25/06/2012 Daily Politics

Good morning. Welcome to the Daily Politics.

So England are out of the football and the pain that is Wimbledon is

about to begin. Oh, well. At least its stopped raining! On the

programme this morning: David Cameron sets out huge changes to

the welfare system. The under-25s may lose their housing benefit

under a future Tory Government in a bid to end what he calls the

"something for nothing culture of entitlement". Have you ever

wondered what a Central Bank actually does? We go behind the

scenes at the Bank of England. And do you grind your teeth when you

hear about things being "accessed", "catalysed", "showcased" or

"impacted"? We meet the minister who has declared war on pointless

buzz-words. All that in the next half hour. And with us for the

whole programme today is Dr Deanne Julius, the American economist and

former member of the Bank of England's Monetary Policy Committee,

who is now the Chairman of the Foreign Affairs think-tank Chatham

House. Welcome to the programme. Let's start with Scotland, where

the "Better Together" campaign is being launched as we speak with the

former Chancellor, Alistair Darling, saying that Scotland will be

stronger if they retain the union. I hope that as somebody who feels

passionately about the future of the country in which I have lived

many years, is that I can encourage them to stay in the United Kingdom

because of the strength it brings us at home and because of the

influence it gives us abroad. Alistair Darling. How should he go

about persuading his fellow countrymen in Scotland that the

union is the best way forward? think he should focus on the

economics case. The identity politics could be strong, but the

economic case is clear-cut. That Scotland will be disadvantaged.

Devolution means devolving assets and liabilities. In the case of

Britain our debt is actually high these days, thanks to the financial

crisis and the bailing out to the Royal Bank of Scotland among other

things. So Scotland would take on its share of that debt. It would

have to finances it on the world capital markets.

Alex Salmond is not proposing that Scotland join the Euro, for example.

It would be difficult, so in that sense separation on a financial

economic basis, no doubt he will not want to frighten the horses in

Scotland? Even if he keeps the pound, what that means is that

Scottish banks will be supervised from London it means that when

Scotland needed to borrow money to finances its own budget deficit, it

sounds like they would be running a deficit, they would have to do that

with Scottish issues, the Scottish- backed pound debt that puts them in

the same situation that Italy is in or Spain. Are you saying that

Scotland could not survive on its snon Not at all, but it would be

more detective than the pro- devolution people paint it. They

would not have control of their currency, they would need to really

develop a track record and credibility in economic management.

Alex Salmond has talked long and hard about the Reeve knews that

Scotland should have gotten and would get from the North Sea oil,

that Scotland's fortunes would rest largely on that? I think he is

right that the fortunes would rest largely on oil, but it is a huge

bet. 30 years ago it would have been a great bet. That is why the

deal was done with the formula, giving more revenues to Scotland

than it produced in taxes, but now production in the North Sea has

been declining in the last decade. Most of the big fields have been

discovered, so unless there is a massive new recovery, it is unlike

that the revenues for the Scottish oil will be there. They will go

down. Now, the coalition has introduced some of the biggest

changes to the welfare system in 60 years, but today, the Prime

Minister is to talk about new changes. David Cameron is to float

the idea of removing Housing Benefit from many under 25s,

forcing them to live with parents. He is to suggest limited

unemployment benefit to two years, a system used in parts of America

and hint at restricting handouts for those with large numbers of

children. Here is Labour's Stephen T hirbgs mms talking about it today.

The Government is right to be worry being the Welfare Bill. The

Government should be concentrating on ensuring that there are jobs

available for young people, requiring them to take the jobs up,

but there are over 1 million young people out of work. There are not

the jobs, so threatening them with throwing them on the streets is not

going to help. Well with us now is one of the

Conservative members of the Work and Pensions Select Committee,

Harriet Baldwin, good morning, welcome to the programme.

Is this back to basics on the welfare state, the end of

compassionate conservatism? Is it compassionate to have a situation

where a young person's whose family have never been in the benefit

system, stays at home in their childhoodhood bedroom until they

are able to afford to move out on their own, and then looks across

the road to see someone in the benefit system, presents to the

Housing Association and is able to move into accommodation.

