12/12/2011 Daily Politics

And good afternoon. Welcome to the Daily Politics here at Westminster,

where the stage is set for the mother of all family arguments in

the Commons this afternoon. He says he was right to veto a new European

treaty that would have seen the Eurozone countries forming a new

fiscal union. The Prime Minister insists that it would not have been

in Britain's interest. But he says he is bitterly disappointed. The

Deputy PM says it will be bad for jobs, bad for growth and leave this

country a pygmy on the world stage. And what about him? It is back to

"I agree with Nick".. Remember that phrase from the election last year?

The Labour leader is accusing the Tories of failing the country and

mishandling negotiations. All three will be in the Commons

this afternoon in what promises to be a highly charged parliamentary

occasion, with the future of Europe at stake and the Westminster

coalition under extraordinary pressure.

That parliamentary statement will be at around 3:30pm this afternoon.

We will be taking the political pulse of members of all three main

parties in the next half-hour. With me throughout the programme is the

businessman Sir Martin Sorrell. If you have any thoughts or comment on

anything we are discussing, send them to us. But first, the economy

itself. More dire predictions this morning, this one from the Standard

Chartered Bank, which says the British economy is already

shrinking and will continue to stagnate until at least halfway

through next year. Martin, do you see the UK economy returning to

recession? No, actually. I have seen the numbers through to

November. We have just finished doing our budgets in New York over

the last couple of weeks. While the UK has been vibrant this year, we

are up about 10% against five to 6% for the company as a whole, we have

added 10% to the number of people in the country, so it is at about

14,000. A but growth is flatlining. Generally, but our business has

done well. It is certainly not flatlining. That is your view, but

you do not think the country as a whole will be back into recession?

No, I think it will be low levels of growth. That is subject to

nothing catastrophic happening. If an Italian or Spanish bank went

down, which some say is a possibility, less so a French or

German bank, because they would be bailed out. But if that happened,

all bets would be offered. I was asked last week whether we would we

do our budgets -- whether we would redo our budgets, and if that sort

of thing happened, you would be back to a layman's scenario, or the

business back budgets are in much better shape than they were.

that is a potential event, that the Eurozone fails or that a major bank

in one of the Eurozone countries fails. The bank failure is much

more short-term. The Eurozone failure is something, given the

decision the Prime Minister made, is more in the air. But is the

crisis in the Eurozone or anything connected to it the main reason for

lack of British growth? It is partly to do with the Eurozone. The

Government has reduced the rate of increase in spending. It has not

cut spending is. It has addressed the issue of getting the deficit

under control, which the Americans have not done. The Americans will

face the same issue after their election in mid- November next year.

Should Britain consider slowing the deficit reduction programme? In my

view, no. It is a bit like turning around the company. You have to

deal with the revenue and cost side, and then put in place a growth

policy. The statement from the Chancellor was a plan being put

together. It is not fully fledged doubt. I would like to see a more

robust, visionary plan for the next three and a half years of this

government. They have to get it together, otherwise they will go to

the nation with the country in the same condition of slow growth. It

will not be a pretty picture electorally. The deputy prime

minister Nick Clegg has said some increases in executive pay, which

has become an even bigger issue, are irresponsible. I do not know

which ones he is referring to, but if you look at WPP on its own, you

have to look at it in the competitive environment in which we

operate. We still work in an international and highly mobile

workplace. Is that less of an argument these days, particularly

in the Times now? No. You will probably have a record year that

WPP. We have to look at that in relation to what is happening

competitively. We still have to compete against private equity

companies. The UK, we have 40,000 people here. Our total workforce is

150,000 worldwide. His Nick Clegg referring to companies based in the

UK or operating in the UK that are working on a worldwide stage, or is

he just referring to UK-based businesses? It might be true in the

context of UK-based businesses, but not for us in 2011, or 2012.

Now, after David Cameron will do his veto at the EU summit on Friday,

the coalition pre-Christmas cheer has descended into open warfare.

David Cameron will face MPs later to explain why he did not put his

signature to a new European back to try to stem the euro crisis. Deputy

prime minister Nick Clegg has angered many Tories by saying David

Cameron's decision threatened to turn Britain into a pygmy on the

world stage. All is not well around the

coalition Christmas table. Peace and goodwill are nowhere to be seen.

Following the summit, David Cameron said: however, the deputy prime

minister Nick Clegg spoke out yesterday, saying it was bad for

Britain. It now looks as though the 26 other members of the EU will

sign the so-called new fiscal compact for the Eurozone. What was

on the table was a plan to stop Eurozone countries allowing their

annual structural deficits to exceed 0.5% of GDP. There will be

automatic penalties for countries to break the rules. Euro countries

will have to submit their budget plans to the European Commission

for approval. David Cameron wanted legal protection for the City of

London from excessive EU regulations, but his European

colleagues rejected his demands and he refused to sign. So can the

coalition survive this spot of pre- Christmas indigestion? Let's speak

to our deputy political editor. There will be many Tory Euro-

sceptic MPs who will be delighted by what they see as David Cameron's

bulldog spirit. Will there be a sense of euphoria in the House of

Commons this afternoon? Among some, there will be cheering and applause.

