:00:02. > :00:12.safety conditions. 15 American companies have refused to join in.
:00:12. > :00:19.
:00:19. > :00:22.They say they are pursuing their own safety checks.
:00:22. > :00:25.Tonight on Newsnight Scotland: We'll have more on RBS. Should the
:00:25. > :00:28.priority be to sell off the shares or to increase lending and maybe
:00:28. > :00:31.create regional banks that could help the economy in Scotland and
:00:31. > :00:33.other areas? We'll ask one of the men who's producing a Parliamentary
:00:33. > :00:37.report on RBS next week. And unemployment falls again here
:00:37. > :00:44.we'll have a tale of two nations. Not Scotland and England, but London
:00:44. > :00:47.and the rest of the UK. Good evening. There will be much
:00:47. > :00:49.debate about whether Stephen Hester wanted to go or was he pushed, about
:00:49. > :00:53.the pay-off he'll receive for leaving, about whether there are
:00:53. > :00:57.splits within the bank on its future or splits between the bank and the
:00:57. > :01:01.Government. The Chancellor praised him for doing a very good rescue job
:01:01. > :01:11.but Hester won't be the man to lead RBS back into the private sector as
:01:11. > :01:15.he wanted. But there's a deeper issue here.
:01:15. > :01:21.Hester found himself at the centre of a web which weaves together many
:01:21. > :01:28.of the most crucial issues of the economy. The most offices, can we
:01:28. > :01:31.have our money back? �45 billion of taxpayer cash was ploughed into
:01:31. > :01:36.RBS. George Osborne wants to put the bank back in the private sector and
:01:36. > :01:41.is due to make a speech outlining how he intends to do it. Some have
:01:41. > :01:44.suggested giving the shares a way to the public. Others argue getting RBS
:01:44. > :01:50.and other banks to lend more to business should be the top priority
:01:50. > :01:56.because that might help the economy to grow again. Vince cable has
:01:56. > :02:00.argued that is more important than a quick sale. Some argue RBS would be
:02:00. > :02:05.more able to make those new loans if it was split up into a so-called
:02:05. > :02:09.good bank and bad bank with the latter taking on most of the
:02:09. > :02:14.underperforming loans. That is expected to be one option in a
:02:14. > :02:23.parliamentary report due next week. Then there's the even bigger
:02:23. > :02:27.question. Whether or not they end up being privatised, our giant
:02:27. > :02:32.financial institutions anything like what Scotland or the UK need? After
:02:32. > :02:35.all, the one thing almost everyone agrees on is there is not enough
:02:35. > :02:38.competition in banking. Joining me now from Millbank is Lord
:02:38. > :02:41.McFall, a member of the House of Lords Economic Affairs Committee.
:02:42. > :02:49.And in our Edinburgh studio is the author and financial journalist, Ray
:02:49. > :02:57.Perman. Before we get on to other matters, a quick take on what you
:02:57. > :03:00.both make of Stephen Hester stepping down. A lot of miners were saying as
:03:00. > :03:09.recently as last weekend, Stephen Hester had no intention of stepping
:03:09. > :03:14.down. I had a breakfast meeting with Stephen Hester a couple of weeks ago
:03:14. > :03:24.in relation to the issues. Let me tell you, he was a guy who was up
:03:24. > :03:24.
:03:24. > :03:32.for it. I, for one, couldn't imagine Stephen Hester saying he would go
:03:32. > :03:36.and someone else was going to take over. He was take -- he was keen to
:03:36. > :03:42.take the bank through. In the financial Times article, he said, I
:03:42. > :03:50.hate losing. I want to keep going, I want to win. What has happened here
:03:50. > :03:57.is there has been political interference with the Chancellor.
:03:57. > :04:04.What do you make of him stepping down? The fact that Stephen Hester
:04:04. > :04:10.is getting a payoff clearly shows that he is being bored out of his
:04:10. > :04:17.contract. He is not leaving voluntarily. There's probably been a
:04:17. > :04:23.disagreement, and the most likely subject for that disagreement is the
:04:23. > :04:29.timing of privatisation. On that privatisation, there is an
:04:29. > :04:34.atmosphere being created, that the only issue about RBS is when it
:04:34. > :04:44.should be sold and how much it should be sold for. Do you think
:04:44. > :04:47.
