18/09/2012 Daily Politics


Jo Coburn with the latest political news and debate. Featuring economist Jonathan Portes and a look at what makes a Brummie.

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Good afternoon, and welcome to the Daily Politics. Is Britain's Afghan


strategy in disarray? After a spate of attacks on allied troops by


rogue Afghan soldiers, NATO suspends joint ground operations.


But that was only hours after the Defence Secretary told MPs that the


attacks would not lead to any change in strategy. But they've


demanded that Philip Hammond comes back to the Commons today to clear


up the mess. We'll have all the latest.


Former Prime Minister John Major says the "green shoots" of economic


recovery are starting to emerge. Is he right? And will any current


politicians be brave enough to come on and say that?


How can the Government bring down the welfare bill? The Government is


apparently looking at radical ways to cut billions from benefits


payments. But could it prove too controversial? What is England's


second city? Manchester. Wrong. Does Birmingham have an image


problem? Politicians there are trying to boost the city's image,


but does anyone down south know where it is?!


All that in the next hour. And with us for the whole programme today is


the economist Jonathan Portes. He heads up the National Institute of


Economic and Social Research. Welcome to the show. Let's start


with the news that the Government is considering changing the way


that annual rises to benefits and pensions are calculated. For a long


time the rise in benefits was pegged to one measure of inflation,


the Retail Price Index. The coalition changed that so benefits


are now related to the rise in the Consumer Prices Index, which is


usually lower than RPI. And now, we understand, they're considering


another change: to link benefit rises to average wage increases,


which for the past few years have been lower still. Any such change


could save billions from the annual welfare bill. Would it save


billions? Only in the short term. Remember, over the medium term,


wages tend to raise higher than prices pause we see improvements in


productivity and we all get richer. Over the past three years or so


earnings to value has fallen. Benefits would rise hire. What this


means is this is a strange idea. It would save money in the short term


but would cost a lot in the long term. Is the implication they'd


only do it in the short term in order to recoup some of the �10


billion they're hoping to save even further from the welfare bill and


link it to inflation, not wages? What we have seen reported at least


by the BBC is that the linking to the wages would be going forward,


so it would be linked to wages going forward, and it would be


rather odd because what that would mean would be you'd be taking money


out of the economy in the short term, reducing the deficit in the


short term, which is the wrong Qing to do from an economics point of


view but you would be costing a lot of money in the long term.


Politically, it would be quite popular. Surveys show,


unsurprisingly, the majority of the British public would favour that if


it meant reducing welfare payments. That's true, but it is rather


illogical to make the saving in the short term then do something which


would cost the country more in the long term. You're of course basing


that on the fact the rate of inflation would change that


dramatically. At the moment wages have been lower than inflation.


Although inflation is coming down, we don't know what's going to


happen in the future. We don't know, but it would be absolutely


astonishing if over the next ten or 20 years wages didn't rise


considerably faster than inflation that would be unprecedented in


recent British history. I don't think that's going to happen. Over


ten or 20 years wages will rise faster than prices. The idea was


floated by the Prime Minister earlier this year. He said


increasing the rewards of work is only possible if out-of-work


benefits rise in line with pay, again, a political justification


for this, but also that will strike a chime with many members of the


public. Well, you can perfectly well argue it's quite reasonable if


you want to keep the ratio of benefits to pay roughly constant,


then over time, having benefits rise roughly in line with earnings


or pay does make a lot of sense. I can perfectly well see the logic of


that but we also have to accept historically and over the medium to


long term that'll mean benefits rising faster, not slower. Thank


you. There seems to be major confusion


over the Government's strategy in Afghanistan following the latest


attacks on NATO troops by rogue Afghan forces. Last night the


Defence Secretary Philip Hammond said there would be no change of


tactics to deal with so-called green-on-blue attacks. However,


within hours the International Security Assistance Force, or ISAF,


announced that joint operations with Afghan troops would now be


scaled back after a loss of trust between NATO and Afghan forces. So


far this year there have been at least 51 deaths caused by Afghan


forces or militants wearing their uniforms. Of those, nine were


British. That compares to 35 for the whole of last year, one of


which was British. This morning the Foreign Secretary has been


answering questions from MPs. He insisted the move did not represent


a major policy shift for British forces. Like the great majority of


Afghans in my experience and our troop, they want us to succeed. The


future of Afghanistan remains clear, and the Taliban should be very


clear, and I make it very clear to them now that our strategy hasn't


changed in Afghanistan and it will not change in the face of these


attacks to. Give any other response, of course, is to increase the


incentive for such attacks. That was the Foreign Secretary.


