05/09/2011 Newsnight

You can almost smell the anxiety, on the trading floors, in the banks

and in the boardrooms of the international financial

institutions, there is a real fear that the economy is about to take

another nose dive. Is it just that they have come back

from their holidays and seen things look different when you're not on

the beach, Paul? Jeremy, no, there is red lights flashing all across

the economic data. And the Americans have begun to take their

money out of European banks. Chancellor, who had to cope the

last night it hit the fan is here, with some advice on cleaning up the

mess. Colonel Gaddafi's secret police

have fled Tripoli, leaving behind their correspondence with MI6. This

British resident was named to the Libyans as a member of an anti-

Gaddafi Islamist group, by our own Secret Service. Why?

We will have an exclusive interview with the leader of Libya's

transitional Government. I will ask Libya's new leader why

he hasn't moved to the capital, Tripoli, and why he wants armed

militias to stay on the streets. Is the way to revive Conservatism in

Scotland to stop calling the party the Scottish Conservatives, the

front runner for the leadership thinks so. How on earth can that

support the union he claims to Woe, woe, thrice woe, as older

viewers may recall Frankie Howard saying on Up Pompeii. The bad news

on the state of the economy, just keeps coming. There has now been so

much of it, that people who once praised the British Government's

strategy for balancing the books, are now begging them to change

course. While across the world, stock markets reflect the gloom by

plunging lower and lower. The FTSE 100 share index fell 3.5% today.

Shares in the Royal Bank of Scotland fell 12%, all to constant

background chatter about how the bankrupt economies of southern

Europe are going to take down a bank or two. Paul Mason is here,

what's causing the panic? Over the last two weeks we have had

mounting evidence that the recovery is over in the US a, in the

eurozone, also - US, in the eurozone, also here. It may not be

a double-dip recession, we may not get to that, but we might be at

stall speed, as economists put it, it might be growing too slow to

gain momentum. One of the best snapshots you can take of an

economy, is by looking at what purchasing managers think, what the

people in business, who actually buy things, are doing right now.

And we had figures on that both for the eurozone, and here today, and

they were both bad. In the eurozone, today, we have had

a survey showing a clear fall in manufacturing orders. Here's the

long-term trend, and we can see the big dip that took place after

Lehman Brothers, well now there's a dip again. And growth is now

Earlier this year, everybody was celebrating Germany's growth, 1.3%

in a single quarter. Well it now looks like in the second quarter it

was just 0.1%. It might already be in a recession. Meanwhile, Greece

is definitely in a deep recession, the austerity programme there means

the economy is 6.9% smaller than it was a year ago. And, says the state

budget office, its debt dynamic is now out of control. Up until now,

we have been getting bad news out of southern Europe, but fairly

strong news out from northern Europe. The message has been, well,

perhaps the German economy can keep the others going. With the latest

data showing that German growth has virtually disappeared, with the

weakening of the expectations data from EFO particularly, it does

looks a if the German economy isn't in a strong state, that make the

break up of the euro, increasingly likely. But hold on a minute, how

do you get from one bad growth figure to the break up of a whole

currency? Well, Greece, Ireland and Portugal have banks being kept

alive from state aid from Europe, in July, Italy and Spain started

taking money from the centre to keep their banks afloat. That

leaves these countries in the north doing the bailing out. And the

problem is, how many of their banks would collapse if they had to write

down debts from southern Europe. The answer is, a lot of them. And

so, you have got American banks now starting to move their money out of

the European system, and evidence that even European banks are moving

their cash to America. About half a trillion in the last six months.

think it is pretty clear that the eurozone economy is slowing down

really very sharply. In common with what we are seeing around the world.

Evidence from the United States, from parts of Asia, and also the UK,

it is all the same thing a very marked slowdown. I think the most

worrying thing is this slowdown is happening at a time when it is

quite obvious that the banking system remains extremely weak.