:04:47. > :04:56.that is the right way of framing the debate? Concentrating on getting tax
:04:56. > :04:58.payers money back at the expense of anything else, particularly in
:04:58. > :05:03.trying to get it in before the election, is probably the wrong
:05:03. > :05:07.thing to do because what we need to get back to is a sustainable banking
:05:07. > :05:14.system, one which will not threaten the economy and the country in the
:05:14. > :05:19.future and is going to do a good job. On the specific point about
:05:19. > :05:28.selling it, one of the problems is if I am running I -- I am running
:05:28. > :05:35.RBS, and I am told the shares will sold, my priority will be to build
:05:35. > :05:40.up my capital, the bits of the bank that sure it up against future
:05:40. > :05:46.catastrophes over lending to the kind of businesses who are saying,
:05:46. > :05:51.we can't get money from the banks at the moment. It is an issue but it is
:05:51. > :05:56.not the only one stopping banks from lending. One of the big issues is
:05:56. > :06:00.lack of demand, and lack of demand is driven by the fact the economy is
:06:01. > :06:08.in the doldrums and companies can't see an upside. It's not entirely the
:06:08. > :06:16.fort of the banks. But the banks could lend more easily. What do you
:06:16. > :06:21.make of the way this debate has been framed? The chairman let it slip
:06:21. > :06:31.tonight in an interview when he said that the Treasury want privatisation
:06:31. > :06:36.at the end of 2014. You want a stable banking system. You don't
:06:36. > :06:42.want an unstable one. Stephen Hester will be the sixth senior executive
:06:42. > :06:48.to leave RBS in the past number of banks. This is an unstable bank.
:06:48. > :06:58.Economic size got to drive the issue. It has not got to be
:06:58. > :07:03.
:07:03. > :07:10.politics. -- economic 's has got to. This is a demand issue. It isn't all
:07:10. > :07:15.the fault of the banks. The overall consideration here should be the
:07:15. > :07:24.stability of the bank, and political interference and political diktats
:07:24. > :07:30.doesn't help the situation. A point you were about to come onto is
:07:30. > :07:40.this: It doesn't make sense, although RBS has shrunk its balance
:07:40. > :07:42.
:07:42. > :07:47.sheet, nonetheless, it is still a huge bang. Doesn't make any sense at
:07:47. > :07:54.all -- does it make any sense at all to put that back out on the private
:07:54. > :07:59.sector? You're right. The balance sheet of RBS has been shrunk by a
:07:59. > :08:08.third but it is still the size of the British economy. The problem
:08:08. > :08:13.with Britain is that we only have one sized bank. We have for huge
:08:13. > :08:18.banks and practically nothing underneath that. If you look at
:08:18. > :08:22.successful economies, for example, the German economy, they have big
:08:22. > :08:28.banks and small banks. We need sustainable ecosystems in banking,
:08:28. > :08:33.just as we do in the economy in general. The Archbishop of
:08:33. > :08:38.Canterbury was right when he said we need regional banks that understand
:08:38. > :08:46.local regions and businesses and can rent them. Breaking up RBS would be
:08:46. > :08:53.one way of achieving that. Is that an argument? One of the options was
:08:54. > :09:02.this idea of a good and bad bank. What he is suggesting something
:09:02. > :09:12.different: Why not just break up RBS into lots of banks, get back into
:09:12. > :09:13.
:09:13. > :09:21.this idea? Perhaps, let them compete with each other in the future. The
:09:21. > :09:28.need for increased competition is there, but think of the disposal of
:09:28. > :09:36.the 316 branches which the European Union asked RBS to undertake.
:09:36. > :09:43.of the 630 Bryants structures -- branches which Lloyds were
:09:43. > :09:47.undertaking. Both deals have now crumbled. After �2.5 billion spent,
:09:47. > :09:54.we are in a worse position now than three or four years ago. What does
:09:54. > :09:59.that tell us? It tells us that in getting a new architecture for
:09:59. > :10:09.banking, it can be long and difficult. Regional banks are a
:10:09. > :10:12.
:10:12. > :10:16.noble aim. But if we are going to do this, this is a long-term basis. We
:10:16. > :10:19.should take the opportunity to say what type of banking system do we
:10:19. > :10:29.want in our country and how do we go about that over the next ten or 20
:10:29. > :10:32.
