12/06/2013 Newsnight Scotland


12/06/2013

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safety conditions. 15 American companies have refused to join in.

:00:02.:00:12.
:00:12.:00:19.

They say they are pursuing their own safety checks.

:00:19.:00:22.

Tonight on Newsnight Scotland: We'll have more on RBS. Should the

:00:22.:00:25.

priority be to sell off the shares or to increase lending and maybe

:00:25.:00:28.

create regional banks that could help the economy in Scotland and

:00:28.:00:31.

other areas? We'll ask one of the men who's producing a Parliamentary

:00:31.:00:33.

report on RBS next week. And unemployment falls again here

:00:33.:00:37.

we'll have a tale of two nations. Not Scotland and England, but London

:00:37.:00:44.

and the rest of the UK. Good evening. There will be much

:00:44.:00:47.

debate about whether Stephen Hester wanted to go or was he pushed, about

:00:47.:00:49.

the pay-off he'll receive for leaving, about whether there are

:00:49.:00:53.

splits within the bank on its future or splits between the bank and the

:00:53.:00:57.

Government. The Chancellor praised him for doing a very good rescue job

:00:57.:01:01.

but Hester won't be the man to lead RBS back into the private sector as

:01:01.:01:11.

he wanted. But there's a deeper issue here.

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Hester found himself at the centre of a web which weaves together many

:01:15.:01:21.

of the most crucial issues of the economy. The most offices, can we

:01:21.:01:28.

have our money back? �45 billion of taxpayer cash was ploughed into

:01:28.:01:31.

RBS. George Osborne wants to put the bank back in the private sector and

:01:31.:01:36.

is due to make a speech outlining how he intends to do it. Some have

:01:36.:01:41.

suggested giving the shares a way to the public. Others argue getting RBS

:01:41.:01:44.

and other banks to lend more to business should be the top priority

:01:44.:01:50.

because that might help the economy to grow again. Vince cable has

:01:50.:01:56.

argued that is more important than a quick sale. Some argue RBS would be

:01:56.:02:00.

more able to make those new loans if it was split up into a so-called

:02:00.:02:05.

good bank and bad bank with the latter taking on most of the

:02:05.:02:09.

underperforming loans. That is expected to be one option in a

:02:09.:02:14.

parliamentary report due next week. Then there's the even bigger

:02:14.:02:23.

question. Whether or not they end up being privatised, our giant

:02:23.:02:27.

financial institutions anything like what Scotland or the UK need? After

:02:27.:02:32.

all, the one thing almost everyone agrees on is there is not enough

:02:32.:02:35.

competition in banking. Joining me now from Millbank is Lord

:02:35.:02:38.

McFall, a member of the House of Lords Economic Affairs Committee.

:02:38.:02:41.

And in our Edinburgh studio is the author and financial journalist, Ray

:02:42.:02:49.

Perman. Before we get on to other matters, a quick take on what you

:02:49.:02:57.

both make of Stephen Hester stepping down. A lot of miners were saying as

:02:57.:03:00.

recently as last weekend, Stephen Hester had no intention of stepping

:03:00.:03:09.

down. I had a breakfast meeting with Stephen Hester a couple of weeks ago

:03:09.:03:14.

in relation to the issues. Let me tell you, he was a guy who was up

:03:14.:03:24.
:03:24.:03:24.

for it. I, for one, couldn't imagine Stephen Hester saying he would go

:03:24.:03:32.

and someone else was going to take over. He was take -- he was keen to

:03:32.:03:36.

take the bank through. In the financial Times article, he said, I

:03:36.:03:42.

hate losing. I want to keep going, I want to win. What has happened here

:03:42.:03:50.

is there has been political interference with the Chancellor.

:03:50.:03:57.