But the question is what they say beyond that. How far do they ask

for more? Do they say, this is just the start, let's look for

repatriation of powers and have a referendum? Or do they say this is

enough for now? Dealing with the Euro-sceptic wing of the

Conservative Party, David Cameron has managed expectations. What

about the Liberal Democrats - how difficult will it be for Nick

Clegg? It will be difficult for Nick Clegg and David Cameron. Both

of them need to manage the coalition. It will be under a huge

amount of strain as a result of this. For many Liberal Democrats,

their position on Europe is something fundamental. There will

be a fair expression of anguish over what has happened from the

Liberal Democrat benches this afternoon, when the Prime Minister

gives his statement. The question is how much the Conservatives are

prepared to allow the Liberal Democrat to express that view

almost to let off steam, and how much it develops into a fundamental

fissure. The problem with Europe is that it is not a one-off issue like

electoral reform or specific policy like tuition fees. Europe is

something that is with us day in, day out. It involves constant

decision-making. If it becomes a Fisher, you could potentially have

rows further down the line. With us now is the former Foreign

Secretary Sir Malcolm Rifkind. From the Lib Dems, their former leader

Sir Menzies Campbell. And joining Sir Martin, Sir Menzies and Sir

Malcolm is the no doubt future Sir Douglas Alexander, the shadow

Foreign Secretary. Before we get carried away, Menzies Campbell, how

is a bitterly disappointed Nick Clegg going to sit in the Commons

this afternoon as part of a coalition government after David

Cameron vetoed a deal that he said his bat for Britain? Because the

coalition government is essential in the economic interests of this

country. So you will give up any other Liberal Democrat plan?

overwhelming need is to restore economic stability in the UK. That

is why we entered into the coalition agreement. The coalition

agreement also provides clearly that there should only be a

referendum is an -- if there is any transfer of powers from Westminster

to Brussels. What happened on Friday is disappointing. There is

no point in hiding that, but it does not reflect a transfer of

powers, so no referendum is required. It is of course a setback,

but I am not willing to allow it to become a source of permanent

division. What made Nick Clegg changed his mind in his response

from what he said immediately after the summit and Sunday? The benefit

of hindsight. It is not surprising that after a few days, when the

full facts and implications begin to be known, that people's emphasis

would change. Look what happens when we have a Budget in this

country. On the Tuesday, it is hailed as the best thing since

sliced bread. By Sunday, people reach different conclusions.

that what you would expect from the deputy prime minister? One of the

problems of 24 hours-a-day news is that people are expected to make

instantaneous response has. David Cameron was in Brussels and

Nick Clegg is in his flat in Sheffield being called up at 4

o'clock in the morning. Apparently without a clue of what was going

on? No, there was a common position. Nick Clegg agreed to proposals

which he described as being reasonable, which I believe to be

reasonable as well. And that broke down. There was an inevitability

about the position in which David Cameron found himself. If you are a

student of European history, which all three of us are, for the last

25 years, we have found ourselves often at odds with Europe.

Therefore, we have few obvious and immediate allies. We have not got a

history of co-operation. That was the background against which David

Cameron found himself operating. Malcolm Rifkind, what does David

Cameron need to do this afternoon? Does he need to stop a sense of

euphoria to make it even more difficult for Nick Clegg and the

Liberal Democrats? There will not be euphoria as a whole. The crucial

point is to establish what has happened and what has not happened.

You have had a lot of comment over the last 48 hours about Britain

being isolated and not being at the table when important decisions are

made. Actually it's, ever since the single currency was created some

years ago, there has been an empty seat at the table because the UK,

by said -- deciding not to join the single currency, has not been

involved in discussions amongst Eurozone members. All that will

happen now is that the subject being discussed by Eurozone members

will also cover the issues agreed inter-governmental the last Friday

on fiscal union and tax harmonisation and so forth. Either

we took the right decision not to join the single currency or we

didn't. Are you saying that there is no isolation when Britain will

be one country among 26 that could make decisions ahead of European

summits, and Britain will find it difficult to undo or negotiate a

position from that standpoint? has been true for ten years.

there are countries outside the Eurozone that have signed up to the

treaty. They will not necessarily be around the table either. It will

not make much difference what Slovenia, Bulgaria or Romania think

on issues that affect the City of London. We have a situation where

for ten years, since the single car as he was created, the UK, rightly,

by deciding not to join that single currency, cannot expect to be

involved in discussions about it. So the Liberal Democrats are wrong?