Market anxiety is gathering about the continued existence, frankly,

of the euro, we are facing the prosability of both a banking and

financial crisis and an economic crisis at the same time. -

possibility of both a banking financial crisis and the economic

crisis at the same time. Christine Lagarde said the world should

abandon austerity and bring more stimulus, she said the EU banks

needed �200 million to bail them out. The boss of the European

Central Bank said no thanks to austerity, and said the calculation

on the banks were wrong. And it is these public disagreements that

give markets the wobbles. So it looks pretty bad globally, how will

it impact on us? The purchasing managing index, this is the

snapshot, it saw the biggest fall here for a decade. Growth is pretty

flat. What to do about it is the thing the Government has to face?

Tax cuts have been mooted, both by the opposition on VAT, and by the

Conservatives on 50p tax rate. Now, conferences are coming up, and we

might expect to see a bit of movement on tax cuts. So there is a

question of do you just do a bit more loosening fistically. The

other problem that - fiscally, the other problem the British

Government have with growth, you still have the problem that our

major trading partners, America and Europe, are flattening. There is a

public finance issue, the Office for Budget Responsibility basis the

whole - bases the whole paying off the debt based on 1.7% of growth,

most reckon it will be 1%, that is why you have one of the boasts of

the world's biggest fund saying to George Osborne today, change course.

How worried should we be about the state of the economy. One for the

former Chancellor, Emmanuel Darley? I think we should be - Alastair

Darling? If you asked me a year ago if the whole of Europe would have

seen their growth snuffed out and stalled, I would say that wouldn't

happen. There was momentum in our economy and the bigger European

economies, that appears to be stalling, that is worrying. But in

2008 you talked about the worst crisis for 60 years, are we looking

at the worst crisis in 63 years? don't think the crisis I talked

about three years ago has gone away. We were coming through it. Indeed,

part of my argument now is, countries together need to show

exactly the same determination to act together, now as they did in

the end of 2008 and 2009. I think the problem is, we got through the

first shock, the problem is we have not capitalised on that, and we are

slipping back into a situation where the economy is going to slow

down, that means you get all the concern about the state of banks

that you are seeing in the markets at the moment. Is it the state of

the banks that worries you more than the growth figures or anything

else? The two are pretty interrelated. We know we have to

get our borrowing down. You will not do that unless you have a

credible plan for growth. Because you need the growth to get the

revenues and so on. What people are now worried about is some of the

peripheral countries are stalling, in Greece's case, completely. Then

you ask questions about the Greek banks, then you think who is behind

them, the European banks, the ECB itself has an awful lot of Greek

bonds. These things feed off each other. Which is why the one thing

we should have learned in 2008, if you know there is a problem you

need to fix it and decisively. That is not happening. If you were still

in Number 11 Downing Street, what would you do now? I think in our

own economy, the Government by going so fast in the deficit

reduction is now strangling the recovery, I'm worried we will bump

along the bottom. You would ease off on the austerity measures?