What do you make of him stepping down? The fact that Stephen Hester

:03:57.:04:04.

is getting a payoff clearly shows that he is being bored out of his

:04:04.:04:10.

contract. He is not leaving voluntarily. There's probably been a

:04:10.:04:17.

disagreement, and the most likely subject for that disagreement is the

:04:17.:04:23.

timing of privatisation. On that privatisation, there is an

:04:23.:04:29.

atmosphere being created, that the only issue about RBS is when it

:04:29.:04:34.

should be sold and how much it should be sold for. Do you think

:04:34.:04:44.
:04:44.:04:47.

that is the right way of framing the debate? Concentrating on getting tax

:04:47.:04:56.

payers money back at the expense of anything else, particularly in

:04:56.:04:58.

trying to get it in before the election, is probably the wrong

:04:58.:05:03.

thing to do because what we need to get back to is a sustainable banking

:05:03.:05:07.

system, one which will not threaten the economy and the country in the

:05:07.:05:14.

future and is going to do a good job. On the specific point about

:05:14.:05:19.

selling it, one of the problems is if I am running I -- I am running

:05:19.:05:28.

RBS, and I am told the shares will sold, my priority will be to build

:05:28.:05:35.

up my capital, the bits of the bank that sure it up against future

:05:35.:05:40.

catastrophes over lending to the kind of businesses who are saying,

:05:40.:05:46.

we can't get money from the banks at the moment. It is an issue but it is

:05:46.:05:51.

not the only one stopping banks from lending. One of the big issues is

:05:51.:05:56.

lack of demand, and lack of demand is driven by the fact the economy is

:05:56.:06:00.

in the doldrums and companies can't see an upside. It's not entirely the

:06:01.:06:08.

fort of the banks. But the banks could lend more easily. What do you

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make of the way this debate has been framed? The chairman let it slip

:06:16.:06:21.

tonight in an interview when he said that the Treasury want privatisation

:06:21.:06:31.

at the end of 2014. You want a stable banking system. You don't

:06:31.:06:36.

want an unstable one. Stephen Hester will be the sixth senior executive

:06:36.:06:42.

to leave RBS in the past number of banks. This is an unstable bank.

:06:42.:06:48.

Economic size got to drive the issue. It has not got to be

:06:48.:06:58.
:06:58.:07:03.

politics. -- economic 's has got to. This is a demand issue. It isn't all

:07:03.:07:10.

the fault of the banks. The overall consideration here should be the

:07:10.:07:15.

stability of the bank, and political interference and political diktats

:07:15.:07:24.

doesn't help the situation. A point you were about to come onto is

:07:24.:07:30.

this: It doesn't make sense, although RBS has shrunk its balance

:07:30.:07:40.
:07:40.:07:42.

sheet, nonetheless, it is still a huge bang. Doesn't make any sense at

:07:42.:07:47.

all -- does it make any sense at all to put that back out on the private

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sector? You're right. The balance sheet of RBS has been shrunk by a

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third but it is still the size of the British economy. The problem

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with Britain is that we only have one sized bank. We have for huge

:08:08.:08:13.

banks and practically nothing underneath that. If you look at

:08:13.:08:18.

successful economies, for example, the German economy, they have big

:08:18.:08:22.

banks and small banks. We need sustainable ecosystems in banking,

:08:22.:08:28.

just as we do in the economy in general. The Archbishop of

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Canterbury was right when he said we need regional banks that understand

:08:33.:08:38.

local regions and businesses and can rent them. Breaking up RBS would be

:08:38.:08:46.

one way of achieving that. Is that an argument? One of the options was

:08:46.:08:53.

this idea of a good and bad bank. What he is suggesting something

:08:54.:09:02.

different: Why not just break up RBS into lots of banks, get back into

:09:02.:09:12.
:09:12.:09:13.

this idea? Perhaps, let them compete with each other in the future. The

:09:13.:09:21.

need for increased competition is there, but think of the disposal of

:09:21.:09:28.

the 316 branches which the European Union asked RBS to undertake.