We will be no more isolated than we have been for ten years.

Immigration, environment of foreign policy, defence - these are issues

in which Europe has a fundamental interests. They are all issues in

which the UK has a important contribution to make. If you want

an illustration of that, the co- operation between Great Britain and

France in respect of Libya, one of the most successful operations of

its kind in recent history, that capacity will not go as a result of

what happened on Friday. What would you have done on Friday? There was

a deal to be done, and we would have got a better deal. You would

With the benefit of hindsight, what has emerged was that actually,

there was a leader who was motivated by a party interests,

rather than national interests, the words of Nick Clegg. And a leader

that got a bad outcome for Britain, again, the words of Nick Clegg.

That is where we have ended up. The fact that we went into these

negotiations without Denmark, Poland, Sweden, it was not a

coincidence, it was a conscious choice by David Cameron to walkout

of the grouping in order to get the Conservative Party leadership. That

is a terrible indictment of British diplomacy. I think that's a

ridiculous charge, that he walked into negotiations deliberately

without a friend. You have to ask yourself, what would Gordon Brown

have done in similar circumstances? Because he was by no means an

enthusiast for Europe. The fact is, we paid the price for 20 years when

we have not appeared to be fully engaged, and it was an inevitable

conclusion, that when David Cameron put forward what he did, that he

was going to be knocked back. was not fate, this was choice. What

would Gordon Brown have done differently? I travelled with

Gordon Brown to Brazil, literally to each corner of the globe, in

order to get the support of the G20 in the face of the crisis in 2008.

But you need to answer the question on behalf of Labour, would you have

signed up? First of all, we would have had a different approach, by

talking to other countries. And you would have signed up? We would say,

why was he not in a position to ask for a seat at the table, when the

reality is that when 26 countries now sit down on a monthly basis,

Malcolm knows that those issues will have a profound impact on

Britain. We would have asked for different protections in relation

to the single market, and the terrible truth is that David

Cameron came away with a position where 26 countries now, if they so

choose, have the capacity to defeat Britain on qualified majority

voting and financial the donation. It was not a veto, it was a defeat.

There is the question, what exactly did you veto? There was nothing

actually in the communique which was going to directly damage the

City of London at that point. suggestion is being made that this

was all done because of party pressure and so forth. What the

Euro-sceptics, of which I am not one, were asking for, was to demand

repatriation regarding fisheries, working-time directives, things

that were nothing to do with the eurozone or the financial problems.

He refused to do that. What he concentrated on was something

absolutely crucial to the economic and financial future of the country,

which is the City of London, rather similar to what Angela Merkel has

been doing, refusing to allow the European Central Bank to be used as

a bank of last resort. So each country has its own perception.

are you saying that the City of London has now actually been

safeguarded? What about all of this qualified majority voting, with

Britain excluded? That has always been a threat. It would have been

much more of a threat if these new powers, which these countries were

seeking, had been sanctified as being European Union treaties. When

they are European treaties, not only do you have the risk of

qualified majority voting, the European Court of Justice can try

and enforce it, the European Commission - but in fact none of

that will be possible now. They would be enforceable by law, that's

the difference. This is a faire point. What the European Court of

Justice would have had the ability to enforce were the rules of the

eurozone, in relation to the eurozone. In relation to the City,

we are still as vulnerable as we were last week, we are even more

vulnerable, because the way you win in these matters is by having

allies. Was he right, David Cameron, and in this discussion, have our

interests been safeguarded? instant response which Menzies

Campbell referred to is a difficult one. My instinct is that it is

better to be inside than outside. The Google response to China was to

withdraw. I think that was a mistake. This is similar in essence

to me. It is much better to be inside, working with the powers

that be, rather than outside. I think the issue about... Whatever

the rights or wrongs of it, the perception will be, and I have been

speaking to an Indian businessman this morning about where he would

locate, given what has happened in the last 72 hours, the perception

will be that the UK is outside western Europe, and this is a

problem. This was exactly the argument when we declined to join

that currency in the first place. People said it is better be deep

inside, but sometimes you have got to make a judgment. We have two

strikes against us, and it is three strikes and you're out. How worried

are you about further calls for repatriation of powers? The

Europeans will feel emboldened, won't they? No, David Cameron has

already shown, by refusing to raise the issue of repay tuition last

Friday, he concentrated on the issues which were being discussed

at the summit, and he was right to do so. The attitude today for David

Cameron is not to be too affected by the congratulations from the

backbenches, but to stand up to the Euro-sceptics, who, as Malcolm

Rifkind rightly says, want to take Britain out of Europe altogether.

