Browse content similar to 01/08/2012. Check below for episodes and series from the same categories and more!
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about making it pay. They have a ten-year contract and we intend to | :00:01. | :00:11. | |
:00:11. | :00:15. | ||
Tonight on Newsnight Scotland, as the dreadful economic news comes | :00:15. | :00:19. | |
out around the world, the Chancellor told that a character | :00:19. | :00:23. | |
business. Borrow to invest in jobs and the government will guarantee | :00:23. | :00:29. | |
lending. IB's enough to get the economy growing again? -- will | :00:29. | :00:36. | |
these measures be enough? None of the economic indicators will cheer | :00:37. | :00:41. | |
you up, dreadful predictions for British and eurozone manufacturing | :00:41. | :00:50. | |
output, retail sales fell across the country. In the Far East, signs | :00:50. | :00:56. | |
of a slowing of growth in China. Taiwan went into recession. George | :00:56. | :00:59. | |
Osborne has a new wheeze to get bank lending to business but will | :00:59. | :01:07. | |
it work? Getting the economy moving, what | :01:07. | :01:13. | |
every politician once, but easier said than done. Today, the UK | :01:13. | :01:16. | |
Government launched a scheme to make more money available to | :01:16. | :01:21. | |
homeowners and businesses. The Bank of England hopes to lend about �80 | :01:21. | :01:26. | |
billion to banks and business societies at an interest rate of | :01:26. | :01:33. | |
0.75%. But the result showed that more demand gloom. Manufacturing | :01:34. | :01:38. | |
has slowed. House prices have fallen for the 4th time in five | :01:38. | :01:42. | |
months, and in Scotland, retail sales have been trailing behind the | :01:42. | :01:47. | |
rest of the UK. Small businesses are sometimes called the engine | :01:47. | :01:52. | |
room of the economy, and in that engine room, the real impact of | :01:52. | :01:56. | |
economic uncertainty is being felt. It is a difficult situation for | :01:56. | :02:02. | |
many people, but it is by no means impossible or hopeless. One of the | :02:03. | :02:10. | |
major challenges it faces is the issue of confidence. Whether that | :02:10. | :02:14. | |
is large international corporation sitting on cash, not wanting to | :02:14. | :02:19. | |
invest, right down to individual families worried about their jobs. | :02:19. | :02:24. | |
For four years, the mood music in the economy has been downbeat, yet | :02:24. | :02:28. | |
it is not all bad news. Unemployment has been falling back | :02:28. | :02:33. | |
for several months, inflation has been coming down as well. It is | :02:34. | :02:36. | |
worth remembering low-interest rates are good news for people who | :02:36. | :02:41. | |
do not rely on interest for income, but low consumer confidence remains | :02:41. | :02:47. | |
an obstacle to getting the economy moving. As soon as you do not want | :02:47. | :02:52. | |
to make a spending decision, that has an impact on the shop you would | :02:53. | :02:58. | |
purchase from, that has a knock-on effect to suppliers. You do not | :02:58. | :03:02. | |
need to be a professor of economics to see that is a self-perpetuating | :03:02. | :03:09. | |
cycle, and we need to break that if things are going to improve. | :03:09. | :03:14. | |
course, the feel-good factor will not trade -- translate into | :03:14. | :03:21. | |
economic recovery, and the effect which positive vibes can get people | :03:21. | :03:26. | |
spending can vary. The Olympics seems to have had a mixed impact. | :03:26. | :03:31. | |
Some shops say business is down, but even opposition politicians are | :03:31. | :03:36. | |
not trying to make capital from this. I don't think we would trade | :03:36. | :03:39. | |
having the Olympic Games in London, and I don't know what will happen | :03:40. | :03:44. | |
in terms of this two week period in the economy, clearly some places | :03:44. | :03:52. | |
will have not as many people. But this is not just about the UK | :03:52. | :03:55. | |
economy are about what the Scottish short UK governments should or | :03:55. | :04:03. | |
should not do. Economies are interlinked. The crisis in the | :04:03. | :04:07. | |
eurozone continues to threaten economies across the Continent. | :04:08. | :04:11. | |