:09:28.:09:36.

of the 630 Bryants structures -- branches which Lloyds were

:09:36.:09:43.

undertaking. Both deals have now crumbled. After �2.5 billion spent,

:09:43.:09:47.

we are in a worse position now than three or four years ago. What does

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that tell us? It tells us that in getting a new architecture for

:09:54.:09:59.

banking, it can be long and difficult. Regional banks are a

:09:59.:10:09.
:10:09.:10:12.

noble aim. But if we are going to do this, this is a long-term basis. We

:10:12.:10:16.

should take the opportunity to say what type of banking system do we

:10:16.:10:19.

want in our country and how do we go about that over the next ten or 20

:10:19.:10:29.
:10:29.:10:32.

years? Tamil talk about how it is London, paradoxically, which has

:10:32.:10:35.

benefited more than anywhere else from the crisis in the British

:10:35.:10:45.
:10:45.:10:47.

economy. In banking, we seem to have the same thing. Does he have a

:10:47.:10:53.

point? Delay all this and have a broader look than the Vickers

:10:53.:11:00.

commission had? I'm hoping that the Parliamentary banking commission,

:11:00.:11:07.

which John is a member of, will come out with a pretty radical and far

:11:07.:11:12.

reaching report within the next few days or weeks. Whether that is taken

:11:12.:11:17.

up by government or not, or even by the opposition parties, is another

:11:17.:11:22.

matter. It would take extreme political courage to take on the big

:11:22.:11:26.

banks and completely to change the architecture. Scotland has lost out

:11:26.:11:35.

in a big way from the banking collapse because RBS has moved its

:11:35.:11:39.

headquarters away from Scotland and London. That has hit Scotland and

:11:39.:11:45.

the other regions of the UK. To reverse that will take a real effort

:11:45.:11:55.
:11:55.:11:59.

of will. Effort of will. There seems to be almost paralysis. Even on your

:11:59.:12:04.

committee, you've got to compromise. It's almost as if there

:12:04.:12:10.

is no mechanism to have the kind of deep thinking that you want, unless

:12:10.:12:14.

you happen to be a government that already had those ideas that has

:12:14.:12:18.

just been elected with a large majority. Our commission has been

:12:19.:12:26.

sitting for a year. It has been a long exercise. I would like to think

:12:26.:12:33.

that we would have a report which would do would sign post a way

:12:33.:12:39.

forward. There's no magic bullet solution. We've got to take a

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long-term view on that and I would hope that there are challenges

:12:44.:12:48.

therefore government generally about getting a banking system that serves

:12:48.:12:56.

the interests of the current -- of the customer. The only scandal is

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the consumer has been forgotten in this. If we start at the bottom, it

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is better than going up at the top and working away down. How did you

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see a way through this? You are both agreeing that there needs to be a

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more profound look at the structure of banking then we have had from the

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:13:28.:13:34.

You both want to change the structure of banking but you have

:13:35.:13:39.

not said how you would get from there to here. Let me tell you what

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I think will happen but not what I would like to happen because that

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will not happen. The Royal Bank has to sell something like 300 branches.

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Pity is being compelled to do that by the European Commission and

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Lloyd's has to sell 600 branches and the buyers for both of those

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has fallen by the wayside. Something will have to be done

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there and what seems to be the only choice is that the banks themselves

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are going to have to break off part of their own banking system and put

:14:10.:14:14.

their own match -- put their own management in it, effectively

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create daughter banks would they then launch on the stock market so

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there will be an attempt to create some regional banks. OK, we will

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have to leave it there. Thank you very much for joining us. Now,

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there were new unemployment figures out today and the numbers out of

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work fell again in Scotland. The unemployment rate here is below the

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UK average. But when you look at almost any economic indicator from

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employment to house prices the area doing best in the UK is London and

:14:41.:14:43.

the South East of England. Despite the financial crash, and that

:14:44.:14:46.

London is Europe's main financial centre, London has actually done

:14:46.:14:49.

better from the crisis than most areas of Britain. As we'll hear in

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a moment that's not just worrying Scottish Nationalists who say

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Scotland would be better off on its own. It's worrying people in areas

:14:55.:14:58.

of England which are falling more rapidly behind. But first here's

:14:58.:15:07.

