Lord Lawson - Former UK Chancellor of the Exchequer HARDtalk

session. -- 18-hour. Now, time for Welcome to HARDtalk. Britain's

Conservative Party is deeply sceptical about the EU. This is not

news. What is novel is the readiness of some of the party's

grandest members to call for a British exit. One of them, Lord

Lawson, Margaret Thatcher's former Chancellor of the Exchequer,

recently labelled the EU a bureaucratic monstrosity past its

sell-by date. That intervention embarrassed Prime Minister David

Cameron and deep under the impression of a Tory party

dangerously divided. -- and furthered the impression. Why did

he do it? Lord Lawson, welcome to HARDtalk. Thank you.It seems that

over the cause of a long political career, you have made an

extraordinary U-turn from being a strong advocate of Britain's

membership of the EU to now becoming quite clear-cut in your

wish to see Britain leave. The EU has changed over that time. The EU

- it was then called the European economic Community in the beginning

- had a very clear political objective. It has always been

political. The political objective was to make Europe safe from

another European war, a third world war. To be blunt, it was to put to

the German Tiger in the European cage. So that there should be no

resumption of German militarism, which have done so much damage in

the 20th century. And that was a very sensible aspiration - whether

it was necessary to do it to be safe, it made a great deal of

servants. I no longer believe there is a German militaristic for it. It

is done and done. That was the major purpose? That was the major

purpose. At the same time, Europe has changed with the coming of the

common currency -- common currency, the hero, of which the UK is not a

part and quite rightly so. And the eurozone countries are having

terrible economic problems as a result. And the only way - and they

know this and they say this - they can move to solve the economic

problems is that if they accompany the monetary union with full-

blooded fiscal union, a single finance ministry, a single Finance

Minister, single taxes, a single benefit systems, which basically

means political union. The United States of Europe? The United States

of Europe. And that is not something Britain has ever wished

to be part of. You are saying that as far less you are concerned now,

there is only one possible outcome for the European Union, and that is

the full-blooded, full scale Federated United States of Europe?

There is another possibility. They could abandon the single currency

but I do not believe they will do that. Anyhow, it is profoundly

unsatisfactory for Britain at the present time, particularly because

as the eurozone consolidates, there will be a eurozone voting bloc, a

solid block which will have to be in existence, which will determine

things and the British vote will always be outnumbered. David

Cameron recognises that it is unsatisfactory at this present time,

which is why he is saying that he will renegotiate the terms. I am

going to renegotiate a different kind of EU. A new relationship

between Britain and Brussels? unclear whether it is a new

relationship with Britain and Brussels or a new relationship

between the individual that -- individual member states

collectively with Brussels. seems that no matter what the

others do, he is determined that Britain's standing with Europe will

change. That is right. That is what he is declaring to do. And then, he

said that there will be a referendum on the basis of whatever

he is able to renegotiate. Exactly. And it will be in or out. And this

is where I have to be quizzing you quite closely. You chose at a very

sensitive political moment when David Cameron had just seen the

Conservatives do extraordinarily badly in a set of local elections,

you chose to come out in public and say that his approach to Europe,

this idea that yes he wants a referendum, he will give a

referendum if he is Prime Minister in 2017, but in the meantime he

will renegotiate, and I promise you that this renegotiation will

produce something much better for Britain which I would like you to

vote upon in a positive way, you dismissed that as absolutely

incredible. You said that it was impossible to imagine a

renegotiation being removal and delivering what Britain needs. Her

-- being meaningful. You under my door Prime Minister. I did not and

I wish him well. My judgement, which is not based on prejudice...

First of all, we have been through this before... It is highly

prejudicial. He said any negotiation will be inconsequential.

Let me finish the sentence. Harold Wilson. When he came to power in

1974 said precisely the same and he tried to do a renegotiation. And he

got absolutely next to nothing in return. An he then had this

referendum in 1975 and to pretend that he had achieved something but

he had achieved nothing. And we voted and I voted to stay in

because I thought we should stadium, on balance, in 1975. I knew the EU

pretty well because all the time I was a minister, whenever that was,

the best part of ten years, and dealing with my counterparts,

dealing with the Brussels bureaucracy, I knew then very well.

I had many friends there. And they are not going to agree to any

significant change. There is no way they will agree to any significant

change and even if one or two of they would like to, they have to

get the agreement of all of them and that will not happen. David

Cameron is plain wrong, is he? think I would like to see him

succeed but I don't think he will. So we will have to have a

referendum. Therefore, in answer to your question, the reason why I

spoke out is because it is such a momentous issue, an issue of such

importance for the United Kingdom that there has to be a full and

proper debate. The whole issue has to be thrashed out. And that is why

I set out my feelings as to why of the present basis, because I don't

believe even though he would like to, I don't believe he is totally

sincere, even though he would like to negotiate a new relationship, I

don't think that will be possible, and therefore I think that we have

to understand what the issues are. And there are always arguments on

both sides. We should understand where the balance of advantage lies

and we should understand why there is nothing to be afraid of him

leaving. One of your former Cabinet colleagues in the Conservative

administration, Sir Malcolm Rifkind, said that your intervention was

akin to throwing a hand grenade into a small building. Well, I like

Malcolm and he was for a time a colleague of mine in government.