So what do you say to the critics, Labour this morning, that young

people will be out on the streets. 165,000 people who don't have

enough commercial money to pay for rents, what will happen.to them?

is vital that the welfare state acts as a support to those sorts of

young people coming out of care, or perhaps are fleeing from domestic

violence, they absolutely need that new start in life, but if they

would be able to live at home with their parents until past the age of

25, I don't think that is unreasonable for us to have a

discussion and as a state say it does make sense to put you on a

even playing field with some of the other young people. Do you agree

with people choosing having to have children and for the financial

reward then avoid working? I don't think so, but I do think for a

young person at the age of 16, 17, who has had a child, and is able

therefore to move into accommodation with that child, and

then is actually automattically entitled to further increases in

accommodation and further increases in income if they have more

children, I think you cannot be surprised that today in families

with four or more children I think it is, or five or more, more of

them are workless than in work. You are on regard saying that

unemployed families should get child tax credits for no more than

four children? That is what I floated in a study, said that the

automatic entitlement should end. We should have conversations about

requiring skills, education, to try to help you bring the children up

out of poverty. Are the policies sounding cruel or

sensible? Something must be done. I'm not sure about with which

policies should be addressed, but it is clear that the country has

gotten itself into a situation where it cannot afford the Welfare

Bill it has. It is almost a quarter of Government spending. It is

transferring from taxpayers to various sorts of welfare recipients.

Housing Benefit is a huge part of that �20 billion. So the solution

is hard to come up with. Nothing is easy, but something must be done.

It was in the States that Clinton brought in reforms in the 90s, that

ended the automatic entitlement to additional welfare. If you were an

out of person work who had never taken on training, but the

automatic entitlement went. But cab you achieve it? Can you

save another �10 billion, which is what the Chancellor would like to

see after the next election by targeting working age benefits

alone? Does it not need to be spread over the generations,

looking fo for, at example, the pensioners? The package must be

looked at. Housing Benefit strikes me as one of the areas to be looked

at. I was shocked as a person who had not grown up in the country, to

learn once you have accommodation in social housing that you have it

for life life. That seems ridiculous. What about targeting

elderly pensioners's benefits that they get? The Prime Minister is to

make it clear that the 2010 fan festow says we will not touch it,

but I have said that for a company director, they would get a winter

fuel allowance and a large cash for fuel in the winter. Buts that what

a manifesto pledge. You don't think that the Prime

Minister should change that? Well, he is the Prime Minister. You have

said that something must be done. You both said it that times are

tough, that we should be looking at those winter fuel payments for

example? I am on the record as saying we should look at that for

the richer. Why 2015? Because of the manifesto

arrangement. It is not a huge amount of money.

But if we are talking about saving �1.2 billion, you have �10 billion

to find you will not getting from targeting working age benefits

along, or Housing Benefit, but look across the board? Indeed, but that

is what they are doing with the idea of a welfare cap.

That seems sensible. This is a Labour policy, to have a regional

been fifth cap. I think it would make sense to look at different

parts of the country where the housing a less expensive and set it

lower than the 26,000 we have set it at nationally. Why should it not

be for the coalition, looking at Housing Benefit now? I think we

should be raising the debate now. It would be interesting to hear

what the partners would say on this. They have been collaborative so far.

I think it is healthy to have the discussion. I hope that there is

area with common ground with the Liberal Democrats, but given how

slow the process of welfare reform is, it took two years to get the

welfare act through in Parliament, but we have to think about it now.

How happy with the backbenchers? Imagine they would be happy.

They would support this? Is it standing David Cameron in good

stead, trying to appeal to what people say, the red meat for the

Conservative Party? It is down the people we meet every week in our

constituencies. They work hard. They take home at the end of the

day less than someone would on benefits with a large number of

children. I don't think it is fair to the children not to have that

conversation with the parent or parents and I don't think it is

fair to other taxpayers to be necessarily supporting that as a

long-term lifestyle choice. Harriet Baldwin. Thank you very much.

Have you ever wondered what the bank of England does? Or the

European Central Bank? Teetering away. Well, we have wondered. So we

sent Susannah to the Bank of England Museum to see what she

could find out. # Went to the bank just to get a

little money # Well, he told me that they re

choir was # I started feeling funny. # The

Bank of England is aiming to keep the prices of the power to set the

interest rates. The bank, every month has a meeting

of the International Monetary Fund, they decide whether to move the

interest rates up or down. The point of doing that is to try to

meet the inflation target of 2%. So using the bank rate or the interest

rates, is really to try to keep inflation under control.

But the European Central Bank fulfils that role if your currency

is the Euro. There are 17 different countries in the eurozone, which

means that the ECB has to come up with a one size fits all interest

rate. If we had a German Central Bank

maybe the interests rates would be higher for Germany than Greece or

Spain. So there are discussions with the counsel of the ECB, but

the governments have to deal with the fact that their country is not

in sink with the rest of the eurozone.

Mervyn King is thought to be in favour of using more of what is

known as quantitative easing. It is described as printing money,

but it is creating money electronically at the bank. What

the bank does with it, is it goes to financial institutions and says,

basically, give us your gilts, which are a supersave risk-free

government debt. So a transaction takes place and the financial

institutions use the cash to buy riskier assets. That gets the money

into the economy, it creates a demand bolsters confidence as the

money moves around. The European Central Bank has the

power to do quantitative easing too, although it has chosen not to.