Joining me now is our defence correspondent Caroline Wyatt. There


does seem to be confusion. You just heard William Hague saying there is


going to be no change in strategy but a suspension of joint NATO


missions has been suspended. Out of Kabul, a statement that came from


ISAF, the International Security Assistance Force, did imply what


sounded like a fairly major change but with further clarification this


morning from ISAF and the Ministry of Defence it man made clearer. It


is a temporary measure being put into place to protect troops more


at a time of heightened sentiment with a film that is stirring up


sentiment in that area but with the green-on-blue attacks attacks on


NATO's forces. This has already taken effect. We have had statement


coming out of the MoD saying this tactical measure will have a


minimal impact on our operation. "We have a strategic plan that


hasn't changed. We're confident about the way the plan is being


executed." The MoD says. "Some temporary measures have been taken


to reduce our vulnerability to civil disturbances and insider


attacks and further assessments will go on in coming days." There


is an effort to protect British forces. It does send out a signal


to the Afghans that that strust and has been eroded to a certain degree.


Have I understood it right that actually UK-Afghan joint patrols


will continue despite the fact that we have heard from General Alan


that actually joint Afghan missions - is he talking about US Afghan


missions will now stop, and what's happened to the chain of command


here? All of these are good questions. It seems to me the


initial statement from ISAF didn't make clear what this meant. Further


clarifications we have had over Kabul but also out of the MoD now


are saying that is temporary measure. They haven't been


suspended but permission for lower level operations - for example


going out on a foot patrol would seek a greater risk assessment. But


we have heard from Philip Hammond, the Defence Secretary, speaking


outside Downing Street perhaps 20 or so minutes ago saying in fact


British troops have been cleared to take those decisions at a lower


level. Caroline Wyatt, thank you very much.


With me now is the Liberal Democrat former Defence Minister Nick Harvey,


who lost his job in the recent reshuffle. Denis Macshane is a


Labour MP who summoned the Defence Secretary to the Commons yesterday.


And Patrick Hennessey is a former British Army officer who has served


in Afghanistan. We have had some clarification


there. Why didn't we hear that from Philip Hammond last night? There


has been a change, hasn't there? Well, it seems that something was


announced by General Alan in Kabul last night, which reading between


the lines it looks to me as though it has slightly taken London and


Washington by surprise. There has been a refining of his message this


morning, but it's clear this is not a major strategic shift. It is some


sort of enhanced risk assessment at a heightened time of tension, but


our approach - the British approach of close partnering and mentoring


of the Afghan troops in Helmand is going to continue. It has to


continue because this is basis upon which everything we're doing is


founded. Before we go on to the fact that the UK joint missions


will continue, let's go back to the way it was communicated. How on


earth could that sort of message be broadcast by ISAF without our


Defence Secretary know or being told? I think ISAF viewed this as


an operational and tactical decision and have probably been


taken by surprise the extent to which back here in London and


Washington it is being seen by the political community as something


more strategic. There is your answer. There has been slight


communication, but nothing more serious than that. Come on. Let's


get serious. This is the beginning of the end. Yesterday Philip


Hammond had to be dragged to the Commons to explain why British


soldiers still were being sacrificed to no evident purpose.


Today again he's had to be dragged to the House of Commons. He didn't


volunteer the statement. He has been walking up and down Whitehall


asking what his policy would be. Mr Hammond and Cameron for months -


Nick, a very loyal Minister, also said, "We're there to patrol, fight,


train, mentor the Afghans. Now Washington has decided that's over,


and I just can't any longer as a Parliamentarian say more British


men - boys - very often young boys - should be sacrificed for a policy


that's just been totally thrown overboard from the United States."


Exempt it sounds like they'll be more protected if there is going to


be a more vigorous vetting procedure before joint patrols are


allowed, that would surely protect British troops. We should have the


guts to take the decision the Canadians, New Zealanders, the


Dutch, very brave people have taken to say our role in Afghanistan - we


went there with honour. There is no more terrorist threat. It's over.


We should come back and secure basis. We're not talking about


scuttle, but no longer reporting every week, as the Prime Minister


has, to that some British boy has been killed for no discernible


national interest. The politicians and the Ministers have to get a


grip on this and the Prime Minister should take charge of this


personally. Is this the beginning of the end of the British role and


strategy in Afghanistan? I am not sure this is particularly the


beginning of the end. I think there was clearly confution. Apart from


everything else, what surprised me when I was there is it didn't seem


to take accountability of life on the ground. The British live in


shared bases with the Afghans. You're all living together anyway.


