:00:10. > :00:15.Now on BBC News it is time for HARDtalk.
:00:15. > :00:19.Here is the good news. The Greek election did not plunge Europe into
:00:19. > :00:23.economic and financial meltdown. The bad news is that no-one in
:00:23. > :00:28.Europe believes the combined currency, banking and sovereign
:00:28. > :00:32.debt trauma is over. Right across the Continent politicians are
:00:32. > :00:37.struggling to answer a question. How does Europe find a way back to
:00:37. > :00:42.sustainable economic growth? Today my guest is the opposition Labour
:00:42. > :00:46.Party's top business spokesman, Chuka Umunna. He says active
:00:46. > :00:56.government cannot revive and reshape capitalism. Our business
:00:56. > :01:17.
:01:17. > :01:22.leaders or the public ready to Chuka Umunna, welcome to HARDtalk.
:01:22. > :01:26.Good to be with you. Any economic discussion of any country in Europe
:01:26. > :01:29.right now has to begin with the context of the eurozone crisis,
:01:29. > :01:34.what it means for individual nations. The Governor of the Bank
:01:34. > :01:39.of England calls it a very big dark cloud hanging over the British
:01:39. > :01:43.economy, the world economy. Do you agree? I think so. I think it
:01:43. > :01:48.presents a number of challengers for us as a country. Our bands have
:01:48. > :01:50.a degree of exposure to European sovereign debt. What happens in the
:01:50. > :01:57.eurozone affects business confidence in this country, with
:01:57. > :02:03.most of our exports going to the eurozone. And of course if we do
:02:03. > :02:08.not resolve these issues then businesses will not be confident to
:02:08. > :02:12.invest in particular. So you would accept the proposition coming from
:02:12. > :02:16.Chancellor George Osborne that in the end the eurozone crisis is very
:02:16. > :02:21.much constraining what can be achieved in terms of the British
:02:21. > :02:26.economy? He says the recovery is being killed by what is happening
:02:26. > :02:30.to our neighbours. Do you accept that? The recovery actually in the
:02:30. > :02:35.UK is stalled really in the early stages of this government. We have
:02:35. > :02:40.seen the economy contract by 0.4% since the Government announced its
:02:40. > :02:45.spending review plans for the duration of its term in government
:02:45. > :02:51.in October 2010. But I think it is fair to say that for some time we
:02:51. > :02:55.have seen no growth in the economy. I am getting to the point that the
:02:55. > :02:59.Chancellor says, and it sounds like you agree, that given the enormous
:02:59. > :03:03.difficulty posed by what is happening to our near neighbours,
:03:03. > :03:10.our biggest trading partners, it is very difficult for the economy of
:03:10. > :03:13.Britain to grow. It was our exports to the eurozone that kept us out of
:03:13. > :03:17.recession in 2011. We have yet to see the full effect of the eurozone
:03:17. > :03:22.crisis feed through to our economy. It is was to think of the fact that
:03:22. > :03:26.we're in a double dip recession in the UK. France and Germany closely
:03:26. > :03:30.missed going into recession. The point is the argument that we have
:03:30. > :03:35.made as an opposition in the UK is that you need to provide solid
:03:35. > :03:37.foundations to withstand the storm when it comes. The problem the
:03:37. > :03:41.Chancellor has... He is right in saying the eurozone will affect our
:03:41. > :03:46.economy... But he has put us in a very poor position in terms of
:03:46. > :03:49.withstanding that storm when it comes. It is hardly a poor position
:03:49. > :03:55.to be a AAA rated No nation by all of the agencies when so many others
:03:55. > :03:58.across the European Union are not. It is a sign of the confidence that
:03:59. > :04:02.international markets still have in the UK economy as run by the
:04:02. > :04:08.Conservative-led coalition. The G20 is meeting this week. The only
:04:08. > :04:14.other country had has experienced a double-dip recession is Italy. The
:04:14. > :04:19.situation in the UK at the moment is unemployment at 8.7%. We have
:04:19. > :04:22.over 2.6 million people out of work including one million young people.
:04:22. > :04:28.You are sidestepping my point. There is a fundamental point when
:04:28. > :04:32.we are looking at Europe, Britain's place in Europe, about conference.
:04:32. > :04:38.Britain has retained the confidence of not just the bond markets but
:04:38. > :04:45.also of people like Christine Lagarde and the OECD. -- confidence.
:04:45. > :04:48.They all say that Britain's current fiscal situation makes sense and is
:04:48. > :04:53.the right direction to be travelling in. It's I am not sure
:04:53. > :04:56.that is the position of the IMF. One thing that fisting the guards
:04:57. > :05:00.said is that in order to have a credible fiscal policy unit growth.
