18/10/2011 Daily Politics

Afternoon folks, welcome to the Daily Politics. $$NWELINE Retail

prices are rising at 5.6% - a record high in modern times. So how

much damage is it doing to our economy? And should we act to stop

it running out of control? We're awaiting this man's verdict

on Liam Fox. The Cabinet Secretary, Sir Gus O'Donnell's report is out

this afternoon. But will it simply raise more questions than it

answers? And the junior minister, what do they do? Keep the engines

of Government running order just the unglamorous stuff?

All that in the next half an hour. And with us for the whole programme

today is the former Labour Home Office and Work and Pensions

minister, Tony McNulty. The inflation figures? They're

pretty dreadful and much worse than expected. Inflation on the broad

RPI measure is getting close to 6%. And it's rising fastest on those

essentials most households have to buy - food on the table, petrol in

the car, heating for the home. Energy prices up 8.6%. The Bank of

England says inflation will start to fall next year. And that's

likely as the January rise in VAT falls out of the index and a flat-

lining economy puts downward pressure on prices. Commodity

prices are also weaker because the world economy is weaker. Oil-price

is are coming down, gas prices, too. I've written about this on my

latest blog on the Daily Politics website. Dreadful figures? We are

heading towards this woeful combination of no growth, and

inflation creeping. The Japanese had that for the best part of 10

years. The Swedish had that after their banking crisis for some time.

You need to do something on one element or other. The Bank of

England might be right, we do not know. Something needs to be done to

get some growth back in the economy. That will be difficult because what

is going on in the eurozone. It is not easy to see what can be done.

It is a systemic problem. The Labour Party says cut the VAT, and

just as the rise in VAT had an effect on the way up, it would have

a temporary effect on the way down. It would have 12 billion -- at 12

million to borrowing in the sovereign debt crisis? George

Osborne has one club in his bag and that is it. They need to get the

balance right between growth and borrowing. This mantra we have had

in the last week, you don't borrow your way out of a crisis. Actually,

historically that is what nations have done. We will add to borrowing

this year, �122 billion. All four on predicted reasons because of

higher unemployment, higher benefit bills, which cannot be right.

you add to the borrowing, which is the Labour policy. We don't know

how much, but some estimates suggest around 20 billion when you

add on the holiday in National Insurance, as some are suggesting.

Is it conceivable you could add 20 billion to borrowing and not end up

paying a higher interest on your bombs? That is the difficulty.

bombs. It is how temporary it is before it kick-starts the growth.

There is a name game which says it might mean things going wrong with

higher borrowing. At the moment that we are flat lining and

standing still. At the moment we are paying 2.5%, it is an historic

low. It is only just a bit above Germany. If we abandon our deficit

reduction plans, the debts are being added to, but if the market

saw the deficit-reduction plans being reduced they could take

flight, push up the yields and your stimulus would all go in higher

interest payments? This is where the Tories have got it wrong. It is

not just either their plan A, or recklessness. Ed Balls, Ed Miliband

are saying clearly, you have got to do something to generate growth in

the economy. Of course, you need to address deficit reduction, but the

markets are smart enough to understand there has got to be

something other than this austere plan A which is not working.

Really? Because any time there has been a deviation by the Greeks,

Portuguese or the Spanish, French and the Italians, the market's

verdict is ruthless. Yields shoot up, the Spanish and the Italians

are paying over 5% and their deficits are smaller than ours?

There has got to be and there is an alternative to what George Osborne

is doing. There has to be. We're joined now by the Treasury minister,

David Gauke. Welcome to the programme. Do you accept with

inflation now rising between five and 6%, most people's pay will be a

zero rise or a very small rise? Living standards are being

squeezed? Yes, this does have an impact on living standards. That is

why we have taken decisions on reducing the fuel duty, so it is

now six pence per litre lower than it would have been under the plans

we inherited. That is why we are freezing council tax and the

personal allowance for income tax has been increased. These are

difficult times, but given we don't have a lot of room for manoeuvre

because of the state of public finances, we are doing what we can.

The squeeze on living standards is worse for the reasons I mentioned

earlier. The biggest price rises are on those things we have to buy.

Flat-screen TV is are not rising, but we don't all need them. We need

to heat our homes, we need to put petrol in the car and we need to

put food on the table. They are all rising by more than 5%? It is right

global commodity prices are driving price rises up across the board,

and that is why we have inflation creasing at the moment. We accept

that and within the limited room for manoeuvre we have, we are

trying to do what we can to reduce some of those pressures. Does the

Treasury share the optimistic view of the Bank, that inflation is

going to come tumbling down next year? It is not just the Bank of

England that believe inflation is going to fall. The OECD, IMF...

you share it? We look at the assessment the Bank of England has

done. I understand the Treasury looks at what the Bank of England

says, my question is simple and I would appreciate an answer! Do you

share the Bank's view on inflation? We don't disagree with the Bank of

England's view and that you are others that inflation will fall

towards the end of this year and threw 2012. You think it will fall

before the end of this year? That is the Bank of England youth.

know that, but what do you think? It is there, or they're about. That

is about right. Whether it will be December, January, we shall see.