It wouldn't work practically anyway. The threat of the insider attacks


isn't coming from Taliban infiltration. It's coming from


soldiers who have a lot of stress who turn their weapons on the


British and Afghan allies. There are twice as many Afghan-on-Afghan


attacks as there are green on blue. To say you're not going out on foot


patrol together, it doesn't address that you live together. Why the


change of strategy? It's come from Central Command to deal with the


immediate effect. You don't see that as a permanent shift, the


increase, the spike, in the number of people that have been killed in


these attacks you think will go back down to the levels we have


seen in the past? I am not sure it will but I think it's a symptom of


the Afghan security forces rather than a technical strategy from the


forces. It has to carry on if there is any chance of handing over to


the Afghan forces? I don't think British sacrifice should be


sacrificed to cultural tensions in Afghanistan. I don't know if we


stay there another 12 months, 12 years, 120 years we'll make a real


difference. I think our mission is accomplished. I cannot bear the


thought that because politicians will not tell the military what to


do that more British boys will lose their lives. Well, he's right,


isn't he? A lot of the public agree with that. Dennis has had this view


for some time. I don't think there is anything that's happened in the


last 24 hours that impacts that one way or the other. The Afghan forces


have grown quickly to their strength of 150,000 from a very


slow start, and it is this close working with them and the mentoring


with them that's caused their competence to develop frankly


faster than anybody believed possible. We have two years left


there if a combat role before the Afghans take full responsibility


for their own security and we move into a more of an International


Development role there. If we're going make the best of the two


years there and not negate everything that has been achieved


to date, we have to work their competence up to the maximum


possible level, and to do that you have to be integrated with them.


You can't do it in a stand-off-ish sort of way, or you'll slow the


whole thing down. Do you think the message that came out of ISAF was


wrong? No, I don't think it was wrong. I think as Patrick was


saying it was a perfectly sensible response to the heightened tensions


at this moment. Similar things have actually been done in the past when


there have been heightened tensions when things have kicked off around


international films and things in Afghanistan. Before we just ease


back a bit... Why was the MoD not told? I think the MoD heard about


it as ISAF were doing it, and because General Alan evidently


thought this was an operational thing that was right for him to


decide. If chain of command at the end of the day do have to take


responsibility. It is they who make these risk assessments from day to


day, and I acknowledged at the start this seems to be a bit of a


communications muddle which is hopefully... That is very, very


serious issue if even if you don't see the particular... If I may,


this is a made-in-Washington, decided-in-Washington policy.


not. They don't consult with the MoD. Mr Obama has a very difficult


election to get through. America also wants out of Afghanistan. Why


can't you accept you're an elected politician, a decent guy. It's over.


Stop saying... But why is this particular - we have heard now both


from Nick Harvey and Patrick Hennessy. That's your view. But why


has this particular incident suddenly propelled your rhetoric


ever further down that line? Why has it changed it so dramatically


when we have heard the policy... be honest, as Dick Fairly says,


with the Prime Minister in a responsible way I have been saying


strategically there is not much point in British soldiers staying


in GM. We're going to come out. You can't say we're staying there


forever. That's just silly. It's not my rhetoric. I think Philip


Hammond should have come and made a statement to the Commons yesterday.


I think he should have been on top of the process. He self-evidently


isn't. It has been decided in Washington. The policy that has


been defended that we're there to trade jointly with our Afghan


friends is is now out of the window. We have heard it is not out of the


window. My understanding is not out of the window. This has no impact


on the training missions going on, ongoing training. How all


advantages has that been, what has been achieved by the kind of policy


we heard about, these joint missions with Afghan forces?


spent several months working with the Afghan army and they are now of


a different army in how they conduct themselves. There are no


longer led by the British and Americans but are working with them.


They still require a huge amount of support which we are providing. But


it is nonsense to imagine that there is suddenly a Chinese wall


between afghans and British especially in Helmand. They co-


exist. I have been in Afghanistan also and I think we just have to


take a strategic decision. The Russians have had to come out after


they lost too many men. The Prime Minister it said he was going to


get on top of this policy in 2010. Because of all the deaths, you


cannot add more bodies to that funeral pyre. Let us stop the blood


sacrifice now and we think what we are doing. You do not honour the


sacrifice that has been made in a ten-year period by packing in


before you finish the job. There is an internationally agreed timeline


that we will lease by the end of 2014. It is essential for the


Afghans that they take over responsibility from that stage. We


have two years left to continue the work and increase the confidence of


their security apparatus to enable it to stand on its own two feet


when we moved out of a military role. If we do not finish that work


to the best of our ability then that is what will dishonour the


contribution that has been made over the decade we have been there.


The in terms of viewing those opinions about should we use this


as the reason to pull out now, or does Britain have to stay and


finish the job? Well more broadly it seems difficult for me just as


an ordinary citizen to determine what the strategic objective of are


staying there is. It is quite unclear to me and to most people


what we are actually trying to achieve. The answer to that is


Afghanistan was in lawless state that became a haven for


international terrorists. But the goalposts have moved. Of course


they have, we have achieved a great deal. But we can only safely leave


when the can be confident that our departure will not lead to the same


lawless state all over again. And we are making very good progress


towards that end in my judgment and that of Western governments and


military, but we have not finished the job.