wouldn't have embarked on their plans in the first place. If you

don't do anything, you are in deep trouble, if you go too fast you

stall the entire thing, you don't get your growth. George Osborne has

had a had to announce more borrowing as a result of what's

happened. The second critical thing is the G20, the largest economies

in the world, need to discuss together how they can ensure that,

yes, you get the borrowing down, but you get growth back in the

economy. That is an acute problem in Europe and America. That is a

global plan B? The two go together in my view. Just as we did in 2008,

in that case it was a credible plan for rescuing the banking system,

but you can't do that on your own, because all our economies are so

interconnected. What about some other measures, like for example, a

temporary cut in VAT? Lots of economists have talked about what

additional stimulus you might put in place. My own preference, you

know, because if you have time to do it is to cut people's income tax

allowance, because that puts more money in. There is all sorts of

credible arguments. The big argument is how do you get

sufficient money flowing through the economy to get growth? You have

just used the word "credible", yet you can see at the last election

Labour's economic policy wasn't credible? What I said was, the

policy of halfing the deficit, over a four-year period, was a credible

policy, what damaged us was it was patently obvious there was a

disagreement between me and the then Prime Minister as to whether

or not that was the right course of action. It is entirely credible,

and indeed there is lots of independent of Labour economists

who say at the moment that we ought to be reducing the deficit at rate

that allows growth to take place. The policy was credible, but the

implementation wasn't? We left office before, although I had set

our economy on a path that was going to be cutting our borrowing,

the plan was announced at the end of 2008, it still had some way to

go. The point I make, and have made on a number of occasion, that

because people knew there was a disagreement at the top of the

Government as to whether or not that was the right thing to do,

that was a problem. The actual policy of halving the deficit over

a four-year period, that I believe is entirely credible, on the

arguments then which are as good as today. Are you sorry you didn't

have a Spending Review? No. Our spending plan we fixed in 2007 was

due to run to 2010. I was asked dozens of time should we have done

another one in 2008/09, my argument then was things were so uncertain

it would have been difficult. Another important point, I strongly

believe the last Government which I was a member was right to maintain

public spending until we could see that they were back into recovery,

then you start to cut it. And just a reminder...You Left the economy

in the worst shape any in coming Government has had to deal with?

Every country in the world had exactly the same problem. The

reason we are discussing it tonight is because Germany's, France, Italy,

America, we have all had to come through this banking crisis. We all

had to spend money. Let me finish this argument, I remind you our

economy was actually growing in the quarters after we left office, it

was only the present lot have managed to derail that. Do you

think we may already be in recession? Now. I would be

surprised if we are. People ask me do you see a double-dip, I'm not

saying we won't get a statistical negative figure at some stage. My

guess is we are simply bumping along the bottom. Just telling you

now, so much bad data is coming out, people are right to be fearful

about this. When you say we are bumping along the bottom, we can't

go through the bottom, so we can't go into a double-dip recession. I'm

asking you your hunch? My hunch is we won't go into a double-dip

recession, and if we do, that would be a damming indictment on

everything the Government has done since it was elected 18 months ago.

You have already conceded much of it isn't to do with the heyor of

this Government, but what is happening in the - behaviour of

this Government, but what is happening in the eurozone? This

Government is cutting expenditure very fast n the hope that the

private sector will take its place. The private sector doesn't have

that confidence, it is evidenced at the moment, not helped by the

biggest market we have has stalled. You think current Labour economic

policy is credible as well? current policy of the Labour front

bench is the one I left. It must follow, with all due humility, I

think it is credible, yes. You are also part of the Government that

set up the arrangement with the Bank of England do you think that

is credible? I won't plug my new book too much. Plug away? I don't

think the problem was the financial structure, it was the fact of the

early stages with New York a lot of disagreement, - Northern Rock,

there was a lot of disagreement between me and the governor at that

time. If you asked me about the regulatory problem, there is not a

regulatory system in the world that saw this coming. The big mistake

they made, and this is so obvious from Northern Rock, is that they

did not see the interconnections between the banking system. You are

even seeing it today. The European authorities have not done stress

test that is model the failure of a Government. Greece is pretty near

that stage at the present time. Of course there was mistakes made in

the regulatory system. I don't think it was the structure, it was

judgments that was the problem. That reflected rather badly on the

governor of the Bank of England? made some wrong calls in my time. I

think my disagreement with the governor is I think we needed to

put money into the banking system far earlier than we did. I may say,

I made clear that when it came to the big rescue in 2008, Martin

Luther King played major and constructive - Mervyn King played

major and constructive role in that. What were your wrong calls? We took

too long to deal with the Northern Rock situation. Once it was in

trouble, if we had the legislation that we now have, we should have

dealt with it quickly, probably nationalised it far more quickly

than we did. When we actually did nationalise it, at the beginning of

2008, it really started to restore confidence for bait, but later in

the year we were complete - for a bit, but later in the year we were

completely overwhelmed by a banking crisis that had roots in the

American sub-prime market. But some of our banks were up to their necks

in it. Noble of you to take the blame, but it was Gordon Brown's

fault? In our country it was the responsibility of the Government at

the time. I was in the cabinet every single day of that Government,

it is as much my fault as anybody else. None of this actually helps

us, now. What we should be bothered about now is how we make sure we

reduce the risk of this happening again. My immediate concern is a

combination of what is going on in the wider economy, plus the fact

that in Europe they still haven't sorted out some of the problems

with the banks, that is why I'm worried, and moreied - more worried

than 12 months ago. The House of Commons rang to the sound of our

elected representatives congratulating the people of Libya

and the Armed Forces dumping Colonel Gaddafi's despottism this

afternoon. But documents uncovered in the revolution show how very

happy the British intelligence was to help Colonel Gaddafi's regime.