China is warning there economic growth could slow further. The | :04:11. | :04:21. | |
:04:21. | :04:23. | ||
United States said manufacturing had shrunk there. I am joined by | :04:23. | :04:33. | |
:04:33. | :04:34. | ||
Professor Jo Armstrong, David Watt, and George Kerevan. Professor Jo | :04:34. | :04:39. | |
Armstrong, what do you see happening? I do not remember a day | :04:39. | :04:42. | |
when there were so many indicators coming from around the world, none | :04:42. | :04:49. | |
of which were good, what does that tell us about prospects? It is | :04:49. | :04:52. | |
difficult to talk about the world economy because they are still | :04:52. | :04:57. | |
parts of the world but there are growing, the nations that are | :04:57. | :05:01. | |
slowing down are still growing. For the UK and Scotland, it is | :05:01. | :05:05. | |
difficult where we will seek any sort of bounce back when we have | :05:05. | :05:10. | |
significant confidence problems, and public sector cuts to come | :05:10. | :05:16. | |
through. It requires either a significant investment from the | :05:16. | :05:23. | |
private sector, which this information indicates is unlikely, | :05:23. | :05:27. | |
or a change of policy. significant thing is this news | :05:27. | :05:35. | |
about slowing economy, slower growth in the Far East. Part of the | :05:35. | :05:41. | |
plan was to be direct from households to exports, then it | :05:41. | :05:46. | |
turns out we do not export to the places that were growing, we export | :05:46. | :05:51. | |
to the European Union. Not only do we not export to those places but | :05:51. | :05:57. | |
they are slowing down. The barrier is getting higher. We had a good | :05:57. | :06:02. | |
stimulus through export and that is turning round again. The Stirling | :06:02. | :06:07. | |
has strengthened and the euro is weakening. There is a need to look | :06:07. | :06:12. | |
to other parts of the world, there has been a drive by the Scottish | :06:12. | :06:19. | |
Government to make people look at investing elsewhere. You're not | :06:19. | :06:23. | |
going to suddenly change that export drive overnight, that will | :06:23. | :06:28. | |
take time to filter through. That is the problem, is it not, there | :06:28. | :06:38. | |
were suddenly? There's a lack of demand in the British and European | :06:38. | :06:46. | |
and American economies, and these measures may be good ideas, and may | :06:46. | :06:56. | |
:06:56. | :07:02. | ||
transform the economy, but will not I think in Europe and Britain we | :07:02. | :07:07. | |
have over done the austerity so there is a lack of demand. The | :07:07. | :07:12. | |
problem in the UK is affecting manufacturing exports. For the last | :07:12. | :07:18. | |
four years, productivity in the UK has collapsed. That has pushed up | :07:18. | :07:24. | |
unit labour costs. You only have to add the fact that the euro has sunk | :07:25. | :07:29. | |
against the POW and by 15 % in the last year to... There are things | :07:29. | :07:33. | |
you can do. Were should recognise the other side of that | :07:33. | :07:39. | |
productivity., companies have been reluctant to let people go. | :07:39. | :07:42. | |
Productivity may have collapsed but we do not have the mass | :07:42. | :07:49. | |
unemployment we had in the 1980s. That is true. I am pointing out | :07:49. | :07:54. | |
that if you compare Britain's a tent to rebound towards | :07:54. | :07:58. | |
manufacturing exports, that is not working because you have to get the | :07:58. | :08:04. | |
price is right. Ireland, which is one of the eurozone countries which | :08:04. | :08:09. | |
has managed this, is powering away on experts and they have got | :08:09. | :08:13. | |
productivity up dramatically. We have to look at both demand and | :08:14. | :08:20. | |
supply. This will solve the problem. What is the mood among sure members | :08:20. | :08:26. | |
when they see the Government's, we will talk in more detail about this | :08:26. | :08:33. | |
programme, but there it was the one on infrastructure a few weeks ago, | :08:33. | :08:39. | |
is anyone cheering up? I do not think it is all bad. I speak to | :08:39. | :08:44. | |
people who are optimistic. Perhaps my view is skewed, the people were | :08:44. | :08:48. | |
not happy are heading in their offices and will not speak to me. | :08:48. | :08:53. | |