So, top marks or an ignominious fail? The Education Secretary's


proposals to replace GCSEs were examined in Parliament yesterday.


Michael Gove said the new English Baccalaureate would end years of


"drift, decline and dumbing down". In a moment, we'll be getting a bit


of reaction from Giles and some guests. But first, here's what the


Commons made of it last night. Some will argue that more rigorous


qualifications in these subjects will lead to more students failing.


But we believe fatalism is indicative of a dated mindset. One


that believes in the distribution of abilities so fixed that great


teaching can do little to change them. We no great teaching is


changing lives even as we speak. What does this new system to have


to ensure that all young people are studying English and maths until


they're 18? How does it help that 50% who do not go on to higher


education, how does it help the bottom 20% who are most at risk of


becoming not in education, employment or training? There is a


place for course work and examinations especially in the


subjects I used to teach, history and geography. There are also some


pupils were simply do not test well because they are not supported at


home in the same weight more privileged children may be. What


will he do to support those young people from generally poorer


backgrounds who struggle in exams? Coursework and controlled


assessment often works to the benefit of middle-class students


whose parents can better support them and actually the form of


examination so we're putting forward a better designed to


support students from poorer backgrounds to show what they can


build rather simply showing what their parents have achieved. Can I


press the minister further on children who leave school with


nothing, those on the corner of the street drinking cans of beer. We


all have them in our constituencies. Why are there left on the shelf?


Does my Right Honourable friend agree that it is not just good for


children but also essential for our country that we are internationally


competitive in our exam results. Where we fall behind is in the


European Union. We are 12% of the population of the European Union


but now we have fallen to around 4%. One of the key reasons being that


we're not good enough at speaking battling grimly to be able to


compete in such an essential area. The growth of language teaching as


an integral part of our education is central to what the coalition


government wishes to achieve. We do verge in this from the last


government. Welcome. The ebank is just around


the corner. Nick Dakin joins me now. And Damien Heinz, the Conservative


MP. What is wrong with adding up rigour into the examination system


with an exam that we know the grades have been inflated. Everyone


agrees with rigour but I'm interested in what we're doing for


young people to prepare them for the real world of today. There was


a lot in what Michael Gove said yesterday, I believe, I know, but


he gave no evidence that a three hour exam at the end of two years


is the best way to assess people and prefer them for the modern


world. No evidence to come back Lord Baker's opinion that there


needs to be practical tests within it any assessments going forward.


So I think the statement yesterday for Michael Gove begs more


questions than it answers. What would be wrong with looking at the


system and saying, we have a way of changing it but you cannot call it


the same thing because otherwise it would still be devalued by


association. There's nothing wrong with changing the name. What we


need is some stability in education to allow professionals to get on


with the job and continue to do a great job for young people. We do


not want this perpetual change and both political parties are guilty


of that from time to time. I find it ironic that in searching for


rigour we have to take a French word to describe a new English exam.


That could only come from a government such as we have today.


Well calling it E Bac does not make it a bad exam. Some think-tank this


are broadly persuaded of your politics but not persuaded of this


change. I'm not usually accused of being pro-European but young people


are working harder than ever before, being examined more than ever


before and are being let down by the system. GCSEs have been eroded.


We have broken all domestic records in terms of grades but have fallen


down International League tables so we do need reform and an exam that


everyone has a Trust in. Let us go back to the old exam. If I'm 14 or


15 I will be asked by the system to concentrate on the working very


hard to pass a set of exams that I already know the Secretary of State


for this country has said is not worth having. We know that changes


coming and we have a timetable and proper consultation. That is


absolutely right. I was at the tail-end of O-levels and a new exam


was about to come in in the form of the GCSE. We still worked for those


exams, that is what we did. You're doing what you're paid for which is


analysing government policy and criticising it. But they did change


from the O levels to the GCSEs, there were complaints at the time.


I have taught O levels and GCSEs and the worst exam I ever taught


was O-level English language. A total lottery, not fair, not


rigorous. If we go back to those days I think we will quickly feel


the pinch of that. As he knows we're absolutely not talking about


going back to the O-levels. These will keep the best features of the


GCSEs but get rid of the bad ones like the competition between exam


boards will DUP and the capping of aspiration at the foundation levels.


Thank you for doing your homework. That is it from me.


Turn out of 10! Now, whisper it, is the economy quite as bad as


everyone is saying? Amidst all the doom and gloom that fills our


newspapers and television screens, some economists are rather quietly


suggesting there could finally be signs things are turning around.


