18/09/2012 Daily Politics

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