08/03/2012 Newsnight Scotland


08/03/2012

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keeping inflation high, so as to keep some people who shouldn't have

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borrowed the money in houses they cannot afford. Thank you very much

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indeed. Tonight on Newsnight Scotland: The new Green Investment

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Bank is to have its headquarters in Edinburgh. But how much new

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investment will it actually deliver, how much will be north of the

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border and could the whole thing be hobbled by the European Commission?

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Also tonight, it's part of Britain, but not the European Union. It's

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defended by the UK, but it sets its own tax rates and its own

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parliament spends its own money on what it wants. Are we watching

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modern independence in action? Good evening. The campaign to bring the

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Government's Green Investment Bank to Scotland paid off today when the

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Business Secretary announced Edinburgh as the headquarters,

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although the team raising much of the money will be in London. Was it

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politics or commerce? Either way nobody is complaining. But what

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will the Green Bank actually do? Nick Clegg said it could be based

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on Mars for all the difference it could be it -- it could make. Today

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Vince Cable said the location of the green investment bank in

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Edinburgh and London was crucial to its success. Edinburgh is a very

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good financial centre. There is a lot happening on the green industry

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front. London is the centre of specialist banking. We had the

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competition and those two cities came out on top. By the end of the

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year, it will be getting out good projects and be well on the way to

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making Britain a good leader in green investment. Edinburgh has the

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asset management background and green industry expertise and London,

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as a leading finance capital, has experience in brokering

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transactions. The other bidders may not have been all that serious.

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Edinburgh seem to be the standard. London is a financial centre. You

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could have put the HQ in there but it would have been lost. In

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Edinburgh, it says the statement about the importance of Edinburgh.

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It brings in a lot of activity around it. On its own, a few dozen

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jobs - high quality jobs - but it is the catalyst effect of putting

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in green investment banking and other expertise and other financial

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firms may see Edinburgh as a place to put their renewable energy

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finance teams as well. Edinburgh beat of bits from 30 other centres,

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claiming interest in wind and wave power and had support as falling

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over themselves to work permit and claim some credit. As we build up

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and build the public money we have committed to the bank, that will

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create great opportunities. When it comes to long-term investment and

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mobilising that large-scale investment, the Scottish financial

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sector excels. I hope you believe that is the reason at Edinburgh is

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the choice. What is a green investment bank? What is it for? It

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is a small acorn of �3 billion of taxpayers' money come at seeking

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businesses to invest in, so they can grow into mighty oaks. It will

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try to get �200 billion of private sector money to turn into renewable

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business projects, designed to reduce our reliance on fossil fuels.

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It is partly the Government committing money long term on

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preferential terms but also to get money leave it in from the private

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sector and on longer term horizons than the market has been willing to

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back. The market has come forward with a lot of money for renewable

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energy and new technologies but nothing like enough and nothing

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like on the long term basis that you need to develop them. This bank

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is aimed at filling the gaps the market is not yet filling. The

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union is seen in a positive light if the HQ of the British

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institution comes to the capital of Scotland, despite the looming

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referendum. Worth remembering the words of Vince Cable in a leaked

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letter to the Prime Minister. We need to remain sensitive to the

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Scottish dimension with the perception that Alex Salmond cares

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and London does not. It is about renewables but it is also a

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decision, driven at least in part, by politics. A short while ago, the

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chief executive of Scottish Financial Enterprise, Owen Kelly,

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came into our Edinburgh studio. I asked him what he thought this bank

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would invest in that a normal bank wouldn't. The whole purpose of the

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Bank is to address what the UK government perceives to be a market

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failure in that private investors are currently not investing so

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visually in the low carbon technology that is so necessary for

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the transition to the low carbon economy. In that sense, they will

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be investing and making up the slack, if you like, in order to

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ensure the process goes at the pace it needs to go to achieve the

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objectives. Babe want to bring in private investment, don't they?

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They want to put up so many of their own. If this is going to be

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investment in brings the private sector would not invest in any way,

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I presume they are aiming this at things like pension funds, what is

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the carrot? The carrot is the opportunity to invest along with a

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public sector organisation. I suppose, the reason we are

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particularly pleased about today's announcement is, the way to do that

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is to ensure you have top quality investment professionals coming up

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with the kind of projects that make that sort of investment attractive.

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It is great for Edinburgh that it has been chosen as the place to do

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that sort of thinking. In order to invest in some of these projects, a

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state needs to get a waiver, doesn't it, from European rules?

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Can you just explain that? My understanding is that they actually

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have not got that way they yet. the latter point, it is a matter of

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time. We understand this is a process that takes time. I do not

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think we should read anything alarming into the fact there is a

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timescale here. In terms of the reason for it, it is any state aid

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and European law, anything that involves the state spending manic

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or investing has to be approved by the European Commission under

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single market rules. That is what that is about. What type of

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spending has to be approved? Is expending a private company would

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not engage in? Is the European Union more concerned about

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investment in this sort of thing a private sector company might engage

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him because it might be crowding them out? The crucial thing for the

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European Commission is protecting a single market and ensuring that all

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member states or public money of any kind really does not distort

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the market. Obviously, there are exceptions. There are exceptions in

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subsidies for railways and other things. The European Commission

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does want to keep tight control over those things. This bank could

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go ahead as matters stand and invest in something which was a

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very long term renewables project which the private sector would be...

