28/11/2011 Newsnight


28/11/2011

Jeremy Paxman asks where the growth will come from that can save us from recession. And he sits down with the new leader of the American military.


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Transcript


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Remember when they told us a growing economy would lift us out

:00:07.:00:12.

of trouble? Of course it would, but tomorrow we're expected to learn

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that is definitely not what we have got. Instead we have lots of

:00:16.:00:20.

predictions of, if not tomorrow, one of these days.

:00:20.:00:23.

As the Chancellor prepares his autumn offensive, Paul Mason, the

:00:23.:00:28.

man who takes the con out of economics, goes to find out why the

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infamous engine of growth has stalled. What we are looking at is

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a completely new problem, that is, how do you come back from a

:00:36.:00:40.

situation where you have been going quite fast down the wrong road for

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35 years. What ought the chancellor

:00:43.:00:45.

Chancellor of the Exchequer to be doing.

:00:45.:00:50.

Also tonight, we talk to the most powerful soldier in the world about

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Afghanistan, Iran and whether the US military he commands can defeat

:00:54.:00:58.

the Taliban. They will never be destroyed, that is another dock

:00:58.:01:02.

trainal term that means they go away, the Taliban are part of the

:01:02.:01:06.

fabric of that part of the world, and they have have to be dealt with.

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In Egypt they are sealing the ballot boxes after their first free

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elections, at least that is what they hope they are. What is the

:01:13.:01:16.

reality? TRANSLATION: They say no matter we vote or not, the

:01:16.:01:19.

parliament won't form the Government or control it, what use

:01:19.:01:29.
:01:29.:01:31.

is voting? Once upon a time, 1947, to be

:01:31.:01:33.

precise, the Chancellor of the Exchequer resigned his post because

:01:33.:01:37.

he told a journalist what was going ob in his budget. Politicians still,

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quaintly, expect us to believe that statements about the national

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economy are disclosed first, to parliament. It is complete rubbish.

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Over the past few days there has been a steady stream of leaks of

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things that will be announced in tomorrow's Autumn Statement. To

:01:52.:01:58.

show how hard the Government is trying to save us all from penuiry.

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Could it be that tomorrow the Chancellor will have to tell us

:02:00.:02:08.

bleakly that the propbs pects are extremely grim. -- prospect are

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extremely grim, even David Grossman, a mankind to animals has his doubts.

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Not everyone can pull off this look, the Chancellor thinks it can send a

:02:18.:02:23.

message, a message so simple even a four-year-old can understand.

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Time to get busy # To get building and fixing

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Nice and happy, that's great. Osbourne is so keen to be

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photographed near holes in the ground recently, because he wants

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to show the Government is not just about cutting but building.

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Investing in Britain's economic future is the priority for this

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Government. We are finding the resources in difficult times, to

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build the roads and railways, here we are talking about an extension

:02:51.:02:55.

of the tube line that could create 25,000 jobs on the site. We are

:02:55.:02:58.

doing these things, because Britain has to get away from the quick-fix,

:02:58.:03:01.

debt solutions, that got us into this mess. We have to weather the

:03:01.:03:05.

current economic storm, but we have to lay the foundations for a

:03:05.:03:10.

stronger economic future. Today the Chancellor was announcing a �30

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billion infrastructure fund. �20 billion is supposed to come from,

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as yet unnamed, private sources. �5 billion is Government money, but

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won't be spent until after 2015, leaving �5 billion of Government

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funding now. But it is to be paid for from savings elsewhere. We will

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found out tomorrow whether the independent forecasters think any

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of this will work. My fear is they will show growth down, unemployment

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up, borrowing tens of billions higher, because George Osborne's

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plan hasn't worked. He said cutting faster would be good for growth and

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jobs, it has ended up in higher borrowing and failure. One reason

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the Government may have been so keen to crack out so many growth

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announcements, ahead of tomorrow's Autumn Statement. Last week it was

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housing and youth jobs. Is because ministers know that if they held

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everything back until tomorrow, well, it would probably all get

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rather overshadowed by the updated forecasts coming from the office of

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budget responsibility. Ministers are not expecting good news from

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them. The OBR stom tomorrow, it is expected, will confirm what