You can find people who genuinely are happy. A funny thing happened, | :08:53. | :08:58. | |
I spoke to people in PR and marketing who are very upbeat. | :08:58. | :09:04. | |
They're supposed to be the people who were hit first. But then they | :09:04. | :09:10. | |
are marketing people! Yes, but generally it is not all bad. I | :09:10. | :09:14. | |
speak to lots of press people and there is a lack of confidence and | :09:14. | :09:20. | |
an issue about availability of finance. There is a desire for | :09:20. | :09:26. | |
politicians to do things, but it is not all doom and gloom. Do you see | :09:26. | :09:31. | |
any merit in this loan scheme which has come into force today, this | :09:31. | :09:36. | |
idea that the government will make available funds to banks on | :09:36. | :09:41. | |
condition they lend it to business or indeed households and it will be | :09:41. | :09:48. | |
underwritten by government? There is merit in it but like all of | :09:48. | :09:52. | |
these deals they have done with banks in recent years, we have to | :09:52. | :09:58. | |
see it actually working. None of the previous schemes really have | :09:58. | :10:02. | |
been the major change or the sea change we all looked for her. I am | :10:02. | :10:07. | |
not totally convinced this will be in practice. In theory it sounds | :10:07. | :10:11. | |
sensible but often when they have given banks cheap money in the past, | :10:11. | :10:17. | |
they have not been lending to my members. There is a lot of devil in | :10:17. | :10:25. | |
the detail. There is also the issue of whether it addresses the problem, | :10:25. | :10:29. | |
private for up -- companies are sitting on a huge mountain of cash | :10:29. | :10:34. | |
because they do not see any sensible prospect of investing it. | :10:34. | :10:38. | |
It is not clear that many businesses have problems accessing | :10:38. | :10:44. | |
cash but it is not clear across the economy that this is the problem? | :10:44. | :10:50. | |
There is a specific issue in bank lending no one has mentioned. Banks | :10:50. | :10:54. | |
lend money and simultaneously they have to increase their capital | :10:54. | :10:58. | |
reserves. The UK has some of the most onerous capital reserve | :10:58. | :11:04. | |
requirements, worse than in Germany, so you can give it banks cheap | :11:05. | :11:10. | |
money but the government is also saying, a few Len that money you | :11:10. | :11:15. | |
have to stash a lot away as a reserve. That is one of the major | :11:15. | :11:20. | |
factor slowing lending. They are saying one thing and then another | :11:20. | :11:30. | |
:11:30. | :11:32. | ||
thing. Deer by the idea... -- we all know individual problems -- | :11:32. | :11:37. | |
individual businesses have problems but across this economy as a whole, | :11:37. | :11:43. | |
businesses do not want to end -- invest? He I think there is an | :11:43. | :11:47. | |
issue for certain types of businesses which cannot access to | :11:47. | :11:55. | |
finance. Yes, if you are not seeing demand coming through why would you | :11:55. | :11:59. | |
spend your own cash? Why would you go to a bank and asked for a lawn | :11:59. | :12:06. | |
which will cost more than three or four years ago? -- alone. If you | :12:06. | :12:11. | |
cannot see the confidence and demand, investment is a risky place, | :12:11. | :12:16. | |
especially if that uses up your free cash and you end up having to | :12:16. | :12:23. | |
make people redundant. At on this subject, hold on to your hats, we | :12:23. | :12:27. | |
will bring you breaking news or speculation, the front page of the | :12:27. | :12:36. | |
Financial Times tomorrow, there it is. Full state ownership of RBS on | :12:36. | :12:40. | |
the table - it is suggesting that the Cabinet is having discussions | :12:40. | :12:45. | |
of buying out the percentage that the taxpayer does not already own. | :12:45. | :12:52. | |
The argument is, I quote, someone in government believes that the | :12:52. | :12:58. | |
Treasury schemes to free up cash have not worked and forcing RBS to | :12:58. | :13:03. | |
lend more is the only way to push the banks into action. He had to | :13:03. | :13:07. | |
take over the whole bank which he cannot do at the moment because | :13:07. | :13:11. | |