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It is almost inconceivable the private sector would put money into

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it. They could go ahead with that presumably because it would not be

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competing with anything else? Public money could not do that but

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Private Manning could. There is lots of investment in wind. --

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private money. This is about harnessing public and private money.

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I am curious about this European point. What am getting at is, it is

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:08:38.:08:39.

it things that are not... That the private sector would not do on its

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own. I think in some areas, it might be theoretically possible but

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it does not apply with this. What can they do until they get this

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permission? What they can do it is what they have started doing in

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London already and that is preparing the organisation in

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getting the expertise together. That is what the announcement today

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is about. They have said they want to appoint the chairmen, chief

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executive and so on. That is part of building the banks are that it

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is ready to hit the ground running. Obviously, I presume people like us

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survive delighted it has come to Edinburgh. What the implications of

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the transactions team still being in London? The transactions team is

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part of the organisation that actually, if you like, delivers the

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actual investments in consultation with banks and other investors.

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That part of the organisation will be located in London. We always

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knew it would be a challenge to prise it away from London, partly

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because it is already up and running in shadow form. There will

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be a bit of inertia around moving ahead. That is where the markets

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are. The brain of the organisation and the headquarters functions that

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we always argued the best place for them was Edinburgh, and they are

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coming to Edinburgh. The real brain of the operation, the creation of

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investment vehicles and taking investment decisions, will be here

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in Edinburgh. Edinburgh is a centre for that kind of activity. Thank

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you very much indeed. Now, something of a devolutionary riddle.

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It is part of the British Isles but not part of the UK. It is defended

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by the British armed forces and its currency is backed up by the Bank

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of England, but it sets its own personal and business tax rates and

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spends what it wants on what it wants. It is not in the EU but it

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gets to trade with the EU. It used to be part of Scotland, then part

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of England and it has been independent, sort of, for 150 years.

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Ian Hamilton reports from the Isle When is a country not a country?

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When it is the Isle of Man of course. The locals would disagree.

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It might not be a sovereign state but the Isle of Man has all the

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trappings of a country. To all intents and purposes, we are

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internally self-governing. We have our own Parliament, our own laws.

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Our head of state is the Queen. We are in a very fortunate position,

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from that point of view, what Scotland is striving for, which

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already have and have had for a long time. The Manx government has

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no shortage of power, they can spend and raise their own taxes.

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The only two things they do not have control of his defence and

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foreign affairs. It has been suggested this small island in the

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middle of the Irish Sea, with a population of less than 90,000, is

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a perfect example of devolution. contribute to the United Kingdom �3

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million a year. That covers defence and foreign affairs. That is an

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agreed figure, which increases annually come up on the rate of

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inflation. That relationship has been in place for a few years.

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do tend to mirror Westminster legislation, particularly with

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benefits, pensions and the health service. We have a reciprocal

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agreement with the UK where we keep our benefit rates and pensions, etc,

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in line with the United Kingdom. On the state pension, the UK set the

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state pension. The Isle of Man pays the premium over and above the

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:13:02.:13:02.

basic rate for local residents. island has its own currency but it

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is linked to sterling. The island is not and never has been part of

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the United Kingdom, not a member of the European Union. However, it can

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deal with the EU through UK membership. It has its own bank.

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They have attracted financial houses from around the globe. It is

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not just about money. They want to diversify their economy into other

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sectors. We have 34% in financial services and we also have a

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burgeoning manufacturing sector as well as a business and other

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sectors, such as retail and hospitality. We are doing well.

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There are challenges. The Isle of Man has grown for 27 years

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Because they are a small country, it is easy for them to engage with

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:14:20.:14:20.

the government and the radical. In recent years, the Manx government

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has given the vote to 16 and 17 year-olds. At this public meeting

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about the island's health service, it is thought that it is a good

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example of devo max. A relationship is informal, which brings a raft of

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issues that I am sure Scotland will not want to follow. I suspect that

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Alex Salmond is after devo max and not be for devolution. The Scottish

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people need to be aware of the options they will be offered.

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Scotland has a fair bit of power over Westminster. Whereas the Isle

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of Man, we can't call any shots at all at the moment. Scotland does

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have some control of a Westminster, I feel. Do you think the Isle of

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Man is a good example of devo max when it refers to Scotland? Is it a

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good model? I am not fully aware of what devo max Intel at the moment,

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but if it were to end tell something equivalent to the Isle of

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Man, it would be beneficial for Scotland. So some dispute the

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independent status of the Isle of Man. They say it is just a tax

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anomaly of the UK. As a real model of what the Scottish people want to

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develop, I would say no. Scotland has shown itself as being more

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willing to act as an independent country. I would say that Scotland,

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if you do go down the road at independence, you will need to show

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us how it is done. A combination of land mass and population means that

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the differences are massive between Scotland and the Isle of Man.