But the view, most commentators think inflation will fall over the

months ahead. I don't think we have had to on the programme before, and

come back before Christmas to see if your prediction is right. I look

forward to it. I think it will be an interview you do not like.

think you might be right. The official report into the former

Defence Secretary, Liam Fox, and his dealings with his close friend,

Adam Werritty, will be published later today. It's been written by a

man called, Sir Gus O'Donnell, he's the most important civil servant in

the land. He is retiring at Christmas. So you might expect him

to produce a pretty weighty document? Indeed, we're told that

the report runs to - wait for it - a whopping TEN pages! That's

probably a first in the history of the civil service. So, Jo, what

earth-shattering revelations can we expect? Prepare yourself a!

The judgement from Sir Gus O'Donnell, or GOD, as he's known,

will be published later this afternoon. The BBC understands the

report will say Liam Fox broke the ministerial code in his dealings

with his friend, Adam Werritty. Mr Werritty claimed to be Liam Fox's

adviser and joined the former Defence Secretary on 18 foreign

trips, arranging meetings for him despite having no official

Government or Conservative Party role. The report will acknowledge

that Liam Fox did not gain financially from the arrangement.

But there are still questions about how Mr Werritty funded his business

activities and whether he gained from his frequent access to Liam

Fox. I'm joined now by our Deputy

With us now is the former commander of British troops in Bosnia, and

now the Tory MP for Beckenham. We are greedy had no choice but to

step down? Correct. There is a number of people from Labour and

the media don't want to let this go. He has fallen on his sword but they

don't think this story is over? have to wait until the report when

it comes out. But it will be -- we will have to reconsider them. But I

think it will run longer. Do you think he will come back into

Government? Peter Mandelson seemed to do it a few times. I hope he

does. He was a very good secretary of state who gripped the situation.

Trying to grip the MoD is like trying to make an impression on a

huge ball of petite. Anything you have made an impression, you get

off and it goes back. It is getting bigger and bigger? It is probably

platinum. I remember I was in the MoD as a Major and Michael

Heseltine, I remember him saying, "right, we will get a grip of this.

Ritual moans will be sorted we will be inefficient MoD and this is how

it is going to be". That was in the early 80s. Liam Fox had done his

homework in the job, he had been the shadow secretary and had a

lifelong interest in these policies. What does Philip Hammond know about

this? I do not know. I have not asked him. I suspect he knows

enough. I suspect what the ministry of defence requires at his level is

strategic direction and political decisions. He will get plenty of

men of -- military advice from the civil servants at the top and the

generals. They might run circles around him. The MoD might get back

into the game. A lot of them did not like Liam Fox because he was

his own man. Now they have someone who was not an expert in this area,

he was an accountant? If they think that, they are on a loser. Philip

Hammond is an exceptional minister already. Where do you think the

Adam Fox, Adam Werritty story goes now? I think in the end, whatever

is in this report will end up being a forward to a whole exercise which

will be much longer in the end and go to this whole transition being

in generis from opposition to Government. And that is where Liam

Fox has fallen down. Nobody gets in the room of a secretary of state

without the Secretary of State's say-so. The Secretary of State does

not have any private meetings excluding civil servants. User the

Secretary of State? I mean the Secretary of State. The Secretary

of State is the only one who can say, I don't care if he thinks the

civil servants should be in this meeting, I don't think they should

be. It is all driven from the Secretary of State. What you're

saying is the permanent Under- Secretary should know what is going

on? He does, but the Secretary of State is king in his own fiefdom. I

don't think there is this innocence, or naive at the that is betrayed.

Is that why Tony McNulty, they have revealed Liam Fox met other defence

ministers. That could not happen unless Liam Fox said so? Absolutely.

Does that surprise you? Nothing surprises me any more. The facts of

the matter is, I agreed with what to say about the problem of

transferring from opposition into Government. Let's be quite clear,

Liam Fox made an error of judgment. I'm quite sure there is no money,

nothing like that being involved, personal and game. He made an error

of judgment. -- personal gain. It has cost him dear and I think it is

very sad. I think that is right in terms of Liam Fox. Facility and

ability for Adam Werritty to make money, there is no question. Fat is

a question that should be answered this afternoon. -- that is.

pages, you will speed read it and For any politician aspiring to high

office, a stint as a junior minister is a must. You might have

a red box and a ministerial car, but his five years as Parliamentary

Under-Secretary with responsibility for paperclips really the fast

track to the top? You think of government, you think

of the big beasts, the Prime Minister, Secretary of State,

Whitehall mandarins. But those with slightly less glamorous job titles,

the Parliamentary Under-Secretary of State, for example, barely get a

mention. They are the junior ministers, the tier of middle

management that helps keep the wheels of government in motion.