Andrew Black. Hello. At this upmarket Edinburgh

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barbers, the customer base is growing. In many ways the economy

:15:11.:15:16.

may still be on a knife-edge but is this year is looking good. Going

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from strength to strength. Starting in the recession was a brave thing

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to do but we thought it was a good idea, seeing as there is a niche in

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the market and this is a service led environment so it will never be

:15:28.:15:33.

taken over by internet sales or anything like that so we have had a

:15:33.:15:35.

very strong start and we are growing in terms of customer

:15:36.:15:40.

numbers and staff numbers as well. He is the good fortune spreading?

:15:40.:15:45.

Official figures out today revealed unemployment in Scotland has fallen

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for the 7th time erode. How it was Scotland doing when compared to the

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UK? Not too badly, it seems. According to a report Scottish GDP

:15:58.:16:07.

rose by 0.5% in the last quarter of 2012, while falling in the UK. I

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think tank said that when you take out declining oil and gas

:16:11.:16:15.

production Scottish and UK growth was largely identical. On that

:16:15.:16:22.

basis the report said that GDP grew at 0.5% in the UK, compared to 0.3%

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in Scotland. Down at Westminster today's job news was welcomed but

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there was a warning against complacency. I know there is more

:16:32.:16:35.

work that needs to be done to get more people in Scotland in to work.

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That is why am very keen to make sure the work programme is

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effective and that is focusing on helping the long-term unemployed

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and we will work with the Scottish government to get good outcomes for

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people who were out of work at the moment. Launching a jobs programme

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in North Ayrshire today, the First Minister said the UK Government

:16:54.:17:00.

could not be trusted. We have got a Tory Chancellor who doesn't

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understand a way to recovery is in investment and Martin austerity. We

:17:03.:17:08.

could get blown off course by London economic policies. Of course,

:17:08.:17:12.

when Alex Salmond hits out at London he is making a political

:17:12.:17:19.

point but there is a political -- but there is an economic one as

:17:19.:17:29.
:17:29.:17:32.

Yesterday mayor Boris Johnson called for even more investment in

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the UK Capital, which he said was fair. London is not benefiting to

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the detriment of other parts of the UK at all. It is not some great

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beast that is hogging all the resources. We have got four of the

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six poorest boroughs in the UK in London, we have more Child poverty

:17:50.:17:54.

-- poverty. The argument we are trying to making this document is

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that investing in London drives the rest of the UK. When it comes to

:17:59.:18:02.

boosting the economy, can Scotland and the rest of the economy outside

:18:02.:18:07.

London compete? In all sorts of ways it is a massive dynamic global

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city. I don't think there is much you can do about that. Nevertheless

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it is argued that Scotland is still a strong competitor. Everyone seems

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to agree, even the Scottish government's Council of economic

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advisers said in a recent report that outside London and the south-

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east Scotland is the most prosperous part of the United

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Kingdom. Given London's powerhouse status, it seems like to the City

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will continue to attract a high level of investment. The question

:18:36.:18:46.
:18:46.:18:46.

is, can Scotland increase -- compete?

:18:46.:18:49.

Professor Karel Williams is a Director of the Centre for Research

:18:49.:18:52.

on Socio-Cultural Change at the University of Manchester. He joins

:18:52.:18:58.

me now from Salford. My apologies in advance that we do

:18:58.:19:02.

not have that much time so I will get straight to the point. You have

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been doing some work on the paradox, that we had a financial crisis,

:19:07.:19:12.

London is the scent of finance, but somehow London is emerging better

:19:12.:19:15.

and it is stretching its lead over other areas of Britain. Yes, I

:19:15.:19:21.

think that is definitely true. This is part of a long run pattern.

:19:21.:19:25.

London has been putting on full- time jobs and the pattern is also

:19:25.:19:29.

that London is being supported are all kinds of ways by the taxpayer.

:19:29.:19:34.