Back in 1991, when Britain was in the middle of a recession, the then


Chancellor Norman Lamont said in a speech written by our guest of the


day Jonathan Portes, that he detected "the green shoots of


economic spring", and he was heavily criticised for it. So will


we ever hear another Minister mention that loaded phrase "green


shoots"? This morning the latest inflation figures were announced


showing the Consumer Price Index was down to 2.5% in August from


2.6% the previous month, the Retail Price Index was down to 2.9%, from


3.2% the previous month. The latest employment figures show the number


of people in work has increased by 236,000 to 29.6 million, the


largest quarterly rise for two years, and even the markets are


showing positive signs, with the FTSE 100 rising steadily over the


last three months. We're even making more things, Britain's


industrial output rose by 2.9% in July, its fastest pace for 25 years.


And manufacturing output for July rose by 3.2%. So what's going on?


We can speak to our Economics Editor Stephanie Flanders who joins


What is happening is something that was expected at the start of this


year - the story the Chancellor, the Bank of England, Ministers were


telling themselves at the start of the year is there was light at the


end of the tunnel. Things would start to get better in the second


half, around now, because you would have, as we have seen this morning,


inflation coming down, stopping - taking quite a bite out of


households' incomes. You might see a bit more forward activity from


businesses and the High Street, and things would stop feeling worse. I


think the surprise we had - I am afraid that explains some of the


good figures the last month or so is that the first half really was


much worse than expected. We had that big fall in GDP. Some of that


was due to the extra Bank Holidays. I am afraid we're sort of catching


up on that, in a sense that some of that big rise in industrial output


in July was actually just to recover from that extra Bank


Holiday, so we need to be a bit careful in looking at the latest


figures, but there are certainly signs things are levelling off.


There may be more confidence coming from those strong employment


figures. We created almost as many jobs in those three months as


America, which is a seven-times larger economy and growing much


faster, so there has to be something good going on in the


economy. The economists are talking about a levelling off, a sort of


rea guning of a generally flat position rather than a sort of big


feeling that now we're heading off on a strong recovery. Yes. On that


basis, although we might be through the worst point of the recession,


you don't predict this is going to signify the start of growth of any


major description? At the moment, given what happened in the first


half, we'd be very lucky - in fact, quite unlikely we'd see growth over


the course of 2012 as a whole, and I am afraid you would find it hard


to find anyone in the City predicting strong growth from here.


We're still way behind where we were when we started the recession,


which is unusual to have had such a slow recovery with so many bumps.


It is possible things are going to start to feel a bit better, not the


least because confidence over the eurozone is feeling stronger.


you very much. Funnily enough, no Minister was


keen to come on today to talk about green shoots - I can't think why -


actually, I can't blame them, but I am pleased to say we have been


joined by the Conservative MP Andrea Leveson, who sits on the


Treasury committee, and Lord Myners. Do you agree with John Major, green


shoots are appearing? No, I think it's apparent we want green shoots.


Of course. But in reality what the Conservatives were determined to


achieve in Government was to eliminate the structural deficit,


rebalance the economy. We have seen evidence of that with over a


million new private sector jobs. That's really good news and to


invest proceeds into hardworking people. We have cancelled tax


freezes and with raises in tax-free personal allowance, so on. In a


workman-like fashion we're trying to get out of the worst crisis ever.


It can't be underestimated. We have come from so far behind. As


Stephanie said, there is an awful long way to go, so you don't want


to be too optimistic. Andrew doesn't want to say green shoots,


and who would because people have been pilloried for saying it in the


past. There are indicators that perhaps the worst is over. Do you


agree? The problem with economics is you'll get conflicting


indicators at any point. It's wonderful to see the rate of


unemployment coming down, but remember, we still have long-term


unemployment at a 16-year record. John Major talked about the stock


market being high. The UK stock market is actually lagging other


stock markets and is almost certainly the beneficiary of


quantitative easing rather than true economic recovery. We've got


very low long-term interest rates, which are consistent with people


believing that the economy is still in recession, so, no, I would not


use the term "green shoots". I would say that the economy is


probably flat lining at the moment across the whole country, but it's


very, very unwell in the north of England and Wales, parts of the


country Tories don't normally go to, whereas in the south-east it's


probably a little better. Let's talk about that. There is a


perception - as you say, these things often are about perception -


that London and the south-east may not be suffering in quite the same


way generally as the rest of the country do you agree with that?


Well, when you look at what you have done policy-wise, we have


created the lowest corporate tax rates in the G7. We're focused on


getting businesses able to recover. We're creating private sector jobs


across the country, and so actually, it's not for Government to call


sectors - to impose its own strategy on different businesses.


The industrial policy recently announced - did indicate you would


be doing that. We want to support private sector. The Government


can't call private sectors. How do you read it, particularly with


unemployment? Because the figures have been coming down. Is that


misleading? No. What it shows is - I agree broadly with Stephanie. The


economy has essentially had no growth over the last two years, so


the perception we'd fallen back into a severe double-dip recession


earlier this year was a statistical fluke and wasn't really happening.


Equally, the idea we suddenly have a sharp recovery isn't right. What


we have had essentially is two lost years partly because the Government


took the mistaken decision to tighten policy too hard, too


quickly. That's of course backfired. We know that's what happened.