:05:00. > :05:08.We have not seen roads for a long time. If you look in the overall
:05:08. > :05:13.context of the UK's historically, we have had historically low term
:05:13. > :05:17.borrowing rates. We benefit from the fact we control our own
:05:17. > :05:25.monetary policy. We can have a policy which is more appropriate
:05:25. > :05:29.for the UK economy. But to argue to your average person in the street,
:05:29. > :05:34.in my constituency in London, that somehow we are in a safe situation,
:05:34. > :05:38.that is not what it feels like for people at the moment. But what
:05:38. > :05:41.matters is of course what people feared on this -- feel on the
:05:41. > :05:45.street, but also what the bond markets can do two countries. You
:05:45. > :05:49.only have to look at what is happening to Greece, Spain,
:05:49. > :05:53.Portugal, to know that it matters to retain confidence. One point is,
:05:53. > :05:57.this government has retained confidence. When you criticise so
:05:57. > :06:02.heavily as you do in your party the Government's current fiscal
:06:02. > :06:05.policies, it is not worth bearing that point in mind? Firstly I would
:06:05. > :06:13.say that it is a fallacy to compare us to Greece or these other
:06:13. > :06:17.countries. They don't have control of their own monetary policy. Also,
:06:17. > :06:23.the term of payment on their debt is often shorter than ours, which
:06:23. > :06:26.is an average of 13-15 years. Secondly, in terms of retaining the
:06:26. > :06:32.confidence of the markets, several of the credit ratings agencies have
:06:32. > :06:38.put us on negative watch during the last few months. The big worry
:06:38. > :06:42.about people have about our economy is the prospects of future growth.
:06:42. > :06:47.Because the growth forecast for our country has come down, more people
:06:47. > :06:54.are out of work. The Government has had to revise up its borrowing
:06:54. > :07:01.estimates by over �150 billion. That in the long-term will create
:07:01. > :07:04.worries in the market about our ability to repay a debt. I don't
:07:04. > :07:08.think any in the current government would argue that this is the place
:07:08. > :07:13.they would like to be in. They happen to be in. They would argue
:07:13. > :07:16.about what is happening in Europe. But if we get to your
:07:16. > :07:19.responsibilities in politics, which is to represent the Labour Party
:07:19. > :07:22.when it comes to finding a strategy for growth and business growth in
:07:22. > :07:28.this country, is it not true to say that the most important single
:07:28. > :07:32.thing you need to start off with his confidence? Yes. Without
:07:32. > :07:38.wishing to rehash the Arden, if confidence is there right now,
:07:38. > :07:41.George Osborne does have the state to begin to pull some rivers, to
:07:41. > :07:47.put more money to the economy, to guarantee to business that he has
:07:47. > :07:51.business from the infrastructure based prospects. He is in a decent
:07:51. > :07:55.position, isn't he? The first thing to say that is since he announced
:07:55. > :08:02.his spending plans for his time in office in this Parliament,
:08:02. > :08:07.confidence nosedived. That has had a knock-on effect on demand. In the
:08:07. > :08:11.last few days he announced plans to put new liquidity into the banks
:08:11. > :08:14.and threw them into small businesses. Is talking about �80
:08:14. > :08:18.billion worth of cheap money. think you are referring to the
:08:18. > :08:21.funding for lending scheme. That is an admission of failure of the
:08:21. > :08:24.different things he has announced up to this point. We were told in
:08:24. > :08:29.2011 that the Government's Project Merlin accord with the big bangs in
:08:29. > :08:34.the UK would get lending to our small businesses. We have seen a
:08:34. > :08:40.net contraction in lending to small businesses in this country. There's
:08:40. > :08:45.a big problem there. Project Merlin did not work. He then introduced
:08:45. > :08:49.credit easing. Unfortunately the problem with that... It is not bad
:08:49. > :08:56.necessarily... But it is reducing the cost of borrowing but it is not
:08:56. > :08:59.getting money out of the door to profitable businesses not able to
:08:59. > :09:03.access fineness of the mind. That is the problem. This is the reason
:09:03. > :09:09.we have seen the recent announcement by the Bank of England
:09:10. > :09:16.and... That is right. Do you welcome that? It is potentially a
:09:16. > :09:19.huge injection, �80 billion, and if it works well it will get a lot of
:09:19. > :09:23.liquidity into small and medium- sized enterprises. I wanted to work.
:09:23. > :09:27.I hope that given the failures of the past these measures will work.