They reveal information about Libyan dissidents in this country

was fed to Gaddafi's regime. They may also have taken part in the

practice of rendition. What is disclosed today? 300 documents were

obtained by Human Rights Watch in Tripoli, they were looking for a

secret prison, they found this cache of secret documents, sent by

British intelligence to the Libyan authorities. It shows that MI6

wrote to the Libyan Intel gents about the successful reign - Libyan

intelligence about the successful rendition of one man who is on our

That letter was signed "M", thought to be a reference to Sir Mark Alan",

former intelligence officer at MI6. The context to this is the British

was seeking for Gaddafi to relinquish nuclear weapons. The

Libyans wanted something in exchange, intelligence information.

I spoke to Human Rights Watch about this today, they felt the

relationship went too far and it was immoral. Even those of us who

follow these issues closely, we have been shocked and surprised by

the documentation revealed over the last few days. It is significant

and damming. These documents need to be thoroughly investigated. They

suggest that MI6, the British intelligence agencies were

providing information to Colonel Gaddafi's regime about operatives

and their opposition figures and their where abouts. This is a

particularly interesting document, it shows that British intelligence

was willing to pass on information about Libyans living in the UK,

perfectly legally, who were political oppontnents of the

Gaddafi regime. They passed an entire intelligence regieme on one

He was in the UK legally, but he was later prosecuted here for

fundraising for the Libyan Islamic Fighting Group, seeking to

overthrow Gaddafi. Another document sent by British intelligence to the

Libyans also states, they requested information regarding Mohammed X,

not named for legal reasons. He's an Islamic extremist based in

Brighton, he's reported to have visited Afghanistan in 2001, and a

known contact of the Libyan Islamist fighting group members,

and Omar Deghayes, his father was killed by the Libyan regime, he

came to Britain and won asylum in 1986 with his family. He spent time

in Guantanamo Bay later. A Newsnight investigation in the past

has suggested this was case of mistaken identity. Omar Deghayes is

here with us now. Did you know that British intelligence was passing

information about you to Colonel Gaddafi? No, I didn't. And to know

that they did is worrying and concerning and very sad, to know

the country who gave us asylum, and the family from Gaddafi, is passing

information about details of our lives to Gaddafi. It mentions you

as a member of the Libyan Islamic Fighting Group, is that true?

not true. You know it is a prescribed organisation in this

country, you would be committing an offence, were you a member? No, I

was not a member, we were in opposition to Gaddafi, working in

opposition to Gaddafi we know many people in opposition to Gaddafi. I

was not a member of this organisation. MI6 were passing

false information to Gaddafi? think they were passing information.

This is the information that came to us, we don't know what other

information they passed to Gaddafi, whether it is false or not, MI6

should be answerable for that. do you feel about it? As I say,

very concerned and very saddened, and deeply shocked. Because we came

to this country seeking political asylum, and as refugees, with all

the family, because of our treatment with Libya. To know this

country is passing information about us to Gaddafi and his regime

is very sad and shocking. Does it make you reassess this country's

involvement in the overthrow of gad? Not really, we are happy - of

Gaddafi? Not really, we are happy with their contribution towards the

overthrow of Gaddafi. I'm happy with many other people in this

country who are working hard to show all this information and

uncover all these cruelties that did happen. This country, the part

of the Government worked, but many other people worked differently.