What's happening in the labour market - I think what has really


surprised people is how resilient it has been despite how weak the


economy has been overall. That reflects very well on the


underlying strength and flexibility of the UK labour market which is


due not particularly to what's happened in the last year or two


but structural reforms made by governments of both parties over


the last 30 years. We actually have a labour market that's worked well.


That's made this recession considerably less painful than it


otherwise have been. You have talked about the wrong policies of


the Government over the last two years. That's what's led to this


flat-lining growth of growth. of it. Actually, the coalition


hasn't cut in the way it said it would anyway. I think if you look


at the figures - for example, in public sector, net investment has


been cut by 40%, and if you look at the most recent GDP figures, what's


depressing GDP has been to a large extent construction. Where is that


coming from? Reduced public sector spending on social housing. You can


draw a very direct connection from the mistake this cuts the


Government did make. They have hardly reduced the current deficit


over the last year or so. Almost all the reduction has been done in


cutting investment, which is the wrong thing, any economist would


tell you, to do in a recession. What do you say to that? I think


that is completely wrong. Which bit is wrong because the deficit is


going up again even though it was cut last year, and they have had


cuts to investment. Let's be clear about this. The Government was


determined to cut the structural deficit. We were left by the last


Government with over 11% structural deficit. That's wrong. What do you


mean? That wasn't the structural deficit in the last Government. You


have cut the deficit by 25%. Most of that cut has been by cutting net


investment - public sector net investment which isn't part of the


structural investment. You should read the figures before you try and


talk about this. The structural deficit was never 11%, and the cuts


that cut the deficit by 25% was predominantly over two-thirds and


three-quarters in the most recent year has come from cutting public


sector net investment which isn't... Do you accept that there have been


cuts in investment that public sector projects are a big cut.


That's part of where the lowering of the deficit has come from?


Government this week has announced an enormous guarantee in public


sector - private sector funding for infrastructure has been


extraordinarily difficult. What the Labour Party is saying, and I know


Jonathan also advocates - is yet more spending. The Institute for


Fiscal Studies has said under Labour Government we'd have had


�200 billion more of borrowing. cost of borrowing is more too.


is not a deliberate policy. What the Labour Party are advocating is


yet more borrowing that would have a massively negative impact on our


entire economy, pushing up interest rates. That is the fee, isn't it?


If you're spending more money, that is not going to boost - necessarily


boost growth in the economy, going to lead to higher borrowing and


higher rates of deficit. At what point, Lord Myners, do you think


the markets and credit ratings agency are going to say hang on.


We're going to put up your interest rate payments? First the Chancellor


is going to have to reduce deficit as a percentage of of GDP. He's


going to have to announce fairly soon that drop isn't achievable.


What he's missing is the role of the public sector to reinsert


demand in the economy... subsidise jobs that aren't


worthwhile and don't do anything? Exactly. The lessons we learnt from


the '30s is when we have a demand deficiency, the Government should


step in. How much would you like to spend? We're going into a spiral of


decline. You also have to talk more positively. We didn't speak enough


about that early on. All of this talk of austerity from the


Government is having a draining effect on economic confidence.


That's so wrong. Time and time again it was said the biggest


problem is consumer confidence, consumer demand because it has been


talked down. That's not the case. What we did is we had a debt crisis.


What the Government was determined to do was put the economy back on


the straight and narrow. By talking about the austerity measures and


being clear about the task that lies ahead that gave the


international capital market the confidence to continue to lend to


Britain. That's why we have public sector debt figures that look like


some of the southern European countries and borrowing rates that


look like Germany's. It's because the international markets have


confidence in our ability to rebuild the economy. That's key to


our economic growth. We don't want to squander that, briefly, Lord


Myners? No. And announcing a big spending package would. The markets


would respond quite well because they're increasingly worried about


the absence of growth and the fact that's now driving the deficit up


rather than reducing it as the coalition claimed it would. Let's


talk about green shoots - was that your invention in the speech with


Norman Lamont? I co-wrote the speech with Norman and Andrew


Tirery. I don't know who takes credit for the phrase but I


contributed. Is it wise the talk about green shoots when you're in


the middle of a recession? You know, the Government and, indeed, all of


us do have a responsibility not to try to talk the economy down


unnecessarily. We shouldn't be talking about austerity. The


Government made a big mistake in the first few months after the


election by saying we're like Greece... It was essential to get


credibility. And the public, Jonathan Portes, seemed to support


it. On that note - Andrew, thank you very much. You're staying with


us, though I have made a confusion of who is staying and who isn't.


Could Britain learn anything from the United States? The United


States economic recovery might be sluggish, but it's doing better


than Britain are they doing anything over there that we should


be doing over here? We sent Susana to a little bit of Americana right


here in the UK, the All Star Lanes in London's Holborn.