Increasing the amount of money in the economy, which is what

quantitative easing does, can raise inflation.

If the money is spent, quite rapidly, when the economy has not

stepped up its production, then there is more demand than is being

produced in the economy. That creates some bottlenecks and

inflationary pressures. The bank can -- the Bank of England

can bail out as the learned of last resort, but the European Central

Bank does not have the power. Although they are under pressure to

do more. It is more difficult for the ECB to

bail out a bank directly. They have lent a lot of money to banks, but

the responsibility is still very much with national Government.

In if the eurozone ends up with banking union, the ECB could look

The central banks, like the Bank of England and the European Central

Bank, have key roles in stabilising the European economy. With a Cisse

member of the German parliament, representing the Christian Social

Union, the sister party to Angela Merkel's Christian Democrats.

Welcome to the programme. What you say to other European leaders who

say that the Germans are the problem here, that they are Paul

King the use of the European Central Bank to bailing out

southern European countries? only the Germans, all the Eurozone

member countries have already spent a lot of money on bail out. We paid

for Greece alone more than 100 times as much as the United States

did after the Second World War with the Marshall programme. It is not a

question of money, it is a question of political consequence. These

countries have to show the political will to undertake the

necessary reforms and fiscal consolidation necessary. Do you not

think that countries like Greece and Italy with EU governments are

showing that they are willing to take the steps that are necessary

to deal with their structural debt problems, but they need more help

because of the spiralling problem of debt and the fact that the

markets have got their grip on these countries? We need a mix of

policies, but to suggest that the amount of money Eurozone member

countries should pay will lead to overstretched bail-out funds. There

is a limit of effectiveness of financial aid, and also a limit of

political acceptance in the recipient countries as well as in

the donor countries for. Do you think Angela Merkel is the most

unpopular leader on the Continent at the moment? It is not a question

of how popular a leader is, the question is whether the

contributions of a country are adequate to solve the crisis.

you see the Germans, that they could do more, that Angela Merkel

is the key to unlocking the crisis? And at the moment, she is refusing

to take the steps that other leaders are asking her to do.

think she is walking a tightrope. The German perspective is

irrelevant. That is her constituency. If I were in her

place, I would be reluctant to take on an open-ended commitment to

support countries over which there is no effective fiscal control. She

has a difficulty there although I'm sure she is committed to saving the

Euro. She is under pressure to do more. Is that not the point? Angela

Merkel does not want the Euro to collapse. Germany has done well out

of it. Are Germans not worried that that is the consequence? In order

to avoid the collapse of the Euro, the donor countries will have to

keep their own credibility. This is not a question of Germany alone. It

is a question for France and Italy. They will have to keep their

credibility. Will we will have to keep the credibility of the bail-

out fund. This is the crucial question. In the end, do you think

that there will have to be full fiscal and political union for the

Euro to survive? We need closer economic co-ordination at the -- at

least. Full banking union? You would be a supporter that? -- in

support of that. All the discussions of fiscal union or

banking union always lead to a discussion on fresh money. This

will not be sufficient. We will have to undertake structural

reforms in the framework of the European Monetary Union, but the

crisis cannot be solved by fresh money alone. Do you think it is

inevitable, even though there is a new government in Greece, that

Greece will leave the Euro eventually, that they will not be

able to survive? It is not the German Government's position, but

my personal view is that Greece will have to do that to regain

competitive ness -- competitiveness. Her do you do that? If you do that

within that the Euro, we would have to cut social benefits, and keep

the high living costs. This will cause social tensions. I would

prefer, and I believe it would be better for Greece to do this

outside the Eurozone. Of course, this would cause problems. But they

could recover quicker outside the Eurozone. In that what Angela

Merkel wants? It is my personal view. Do you think that is right?

Do you agree that in the end, that is what Greece will have to do?

Eventually, they will have to relieve -- leave the Euro. It seems

they are in an unsustainable position, not just economically but

politically. They have had difficulties, with a messy

coalition which is promising things which are not on offer. It seems

that they will have to leave, possibly not in the next three or

four ones, because agreement a been patched together, but by the end of

the year, certainly, they will be out. I doubt they will leave

voluntarily. They will have to be forced out. The trigger will

probably be the troika, the IMF, the ECB and the Europeans saying

"We cannot release additional bail- out funds because you have not

capture Cross's". The would like that to happen? -- kept your

promises. In Portugal, Spain and Italy we see political consensus on

the necessity of structural reforms and fiscal consolidation. This is a

great difference with Greece. There is more time and chance to recover

for Spain and Italy especially. For example, looking only at public

debt, including implicit debt, Italy is even stronger than Germany.

