25/06/2013 Daily Politics


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Politics. With just 24 hours to go before the chancellor makes his big


spending review statement, Westminster is pretty chilled about


it. We will discuss why. If, as expected, local councils in England


see their budgets squeezed again, is it time to rethink what services


they provide? We will be joined by the biggest cheese in local


government, Sir Merrick Cockell. MPs prepared to debate David


Cameron's plans for a �33 billion high-speed rail link from London to


Manchester. We will hear the case for and against from two top Tories.


And is the cost of government borrowing going up?


We have got everything you need to know about the bond market in 60


seconds. With us for the whole programme


today is the financial commentator Louise Cooper. Welcome back. Let's


kick off with everything you need to know about the bond market that were


too afraid to ask. This week, ten year UK bond yields have reached


2.56%, up by a third in a month. Why does it matter? Two things. Firstly,


the government has a lot of debt. If the interest rate it has to pay on


that debt goes up, the government has to spend more. So it puts the


government under pressure because it has to pay a larger interest bill.


Secondly, mortgages are priced off government debt. So the era of cheap


mortgages is slowly coming to an end. How slowly?Lots of people look


at stock markets and bond markets. But actually, you need to look at


the interest rate markets. They have been volatile over the last two


months. They are telling us that the era of cheap money is over, not just


in the States, where we had the Federal reserve talking about


tapering quantitative easing, the end of money printing, but also in


the UK and the Eurozone. There has been a reappraisal of cheap money,


and this is coming to an end. Because most people don't look at


these rates markets, they don't realise it has happened. Does that


mean, despite the fact that the new Bank of England Governor implied


that base interest rates, which would affect mortgage rates, would


stay low to 2017 to encourage investment, are you saying that will


not happen? We don't quite know, because Mark Carney arrives next


Monday, taking over Tom Mervyn King. We don't know what he will do. But


we do know that the economy is looking stronger than expected. No


cripple dip, possibly even though double-dip. I think the economy


could surprise with its strength. If you look at the financial markets,


they indicate that we could see a base rate increase in the next 12


months. That will surprise many, the titular leave those on mortgages


that are linked to base rates. it could be difficult for banks if


many of their customers struggle to pay higher interest rates. There is


a quote I liked from the US central bank, describing the financial


markets as feral hogs. Colourful language. Surely he is hardly


surprised by the actions of the markets? We have had a 30 year bull


market for bonds, and we have the interest rates at so low that we


haven't seen them for centuries. So we have had this phenomenal bull


market, cheap money. That is coming to an end. And it is almost like


everyone is trying to exit at the same time. That is what he is


referring to, the fear that you need to get out before everyone else.


Time for our daily quiz. The question is, news has emerged about


a government minister who broke their foot after they fell off a


table while dancing in a bar in Soho? Who was it? Theresa May,


Jeremy Brown, Mark Harper or Eric Pickles? You will be surprised by


the ants. Louise, no stranger herself to the bars of Soho, will


give us the correct cancer. Now, tomorrow will be dominated by


the chancellor's spending review. We will talk about that with Louise in


a moment, but there is another big issue on the agenda after George


Osborne's set piece speech, and one which is potentially even more


controversial, the government's plans for a second high-speed rail


line, known as HS2. The plan is to build a new link from London to


Manchester and Leeds, via Birmingham, the East Midlands and


Sheffield. The estimated cost currently runs to �33 billion or a


bit more if they spurred to Heathrow is built as well, with the first


trains running on the line to Birmingham in 2026 and the whole


project completed in 2032. Transport Secretary Patrick McLoughlin is


driving the plans, but he faces opposition from his own


government's backbenchers. Several Conservative MPs have been hostile


to the scheme, including the former Welsh Secretary Cheryl Gillan,


deputy chief whip John Randall and prominent backbencher Andrea Letts.


We can't talk to David Tice from the New Economics Foundation


think-tank, which recently published a report on high-speed rail, which


concluded that the money would be better spent on other things. How


have you come to that conclusion? Well, after a long-standing piece of


research on HS2, we found three critical issues at play here. The


first is that there is little to no proof that the current scheme will


stimulate the broader economy. The second is that it is unlikely to


bridge the North-South divide. And critically, as you referenced at the


top, there are better value for money projects which exist now that


can deliver larger benefits to a larger section of the population in


a shorter timeline. But it will make journeys quicker? Absolutely, but


that is just one of the plethora of potential benefits that could be


reaped when thinking about an investment of �33 billion, the


largest single investment in UK transport in UK history. So to focus


on one potential benefit is looking at things a little myopically, we


think. But you could argue that you could have both. Tell me what you


think it should be spent on? When you consider the strategic


objectives for High Speed two, which include the economic objectives, but


also improving conditions across the country, evidence suggests, whether


it be from international examples or from long-standing research, all the


evidence says that the better bet is to invest locally where you want to


see local growth, originally where you want to see regional


improvements, and you must echo the context into consideration. The UK


has a unique, mature transport system and a unique geography. All


the findings by our organisation suggest that we should be spending


strategic money in a more dispersed way.