There are over 60 junior ministers across the 20 departments of

Whitehall. That is almost one in 10 of all MPs. William Hague at the

Foreign Office has six junior ministers, four ministers of state

and two parliamentary Under- Secretaries. No partridge in a pear

tree, though. What do they do? Well, as memoirs can confirm, the dull

and unglamorous jobs that the Secretary of State doesn't want.

Norman Baker as Parliamentary Under-Secretary for Transport. A

look at his portfolio reveals he is also responsible for alternatives

to travel, amongst other things. The Department of Energy and

climate change's Ministry of State Charles Henry is responsible for

Smart Meters and lean regulation. At the Foreign Office, David

Lidington can include ministerial correspondence and communications

amongst his long list of responsibilities. It is hardly the

West Wing. A junior minister's job is really to sell government policy.

Oh, and cover the behind of the Secretary of State in some of those

tricky media interviews. Just ask someone who has done it.

certainly have to speak for them. Cabinet ministers often suddenly

disappeared, leaving junior ministers to hold the can and go on

the Today programme when the Riz Ahmed unpopular decision. But

nobody really notices them, disappearing off the scene when

there is difficult politics. Don't assume that just because you have a

red box and minister in your job title that you actually have any

power. It depends entirely on Number Ten. At the Prime Minister

and people around him are interested in you, then you have

influence. I was a specialist in Europe, Tony Blair's area. I had a

lot of walk in rights to Number Ten. But if you are favoured or not, a

junior minister must still watch what they say. Remember this?

of the egg production in this country is sadly infected with

salmonella. There was only one junior rule that every junior

minister must obey if they want to survive. Don't overshadow your boss.

A few days before the 2005 election, there was a huge profile on me as

the most influential minister of foreign affairs in Britain, just

after the election I found I was no longer a minister. If there is no

real perk, power or influence, why do people do it? Well, it looks

good on your CV. Your own coffee machine, drinks cabinet in the

office, shining name plaque... We are joined by Norman Baker. How

fulfilling his it being a junior minister? Very fulfilling. I don't

have a coffee machine or a name plaque. I have a ministerial bike

that I chose myself. It depends on your relationship with the

Secretary of stake. Philip Hammond was willing to let me get into

areas of the department where I was able to get money for the Treasury,

for a transport fund. I was given areas like rail performance to deal

with, which is quite fulfilling. Another dynamic which is different

from Denis McShane's time, we have a coalition government. There is a

different dynamic there. You would have said the same thing when you

were run government. Now would you say that all would you agree with

Chris Mullin, who says it is low- level drudgery and utter lack of

influence? I wouldn't have been so upfront about the fact that the

last government was a coalition as well! I don't agree with Chris

Mullin. I've read his books and I think they are entertaining. But I

think junior ministers are central to the operation. But they don't

have any real influence? They do, it depends on the Secretary of

State. I had the great fortune to work with very strong secretaries

of state that would let you get on with it. The one thing a junior

minister craves is there a little bit of a policy that they can

determine and run themselves. it's not just Chris Mullin, maybe

you two are the exception to the rule. Lord Digby Jones described it

as one of the most dehumanising experiences a person can have.

Peter Hennessy said that junior ministers are the wretches of the

Earth and are often treated as such. I don't recognise that. In my

department we have junior ministers that have areas of responsibility

and get on with it. Philip Hammond was keeping his finger on the pulse.

He was expected to do that. He was a competent Secretary of State for

Transport. But he recognised he couldn't do everything and in

certain areas there was specialisms that we have which ought to be used.