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everybody is expecting, is that George Osborne will not meet his

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target by the end of the parliament for growth? David Cameron has said

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it will be more difficult to deal with the problems this Government

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inherited from Labour, because of the head winds we face from the

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crisis of confidence in the eurozone. But I'm sure we will see

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tomorrow the measures that are necessary to make sure we both bear

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down on our debts, and ensure we have the investment in

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infrastructure and future jobs, to make sure we can get out of the

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hole we are in. There was a kind of dress rehearsal for bad news today,

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in the shape of an updated OECD forecast. The headlines from this

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are pretty sobering. Negative growth for the first two quarters

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of next year. That is the technical definition of a recession, or in

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this case, a double-dip recession. Growth next year says the OECD,

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will be 0.5%, that is a huge downgrade from their previous

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assessment of 1.8%. And, says the organisation, unemployment is

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expected to hit 9.1% in the UK, by 2013. That means an extra 400,000

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people will be out of work. Whilst Labour is understandably keen to

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pin the blame on the Government. Nowhere, in fact, does the OECD say

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it is Government policies that are at fault in the reduced growth

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prospects. Actually it says being seen to be getting a grip of the

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deficit has actually given Britain more room to cushion the slowdown.

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In any case, it seems that because of poor growth, the coalition isn't

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reducing the deficit as fast as it planned. The Government is going to

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reduce the deficit, slower than actually you advocated, how can

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that be the problem that is causing low growth? Because the Government

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decided a year-and-a-half ago to cut very deeply public spending,

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and to increase taxes. That is what has choked off growth over the last

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year-and-a-half. In the last year the UK economy has grown by 0.5%,

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lower than all the other countries in the G7, apart from Japan, we

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know they have had a huge earthquake. The choices the

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Government made over a year ago are what has resulted in borrowing

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coming in higher than forecast. David Cameron was out doing his own

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growth photo opportunity today, hoping, no doubt, for headlines

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about being on the right track, or something like that. Tomorrow's

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assessment by the Office for Budget Responsibility is likely, though,

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to be problematic. What the Prime Minister is trying to do is to

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convince people that given where he started from, no other set of

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policies would have delivered a better result. Our economics editor,

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Paul Mason, is here in the studio. Put this in context for us will

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you? Tomorrow comes amid a shrew of really bad economic news. That OECD

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prediction for the UK, of another recession, a second recession,

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might be one of the worst predictions or the most pessimistic,

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it is probably because they have had longer time and more data, they

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have had a chance to see what is happening in the eurozone.

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Mervyn King said there are signs in the eurozone. The rest of the

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markets have been talking two weeks. It is there, anecdotally the end of

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the mortgage market, you see mortgages pulled, cross-border

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mortages and deals all times coming in 2007 that were the trigger in

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2007 and the trigger for a big crunch. The Government and tomorrow

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was all supposed to be about the long-term strategy, and now the

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question is how long can you go on with the famous plan A, of course,

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deficit reduction, about �111 billion, taken out of state pending,

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was supposed to be bridgeed by loose monetary policy, until the

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economy got there, to that he will dor rad dough of sustainable growth

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based on manufacturing, the question now is will it ever get

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there, and in what circumstances. And this is what the Chancellor has

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to explain to people in parliament tomorrow. What exactly is the plan

:08:42.:08:51.

if the eurozone goes belly up, and if continued, desire for parts of

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the economy never makes it. With us is the former UK finance secretary,

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Lord Myners, and the deputy chairman of the Conservative Party,

:09:00.:09:02.

Michael Fallon. These initiatives that have been just leaking out

:09:02.:09:07.

over the last few days, why is it taking 18 months to get around to

:09:07.:09:11.

them? They haven't just been leaking out. Things like credit

:09:11.:09:15.

easing was announced at the last party conference. The spending

:09:15.:09:20.

stuff today? On infrastructure? roads and railways and the like?