With us now is the Conservative MP and former Welsh Secretary Cheryl


Gillan, whose constituency will be affected by HS2. We have also been


joined by the Conservative MP Stuart Andrew, who co-chairs a group of MPs


interested in high-speed rail. What is the main argument in favour of


HS2? The main argument is capacity. Both the east Coast and West Coast


are running close to full capacity. I get on the East Coast Main Line


every week, and if you go at peak time, you are standing all the way


to Peter Brooke. If we don't you with this, we will be relying on a


Victorian system right into the next century. That is not acceptable. We


need an alternative that deals with that capacity, and HS2 is the


alternative. It seems a straightforward solution to what


will become an increasingly big problem. It will become a �33


billion plus way of solving a bit of overcrowding on a couple of railway


lines. The New Economics Foundation did very good work showing what the


alternative spend could be and how you could get better value for money


for the taxpayer. Would it deal with the overcrowding? I think it would,


because it would affect the upgrading of the East Coast Main


Line and West Coast Main Line, but would also spread prosperity to the


north by involving regional transport schemes. Stuart is talking


about a railway that will not be completed before 2033 at the least,


and it is looking even longer now that there have been so many


mistakes on the consultation and the environmental side. It looks as if


this bill tomorrow is just to cover the government and give it some sort


of political boost. It will take longer than they anticipated.


is the problem, the completion time. We are looking so far into the


future, and the situation both economically and the demands on the


transport system may have changed. But if we don't start planning now,


we will have a serious problem in 20 years' time. We have been here


before. We had the upgrading of the West Coast Main Line which took ten


years of long delays, liens of pounds and has not solved the


problem. If we are serious about tackling this problem, which is


getting worse, we need a solution. I am not saying HS2 is the only thing


we should do to stop we have to do the regional things as well.


government says it is committed to a variety of infrastructure plans. �33


billion is a huge amount of money, but it will be spread over many


years, and businesses in the Midlands and the north are in


favour. Well, you only have to look at what outside commentators have


said. For example, the National Audit Office, an independent


observer, said the strategic objectives were unclear and doubted


the ability of the Department to even deliver this budget competently


and on-time and on cost. It is not just me saying this. The government


has failed to look at other alternatives. I believe it said it


will examine the alternatives when the hybrid Bill comes in later this


year. However, I think the bill tomorrow is unnecessary. We did not


have a paving bill for HS one or crossrail. This is just to give the


government political cover and to tie in labour. Politically, you are


into constituencies that are affected in different ways, so one


might argue that you have a vested interest. �33 billion is a lot of


money and of course you could spend it on other projects, but if you


think about what could be bridged in terms of the North-South vied, is it


money well spent? I am always sceptical of the economic analysis


that points to great benefits, the cost frankly, they just don't know.


As you were saying, the supposedly independent National Audit Office is


the sceptical of this project. At a time when we are heavily indebted,


desperately in need of economic growth, this is a project which


costs �33 billion. I don't see the economic advantage. We know we have


a problem with Heathrow and the M25. You say you stand on the train


to Peter borough. I commute every day in London and I never not stand.


Wimbledon to Canary Wharf, an hour and a quarter, I am always standing.


Travellers in London will tell you there ain't no sitting down in


rush-hour. We are talking about long distance train journeys here. We


have to get our cities better connected. We are seeing crossrail


built to benefit the south. We want investment that helps us in the


north so that we can take advantage. I want my constituents to


benefit from the wider economy. not sure this will make a


difference. Then start it in the north. I looked at this project and


I started by saying, it goes through an area of outstanding natural


beauty and I am against it. I then looked at it in more detail, and I


think it is the wrong product. Started in the north. But also, we


are investing in the north. We are seeing the rail line between Leeds


and Manchester being electrified and new stations being built everywhere.


This will, and HS2. Looking at it politically, how many of your


Conservative colleagues will join you in voting against this will?


have no idea. It is a small bill to give the government cover. The real


problem will be when it comes to the hybrid Bill and the petition


process. I think over 30 colleagues have signed the recent amendment to


the paving bill tomorrow, cross-party as well will stop but


tomorrow is about the government saying, Parliament supported HS2, so


we will go ahead with it. And it is to tie in the Labour Party. It was


not needed for the Channel Tunnel rail Link. This is political cover.