But it is scarcely a hand grenade. If we are told we will have a

referendum if we do not say -- if we say let us discuss the issues.

The is ludicrous to say that the issue cannot be discussed. And I

discuss them in a very careful, not extravagant, lot of call and

reasoned way. The Tory party, your party, I think you would accept is

deeply divided on this. There are some dumb -- there are some - not

many - who are broadly in favour of Europe. And then there are sceptics,

some of whom say renegotiation is the key to this. David Cameron

would be one of those. And there are some who say that getting out

is the only solution. What you have done with your intervention is a to

those who believe in renegotiation led by the Prime Minister that

their position has no credibility, does not reflect the facts and

shows no understanding of the way the EU works, and that is a pretty

grave charge to lay at the door of the Prime Minister. First of all, I

believe he is perfectly sincere. I have not out at him, nor have I

stated... Understood. You just think he is wrong. I think he is...

I think he means to get a fundamental change in relationship.

I don't believe that is on. And therefore, one has to say, where

does that leave us and what should we do? When you say the

Conservative Party is divided on this, as you also say, it is quite

clear where the majority of the party now lies. But it is not just

the Conservative Party that is divided. The Labour Party is

divided. One of them must hobble donors -- one of their most

powerful owners has called for Labour to go for the referendum as

well. He has said that we should leave as well. This is not a party

issue, the whole nation is divided on this. The problem, I suppose, is

that in British politics right now, one of the most serious threats to

the Conservative position is the rise of the UKIP, his position is

quite clear. They say they are against the EU, they want Britain

to get out as soon as possible, which is pretty much all position

as well. And the leader of the UKIP, Nigel Farage, was the one man who

truly, warmly welcomed and celebrated your intervention. He

said that if you feel like a Nigel Lawson, one of the biggest people

in the Tory party, that of European Union is bad for Britain, the only

party that clearly expresses that view is minor - the UKIP. The UK

Independence Party, which is a very small party even though they did

well... In the opinion polls, it is over 20%. But it is not one of the

major parties in the country. The UKIP gets, I think, most people

agree, most of its support on an anti-immigrant platform. This is

not the issue we are talking about. We are talking about Europe. And

the fact of the matter is that I am far from alone. After I made my day

Marsh, a number of other senior Conservatives came out to basically

agree. Michael Gove, for example, the Secretary of State for

Education, indicated that he would vote on leaving the EU. And he is

someone who David Cameron greatly values. I think that we need to

think not in terms of party politics. We need to think of what

is in the interests of the UK and that is what drives me. That us

talk a little bit about that. There are a whole bunch of leading

British businessmen who have written collected the EU and action

-- access to the single market is around two �90 billion per year to

the UK economy. Richard Branson, Martin Sorrell... Many others. They

say that in economic terms, it is fundamentally wrong and deeply

mistaken to think that the British economy can do well outside of the

EU. I know that there are these Sufi years but they are ludicrous

and economically illiterate. -- there are these concerns. I went to

some length in my article. We have to be brave about it because we do

not have a lot of time. No, we don't! But I am amazed that the

people who run these companies in Britain are economically

illiterate! They are very good. People who run companies

successfully, on the whole, what they are good at, his mining

company successfully. He does not mean they are good at everything.

You only have to look at the US exports to the EU. Or to the UK,

which is part of the EU. Or Chinese exports to the EU including the UK.

You don't have to be in the EU to trade with the EU. Yes, but none of

those other countries have 50% of exports going to Europe. It is

closer to 40% and we should have more going to Europe and will go

into the growth areas of the world. The growth areas of the world today

are not in Europe. They are the emerging world countries. In Asia,

particularly - China and the other Eastern countries. And also in

Latin America. That is where we should be focusing our export

potential. But does it give you pause when you hear the Americans,

Barack Obama, talking about the UK's membership of the EU being in

his words an expression of the UK's influence and role in the world?