:10:32. > :10:35.years? Tamil talk about how it is London, paradoxically, which has
:10:35. > :10:45.benefited more than anywhere else from the crisis in the British
:10:45. > :10:47.
:10:47. > :10:53.economy. In banking, we seem to have the same thing. Does he have a
:10:53. > :11:00.point? Delay all this and have a broader look than the Vickers
:11:00. > :11:07.commission had? I'm hoping that the Parliamentary banking commission,
:11:07. > :11:12.which John is a member of, will come out with a pretty radical and far
:11:12. > :11:17.reaching report within the next few days or weeks. Whether that is taken
:11:17. > :11:22.up by government or not, or even by the opposition parties, is another
:11:22. > :11:26.matter. It would take extreme political courage to take on the big
:11:26. > :11:35.banks and completely to change the architecture. Scotland has lost out
:11:35. > :11:39.in a big way from the banking collapse because RBS has moved its
:11:39. > :11:45.headquarters away from Scotland and London. That has hit Scotland and
:11:45. > :11:55.the other regions of the UK. To reverse that will take a real effort
:11:55. > :11:59.
:11:59. > :12:04.of will. Effort of will. There seems to be almost paralysis. Even on your
:12:04. > :12:10.committee, you've got to compromise. It's almost as if there
:12:10. > :12:14.is no mechanism to have the kind of deep thinking that you want, unless
:12:14. > :12:18.you happen to be a government that already had those ideas that has
:12:19. > :12:26.just been elected with a large majority. Our commission has been
:12:26. > :12:33.sitting for a year. It has been a long exercise. I would like to think
:12:33. > :12:39.that we would have a report which would do would sign post a way
:12:39. > :12:44.forward. There's no magic bullet solution. We've got to take a
:12:44. > :12:48.long-term view on that and I would hope that there are challenges
:12:48. > :12:56.therefore government generally about getting a banking system that serves
:12:56. > :13:00.the interests of the current -- of the customer. The only scandal is
:13:00. > :13:06.the consumer has been forgotten in this. If we start at the bottom, it
:13:06. > :13:14.is better than going up at the top and working away down. How did you
:13:14. > :13:18.see a way through this? You are both agreeing that there needs to be a
:13:18. > :13:28.more profound look at the structure of banking then we have had from the
:13:28. > :13:34.
:13:35. > :13:39.You both want to change the structure of banking but you have
:13:39. > :13:43.not said how you would get from there to here. Let me tell you what
:13:43. > :13:48.I think will happen but not what I would like to happen because that
:13:48. > :13:52.will not happen. The Royal Bank has to sell something like 300 branches.
:13:52. > :13:57.Pity is being compelled to do that by the European Commission and
:13:57. > :14:00.Lloyd's has to sell 600 branches and the buyers for both of those
:14:00. > :14:05.has fallen by the wayside. Something will have to be done
:14:05. > :14:10.there and what seems to be the only choice is that the banks themselves
:14:10. > :14:14.are going to have to break off part of their own banking system and put
:14:14. > :14:18.their own match -- put their own management in it, effectively
:14:18. > :14:23.create daughter banks would they then launch on the stock market so
:14:24. > :14:28.there will be an attempt to create some regional banks. OK, we will
:14:28. > :14:31.have to leave it there. Thank you very much for joining us. Now,
:14:31. > :14:34.there were new unemployment figures out today and the numbers out of
:14:34. > :14:37.work fell again in Scotland. The unemployment rate here is below the
:14:37. > :14:41.UK average. But when you look at almost any economic indicator from
:14:41. > :14:43.employment to house prices the area doing best in the UK is London and
:14:44. > :14:46.the South East of England. Despite the financial crash, and that
:14:46. > :14:49.London is Europe's main financial centre, London has actually done
:14:49. > :14:52.better from the crisis than most areas of Britain. As we'll hear in
:14:52. > :14:55.a moment that's not just worrying Scottish Nationalists who say
:14:55. > :14:58.Scotland would be better off on its own. It's worrying people in areas
:14:58. > :15:07.of England which are falling more rapidly behind. But first here's
:15:07. > :15:11.Andrew Black. Hello. At this upmarket Edinburgh
:15:11. > :15:16.barbers, the customer base is growing. In many ways the economy
:15:16. > :15:20.may still be on a knife-edge but is this year is looking good. Going
:15:20. > :15:25.from strength to strength. Starting in the recession was a brave thing
:15:25. > :15:28.to do but we thought it was a good idea, seeing as there is a niche in
:15:28. > :15:33.the market and this is a service led environment so it will never be
:15:33. > :15:35.taken over by internet sales or anything like that so we have had a
:15:36. > :15:40.very strong start and we are growing in terms of customer
:15:40. > :15:45.numbers and staff numbers as well. He is the good fortune spreading?