:09:27. > :09:31.We will see over time their effectiveness. But I want them to
:09:31. > :09:35.work. The key is, will it get money to businesses that cannot access
:09:35. > :09:43.finance at the moment, as opposed to simply reducing the cost of
:09:43. > :09:46.borrowing? You also think that the other measures are a step in the
:09:46. > :09:49.right direction? Planning restrictions eased for construction
:09:49. > :09:52.companies. A national infrastructure plan which is
:09:52. > :09:56.designed to get pension funds to put money into the capital projects.
:09:56. > :10:06.We have also had things like tax breaks for the hi-tech audio-visual
:10:06. > :10:08.
:10:08. > :10:11.sector. The Government now Boban -- the government appears to be many
:10:11. > :10:16.of the things that you wanted them to. It is doing some of the things
:10:16. > :10:18.we called for. You referred to the video games tax relief that we
:10:18. > :10:24.introduced in government which has helped port bow video games
:10:24. > :10:27.industry in a place where it is one of the best in the world. When the
:10:27. > :10:32.Government came into power it scrapped it. It admitted it made a
:10:32. > :10:38.mistake. That is a good thing. is not about point-scoring. We are
:10:38. > :10:42.one economy in recession amongst eight Continent in a deep hole. I'm
:10:42. > :10:45.sure that you would agree it is not a time of point scoring, it is
:10:45. > :10:50.finding the best strategy so the Government and productively help
:10:50. > :10:57.business to grow into it -- in a way it has not grown in the last
:10:57. > :11:01.five years. Whatever you call it, the current government seems to be
:11:01. > :11:06.turning the wheel a little bit toward a more expansive policy. It
:11:06. > :11:10.seems to me that is something you ought to be welcoming. It is still
:11:10. > :11:14.refusing to change its basic fiscal position and go for a more
:11:14. > :11:19.responsible, and Escrick, less a deeper deficit reduction programme.
:11:19. > :11:23.That would actually allow the economy to grow. In terms of the
:11:23. > :11:28.recent things we have heard which suggests they are moving towards a
:11:28. > :11:33.bit more of an expansion attitude, that is to be welcomed. The point
:11:33. > :11:37.is, look at the gravity of the situation we're faced with. Two
:11:37. > :11:40.quarters of negative growth. Many economists predict that in the
:11:40. > :11:44.second quarter of this year we will also get a negative figure. We need
:11:44. > :11:49.the Government to be doing a lot more than it is at the moment. I
:11:49. > :11:53.think that this speaks to a wider debate which is going on around the
:11:53. > :11:57.world about the proper role of government is to be the private
:11:57. > :12:02.sector and the extent to which they should work in partnership. There
:12:02. > :12:06.is an old retro view that says the best thing government can do is to
:12:06. > :12:09.simply step aside. If you like that is the orthodoxy of Ronald Reagan
:12:09. > :12:13.and Margaret Thatcher. He should step aside and let the market to
:12:13. > :12:18.the world FT -- do the work. Another opinion says, actually,
:12:18. > :12:22.there are many things the market cannot do. It does not
:12:22. > :12:27.automatically and naturally operate in an entirely efficient way. It
:12:27. > :12:30.cannot provide strategic direction for particular national economies.
:12:30. > :12:34.It cannot identify where you have got a competitive edge and a
:12:34. > :12:37.comparative advantage. So you need government to work in partnership,
:12:37. > :12:41.not in a kind of pop down overbearing way with business, but
:12:41. > :12:47.in partnership with business to grow business. That is what has
:12:47. > :12:57.happened in Singapore for example, Germany. It has a national
:12:57. > :12:57.
:12:57. > :13:01.architecture with it. Indeed,... did not happen under the dozen
:13:01. > :13:05.years of the Labour government, but you argue it could happen now?
:13:05. > :13:08.is right. We have to be humble enough to say, yes, we got lots of
:13:08. > :13:12.things right in government. When we left them that we were racked by
:13:12. > :13:16.the World Bank as the fourth best place in the world to do business.
:13:16. > :13:22.But we should have been prosecuting active industrial policy is far
:13:22. > :13:28.earlier. The important thing is... Active government strategies, you
:13:28. > :13:31.say. How does that fit with Ed Miliband's key speech where he
:13:31. > :13:36.introduced the idea of defining the private sector as essentially full
:13:36. > :13:44.of good businesses and bad ones? Worth while producers, or creditors,
:13:44. > :13:49.he said. Is it the case that Ed Miliband led Labour Party policy on
:13:49. > :13:53.business is to try to reshape the nature of the private sector, to
:13:53. > :13:59.stamp out predatory capitalism and simply encourage those that are
:13:59. > :14:04.defined in your terms as the work while producers? I would not quite
:14:04. > :14:09.put it that way. That is the way you put it. Let me answer your
:14:09. > :14:16.question this way. What we are actually looking at here, and you
:14:16. > :14:20.are talking about the subjective politicians... A politician's
:14:21. > :14:26.imposing a subjective view. But we should be led by business. What
:14:26. > :14:30.we're talking about is, what are the business practices, models,
:14:30. > :14:40.behaviours that are successful? What is the consensus view within
:14:40. > :14:42.