It is a project that will benefit far more people across the country.


We have 20 years to talk about it! As I hope you all know by now. If


you don't you have not been listening, tomorrow's big news with


the George Osborne's statement on the Spending Review. We will look


ahead to that in a moment. First, what is a Spending Review anyway?


Across the great departments of state, they await judgment from


above. The Chancellor, George Osborne, has, in simple terms: Asked


for �11. 1.5 billion more of savings or cuts in their overall budget,


whilst leaving some areas, the NHS, overseas aid, and the schools


budget, untouched. Who has to save what for the period 2015-16 is


essentially what the Spending Review is about. To paint you a picture


about what a Government Spending Review is about, it's a review of


Government spending. It does exactly what it says on the tin. Except, it


kind of doesn't. It is about how much money is going to be taken away


from whichp department. So, the money is at the centre of it. But,


of course, it is the politics in the end that will determine who loses


the money, or who loses more and who loses less. It's politics that fogs


things. 2016 is after an election. Meaning the current Government's


spending priorities, are now those the current Opposition, who might


rise to form the next Government, have already said they'll stick


with. But, theds' argue, the very need -- they'd argue, the very need


to have a Spending Review is a sign of Government failure. The


Government argue it is they who are taking the brave and sensible


overview on spending. And, of course, there has been a battle, or


at least hard dealing inside Government. Actual lit decisions at


the end are taken by a very small group. -- Actually the decisions are


taken by a very small group. If they can't get agreement in the end, they


may have to impose. They don't want to impose and that risks


resignations and so on but it is actually them that hold all the


cards. Lest we think that this is a modern phenomenon, two years after


the Great Fire that destroyed the original St Paul's, the king,


Charles II was having just the same problem. He asked for savings in


expenditure. Apparently ministers were, in the words of one historian


- pathetically timid. There were savings of �84. Kings Charles was


unimpressed and sent them back it the drawing board to think again. He


wanted them, in what we might say these days - to go harder and


faster. Oh, and just to bring you bang up to date. Tomorrow the


Government will refer to this Spending Review, as a spending


round. Sometimes it's as if they like to confuse you. We are easily


confused. Louise Cooper is still with me. Should we care too much


about what a Government's promising to do in a couple of years' time? It


is not for the now? It kind of tells you - it indicates what their


thinking is. To me, my problem with the Spending Review is the


ringfencing. Because if you ringfence 60% of your spending, then


the rest has to take massive hits, as we all know. And particularly on


the health care costs. You know, we all know that health care is rising


much faster than either GDP growth or inflation. Now that is a big


problem. And rather than being open and honest and trying to have some


kind of engagement with the electorate and trying to say - what


do you want us to do? It is just public opinion says no cuts on


health care, so that's it. Well, you kind of need to engage the public


and say, we cannot afford an ever-rising health care bill, what


do you want us to do? The absence of that political discussion is across


all parties. Although, interestingly, it is with this


Spending Review, that it has at least been considered. Maybe not on


health, particularly but whether ringfencing is a good idea because


so many members of the Cabinet, Secretary of States have fought hard


against it because as you say, it distorts spending in other


departments but for political reasons they don't want to look at


it. What about welfare? The commitment this time is not to make


any further cuts to welfare in 2015-16 because they have taken a


big hit but again t has raised the debate about universal benefits for


pensioners, for example. Is that a good thing? -- it has raised the


debate. If we can afford universal benefits, marvellous. But we can't.


We had a rise in the welfare state, under Labour, that what happened


because we were in a credit boom and a prolonged upturn cycle. We could


only afford that welfare state temporarily. Unfortunately, taking


people's benefits back from them, when they now think they are a


right, an entitlement, is incredibly difficult. But that is what needs to


happen. With, as we have been hearing, George Osborne will outline


his Spending Review tomorrow and local councils in England are once


again expected to take a significant hit. The Local Government


Association says councils have already had their budgets cut by


one-third, since 2010 and warn any further squeeze will jeopardise some


services. Is it time to re-think how things like libraries and sports


centres are run and paid for? The argument about whether council


cuts are necessary, or harsh, will always be there. But it's down to


our councils to decide what is lost from the landscape. There's no room


for efficiency savings any more. We really are down to the bones of


service delivery and we are looking at cutting the limbs off. Closures


and moth balling, two words we've heard a lot of recently. Frontline


services are being affected and councils tell us there is not enough


money to run things any more. In the process of balancing the books, the


third word that keeps cropping up is - volunteers. With cutbacks here it


stay, some communities have realised if they want to take their services


open, they're going to have to run them for themselves. This leisure


centre was closed two years ago. Barnsley Council decided the


couldn't afford to run it. It lay empty for nearly a year but a group


of volunteers have got it up and running. I think you can see the


mill due everywhere. One of the pipes burst when the building was


shut. We have a dehumidifier still going to try to get rid of the


moisture. Leisure is seen by some as an easy target for savings. Councils


don't have to provide T maybe Martin and his team are all part of the big


society. -- don't have to provide it. I don't think it matters what


you call T but lots of people who are interested from the local


community, if we have come together to get a community-based facility up


and running, I don't think you can knock that, from whatever part of


the political spectrum you are from. There are around ten classes here


every week. It brings them in �600 a month. But there is serious sweat


and toil to be done before this can be a have Iable leisure centre.