A good manager, a good Secretary of State, will allow junior ministers

to flourish in that way. How do you feel, in the thick of it, you see

special advisers running around and exerting influence. That must be

frustrating? It's different in a coalition. They have special

advisers in the coalition? Well, we have special advisers, for whether

they are Tory or Lib Dem secretaries of state. I have a Lib

Dem responsibility in the coalition to make sure that Liberal Democrat

policies are delivered. So why have a hierarchy to the Secretary of

State and to Nick Clegg. Isn't that the difference? In the coalition,

is less likely that Norman Baker, the only Liberal Democrat... In the

village! In the Department of Transport, he's more likely to be

told off by the Secretary of State, it's easier for the Secretary of

State to tell him to get back into his box? The distinction between

the two parties will have to be blurred. He will be part of the

overall team. Ind the end, you have to tell special advisers where to

get off, whether they are in coalition or otherwise. They say,

the Secretary of State wants this. You say, politely, well, tell him

to pick up the phone and ask me! He were elected you? The special

advisers for Transport are conservative. So they answer to the

Secretary of State, they don't answer to me and I don't answer to

them. It's a different dynamic. he's got it all wrong? If it's an

exaggeration, like Yes, Minister was an underestimate! There are

only two countries in Europe with higher inflation than Britain. �10

to each of you if you can name them? Liechtenstein. Spain? In

Europe? That is one, what is the other? Do I get �5 for that? No, 10

if you name both. Greece? Estonia? They are playing each other in the

European Championships! It would be a lot riskier to give it to an

investment banker. The backbench committee of the

Commons will meet an hour to decide which question they are going to

put forward for the House of Commons chamber. All eyes will be

on whether they will choose the issue of a referendum on our

membership of the European Union. One leading campaigner for a

referendum is Nikki Sinclaire. She was once of the UK Independence

Party, now an independent MEP. She went from town to town, championing

of the referendum calls. Recently, she delivered a petition to Downing

Street. It ran to about 100,000 signatures. She took a long MPs

from both the conservative and Labour parties that wanted it put

to a vote. Welcome to the Daily Politics. Even if you get this vote

comedy will not get a referendum, will you? I think it's unlikely at

this stage. The idea was to put pressure on the Government and we

have done that by collecting that 100,000. These were 100,000 voices

that I brought down to Downing Street. I am the guardian of those

voices. Since we collected his 100,000, we have actually got it up

to 120,000. Wouldn't you have more influence inside the Conservative

Party, strengthening the Euro- sceptic wing? The Conservative

Party has promised a lot on Europe but they failed to deliver.

Remember the cast-iron promise of... I do indeed, there are plenty of

Conservative backbenchers take your view. But you don't have the

influence they have on the outside? An independent, so I can speak to

all parties. But I'd like to see what MPs turn up. Hopefully we will

get the debate. It had been said that it would happen. What

conservative and Labour MPs, they will turn up and put their vote to

this, and I ask people at home to write to their MPs and make sure

they turn up. We need to put pressure on the politicians. This

is a debate that is long overdue. We have argued about it for 30

years plus. We need to have a formal debate in this country, a

binding referendum. Do you think we should have a referendum? I'm not

sure. The Government are in a very strange position. They promise that

if there is another Lisbon Treaty, then they should have a referendum.

But that wouldn't be in or out? might come back to bite them, it

would only be written in terms of in or out. Whole coverage would be

that you cannot have one on an esoteric treaty without it being in

or out. I'm fairly agnostic, which is appalling for Euro-sceptics,

that I should be agnostic on something so important. But I think

they might get that in or out referendum by stealth, possibly the

worst of all words. How? If there is a Lisbon part two, if the

Government stick to where they are and say they will have a referendum

on it, then that will become, de facto, a referendum on in or out.

If they lose it, it opens up the whole question. Your government

promises a referendum on Lisbon, we never got it. Surely, if there is

to be major treaty changes again, why shouldn't there be? There

should be, I agree with the Government on that. Whether it

becomes in or out in all but name, the referendum you are after, I'm

not sure. Just to be clear, you're recruiting sergeant at the moment

is the President of the commission. For him to argue they should be a

5% increase in the budget, and that the answer to the euro-zone is the

political integrated project that Europhiles have wanted all along,

that is good for the Euro-sceptic cause. Can we trust Mr Cameron? We

were promised referendums. The wording was changed under the

Labour government. The next treaty changes likely to be with the

eurozone. Cameron would say that we are not in that, so therefore we

should not have it. I don't know about the legislation, but it has

been cast that if there is a treaty change, there should be a

referendum. If you got a referendum on in or out, most Euro-sceptics

would still vote yes to stay in? would take issue and say that

actually, in an opinion poll commissioned with YouGov last month,

more importantly for Conservative Party, 66% of Conservative voters

would vote to leave it. But even Euro-sceptics like William Hague

said that they would still vote yes to stay in. They want to change it

and repatriate powers, but they don't want to leave? It's amazing

what they say in opposition. never said he would lead in

opposition either. To leave the European Union, under Article 50 of

the Lisbon Treaty, to renegotiate, you need unanimity from 27 states.

Euro-scepticism, there was a time when it was regarded as... Well,

particularly by fashionable opinion, as a rarefied form of madness. It

is now mainstream British opinion? I think so. What is interesting is

how many of... And we will see it from the meetings this morning...

How many of the new Tory intake are sitting there. I thrill -- still

think it's a minority pursuit on our benches. The only people bath

with he would work Kate Hoey, the regulars. It shouldn't be seen as a

conservative thing. There as many Euro-sceptic Labour people as well.

I'm not sure of that. In your heart of hearts, will we still be in the

European Union in 10 years' time? Hopefully not! That is two words!

know what you hope, it is what you thought I was asking about. Thanks