:15:45. > :15:50.Official figures out today revealed unemployment in Scotland has fallen
:15:50. > :15:58.for the 7th time erode. How it was Scotland doing when compared to the
:15:58. > :16:07.UK? Not too badly, it seems. According to a report Scottish GDP
:16:07. > :16:11.rose by 0.5% in the last quarter of 2012, while falling in the UK. I
:16:11. > :16:15.think tank said that when you take out declining oil and gas
:16:15. > :16:22.production Scottish and UK growth was largely identical. On that
:16:22. > :16:27.basis the report said that GDP grew at 0.5% in the UK, compared to 0.3%
:16:27. > :16:32.in Scotland. Down at Westminster today's job news was welcomed but
:16:32. > :16:35.there was a warning against complacency. I know there is more
:16:35. > :16:39.work that needs to be done to get more people in Scotland in to work.
:16:39. > :16:42.That is why am very keen to make sure the work programme is
:16:42. > :16:46.effective and that is focusing on helping the long-term unemployed
:16:46. > :16:51.and we will work with the Scottish government to get good outcomes for
:16:51. > :16:54.people who were out of work at the moment. Launching a jobs programme
:16:54. > :17:00.in North Ayrshire today, the First Minister said the UK Government
:17:00. > :17:03.could not be trusted. We have got a Tory Chancellor who doesn't
:17:03. > :17:08.understand a way to recovery is in investment and Martin austerity. We
:17:08. > :17:12.could get blown off course by London economic policies. Of course,
:17:12. > :17:19.when Alex Salmond hits out at London he is making a political
:17:19. > :17:29.point but there is a political -- but there is an economic one as
:17:29. > :17:32.
:17:32. > :17:37.Yesterday mayor Boris Johnson called for even more investment in
:17:37. > :17:41.the UK Capital, which he said was fair. London is not benefiting to
:17:41. > :17:46.the detriment of other parts of the UK at all. It is not some great
:17:46. > :17:50.beast that is hogging all the resources. We have got four of the
:17:50. > :17:54.six poorest boroughs in the UK in London, we have more Child poverty
:17:54. > :17:59.-- poverty. The argument we are trying to making this document is
:17:59. > :18:02.that investing in London drives the rest of the UK. When it comes to
:18:02. > :18:07.boosting the economy, can Scotland and the rest of the economy outside
:18:07. > :18:12.London compete? In all sorts of ways it is a massive dynamic global
:18:12. > :18:16.city. I don't think there is much you can do about that. Nevertheless
:18:16. > :18:20.it is argued that Scotland is still a strong competitor. Everyone seems
:18:20. > :18:24.to agree, even the Scottish government's Council of economic
:18:24. > :18:28.advisers said in a recent report that outside London and the south-
:18:28. > :18:32.east Scotland is the most prosperous part of the United
:18:32. > :18:36.Kingdom. Given London's powerhouse status, it seems like to the City
:18:36. > :18:46.will continue to attract a high level of investment. The question
:18:46. > :18:46.
:18:46. > :18:49.is, can Scotland increase -- compete?
:18:49. > :18:52.Professor Karel Williams is a Director of the Centre for Research
:18:52. > :18:58.on Socio-Cultural Change at the University of Manchester. He joins
:18:58. > :19:02.me now from Salford. My apologies in advance that we do
:19:02. > :19:07.not have that much time so I will get straight to the point. You have
:19:07. > :19:12.been doing some work on the paradox, that we had a financial crisis,
:19:12. > :19:15.London is the scent of finance, but somehow London is emerging better
:19:15. > :19:21.and it is stretching its lead over other areas of Britain. Yes, I
:19:21. > :19:25.think that is definitely true. This is part of a long run pattern.
:19:25. > :19:29.London has been putting on full- time jobs and the pattern is also
:19:29. > :19:34.that London is being supported are all kinds of ways by the taxpayer.