Huge amounts of spend on infrastructure, like Crossrail,

:19:34.:19:39.

with Boris Johnson asking for more. Of course, huge amounts have gone

:19:39.:19:43.

in to the financial sector after the financial crisis. There is

:19:43.:19:47.

another bit of your theory in their you believe this has been going on

:19:47.:19:50.

for years but there was a social compact through public spending and

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you believe that is now breaking down. I think the basic point is

:19:55.:20:00.

that under New Labour what happened was that there was spending that

:20:00.:20:05.

created jobs and health -- in health and education, publicly-

:20:05.:20:09.

funded jobs right across the UK and also won the Dee industrialised

:20:09.:20:14.

areas you had up to 20% of the working-age population parked up on

:20:14.:20:18.

benefit. Now we are seeing cuts that heard about a Britain

:20:18.:20:24.

disproportionately because these cuts actually take out publicly-

:20:24.:20:27.

funded jobs and these cuts scale back benefits and all the evidence

:20:28.:20:32.

suggests that this takes Persian it -- purchasing power

:20:32.:20:36.

disproportionately out of, for example, poor northern English

:20:36.:20:40.

cities. The depressing bit about all of this is that you do not

:20:40.:20:43.

think there is all that much that can be done about it, certainly in

:20:43.:20:48.

economic terms. Using London's dominance will increase. I am not a

:20:48.:20:55.

Scottish that some are less but it is really a political problem. The

:20:55.:20:58.

counterweight is not really the economic competition between the

:20:58.:21:03.

regions and London but it is some kind of political negotiation, some

:21:03.:21:07.

kind of political settlement. Let me take one simple issue. As far as

:21:07.:21:12.

we can measure 80% of the extra jobs in London are taken by people

:21:12.:21:17.

who are born outside the UK. That means that internal migration is

:21:17.:21:22.

not working as it did in the 20s and 30s, when in nearly half-a-

:21:22.:21:27.

million people left South Wales for the Midlands and the south-east for

:21:27.:21:32.

jobs. That is a political problem about how you get internal

:21:32.:21:37.

migration moving and I don't think it is simply a question of economic

:21:37.:21:45.

competition. A right, what is your solution? I think we need strong

:21:45.:21:51.

regional governments who would actually raised the question of why

:21:51.:21:55.

it funds like pension funds, where are they going to London? How much

:21:55.:21:59.

taxpayers' money is being used to support a financial system

:21:59.:22:02.

concentrated London and how much infrastructure spend is going on?

:22:03.:22:06.

All right, thank you very much for joining us. We don't really have

:22:06.:22:10.

time for the papers but I will show you them. That is the Scotsman

:22:10.:22:14.

which is leading on Stephen Hester. Most of them are. I will be back

:22:14.:22:24.
:22:24.:22:28.

Hello. The wind is really picking up at the moment. It will be a very

:22:28.:22:32.

blustery day across the southern half of the UK tomorrow.

:22:32.:22:36.

Unseasonably strong gusts could cause problems, damage trees and

:22:36.:22:40.

caused transport disruption. Heavy showers across Northern Ireland but

:22:40.:22:45.

also sunny spells. Not too many showers across Scotland. There

:22:45.:22:49.

could be spells of sunshine lifted the temperatures to 15 degrees.

:22:49.:22:54.

Heavy showers across northern England, also across the North West

:22:54.:22:57.

but moving eastwards to the afternoon and evening. Heavy

:22:57.:23:01.

downpours developing in the Midlands. A blustery day here and

:23:01.:23:04.

in East Anglia and the south-east. Generally dry and sunny but the

:23:04.:23:08.

wind will be unusually strong for the time of year and it could cause

:23:08.:23:12.

problems, may be some transport disruption but certainly problems

:23:12.:23:18.

if you are out in a small vessel on the coast. North Wales is blustery

:23:18.:23:22.

but with heavy downpours. As we go into Thursday night the wind will

:23:22.:23:25.

ease down but it will strengthen again on Friday as more wet weather

:23:25.:23:30.

pushes in from the West. In eastern areas there will be sunshine or

:23:30.:23:35.

Friday and with lighter winds on Friday in London it could feel

:23:35.:23:38.

warmer. It is far from settled, there were at the moment. The wind

:23:38.:23:43.

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