:09:20.:09:25.

is because we have stuck to plan A that we are able now to accelerate

:09:25.:09:28.

some infrastructure spending. Why has it taken 18 months to get

:09:28.:09:32.

around to it? We have now discovered that some departments

:09:32.:09:36.

are underspending, and we are able to bring that spending forward and

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move it into infrastructure and get the economy growing again. You must

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be chuffed, aren't you? shouldn't say no things-to-things

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that could be good for stimulating the economy. But the economy as a

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consequence of this Government's policy last been pushed back

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towards recession, and that is -- has been pushed back towards

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recession. The Conservatives have misunderstood it, they have it

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round the wrong way. They are arguing the deficit is damaging

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growth, at the moment it is the absence of growth that is inflating

:10:10.:10:14.

the deficit. Hang on a moment. Lord Myners should hang his head in

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shame, he's one of the Treasury ministers that left us this deficit,

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that we are now having to tackle. The EOCD today said growth is

:10:22.:10:26.

slower because of the problems in the eurozone, that Paul has

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identified. Of course growth is much slower, but they also said

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that the fiscal plan we have got has bolstered credibility and needs

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to continue, despite the worsening outlook. The plan A is there, and

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we are sticking to the plan. At the same time doing what we can to

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accelerate growth and help families through this. Michael, the fact is

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the economy in the 12 months of the final quarter of 2009 grew at 2.6%.

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Since then it hasn't grown at all. Over the last 12 months only

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Portugal, Greece and Cyprus, have achieved lower rates of growth than

:11:02.:11:07.

the UK. The problems started well before the eurocrisis, and it is

:11:07.:11:12.

the policies of your Government, which are creating this absence of

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growth. This is rewriting history, from somebody who served in the

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Treasury at the time. Those countries may well abide

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differently, we had a worse deficit from these countries, which you

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yourself left us. The eurozone crisis didn't start this year. The

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crisis started in Greece well back at the beginning of 2010. In fact,

:11:32.:11:35.

under the last Labour Government. This has been a very, very slow

:11:36.:11:40.

build up in the eurozone. Is that their fault too? No, it is building

:11:40.:11:43.

up for a year-and-a-half, you can't just say the eurozone is going

:11:44.:11:47.

wrong on our watch. This has been building up for a couple of years

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in the eurozone. We have had to inherit the consequences of it.

:11:50.:11:54.

What you are going to hear tomorrow, we will try to accelerate growth,

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spending on infrastructure, and help for motorists and rail

:12:01.:12:06.

commuters. We're hearing �5 billion on infrastructure in the course of

:12:06.:12:10.

this parliament? That is going to bring in �20 billion of private

:12:10.:12:13.

investment as well through getting the pension funds involved for the

:12:13.:12:16.

first time in this country, getting them investing. Have you guarantee

:12:16.:12:20.

from the pension funds of the Chinese and others? No, the point

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is to bring in the British pension fund, it has not been done before.

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You have done that before? We have signed a guarantee with the pension

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funds to get the money in there. Guaranteed is it? The �5 billion

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will lock in another �20 billion on top. Guaranteed? It is an agreement

:12:36.:12:40.

to do it. You know it is not a guarantee in terms of fixed

:12:40.:12:44.

commitments because there are projects and pricing of projects,

:12:44.:12:48.

toll agreements payment agreements, there is an agreement in principle

:12:48.:12:51.

to look favourably, there isn't a guarantee. You don't think it is a

:12:51.:12:55.

good thing? It is a good thing. Suppose it is �5 billion over the

:12:55.:13:03.

rest of the parliament? It is �30, �5 now, and �5 in the next and �20

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of private. We are spending much more, but it is �5 billion to start

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with. Spread over four years? an accelerated spinding. --

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Spending. How many people are going to go out. The Government cut

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spending by �50 billion earlier this year. How many people will go

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out and spend money on extra mince pies or whatever it is, because

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they have heard the A14 will be widened? If you use the A14 as a

:13:34.:13:39.

business, you certainly need it widened f you want that road to

:13:39.:13:44.

Norwich dualed, you will be cheering at the news today. There

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are agreements not just for roads, but rail, and more school building.

:13:48.:13:52.

Why are you shaking your head? is improving our infrastructure,

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isn't that important. Improving infrastructure is something we

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agree about, we have been arguing in favour of for over 12 months. As

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Jeremy said, it took you a long time to finally realise you need to

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do something about it, and reverse the massive cuts that you announced

:14:08.:14:13.

in the last budget. You reduced Government capital expenditure by

:14:13.:14:16.