:19:34. > :19:39.Huge amounts of spend on infrastructure, like Crossrail,
:19:39. > :19:43.with Boris Johnson asking for more. Of course, huge amounts have gone
:19:43. > :19:47.in to the financial sector after the financial crisis. There is
:19:47. > :19:50.another bit of your theory in their you believe this has been going on
:19:50. > :19:55.for years but there was a social compact through public spending and
:19:55. > :20:00.you believe that is now breaking down. I think the basic point is
:20:00. > :20:05.that under New Labour what happened was that there was spending that
:20:05. > :20:09.created jobs and health -- in health and education, publicly-
:20:09. > :20:14.funded jobs right across the UK and also won the Dee industrialised
:20:14. > :20:18.areas you had up to 20% of the working-age population parked up on
:20:18. > :20:24.benefit. Now we are seeing cuts that heard about a Britain
:20:24. > :20:27.disproportionately because these cuts actually take out publicly-
:20:28. > :20:32.funded jobs and these cuts scale back benefits and all the evidence
:20:32. > :20:36.suggests that this takes Persian it -- purchasing power
:20:36. > :20:40.disproportionately out of, for example, poor northern English
:20:40. > :20:43.cities. The depressing bit about all of this is that you do not
:20:43. > :20:48.think there is all that much that can be done about it, certainly in
:20:48. > :20:55.economic terms. Using London's dominance will increase. I am not a
:20:55. > :20:58.Scottish that some are less but it is really a political problem. The
:20:58. > :21:03.counterweight is not really the economic competition between the
:21:03. > :21:07.regions and London but it is some kind of political negotiation, some
:21:07. > :21:12.kind of political settlement. Let me take one simple issue. As far as
:21:12. > :21:17.we can measure 80% of the extra jobs in London are taken by people
:21:17. > :21:22.who are born outside the UK. That means that internal migration is
:21:22. > :21:27.not working as it did in the 20s and 30s, when in nearly half-a-
:21:27. > :21:32.million people left South Wales for the Midlands and the south-east for
:21:32. > :21:37.jobs. That is a political problem about how you get internal
:21:37. > :21:45.migration moving and I don't think it is simply a question of economic
:21:45. > :21:51.competition. A right, what is your solution? I think we need strong
:21:51. > :21:55.regional governments who would actually raised the question of why
:21:55. > :21:59.it funds like pension funds, where are they going to London? How much
:21:59. > :22:02.taxpayers' money is being used to support a financial system
:22:03. > :22:06.concentrated London and how much infrastructure spend is going on?
:22:06. > :22:10.All right, thank you very much for joining us. We don't really have
:22:10. > :22:14.time for the papers but I will show you them. That is the Scotsman
:22:14. > :22:24.which is leading on Stephen Hester. Most of them are. I will be back
:22:24. > :22:28.
:22:28. > :22:32.Hello. The wind is really picking up at the moment. It will be a very
:22:32. > :22:36.blustery day across the southern half of the UK tomorrow.
:22:36. > :22:40.Unseasonably strong gusts could cause problems, damage trees and
:22:40. > :22:45.caused transport disruption. Heavy showers across Northern Ireland but
:22:45. > :22:49.also sunny spells. Not too many showers across Scotland. There
:22:49. > :22:54.could be spells of sunshine lifted the temperatures to 15 degrees.
:22:54. > :22:57.Heavy showers across northern England, also across the North West
:22:57. > :23:01.but moving eastwards to the afternoon and evening. Heavy
:23:01. > :23:04.downpours developing in the Midlands. A blustery day here and
:23:04. > :23:08.in East Anglia and the south-east. Generally dry and sunny but the
:23:08. > :23:12.wind will be unusually strong for the time of year and it could cause
:23:12. > :23:18.problems, may be some transport disruption but certainly problems
:23:18. > :23:22.if you are out in a small vessel on the coast. North Wales is blustery
:23:22. > :23:25.but with heavy downpours. As we go into Thursday night the wind will
:23:25. > :23:30.ease down but it will strengthen again on Friday as more wet weather
:23:30. > :23:35.pushes in from the West. In eastern areas there will be sunshine or
:23:35. > :23:38.Friday and with lighter winds on Friday in London it could feel
:23:38. > :23:43.warmer. It is far from settled, there were at the moment. The wind