:14:42. > :14:48.business on that? There are lots of The British Chambers of Commerce
:14:48. > :14:53.said that in response to this view of capitalism, all organisations
:14:53. > :15:00.that create wealth and comply with the law are by definition a good
:15:00. > :15:04.companies. Do you accept that? not disagree with that. But do you
:15:04. > :15:10.agree or disagree with that simple concept about what makes a good
:15:10. > :15:13.company in the UK I would not necessarily... That would not be my
:15:13. > :15:18.comprehensive definition of good business models and behaviours. Let
:15:18. > :15:21.me explain why. There is a question as to whether you are delivering
:15:22. > :15:28.value in the long-term or whether you are just looking at increasing
:15:28. > :15:32.profits in the short-term. The quick buck, if you like, in stead
:15:32. > :15:36.of long-term fund new creation. I have spoken to him about this and
:15:36. > :15:40.there is a lot of common agreement. If you look at the different
:15:40. > :15:44.practices and behaviour models that work, they are businesses that
:15:44. > :15:48.found you and invest in their workforces. If you have a happy
:15:48. > :15:52.workforce you will have less absenteeism and poor productivity.
:15:52. > :15:58.This is not necessarily what politicians are saying but this is
:15:58. > :16:02.what businesses are saying. This is highly subjective. Any future
:16:02. > :16:07.Labour government is going to have to go into every company and decide
:16:07. > :16:11.whether it has a happy workforce or whether it is doing things in a
:16:11. > :16:14.socially responsible way? How are you going to do this? There is a
:16:14. > :16:22.degree of subjects to the sea but if you look at what businesses are
:16:22. > :16:28.saying, if you go on to the business page of Google, it says
:16:28. > :16:33.people are their greatest asset. They are all sorts of Fraser's.
:16:33. > :16:38.There are many businesses that look at people as simply a cost to be
:16:38. > :16:44.reduced. I doubt they say that in their brochures which you read. The
:16:44. > :16:50.point is, you are quoting a Google and taking at face only what they
:16:50. > :16:54.say. Any company these days issues the right sort of words about
:16:54. > :16:59.corporate responsibility but I first wonder how in government,
:16:59. > :17:03.Labour government is going to make sense of this notion that we have
:17:03. > :17:10.good capitalism and Bad capitalism, this is his you want to promote and
:17:10. > :17:14.businesses you do not want? -- businesses. If I could finish, I
:17:14. > :17:18.was talking about investing in people and investing in a long-term
:17:18. > :17:23.sustainable value creation. We need to recognise the activity that is
:17:23. > :17:29.this carries out its fresh and tensions on the community in which
:17:29. > :17:33.it is carrying it out -- business. If it gets it wrong, in the US for
:17:33. > :17:39.example, it does not only have adverse consequences but it also
:17:39. > :17:44.could have harmful effects on the population. You ask, what do you do
:17:44. > :17:49.as policy makers? I say they are a range of levers that we can use to
:17:49. > :17:53.encourage that which is good. Good business practice. That is
:17:53. > :17:59.successful, which helps provide more jobs. There are a number of
:17:59. > :18:02.things we can do. We can use the tax system. In government, we
:18:02. > :18:07.introduced capital allowances to encourage businesses to invest in
:18:07. > :18:13.plant machinery and the things that help them grow their companies in
:18:13. > :18:20.the long-term. Yes. You can use recruitment. The government in the
:18:20. > :18:25.UK is one of the last as purchases of goods. If you are getting a
:18:25. > :18:30.service from a contractor, let's ask the contractor to help the
:18:30. > :18:35.skills of the economy. There are a number of things you can do to help
:18:35. > :18:40.foster good business behaviours. You have learned that many
:18:40. > :18:47.interesting ideas. Let's put one practical case to you. One of the
:18:47. > :18:51.most successful British companies recently, has been WPP. In recent
:18:51. > :18:56.weeks they have run into a few problems there is a promise to pay
:18:56. > :19:01.the chief executive an enormous sum of money in terms of renumeration
:19:01. > :19:08.for the last few years, �30 million or so. Shareholders voted against
:19:08. > :19:14.it. You have spoken loudly against excessive corporate pay. In your
:19:14. > :19:20.view does this make this company a company that is behaving in a way
:19:20. > :19:24.that is unacceptable? No. What we have seen happening across the
:19:24. > :19:32.board in different companies, we have seen unprecedented levels of
:19:32. > :19:41.shareholder activism and engagement in their companies. This happens to
:19:41. > :19:48.be in the issue of renumeration. This is not a reward for failure.