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Perhaps there will be looking across the water to us.

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I'm joined now by a man who spent 15 years as Clerk to the Parliament

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of the Isle of Man alongside his career as a constitutional Law

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academic. St John Bates is currently a visiting professor at

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Strathclyde University and still travels the world consulting on

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:16:50.:16:50.

constitutional issues. First, a few facts. What -- in what meaningful

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sense is it not part of the UK? is a Crown dependency, which means

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the Queen is head of state, but it is not actually part of the UK.

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in what sense is it not part of the EU? He it is part of the EU in a

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sense. It is an illustration of one of the problems you have just seen

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in the film really. When the UK joined the EU, the Isle of Man said,

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what about us. So did the Channel Islands. Basically the UK

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government response was, we are having problems getting in

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ourselves, do not make life difficult. You're either have to

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:17:44.:17:45.

come in at some point or stay out completely. The pro to court was

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small and provided for what was needed at the time. -- the protocol.

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It was a sparse document because it was done at the last moment. It was

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an illustration of the problems someone else looking after external

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relations if you are a small place because they are doing their own

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thing and they are an element of that. All of these anomalies, and

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it is an unusual set up, isn't it the case up that is fine as far as

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Britain is concerned because it is so small? It is a bit like councils

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for small islands get to do things... They can't legislate.

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:18:43.:18:46.

course. The UK and a larger -- and other states are worried about the

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financial aspect. If someone invests in the Isle of Man, it goes

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on the London market and back into London. Public attention here was

:18:57.:19:07.
:19:07.:19:13.

drawn to the Isle of Man over the saving issues. Gordon Brown wanted

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to crack down on tax havens and wanted to know why there were some

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that were part of Britain. There are discussions about changing

:19:26.:19:36.
:19:36.:19:38.

financial regulations to make sure the financial cannot happen again.

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-- financial crash. The offshore market is competitive and if you do

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not regulate your industry properly, you are dead in the water because

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you do not get a plaque listing and people will not invest. -- get the

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right listing. In Isle of Man they have things like the FSA and they

:20:03.:20:13.
:20:13.:20:19.

do a very thorough job. That did not save the bank going down the

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drain? Of course not, but other things have gone down the drain.

:20:27.:20:34.

But there are strong links with the FSA and the equipment on the Isle

:20:34.:20:39.

of Man. In terms of the European thing, if you are part of the EU,

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are there disadvantages to not being a normal part of it? There

:20:46.:20:52.

are. This protocol dealt basically with agriculture. What matters now

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our services. They can sell insurance, but they cannot sell it

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directly into the EU. There has to be a bilateral individual state. If

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the UK had entered 10 years later, we would have been looking for

:21:09.:21:14.

something very different. Are there any parallels with the situation in

:21:14.:21:24.
:21:24.:21:29.

Scotland? Yes. We heard in that piece about devo max. If you take

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the sort of, or one end of the spectrum in terms of everything it

:21:35.:21:42.

been devolved to Scotland apart from defence and foreign affairs,

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then defence and foreign affairs are quite close to the relationship

:21:48.:21:52.

on the Isle of Man. The other thing they had that was not mentioned in

:21:52.:22:01.

the film is that it is dealt with by unwritten rules and not an act.

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The convention is that the UK is responsible for defence, foreign

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affairs and ultimately be good government of the island. Again,

:22:10.:22:20.
:22:20.:22:24.

the issue there would be the economy, or what the -- what an

:22:24.:22:33.

independent Scotland could do financially. What the Isle of Man

:22:33.:22:40.

does is not going to affect... there is a lot of Investment there.

:22:40.:22:46.

In that sense it is more like a council. It will not have a big

:22:46.:22:51.

effect if one council, for example, does something that is financially

:22:51.:22:56.

bad. You can look at it another way. People see it as offshore and so

:22:56.:23:01.

forth, but in fact, we use the power was to create the shipping

:23:01.:23:08.

register, Aircraft Register, a very large space industry by using tax

:23:08.:23:17.

breaks to help people. My mind boggled their. Unfortunately we are

:23:17.:23:23.

out of time. You would have to come back. Very quickly, tomorrow's

:23:23.:23:33.
:23:33.:23:49.

That is all we have time for this A cloudy night tonight means it is

:23:49.:23:57.

not quite as cold. It makes for a rather grey start on Friday morning.

:23:57.:24:01.

The wet weather will slowly spread across Scotland and into Northern

:24:01.:24:09.

Ireland. Some drizzly conditions across the Pennines. Central and

:24:09.:24:13.

eastern England will see some brighter skies. With a hint of

:24:13.:24:21.

sunshine, temperatures could jump up to 13 Celsius. Maybe some

:24:21.:24:28.

drizzle here and there across the south-west. Most of Wales will be

:24:28.:24:35.

dry and cloudy. Same for the sudden heart of Northern Ireland. Possibly

:24:35.:24:43.

14 degrees in Belfast. It will turn whipped by the afternoon. Northern

:24:43.:24:51.

Scotland start wet, but it should brighten up. More proneness on

:24:51.:24:59.

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