That would be deeply, deeply damaging. From business, the

perception is that this was a political decision, not an economic

decision, and that's the problem. The perception, rightly or wrongly,

is that it was made because of the pressures being put on the Prime

Minister and the coalition. It is our duty to overturn those

perceptions. We will all be watching this afternoon. So, the

Government is divided over Europe, and everyone is waiting for a

crucial Commons statement from the Prime Minister. What does that

remind you of? The 1990s, when the Tory party nearly tore itself apart

over the Maastricht treaty, laying the foundations for the EU we know

today? Up to a point, maybe. But there are some crucial differences.

Adam has been looking back in his history book to find out how much

all of that is relevant to today. Here's a coincidence, the day David

Cameron vetoed the decision was the 20th anniversary of John Major

agreeing to the Maastricht treaty. I think it was a very good result

for Britain. In 1991, he kept the UK out of the chapter on social

policies and the early stages of the euro. But it sparked a war in

his own party. The idea that we're going to be able to control the

European Community, in imposing these regulations on employers in

this country, is pie in the sky, and a triumph of hope over

experience. Parliament must put this stalemate over Europe behind

it. I am not prepared to let it poison the political atmosphere any

longer. I have tracked down two of those foot soldiers, Sir Teddy

Taylor, now happily retired by the seaside, and Rupert Allison, also

known as espionage author Nigel West, to find out if any of this is

still relevant today. Maastricht was the general principle of ever

closer union. Whenever we mentioned that, we were told, this is

nonsense, political union will only go to a certain point, the idea of

a United States of Europe is absolutely Darfur. -- absolutely

laughable. Well, that's exactly where we are heading now. It was

absolutely obvious, why didn't people see it? It couldn't work.

The treaty got through Parliament, but a year later, eight Tory rebels

lost the whip, and effectively formed a kind of party within a

party, which held John Major's government to ransom, because he

had such a tiny majority. It meant every single vote mattered. It was

very sad, the Chief Whip was banging on a toilet door, trying to

get him out! Yet new lows reports at the time portrayed them as

heroes. -- portrayed them less as heroes, more like weirdos. My own

view is that we were right. My own parliamentary constituency had the

opportunity to ditch me when I lost the whip, and to my gratitude, the

whole of the constituencies supported me. There's no euro

enthusiasts at all, apart from Ken Clarke. As the new crop of Euro-

sceptics gather to hear the current Prime Minister in the Commons today,

they view this period with mixed feelings. Some cringe, others say

this is when their political views were forged. The Conservative MP

Richard Shepherd was one of those so-called Maastricht rebels - do

you feel vindicated now? I have no doubt that what we did was right.

And this was the Maastricht treaty, it made us citizens of the European

Union, but predicated all the mess that we are in now, and it

challenges the very central themes of British history. For instance,

our constitution - who is the master, who governs, who is

accountable to anyone in this international morass? You were

painted there, along with some of your colleagues, as outcasts - did

you feel you were very much on the fringes of the party? No, I didn't,

and I don't think it is true to say that of the rebels. The change, the

seismic shock to the party, was the removal of the whip. In fact, what

you heard was a 22 person committee, and as you know, the Government had

to send us in the post membership of the party again within six weeks.

So it wasn't a big deal. They were on the back foot. But the themes

that I am talking about, Angela Merkel said exactly what we said

all of those years ago - this is a political project. And yet we are

looking at an economic catastrophe, possibly. And when you hear people

say, this is political, when it is economic, you know you're in real

trouble. And last weekend, Friday, that's what you saw. They're going

on a political project, and knock attacking it as if it were an

economic project. Sir Martin Sorrell, those same arguments are

still what we will be hearing this afternoon? Yes, the argument is

about who has political power. It reminds me about what you see

inside agencies. In the old days, the country managers would object

to the European headquarters having control over their budgets. So, it

is a political decision which was taken, and really, the fundamental

problem is an economic one. terms of the mainstay of the

Conservative Party now, do you feel your views are being shared and

held by a significant number? you're seeing the new generation

coming up, who will just find this incomprehensible, why are we still

struggling on such profound issues? Do you think there will be a push

for further repatriation of powers from Brussels and possibly a

referendum? This is like a huge smokescreen has gone up since

Friday's decision, it takes time for the cloud to you're. And there

will be come backs on this. After all you have now got non-

functioning democratic governments in Italy and Greece. These will all

create their own momentum, I think. And so I would like to see how it

settles down, but I think the drift is, I have to say, irrevocably, to

use a word from the Maastricht treaty, because that is what this

currency is supposed to become irreversible - words from the

treaty... Very briefly, you say that is the drift, so would it be

impossible for the coalition to continue? The division is clearly a

very deep and important one. And you have made the point that this

is a very difficult moment for the Liberal Party, too. Because to have

a general election at this time would not be helpful. Thank you

very much. That's all for today. Thanks to our guests, and