Which is the best lane for recovery? If you're in President


Obama's America, the answer seems to be to throw public money at the


economy - so-called fiscal stimulus, and if you're coalition Britain,


you could roll out spending cuts, otherwise known as austerity. The


US economy has been growing, while Britain's has been shrinking, so is


it time to switch lanes? I think there are lessons we can learn. The


stimulus plan, which has been carried out in the United States,


has made a big difference to growth and jobs. We ought to try that in


the UK. We have already been trying on American shoes for size, so says


free market think-tank. There is a myth about fiscal stimulus. We


somehow believe Barack Obama is pumping huge amounts of money into


the economy and David Cameron and Nick Clegg are practising austerity.


Actually, the amount of debt that has been added to year on year is


almost the same. The reasons America is bouncing back in the


last three or four years have to be different reasons. Despite all the


spending, almost 12.5 million people are out of work in America.


Unemployment is still a major problem. The proportion of people


without jobs has risen above 8.2% of the United States population.


That's a slightly higher proportion than the UK where the unemployment


rate has been falling. Here, the number out of work stands at just


2.6 million. The last set of unemployment figures show the


numbers not working fell by 7,000 in the three months to July that


doesn't mean the agenda is working in the UK according to one American


economist. Well, the growth path of the UK has been worse than in the


US, and so it's hard to argue that short-term policies that were


enacted in the past couple of years are a major factor in the low


unemployment rate in the UK. Then there is the battle of the AAA


triple credit rating. Britain has so far held on to its prized rating


though it's on a negative outlook. The United States has already been


downgraded by one ratings agency and might be again if Congress


doesn't decide on a deficit reduction plan. I wouldn't worry


too much if I was an American about perhaps the rating going down


further. I wouldn't be too hung up as a Brit about our AAA rating.


There are many, many, many other criteria the look at. So stay the


course, or mix in some American flavour? The trouble is you don't


know what it's like until you taste Lord Myners and Jonathan Portes are


still with us. What has the stimulus package actually achieved?


The American economy is now 1.5% bigger than when we went into the


global recession. The UK economy is 4.3% smaller. We are one of only


two G 20 countries that still has economic output below the level of


the previous peak. The stimulus policies that Bagger bummer have


followed have undoubtedly contributed towards increased


output in America. But record numbers of people are still


dropping out of the work force and that tells a different story.


tells a story that is not great but it would have been even worse if we


have not had fiscal stimulus. terms of the stimulus, it may have


created demand and kept the economy moving, but would it do so in a


sustained manner? I think sustainability comes from the fact


that if the government puts more demand into the economy at a time


when there is more supply and demand, it gets the economy going.


And because it gets going, businessmen feel more confident.


They see their customers coming back into their shops. I was the


chairman of Marks and Spencers and that is how it works, the customers


come back, the company begins to invest and then you have a


beneficial cycle in which government contribution to the


economy can be reduced. But to cut back now is suicidal in terms of


the contribution of government expenditure to economic activity.


Except that it does keep the markings on side -- the Markets on


site. And it does mean that interest payments are low and that


must be a good thing. We know what happens now when the ratings


agencies downgrade some were like America, we saw that last September.


What happened? Interest rates on US government debt fell. They felt and


they stayed at their lowest rates in many years. But would that


happen here? There's every reason to believe it would not. Do you


know when the ratings agency started to downgrade Japan? More


than 10 years ago. And what has happened to their interest rates


since then, they have stayed at the lowest recorded interest rates


since the Babylonian Empire. terms of the stimulus that you're


both advocating, how much should it be? My personal opinion is that a


short-term stimulus on the order of 2% of GDP, around �30 billion,


directed in the first instance and public sector investment. So the


kind of things the government is trying to do it anyway. But just


off the balance sheet. The government does want more


investment, but it does not want to be seen to be borrowing more.


it does not want to add to borrowing. His 30 billion enough?


It is less important how much it is that how it is spent. I would


disagree with Jonathan. I think infrastructure is important. The


others are trying to put back in some Infrastructure Investment that


they pulled out. But are much like more to be done, not through


monetary policy, but short-term cuts in VAT, tax concessions


favouring the low paid. Let us go back to the issue of jobs. Lord


Myners said earlier that cutting public sector jobs was not the way


forward but you're not agreed with the government policies that says


that many of those public sector jobs are wasteful, but they do need


to go in order to rebalance the economy so when it comes out of


recession it is in better shape? think over time the size of the


public sector does need to be reduced. In the medium to long-term


the books have to balance. The government is correct about this.