There was a bigger game in play here. The bigger game was to make

sure Gaddafi abandoned his programme of development of weapons

of mass destruction, which we know was active, unlike some other

alleged programmes of weapons of mass destruction. In that context,

feeding a bit of what you say is false information to Colonel

Gaddafi to keep him sweet, is surely a small price to pay? That

is the thing, this is the information we spoke about today.

We know they were involved in many other things. They were involved in

rendering people, passing people to Libya who ended up dead in Libyan

prisons. It's not only passing false

information to the Libyans. But it is lots of other work that has been

done that is immoral and really has to be opposed by everyone who has

ability to speak up. Mr Deghayes thank you.

Our diplomatic editor joins us now from Washington. What can you tell

us about this? It is interesting, just talking to people around the

bizarres, as they Baz Tsars as they say about those around the

intelligence world. If your relationships with countries like

Libya flip many times during the period of his rule, the discovery

of documents like this is bound to be messy. Their arguments money

along the lines that these contacts, as we understand from an interview

given to the BBC by Colonel Gaddafi's lasten Foreign Minister,

were continuing right up to the outbreak of the Libyan revolution,

and all authorised by the British Government. In that case MI6, SIS,

in having officers in Tripoli, and conducted this intelligence liaison,

were acting under ministerial direction. The other argument made

is the renditions we have learned about from Thailand and Hong Kong,

were not of people in British custody. In other words, there was

not the same responsibility, they believe, under the European Human

Rights Convention and various other laws, on Britain, not to hand these

people over for questioning in Lybia, even though we all know what

that might involve. You might think this is sof fesry, but they tend to

- sophestry, they tend to involve situations where individuals are

held by the country. But they handsome to the Americans who

rendered them to Bagram, which is far more serious than where third

countries did deals with Libya and the Americans played an enabling

role. Will this be enough to bring it out? They can probably get their

way through it, particularly with reference to ministerial submission,

endorsing what they did. I think the difficult area is the handing

over of intelligence. If you hand over intelligence on people living

in Britain, naming them, telling the Libyans they are involved in

militant and anti-Government activity, you then expose their

families, their associates, to action by the Libyan regime, or

them if they go back there. That seems to run directly counter to an

assurance that was given by the chief of MI6 in a speech last

October. Torture is illegal and nothing to do with us. If we know

acts where torture is taking place, we are advised by European and

international law to avoid that action, and we do. Even if allows

the tort activity to go ahead. Libya itself the revolutionaries

have still not managed to find Colonel Gaddafi and remain poised

outside a town, where they believe elements of his regime are holed up.

The revolution is not over, and until it is, the National

Transitional Council doesn't feel it can move to the capital. So what

is the plan of the leaders of the revolution? Our reporter in Libya

has got the man who leads the council and so is the country's

effective ruler right now. Tim's in Benghazi right now to tell us what

he had to say. Yes, Mustafa Abdel-Jalil, now

Libya's interim leader. He's a very emegmatic figure, certainly well

respected, because when he was Gaddafi's minister of justice, he

very much stood up for political prisoners and their rights. At the

same time, not very charasmatic, man who has had to tread a very

careful line between disparate factions on his own council, the

liberal wing, the Islamist wing, the careful line between thanking

the west for its support over recent months, and at the same time

insisting that the Libyans must own their own revolution. So very

interesting talking to him, what I wanted to know first is why he has

been so slow in moving to Tripoli. Before that he also had some

fascinating news about what has been happening on one of the

remaining battle fronts today. The struggle is almost over, they

believe, still not quite. Anti- Gaddafi's fighters, south-east of

Tripoli, held back today, in the hope negotiations will lead to the

surrender of the town, Bani Walid. It is one of just four pockets of

resistance, that Libya's revolutionary forces must subdue,

before they can turn their attention to other tasks.