:19:48. > :19:55.He has pointed out his global competitors, the huge US companies
:19:55. > :20:01.and others, that they give their chief executives more than he has
:20:01. > :20:03.been given. So this is not about success or failure. You are talking
:20:03. > :20:08.about the government intervening in stopping in what you regard as
:20:08. > :20:13.excessive pay. The judgement that needs to be made has to be made by
:20:13. > :20:16.the shareholders, those that control the business. In 2011, the
:20:16. > :20:21.shareholders sustained a loss on their stock and therefore took the
:20:21. > :20:25.view that increasing the pay on the chief executive at that time or
:20:25. > :20:33.above 60% was not something they thought was the right thing to do.
:20:33. > :20:37.It is not right for me to go around and dictate to individual companies.
:20:37. > :20:42.What hope will say is that it should be an issue for the
:20:42. > :20:45.shareholders. -- 5. In terms of the quality and differences between
:20:46. > :20:50.what the chief executives get and the rest of society, if we do not
:20:50. > :20:55.get this right it could be bad for business. Perverse pay structures,
:20:55. > :20:59.and I know this because I used to be an employment lawyer myself,
:20:59. > :21:07.promotes the wrong kind of decision making. People have to be in the
:21:07. > :21:16.driving seat. That is why shareholder activism we have seen...
:21:16. > :21:21.All right, let's just one -- think of one link, the top tax rates.
:21:21. > :21:27.Businesses have sued because the Conservative government has cut the
:21:27. > :21:32.top level of tax from 50p, imposed at the end of the last Labour
:21:32. > :21:35.government, to under 45 P. Would you or any future government want
:21:35. > :21:40.to be part of a government that guarantees the raising of the top
:21:40. > :21:43.level of tax? What I would say is that I would like to be part of a
:21:43. > :21:48.government where we are implementing policies that ensure
:21:48. > :21:52.the broader shoulders bear the heaviest burden. Should you go back
:21:52. > :21:59.to 50p? We have said if there is a lectern in the next month, which I
:21:59. > :22:02.hope so, although the election is scheduled in 2015, then we would
:22:02. > :22:10.reverse the decision the Government has made to bring down the top rate
:22:10. > :22:15.of tax. Why not go further? One way of thinking about the soul of the
:22:15. > :22:18.Labour Party is thinking about France. Cons of Holland is the new
:22:18. > :22:23.president of the Socialist government. He has promised a high
:22:23. > :22:28.rate of tax for top earners. Why is Labour not taking on a more radical
:22:28. > :22:34.few of the share that the top earners should pay? That is
:22:34. > :22:39.something we have to be appropriate in our policy. But you are not
:22:39. > :22:46.dissimilar in economic terms. Why are you not taking on some of his
:22:47. > :22:52.ideas? I am not necessarily just with one system. I am interested in
:22:52. > :22:56.the outcome. The top rate of tax of 50p is the only way that you can
:22:56. > :23:00.insure the ones with the broader shoulders can bear the heaviest
:23:00. > :23:06.burden. You have to make a decision when we get a general election to
:23:06. > :23:12.what we would do at that one. So it could go beyond 50p? I cannot see
:23:12. > :23:16.us having a top rate of tax in the region of 75p, certainly not. That
:23:16. > :23:25.is not something we are going to be making policy on now because it
:23:25. > :23:33.would be irresponsible. We have to look at the Policy Programme at the
:23:33. > :23:42.next election. We want a fair society. One name that has not crop
:23:42. > :23:46.up much of his conversation -- is Tony Blair. He has said that we
:23:46. > :23:53.have even lost our backers, and we do not have feelings we have with
:23:53. > :23:57.is this any more. He expressed deep concern. Are you also concerned?
:23:57. > :24:01.major business person came up for Labour in the last election. As
:24:01. > :24:07.somebody who has advised businesses during my professional life, that
:24:07. > :24:10.is a matter of regret. Tony Blair is right, we have to rebuild that
:24:10. > :24:20.trust in the business community. The starting point in us having an
:24:20. > :24:24.