The debt, including a plus a debt, will be at 192% in Italy, with 146%.

Italy is a strong economy. They will have to keep his credibility.

One thing I can guarantee is that we will be talking about this at

months to come. Thank you very much. Time for a paradigm shift.

International developed minister -- international development minister

Alain de Gaulle -- Alan Duncan has issued a memo a urging staff to

stop using buzzwords in internal memos. He says that staff risked

damaging Britain's reputation by using language that the rest of the

world does not understand. Let us look at what has gotten so hot

under the collar. What are some of the words that targeting the

Minister so hot under the collar? He does not want to hear anyone

leverage or mainstream anything. And he certainly does not like what

he describes as a meaningless term of "Going forward". In the memo he

says "We do not ever access, showcase, catalyse or impact

anything." He finds a baffling when a sentence begins "Grateful for

you're" Instead of "I would be grateful for Europe." And whatever

you do, do not refer to his apartment's work in "The

humanitarian space." The team here had a holistic approach to this,

cascaded down and decided to facilitate the booking of the key

contributor to help achieve maximum impact. I have practised at all

morning! Alan Duncan is here for some quality face time. We are

primed for upwards the back. Were you cringing? I was cringing.

Otherwise, you are perfect of course. I am on my best behaviour

here, hoping that I do not misuse or abuse the English language. Is

this just about grammar? Are you just fed up with the phrases that

are used, the jargon that is used, in the media world and the

political world? Both. I describe myself as a grammar fascist. I send

staff looking for a lost'sometimes. This is also about meaning.

Sometimes people choose words to suggest purpose, with insufficient

thought behind them. If you cannot express yourself clearly, it

suggests you're not thinking clearly and if you're not thinking

clearly, we end up with rotten policy. Is it the case that this is

our culture revolves, that people use those phrases, "At the end of

the day," "Damning report," Is that just how people speak? Of course

some of these words emerge and you do not want to destroy the

evolution of language. The danger and Whitehall is that you end up

with Whitehall war for which people in individual departments

understand but nobody else does. -- waffle. Do they understand it?

there is a danger they do not understand it. Who is the worst

offender? I would never name anybody. My office a brilliant and

they have got the message. By and large, the great thing about

officials and the British Civil Service is that if you make your

views clear, they will respond. They are professionals. What they

do not like above all is uncertainty. I hope I have given

some clarity. I have to say, the quality of the written word now

coming across my desk as inevitably improved. We are no longer the

hippy wing of government. Economists like you're the worst

offenders. When we speak to each other, yes. -- You are the worst

offenders. When I was at the Bank of England, I had to learn to speak

economic speak. But I applaud Alan for what he's doing because I think

one of the great remaining advantages the British have on the

international stage is that they can speak English properly.

have they been mimicking Americans in some way, by using that more

colloquial language? I think business is often the worst

offender. Some of the language that creeps into the boardroom is

laughable. But perhaps the worst American habit is when the verb --

they've her a noun, they take a noun, like showcase, "You're

showing something," And the next thing that happens is you are

showcasing it. I would like to stamp on that. Do you think about

that? Perhaps I can respond. What annoys me about the English use of

words, "To be perfectly honest," I despise that phrase. We are all

perfectly honest. And if we are not, we should not say that we are.

is like being half pregnant. either honest or you're not!

dislike people calling something of fierce. If it is surely obvious,

one needn't say it. If it is not truly obvious, that is such a

future. We have to avoid saying, "Of course you know." People might

not know. There is a question of the BBC being institutionalised and

there is a language that grows up in institutions like the BBC and in

Parliament. David Cameron, we looked briefly through his speeches

and he uses "Wake-up call." What is that? Literally waking you up?

suppose it is. Let me give you a BBC example. "We now battle

things." Battle against them. Gradually this Americanisation, or

American turn of phrase has crept into a number of BBC news bulletins.

The rough things like "Only time will tell," And so energising. What

is that Kim acolyte synergy, when you're working together. -- What is

that? We like Synergy, when you are working together. Are these phrases

meaningless or are they nice ways of finishing off reports? I think

that one is all right, because sometimes poetic turns of phrase

become widely used and then become widely understood. So long as they

are grammatical and not horrible, horrible twist of language, then I

think we can live with them. Who is the worst offender, politician-

wise? I do not think I can think of anyone. The Department of Education,

I would nominate as a department that is particularly bad when it

comes to jargon. Why? I was on the Learning and Skills Council for two

years and it took me 18 months to figure out what in the world all

these terms meant. And we will leave that thought in every one's