.:27:50.

this could have gone more radically than the intention. 435 US members

:27:50.:27:54.

of the House, 100 senators. Look at the House of Lords, stuffed tot

:27:54.:27:58.

gulls. You can't fit them all in. I would have been, although it's

:27:58.:28:01.

politically impossible, I would have been more radical. We have to

:28:01.:28:07.

leave it there. You're not on the chicken run this time, are you?

:28:07.:28:10.

don't dispute your expression before, I would look at it more

:28:10.:28:14.

kindly. It was called that because to get a new seat they had to take

:28:14.:28:18.

lots and lots of chicken dinners. You're not in the unelected part,

:28:18.:28:28.
:28:28.:28:29.

it doesn't bother. It does bother you. I meant personally. They're

:28:29.:28:33.

The government welcomes proposals to radically reform the banking system but will changes damage the UK economy?

Unions call for co-ordinated strikes over cuts to pensions as the TUC conference begins. We'll hear from their General Secretary Brendan Barber.

As 50 parliamentary seats are set to be abolished, MPs prepare to fight their colleagues to keep their jobs.

Joining Andrew Neil for the whole show is the former ambassador Sir Christopher Meyer.


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