Leaving it to volunteers, not a bad thing says the Government. Public


satisfaction with council services since 2010 has gone up. They need


tolike at new ways of working, sharing management and sharing


resources and being innovative and not doing what they have always done


because they have always done it. But looking at the wider spectrum of


opportunities out there. Six months on, Martin and the team have won an


award for their work keeping the leisure centre open and they are


diversifying. The man who runs the community church have moved to hold


their services here on Sunday afternoon. Today it is a if the ball


pitch. On a Sunday, it is a church. Good luck to him. But there is hard


work still to do. The centre is not ready for gym-goers yet and more tin


admits it can be a struggle to put up once a council puts down. --


Martin admits. You have to think - will this work when you set it up?


If you think you can, stand up and have a go. If you don't, maybe


nobody else will. Add private companies to groups of volunteers


and could some see a time when councils aren't needed at all?


yes I can. I think now an elected councillor, regardless of what party


they are in, have to ask themselves the question: Why am I going into


local politics? What is it I can actually do?


James Vincent reporting there. We have been joined by the Chairman of


the Local Government Association, Merrick Cockell. On the back of that


film, which statutory services, provided by the council will be at


risk if the Chancellor goes ahead with further cuts to local councils?


We will know the pressures we are under, particularly around social


care and that there maybe good news on that tomorrow, but that is


skewing public services, so that many of those universal services,


the things that people experience day-to-day and value, are under risk


because of those statutory responsibilities you talk about. So


it is difficult to predict. We think there are about 86 councils around


the country and there are a mixture of districts, counties,


Metropolitan, London Boroughs, that are at risk of perhaps beginning to


fail some of the key responsibilities and I think that's


a matter of real concern. You have mentioned social care as a matter of


statutory responsibility. What other areas with the councils, which


responsibilities might they not be able to fulfil? Well, each will have


different circumstances. Tomorrow we'll hear more, particularly about


sharing around health, integration around hale. This is going to be key


tomorrow for us. -- around health. We know there is bad news about a


reduction in our grant but the good news would be if we would begin to


integrate with health arounded adult care that. Doesn't apply to district


councils, but that might lesson some of the pressure if the numbers are


significant. -- might lesson. It has to be the start of a progress


of real integration, not just in health but all public services. It


may be a way through the problems. The example in the film wasville


tiers stepping into the breech, for example if a community centre has to


close. -- volunteers stepping in. I don't see it as a way of dealing


with problems with finance. I think it is the right way of working with


your communities and the response to question about - should councils be


there? Has missed the point. Councils are not just about


providing whether you are commissioning or delivering them


yourselves, they are actual lit democratic accountability about. --


they are actually the. It is the fact that people are accountable for


public services in their areas. it about accountability, and


deliverability. If public services could be delivered in the way shown


in the film, you say you are in favour, then it would mean much


smaller councils Councils have to let G if we are saying to Government


- you must hand over control of local services to local people


through the democratic process and that has also to do the with English


question, then councils have to pass that down to the be communities and


sometimes there won't be much money, if any at all going with those


things we pass down. You spoke about the problems of ringfencing. One of


the distortions is the hit local councils take. 8-10% cut. That


sounds big, to me Clearly there was a lot of fat there. I remember when


I had my son in 2009. I went to baby massage classes, which were


marvellous, but I'm not sure my local council should be providing


that. However, from the data I have looked at, local councils have taken


one-third off their budget. Over many years. There is a point where


politically it is easy to hit local councils than to make big decisions


nationwide. The volunteers are a good thing but it can't replace


council services. That's right. We haven't been consulted and


negotiated with on this. I think, rather as you were saying earlier,


we need a different approach as to how we provide public services. We


need agreement on four or five years, not on a single year


announced at the beginning of the process. Time to find out the answer


to the question. The question as to which Government minister broke


their foot after falling off a table while dancing in a bar in Soho?


I've love to think it was Eric Pickles? It is not.It puts an


amazing image into my mind. It is not. It is Mark Harper. Thank you


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