And when other US officials told the newspapers that if the UK

thinks it can negotiate a trade deal with the US just as the EU is

doing right now, which David Cameron support, they have another

think coming. They say there is no appetite for signing a separate

trade deal. I will tell you between ourselves what the American action

is all about. Of course we will be able to negotiate a trade deal of

some kind because it will be in our mutual interest. If you say that,

but Washington says something different. I will tell you why. I

know the Americans very well, I have nothing against them. America

has always been concerned that the EU will become anti-American. There

is a strong strand within Europe, particularly in France now, and Air

France very well, of jealousy and anti-Americanism in France. And the

Americans always believed that so long as the UK was in the EU, that

would prevent the EU from turning anti-American. And that is why it

is in the US interest for us to be there. That does not mean it is in

I have a set, might consider an opinion is that unless there is a

transformation of the relationship between Britain and the European

Union - which I do not think is possible to negotiate, we should

leave. That is how I will be voting when the referendum comes. I have

also pointed out that the problems for Britain are likely to get more

and more acute that it -- as it evolves into a political union. As

you may or may not know, I have interests in other issues. I have

expressed issues on those as well. I do want to get your views of on

other issues. You have been sitting on this parliamentary commission on

banking standards. It is partly tied to the European Union. You say

one of the most dangerous elements is the frenzy of regulatory

activism coming from Brussels coming, in your view, trying to cut

down to size the City of London and its financial importance. When it

comes to learning the lessons of 2008 and the financial meltdown, do

you think there is evidence the British government and system has

truly learned the lessons? I hope so. I think some people have. The

Bank of England, which now has the responsibility of supervising and

regulating the banking system of the CD, I think they have learnt a

lot. I have out commission on banking standards will be able to

help move on. The position is, There are only two major financial

centres in the world. They are New York and London. We are the only

one in the European time zone which is tremendously important. I want

us to continue to be a major global financial centre. The main thing

necessary to that is to clean up the banking system in this country.

Which is what the commission of which I am a member is about. We

will be making various recommendations. There will be a

slave of recommendations - some quite radical. There is another

thing, the cleaning up is the most important thing but also, we must

not allow ourselves - this is the connection between the two issues

which you rightly point out - we must not allow ourselves to be

governed by misconceived, misguided, foggy European regulations which in

fact damaged London as a global centre. Hang on. May I stop you? It

is a global centre but it has problems of his cissy. The European

Union has taken actions in the last few months which would put

stringent controls on bankers pay, for example - limiting the size of

any bonus to 100% of base salary - that is something which in London,

pay and remuneration, has been a huge issue. Especially from the

public. A Usain that is wrong? think the renumeration is an

important issue. You are absolutely right but this is a classic example

of where the European Union is going wrong. The effect of what

they've done is the bonuses cannot be more than a certain proportion

of the fixed salary. So what you do? You put up the fixed salary.

What good is that? EU the problem worse. Do you actually believe

David Cameron and George was one barb going to take any advice from

your commission? Using to be clear in your mind that as a result of

the terrible damage done to the Royal Bank of Scotland which is now

80% in public ownership, you think the only viable solution is to

break that back up into two - aback -- a bad bank with the long-term

debts and free up a good back to become a key player in the banking

system for the future. Fully privatise. You have said that is

what you want but it seems that is what Cameron and Osborne and do not

want. As a member of the Commission and someone with some experience of

banking, but, I am sure the government will listen, whether

they will do what recommend we shall see. All we can do is

recommend what we think is the best thing. This split is not something

that the commission has thought up by its are ?I ? by its are -

known to any student of banking. It is what the Swedes did when they

had their banking crisis in the 1990s. To some extent this is what

the US dip successfully today because they had a banking disaster

as well. To be clear about the future, you want RBS - this is an

important issue because it is 80% in public ownership - you want it

to be rebuilt in a way that the government at the moment is not

prepared to countenance. One of the problems with the economy at the

present time - I'm glad to say the right increasing signs that we are

gradually - it has taken a long time - a recovery is on the way.

Not at the great praise... We can argue for a long time about the

figures. Nevertheless, one of the things holding us back is a lack of

lending to small to medium-sized businesses who are not being

finance. One of the reasons why they find it difficult to get back

finance finances, is that they have bad debt which they are not owning

up to any Nexen terrified of any new lending. In case that goes back.

If you had the separation - good bank and bad bank - the good bank

would be in a stronger position to lend to small and medium-sized

businesses and that would be excellent for the British economy

an obviously good for the taxpayers as well. We have a incompetence,

mismanagement, manipulation of markets in the libel scandal, we

have had the chairman of your commission not of him that a few

bad apples but large numbers of people who over long periods of

time conducted abuses, malpractices, what I would call fraud and it

sticks in the court that these are serious offences have yet not seen

anybody emerge with a prison jumpsuit up on their bodies. What

he seems to be saying is that for all the talk here in London,

actually, the government has not acted in a way the public needs it

to act to change the mindset and practices of the City of London.

One of the reasons - the main reason - why the government set up

this commission are indeed the Labour Party was opposed to it,

they thought we should be a judicial enquiry with a High Court

judge in charge of it. Everybody agree something had to be done.

Anyway, the government, I think was right to set up this kind of

parliamentary commission. They set it up because they realise that

there are a number of things that went badly wrong and they want to

see the recommendations. You will hold their feet to the fire?

will not be afraid to say what we think needs to be done. And if they

do not do it? That will be debated in the House of Commons and the

House of Lords. Can your recommendations ensure that the

meltdown we saw, not least in the City of London in 2008, can never

happen again? And would never use the word never but I would hope

that if these recommendations are accepted, it would be highly

unlikely. A further point - very poor and to establish that if there