The head of the National Transitional Council, Mustafa

Abdel-Jalil, told Newsnight today, that two of Gaddafi's sons had

prevented Bani Walid surrendering. A third son, he said, had been

killed there. Tran I must stress that - TRANSLATION: I must stress

that they are the ones blocking the city. They are there, and they have

had a shelter with some of the tribe there is. As we have heard

from some sources that Khamis, the son also of Gaddafi, has been

buried there. There were negotiations with these tribes that

have sheltered the Gaddafi family, with our rebels. We have principles

in the tribes here, if anyone has had shelter with you, you will

never be able to make him surrender. We understand this, and have given

three days, and amended this to one week. We are still abiding by our

words. But, as we say, that negotiation still has time. Once we

have ended these negotiations, then there will be another. But we had

information that the Gaddafi sons have left the city.

Libya's new leaders say it is only after they have announced the

liberation of the whole country that they will complete the move

from here in Benghazi, the birth place of the revolution, to the

capital, Tripoli. Britain, and other western backers have urged

them to do so as soon as possible. Bau, according to the council, it

is only after - because, according to the council, it is only after

the move that a new interim Government will be formed.

Something is due to the delay because of security concerns, but

the head of the council denies that. TRANSLATION: I'm Muslim that I

understand everything has happened by God, I'm not afraid of death at

all. The whole issue is an administrative matter. It has

nothing to do with security. I can assure you that the security in

Tripoli is more secure than Benghazi.

Even so, the council admits that Tripoli is in the hands of

revolutionary militias it doesn't entirely control, isn't that a

problem? TRANSLATION: There is no army for our country. Our

revolutionaries with the assistance of our allies and our friends, the

NATO, that we started to be able to defend ourselves against the

militias populated by the Gaddafi regime. They are not officials,

they are volunteers, they are doctors, engineer, students. Even

football players. Now, as the war comes to an end, some of the arms

those civilian rebels have acquired, are being traded on the black

market here in Benghazi and across Libya.

Ask him how much that is? What? thinks this is $1400. Around �1,000.

Let me feel how heavy that is. That is seriously heavy. I would have

difficulty using that. You don't reckon. He says it is a machine

begun, it rotates. - Machine gun, it rotates. For me to hold it might

be a bit much. He has a lot of ammunition as well. This is a much

nigs for Kalashnikovs. He says - ammunition for Kalashnikovs. He

says he will have discount for you. This is all being sold completely

openly. Arms trade something a sensitive matter, that is why we

judged it was safer to film from a distance. Despite the risk of a

country awash with weapons, the head of the council believes for

now, arms revolutionaries should stay on the streets at least.

TRANSLATION: We must stress there is no contradiction whatsoever. The

call for disarming and collecting the arm is a policy matter. At the

moment the arms remain with the revolutionaries, it will not have a

threat to the security. It is on the contrary, it is needed to

stablise the security wherever we have any pockets that are still not

known to us. Hopefully that by the time we are in full control of

every inch of the cities, then we will go to the policies that we

have already settled. Until they control every city,

feeding the frontline is still a big task. Performed in Benghazi by

hundreds of volunteers. The new Libya has few institutions. But the

revolution has fuelled a new civic activism, and a determination, as

this poster says, to avoid tribal divisions. Libya's new leaders will

need to harness all that energy and enthusiasm, if they are to stand a

chance of bringing stability, and even democracy to the country in

the months ahead. Well, today, Mustafa Abdel-Jalil

told me that he would be in Tripoli at the beginning of next week. And

that, presumably, is when liberation will be declared.

Although, in practice, with the deadline for negotiations only

running out on Saturday, it is very hard to see that in these main

places where Gaddafi loyalists are still fighting in Bani Walid, in

Sirte in the south, it is very hard to see how the battles will really

be over by then. When the rest of the council does get to Tripoli, I

think one of the big problems they will face, is what to do with

former Gaddafi people, who jumped ship right at the very last minute,

and now still want prominent positions in the new Libya, already.

Already there is a revolt brewing within the ranks of council

supporter about one former Gaddafi commander, who has already been

given a senior new military role, with the new authorities. I think

we expect many more arguments and divisions of this kind as they try

to form a new administration over the coming months.

