29/01/2013 Newsnight Scotland


29/01/2013

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to recognise that there are times when sensitivities have to be

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Tonight on Newsnight Scotland: House prices have fallen slightly

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over the last year. But should we hope they fall further and more

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dramatically over the next few years? We hear the arguments for a

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wholesale recasting of the housing market.

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And "Vive l' Ecosse libre"? The Prime Minister of Quebec meets the

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First Minister of Scotland. What were they chatting about? And why

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was Alex Salmond keeping so quiet about it?

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Good evening. The news that house prices in Scotland fell only

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slightly over the past year is likely to be regarded as good news

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by home owners, estate agents and politicians. A cornerstone of the

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economic policy of all governments for more than 30 years has been

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first to encourage people to get on the ladder and then help them stay

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on it. But has the time come to rethink our attitudes to home

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ownership and what housing is for? From the register house archives, a

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tome that provides a snapshot of the early 20th century life. Select

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an address and it provides all sorts of information. Who lived

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there, their profession, and whether they are owned the property.

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Together, the book's point towards a twin jet -- trend.

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You do find a Scottish tell us that people were venting their tenement

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flat. But there were owners and occupiers of the larger properties

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in more middle-class areas. Even there, you would find people

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tenting and moving on. These 1905 valuation provide a fascinating

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insight into how the housing market looked in Scotland eight century

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ago. There was a time when racing was the most popular option. Asthma

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from renting. Today, it seems Pick up a newspaper or turn on the

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TV at any time in recent years, and it will not take long to realise

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that home ownership and house prices have become a national

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obsession. The change from owner of his Asian -- occupation to the

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current obsession was very quick. Partly it was because of the

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mortgage market becoming more flexible so that people could

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borrow money. Then we got up this culture of people wanting to be

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owner-occupiers. But while the culture endures, the financial

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crash ensured the days of generous lending are over. It is underlined

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by today's figures for the housing market characterised by low sales

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and stagnant prices. The banks are getting different

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signals. Politically, it is difficult to allow many more

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repossessed has to take place. A lot of people can't sell on the

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properties they have got. So, for all of those reasons, the market is

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quite stack at the moment. Prices are not falling, which is good for

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people who owned properties. Not so good if you are trying to get onto

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the property ladder. But the number of transactions remains low.

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This changing an spake -- landscape changes the motives for home

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ownership. That is the complexity of housing. It is both a financial

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investment product and a use product. Over that time period from

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the 1960s to now, we have seen it more as an investment product, not

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necessarily as a use product. I think that is the change. We are

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now going back to see it more as a use product. For Lynsey and her

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partner Stephen, the priority was buying a home they could call their

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own, I hope that was made possible by a government scheme that helped

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him to overcome the hurdle of finding this posit. -- deposit.

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were able to put down just a 5% deposit.

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This initiative for new-build houses is welcomed by those in the

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business of buying and selling property. But they would like more

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to be done. They certainly help first-time buyers, but of course,

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the new-build market is only a small percentage of the market --

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market. The rest it left behind. What would we -- what we would like

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to see his release in the cellar to rip up the ladder. -- to move up

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the ladder. But some point to a cultural shift

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already well under way. We are seeing an increase in the number of

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people moving into the private rental sector. The age of under 35,

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we are seeing a dramatic increase, which changes the number -- nature

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of housing. Private renting is short, and the notion of security

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within the house and the potential for people moving around regularly

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has major implications for the way that we organise society. If you

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have got kids, you can't move every six months. A change in trend that

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begs the question, to what extent do the history books. Towards the

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future for Scotland? -- do the history books point towards the

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future for Scotland? I'm joined now in the studio by

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Mark Stephens, professor of Public Policy at Heriot-Watt University.

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And joining me from our Salford studio is Jonathan Davis, who runs

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the housepricecrash.co.uk website. Dunnett then, the housing crash

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which you thought was going to happen. -- Jonathan. It hasn't

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really happened, has it? Prices nationally are lower than they were

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at the peak of 2007, even though, as everyone knows, we have the

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lowest interest rates in history. If you look to the West, not far

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across the water, to Northern Ireland, house prices are down 53%.