The question that I and most economists have is about the timing


of this. And on this I do agree with Lord Myers. To take demand out


of the economy precisely in the middle of a recession. It is a


question of timing and not of the long term strategy which most


economists would agree. You should only be spending what you can fund


through taxes. Well defence secretary Philip


Hammond has made a statement in the Commons on NATO strategy in


Afghanistan. In respect of the ISAF statement


issued on Saturday the media have become over-excited. It might be


helpful to quote from a press release issued by the commander of


ISAF forces this morning. Recent media coverage regarding the change


in ISAF's model of security force assistance to the Afghan national


security forces is not accurate. ISAF remains committed to


partnering with, training, advising and assisting our counterparts. The


ISAF model is focused at the battalion level and above with


exceptions approved by senior commanders. Partnering a prayers at


all levels from platoon to core. This has not changed. In response


to elevated track levels resulting from the innocence of Muslims video,


ISAF has taken some prudent but temporary measures to reduce our


profile and vulnerability to civil disturbances or insider attacks.


The security force assistance model is integral to the success of the


mission and ISAF will return to normal operations as soon as


conditions warrant. Defence secretary Philip Hammond


speaking to the Commons a moment ago.


There are a million of them - and they've been behind some of the


greatest scientific discoveries and technological advances in British


history. So why is Birmingham City Council organising a meeting today


to ask what makes a Brummie? Well, they're worried that


Birmingham's status as the country's second city isn't


recognised widely enough by people from elsewhere. We sent Adam out


onto the streets of London to find out if that's true.


Dino what England's second city is? I have no idea. Do you know any


other cities in England? Oh, yes. It is Birmingham? Correct. Would


she ever think of relocating to Birmingham? I would not. I have


never been to Birmingham in all honesty. You have a lot of


landmarks up their full stock like what? The big cow! The Bull Ring?


What else has Birmingham got going for it? The train station! What is


England's second city? Manchester. Would you like to try again?


Liverpool. And again? Leaves. Dublin? That is in the Republic of


Ireland! Have you heard of a place called Birmingham? Never heard of


it. Where are you from? Coria. would you say is England's second


city? What do you mean? Do you think it is a good second city?


really. Why not? It is in the Midlands, there's nothing much


there. Can you do a Birmingham accent? It is tricky to do a


Birmingham accent... That is a Liverpool accent!


I thought that was not bad. But it does sound as if Birmingham needs


to do some publicity. Waseem Zaffar is in a Birmingham studio now. That


will not have filled you with any great jury listening to those


people who could not name Birmingham as the second city. Why


does it seem to punch below its weight? There are a number of


issues that we need to look at. I do not think the people of


Birmingham themselves do not know enough about their history. We ate


in the council are looking at what we need to be proud of and what


attracts people to this great city. We have people who have been here


for generations but also people from up to 150 different countries


around the world who have made Birmingham their home. What makes


you proud? It has fantastic places, the best sporting venues,


incredible shopping-centres. But what makes me most crowd is the


people of Birmingham, we are of the warmest, most friendly people. You


can make Birmingham your home straight away. And that is because


we hope people to settle and integrate here. We have incredibly


diverse and friendly communities. Do you think the city centre is


attractive? It has changed a lot and I think has been vastly


improved. Do you think it is now an attractive city? Without doubt it


is an incredible city centre pub there are also other places around


the city equally as good. There's still a long way to go before it is


a perfect city. Clearly some of the people you interviewed do not


recognise it as the second city. This inquiry will look at that and


address some of those issues. do you think would be a good way to


start at Birmingham campaign to convince Londoners that this is the


destination? One thing we need to do is educate the young people in


that city, the people of Birmingham, on the heritage and history of the


city and what it is today. We can sell the city far better than


anyone else. But we did have an adoptive son, Usain Bolt! Do you


think if they had chosen to have an elected mayor, would that help?


was part of that campaign and I think it would have helped. But we


met with the Prime Minister at last week to talk about punching our


weight. What do you think about Birmingham, Louis Oosthuizen's I


have been there a number of times, my sister lives just outside


Birmingham. I don't know it. There is a tremendous advantage to the UK


as a whole in having London as a global city but it has led to a


somewhat distorted model of economic development. We are in


possession of major cities which have plunged below the wait for too


long. And we needed to get behind those cities and let them take some


of the weight in generating sustainable economic growth. Do you


think it has been to the detriment of cities like Birmingham, would


you like to see that addressed? London is absolutely vital to the


economic future of Britain, we should not downplay that in any way.


But we cannot have a model of economic development solely based


on London's advantages as a global city, we also have to insure that


the regions and in particular the big regional cities also develop.


What would be one bit of advice for Waseem Zaffar in terms of what they


could do to promote Birmingham? What I know about the evidence of


the city development is what really matters is people. From an economic


point of view of what that means is skilled workers and in particular


universities. It is getting good universities and making sure they


work well with local business communities. And people go to those


universities and want to stay there afterwards. Good luck with your


campaign. That's all for today. Thanks to our


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