I should just mention we did ask the Government for an interview

today to talk about Libya generally, and the issue of rendition

specifically, our interview with Omar Deghayes as well. But no-one

was available, we were told. A vote for me and I will finish off the

party, as leadership pitches go it is a bold one. He comes to bury the

Conservative Party, not praise it. The deputy leader of the Scottish

Conservatives, a man called Murdo Fraser, is running on a platform of

disbanding the party and bringing something new and right-wing and

Scottish in its place it's not a well known name across the borders,

because there are many really known reintroduced beavers than in the UK.

You might be for given for thinking the lesser spotted Tory across the

border is rare find. But the history of the party in Scotland

tells a different story. Their hey day as Scotland's party of choice

hit its height around the late 1920s to late 1950, when ideas of

God, empire, union and local industry endeared them to the

Scottish electorate. Then they were known as Scottish unionists,

writing the Labour Party off as alien socialists. The high water

mark came in 1955. They won both a majority of the seats and the vote,

something no other party in Scotland has achieved before or

since. No coincidence it was the same near the Church of Scotland

measureship hit its height too. As church attendance fell, and the

empire fell away. 1965 saw Edward Heath instigate brand change from

the Scottish unionist party, to the modern Scottish Conservative Party.

By the time Thatcher imposed the poll tax on the Scottish people,

the country's industrial heart, forged in coal and steel, was also

in its death throws. The Conservatives were seen as - throes.

The Conservatives were seen as not feeling the pain. And Scotland's

four major newspapers turned on the Tories. John Major fought a strong

unionist campaign in 1992, and gained ground. Five years later,

though, Blair's landslide wiped the Tories from the map in Scotland.

Not a single MP was left. With that, the resurgence of the SNP began. In

2004, Alex Salmond returned as leader of the SNP, it was the start

of gains for the nationalists that would leave the once powerful

Tories bit part players in the future of Scotland. Well, with us

now, live from Dundee, is the man with plan, the deputy leader of the

Scottish Conservatives, yes, Murdo Fraser. And with me in the studio

is the former Secretary of State for Scotland, Lord Forsyth. Murdo

Fraser, same people, same policies, how stupid do you think people are?

We are what we are talking about is creating a new political entity. We

are not going to dissolve the Scottish Conservative Party, as

some have said, we will use it and build on it to create a new

progressive centre right party, with a distinct Scottish identity,

that will have a relationship with the US Conservative Party, akin to

the same as in Bavaria with the Christian Democrats also in Germany.

That is a positive move. There are a lot of people in Scotland who

share centre right values who believe the things we believe in,

in terms of taxation and law and order and support for the family,

but can't bring themselves to vote for the Conservative Party, because

they think our party allegances lie in London and say we haven't come

to terms with post devolution Scotland You haven't a great deal

to lose, do you? We lost a great deal. In 1997 we had 97% of the

vote, at the last Scottish elections we got 13.5%. Why not

reinvent yourselves? We need to be ourselves and get on the front foot

and campaign as Conservatives in Scotland. This idea that Murdo has

that the party isn't able to make its own policies, we have always

had different policies. The poll tax was asked by the Scottish

Secretary of Margaret Thatcher because of a specific problem that

arose with the Scottish rating system. Let's not get hung up on

the question of poll tax, you of all people should not want that!

How are you going to explain to the people of Scotland that the union

is bad for your party, but good for the country? The irony is, of

course, until 1965, as your clip said, there were no Conservatives

in Scotland. We had something called the Scottish Unionist Party,

ironically that was much more electorally popular than the

Conservative Party has been since that time. Nobody said the union

was under threat, because we had a distinct Scottish centre right

party in those days. I think we will be far better placed to fight

the SNP, with a much more vigorous new centre right party with a

Scottish identity. I have been deluged in the last 48 hours since

I announced this idea, with contacts from people saying this is

exactly the right thing to do. We don't want to be in the

Conservative Party, but if you set up this new entity we will come and

join you and fight the SNP and their plans to break up Britain.