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And nationally, they are down a bit less because of London. There's no

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doubt the market has collapsed, as indeed the piece just said. The

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number of transactions is down about a half. I tell you, anybody

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who knows about finance of the city or markets knows that when the

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volume collapses, the price will follow. Sure, except it hasn't so

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far. Northern Ireland was different, as was the US. When you look at

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these markets, it looks as if some of the financial engineering that

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was going on there was not going on in as extreme a way in the UK. We

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are seeing what you would expect in a prolonged recession, aren't we?

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There's no doubt the politicians have been doing everything they can

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to avoid a collapse on the mainland, but they can't avoid it because the

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economics at -- are clear. In comes are falling. The public sector cuts

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have only scratched the surface. There's more to come. At some point

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in the future, interest rates are going to rise. Do you think that is

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true? I don't agree with the emphasis. I think when you get

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rapidly falling house prices, as a result of forced sales, this is a

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big difference on the early 1990s, when we saw protracted falls in

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house prices, then you had a period of... Why are not -- we not getting

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that? The principal reason is the low interest rate policy. That is

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the big difference between now in the early 1990s. So what you get

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instead is this reduction in transactions. That is where the

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adjustments are taking place. A less there's a trigger setting

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people into forced sales, then I think we have a relatively stable

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house price outlook. But there may be longer term adjustment. Is there

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anything that can be done about it? George Osborne would argue that low

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interest rates are a result of his wonderful economic policies. A lot

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of Economist's would say it is nothing to do with that. They would

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just say it's because of a massive private sector surplus. It is not

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at all clear that you could somehow engineer a rise in interest rates.

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Well, no, but I don't think that is the point. The point is as long as

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we can retain low interest rates, what we will get in the housing

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market is a gradual adjustment. I think that would be desirable. What

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would be undesirable would be at -- and attempts to stoke up the market

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artificially. Jonathan, do you think that is enough? Or should we

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seize the moment? Given the distortions in the housing market,

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and how it is arguably going to be, a driver of inequality in this

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country and how difficult it is for younger families to get on the

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property in -- ladder, isn't now the time to force prices down?

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Politicians, the people who lead the country's, they grew up in an

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era of falling interest rates and rising loans and rising house

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prices. It worked. So they are now hard-wired into believing that high

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house prices is actually good for an economy without joining the dots.

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It is dreadful for an economy! People can't buy, so they are

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spending a lot of money on rent, which means they can't spend it in

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the economy, and those who have taken out a mortgage, although the

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cost comes down, the other chap is not right. Eventually, interest

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rates will rise. They are at a 300 yellow. There's way that his -- no

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way that is sustainable. Look at Northern Ireland. Look at America,

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where we have much lower house prices now. People are spending

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less on housing. They can actually put it into the economy. What do

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It is a little bit hysterical. It is undesirable to have high house

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prices in the long term. There was a belief that we were in this

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position where house prices would continue to go up and up and be

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maintained, and people could continue to borrow against the

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value of their houses and put that money into the economy. Clearly

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that was not sustainable. We had this big shock and we saw a fall in

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house prices. We have now seen some kind of stabilisation. I think it

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would be desirable long-term for there to be a gradual reduction in

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house prices in relation to incomes. If you're going to engineer it,

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politically it is very difficult. Everything in Britain is geared

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towards buying a house because you do not have to pay capital gains

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tax when you sell it. On the other hand, no political party will say

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it would be more ahead is -- more sensible if we abolish that will

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stop the politicians are hard-wired into believing that people want

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high house prices. They are forgetting those under 35 who do

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not have mortgages and are paying rent. They are forgetting and

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retired people living in valuable properties which largely do not

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have any debts. There is issued proportion of the electorate which

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would be quite comfortable having much lower house prices. The reason

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we have high house prices is the politicians think it is good, and

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big business wants it, but that is no good for the real economy. That

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is the multinationals. It is the multinationals laying people off,

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the small companies taking people on. We will have to leave it there.

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The First Minister had a meeting of minds. His guest in Edinburgh was

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Pauline Marois, the Prime Minister of Quebec. They have twice held

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referendums on whether to stop being a province and the, country.