shareholders can object at the moment. Basically, you tell them | :13:11. | :13:16. | |
what to do. It may or may not happen but some of the Government | :13:16. | :13:24. | |
may say, if it did happen, would that be a good idea? It is a very | :13:24. | :13:27. | |
interesting one that at Conservative but -- government | :13:27. | :13:31. | |
would seek to nationalise a bank. It is difficult to understand why | :13:31. | :13:36. | |
the expectation of one bank being taken over would make a marked | :13:36. | :13:40. | |
difference to lending in the sector, would act as a catalyst to all the | :13:40. | :13:44. | |
others? Would this government be able to indicate what the credit | :13:44. | :13:49. | |
risk pressing should then be to help others understand how the | :13:49. | :13:57. | |
issue price of new loans? It is difficult to see how one bank being | :13:57. | :14:00. | |
nationalised would fundamentally change their I -- the lending | :14:00. | :14:07. | |
outlook. Jaw it, what he make of this suggestion? I green | :14:07. | :14:17. | |
:14:17. | :14:25. | ||
nationalising one bank will not The Bank of England should start | :14:25. | :14:28. | |
charging banks for keeping their money idle and then they would be | :14:29. | :14:32. | |
forced to lend. You think that would be a better move than buying | :14:32. | :14:39. | |
out the bits of RBS we do not own? I am a great experimentalist. I | :14:39. | :14:44. | |
think it would be a good idea to take RBS into ownership and give it | :14:44. | :14:48. | |
to the Scottish government to run it as a regional investment bank as | :14:48. | :14:56. | |
they do in Germany. I will try anything. I presume you would like | :14:56. | :15:05. | |
a bit of RBS, not all one trillion pounds of assets? I AM intrigued by | :15:05. | :15:11. | |
this Financial Times story. I will believe it when I actually see it. | :15:11. | :15:17. | |
I will believe it when I see George Osborne actually nationalise a bank. | :15:17. | :15:23. | |
I think I did say that according to the F T, he is opposed to it. I am | :15:23. | :15:27. | |
curious to your reaction to it? not convince politicians make a | :15:27. | :15:33. | |
better job of running a bank than the current people, to be honest. I | :15:33. | :15:36. | |
think the government should say to RBS we are prepared to sit back | :15:36. | :15:42. | |
longer and wait for a return on our investment rather than force their | :15:42. | :15:48. | |
hand into getting capital out to the business community. Something | :15:48. | :15:52. | |
has to be done, I do accept that but I am far from convinced that | :15:52. | :15:57. | |
nationalising a bank is the answer. They could seek to underwrite the | :15:57. | :16:00. | |
credit risk which the bank is uncomfortable to do which might | :16:00. | :16:05. | |
encourage them to lend more. They would say that is what they are | :16:05. | :16:11. | |
doing. They are in this plan for infrastructure projects, are they | :16:11. | :16:16. | |
not? Only for projects which are deemed to be unfunded will end any | :16:16. | :16:20. | |
case but have to go now, that seems to be impossible to find such | :16:20. | :16:29. | |
projects. Does it seem to you, I'm just curious as to why they are | :16:29. | :16:34. | |
coming out with schemes like the infrastructure scheme where they | :16:34. | :16:39. | |
are underwriting debts. Today is a fancy way of doing the same thing, | :16:39. | :16:42. | |
yet in the electricity bill they had just cancelled their commitment | :16:42. | :16:47. | |
to underwrite the huge power investments whether in nuclear or | :16:47. | :16:51. | |
offshore renewables which in the original bill would be underwritten | :16:51. | :16:56. | |
by the government? I suppose the difference would be there is a | :16:57. | :17:02. | |
long-term contribution, a long-term cost to consumers that they are | :17:02. | :17:09. | |
setting in train. At the moment you can turn off the tap. We will have | :17:09. | :17:12. | |
to leave it there. Thank you very much. A quick look at the front | :17:13. | :17:20. | |
pages. I expect to see a lot of Bradley Wiggins needless to say. | :17:20. | :17:25. | |
The Financial Times - a full state ownership of RBS on the table. The | :17:25. | :17:32. | |
Guardian, there is a picture of Bradley Wiggins. The Scottish Daily | :17:32. | :17:39. |