There is a real appetite for this to happen. I'm surprised he hasn't

been deluged for Conservatives, who have worked very hard for policies

for the Conservatives, and must be dismayed to hear them thrashed in

this way. The Conservatives get 450,000 votes in Scotland still. We

have 10,000 members, our constituencies are in decay, we

don't have modern campaigning. The way to take things forward is to

fight. It is perfectly possible for the Conservatives to get back to

having 27% of the vote. The MoD sl in chaels. Waless had - the model

is in Wales, Wales had industrial decline and all the problems

experienced under the Conservative Government in the 1980, we have

increased our seats by working with the party in England and working on

a united front. The seperatist agenda is playing straight into the

hand of the SNP. How so, he believes in the union? It is a very

funny say to say we need a UK, in order to do so we have to destroy a

Scottish party. The Scottish Conservatives are the oldest party

in Scotland. There are times when we have had nearly all the sites

and then a lack of seats. In 1955 there were two candidates only

standing, a liberal Conservative, and Labour. Now we have a four-way

split. You are like the Labour Party one more heave slot. Take a

radical initiative, create something now, distinctively

Scottish and see if people go for it? Because the principles and

policies and values for which we stand are capable of attracting

votes in Scotland if they are presented. If you are on the back

foot all the time. Appeasing the SNP and not prepared to fight for

those values, don't be surprised if people wonder why to vote for it.

Us that banged to rights, Murdo Fraser? We have tried all these

things Michael saying, we have had excellent leaders the Scottish

Conservatives, and Annabel Goldie, the leader, about to retire, we

have had a Conservative Party leader in Scotland whose personal

ratings were higher than the Labour Party.

Why don't people vote for you? is an idea of Scottish identity.

Voters in Scotland a post-evolution era, want to vote for parties with

a Scottish identity. That is why so many centre right voters in

Scotland vote for the Scottish National Party, even though they

might not believe the policies. If this is such a bad idea, why does

his former boss endorse it so massively, why has Norman Tebbit

come out to endorse it. These are not nationalist appeasers, they are

staunch unionists, that is why we are backing this ban, because they

say it is a way to safety union. Everyone is entitled for their

opinion. Murdo is standing for the leadership of his party, on

platform that says I'm going to wind up your party and it will be

something else. It wasn't just the changing of the name, but the

notion we did well in the 50s because of our name is fatuous and

obscured. You have a situation where the Scottish Conservatives

could have a completely different set of policies on key issues to

the national policy in London? you look at the Conservatives in

London v they developed links with nurses, doctors and teachers, a

distinct identity. The manifesto comes up the night before and they

try to put a kilt on it, that is not the way to create that idea on

it. You don't think they are competent? We are not as well

organised as we should be. Is that a pie light way of saying, yes,

they have been incompetent. Clearly we have been losing votes at every

turn. There is no point in throwing in a the towel and creating a new

party. We have seen that before and the results show. Murdo has done a

great job, he used to canvas for me, he slept on my floor. I think he

just needs to be a little bit more confident, and concentrate on

getting across our values and our policies and engaging with the

electorate, using modern communication tools, the answer

does not lie in changing the name. The electorate are far brighter

than to be taken in this by that. That's all we have time for. That's

all from Newsnight tonight, hope you will be here tomorrow, I will

Plenty of weather coming in our direction over the next few days.

Of wet and windy. This is the scene first thing in the morning. A lot

of rain around, particularly for England and Wales. Keeping down

towards the south-east. Something a bit brighter emerging by the

afternoon. Bright and breezy picture across the heart of the

Midlands, one or two showers sneaking through. The worst of the

rain will be clearing from Kent and East Sussex by mid-afternoon. If

you start off with rain things improve later on in the day. Across

the more western parts of England and Wales, further showers rattling

in during the course of the afternoon on the stiff old westerly

wind. Temperatures holding in the mid-teens for the most part. For

Northern Ireland the risk of prolonged outbreaks of rain and

sunshine limited, same for Scotland. Some real wet weather across the

west of Scotlandment brightness further east. More showers to come

through the middle of the week. A brisk wind making it feel cool,

despite some sunshine. Across southern areas too, it is a similar

picture, some sunshine, yes, but also some fairly heavy showers

around. So, on Wednesday, probably most of the showers across the more