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There are 8 million people in Quebec, nearly a quarter of all

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comedians. Pauline Marois is the premier of Quebec, she was greeted

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at Holyrood by the Deputy presiding Thank you very much, it is a great

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pleasure to meet you. This bottle is the official record of her

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meeting with the First Minister of Scotland. Most people in Quebec

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speak French and what political independence from Canada, but not

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yet a majority. In 1980 and 1985 they had the chance to vote for it

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and they did not. In 1995, the majority was wafer-thin. Pauline

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Marois is careful not to intrude on the Scottish debate, but she does

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have a device for Alex Salmond and the campaign. You have obligations

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for the people of a Yes orientation and the no orientation. You need to

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say to these groups, you have an amount of money you can invest, put

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into publicity, marketing, in our case, the other provinces and the

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federal government decided to put money into the process, and that

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was not permitted, and has been very difficult for us. The party

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which governs as a minority would like to see another referendum, but

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Pauline Marois would not be drawn on when they would like that to be.

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I am joined from Edinburgh by Annis May Timpson, director of Canadian

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Studies at Edinburgh University. What I find extraordinary is you

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have a nationalist Prime Minister meeting the First Minister of

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Scotland. They would not let any TV cameras in. The Scottish Government

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put out a press release about it in which they managed to misspell the

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word Quebec throughout, and they had not even permitted on his

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official website. While they been so quiet? It is interesting that

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Alex Salmond is heading a majority government and looking forward in

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his view to a referendum in 2014. He has had a diplomatic visit on

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the way back from Davos from the premier of a minority government

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which, although was wafer-thin, nonetheless lost its referendum. I

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think it is quite interesting that many Alex Salmond does not want to

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be associated directly with this process, even though historically,

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he has always been clear politically that the party and the

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SNP have a long historic relationship. Is there a mood music

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thing here? People in Scotland and the rest of Britain have very warm

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feelings about Canada, I'm not sure they have warm feelings about

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Quebec in particular. There's a long relationship between Scotland

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and Quebec, you only have to go to Montreal to see the influence.

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Nonetheless, the point you're making is very good, because I

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think Alex Salmond is probably playing a very important strategic

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role in that he needs to gain and continue to gain the support of

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Canada and the Canadian government, particularly in the run-up to the

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Commonwealth Games next year, before his proposed referendum. In

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some senses, he needs to play the nationalist card, to be welcoming

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to Pauline Marois at some level, but nonetheless, he also needs to

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keep that Canadian agenda up front as well because of his broader

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objectives, and that also relates to homecoming issues that are

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important. Is there some nervousness about Pauline Marois

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herself? I'm not sure what the status is, but she was going to

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introduce an identity act in Quebec, which was widely denounced by

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people across Canada as being xenophobic. It is not entirely

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clear that that is something Alex Salmond would want to be associated

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with. That is a real problem that goes back much more historically to

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the previous leader and a famous comments when they lost at the 1995

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election. He said it was because of money in the ethnic vote, which was

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an anti-Semitic comment at the time. I also think possibly because of

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the difficulties Pauline Marois bases around trying to promote an

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idea of civic nationalism, it might have been quite helpful for her in

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Canada and in Quebec particularly to come here and be associated with

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a party internationally that is actually trying to promote in

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Scotland as we Sonya programme a very civic agenda, -- as we have

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seen on your programme, one of inclusion. That might be very

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important. The other thing that interested me is I think I am right

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in saying in 1995 when they had a referendum, when the campaign

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started, the pro-independence people were absolutely nowhere,

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doing really badly. They almost turned it round. Presumably there

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was political intelligence. Sure, that is going on all the time, but

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actually at the time in the early 1990s, the Yes vote was doing quite

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well, at 42%. That obviously changed, with 49%. I think one of

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the things that is really crucial here... Very briefly, how did they

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turn it round? I think that they turned it round because, and this

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is very different from the situation here, the leader was

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supported by performing of the official opposition in the Canadian

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federal parliament -- supported by the official opposition. That

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combination of factors reinforce something that was significant, and

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that is so different from what is going on in the UK, where you

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actually have 53 MPs from Scotland in the UK parliament actually

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supportive of the Unionist agenda. We have to leave it there. Thank

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you. Very quick look at the front pages, starting with the Scotsman.

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It says UK government figures It says UK government figures

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