�50 billion. This �5 billion that you will spend over the remainder

:14:16.:14:20.

of the parliament, is less than the cuts you have already introduced in

:14:20.:14:24.

the current year. Which is similar to the cuts you would have had to

:14:24.:14:28.

make? Jeremy, we have had lots of good news leaked over the last

:14:28.:14:31.

three or four days, tomorrow we will get the hard news about how

:14:31.:14:35.

grim the economic outlook is. Sounds if you are relishing it?

:14:35.:14:43.

at all. Very much I am in despair the Government is doing nothing

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about it. You think we are going to have a recession? Yes, the major

:14:46.:14:50.

parts of the country is already in the recession. It is the south-east

:14:50.:14:53.

that is buoyant. The remainder of the country has been in recession

:14:53.:14:58.

for at least three months, probably six. You were already planning to

:14:58.:15:01.

cut capital expenditure, that was in Alistair Darling's budget, but

:15:01.:15:07.

the fact is we are spending over 50% of GDP, only the second time

:15:07.:15:15.

since the war have we done that. You are in charge now That is why

:15:15.:15:17.

we have to bring spending under control. It is only because it is

:15:17.:15:21.

under control we are able to bring forward some good spending on the

:15:21.:15:26.

infrastructure and to help motorists and rail users. Continue

:15:26.:15:29.

this outside. Beneath everything else the rot undermining our

:15:29.:15:33.

economy is all about our collective and individual habit of living on

:15:33.:15:37.

tick. In turn, that is about the fact in the last several decades we

:15:37.:15:40.

have allowed and encourage things we used to make here to be

:15:40.:15:43.

manufactured abroad. David Cameron promised he would rebalance the

:15:43.:15:47.

economy, so that more of our income came again from making things. So,

:15:47.:15:52.

economics editor, how is he doing? We don't know. Hopefully the OBR

:15:52.:15:55.

tomorrow, their projections will tell us. We know what their plan

:15:55.:16:02.

was. The plan was in years time, that whole -- hole in growth, left

:16:02.:16:05.

by reducing state spending, would be completely replaced by exports.

:16:05.:16:10.

Britain has been a net importer for the last decade, really going into

:16:10.:16:14.

exPortland. We would also be a much more heavily focused manufacturing

:16:14.:16:17.

and business investment economy. The whole shape of the economy was

:16:17.:16:21.

supposed to change. I have decided to go to the North West, which is

:16:21.:16:23.

still our biggest manufacturing base and see what they are already

:16:23.:16:27.

doing, what you could do, and what it would take to really change the

:16:27.:16:31.

shape of that economy, so that ultimately you flip the UK towards

:16:31.:16:41.

where the coalition wants it to be. The old drivers of growth are over.

:16:41.:16:48.

The economy has to reBelfast. -- reBelfast.

:16:48.:16:58.
:16:58.:17:09.

Reindustrialised, boost growth, but it is easier said than done. The

:17:09.:17:13.

north-east is the biggest manufacturing sector in England,

:17:13.:17:15.

scattered with industries that have failed. But running through the

:17:15.:17:21.

middle of it, a giant clue about how to kick start industrial growth.

:17:21.:17:25.

The Bridgwater canal, built by an Earl, 250 years ago, when there was

:17:25.:17:34.

nothing else here. When he built this canal, Bridgwater unleashed a

:17:34.:17:37.

complex process of industrialisation. Here, where a

:17:37.:17:42.

brook runs underneath it, he built an early cotton mill, I'm standing

:17:42.:17:48.

on the ruins of it. Even in the 20th century it made sense to build

:17:48.:17:52.

a newer, bigger factory where the skills and expertise already

:17:52.:17:57.

existed. How would you do that now? What is

:17:57.:18:07.
:18:07.:18:09.

the equivalent of the canal today? What is the new cotton.

:18:09.:18:15.

Fraf even if is a single layer -- graphene is a single layer of

:18:15.:18:19.

graphite, it is more productive than copper, thermal properties

:18:19.:18:24.

that exceed any other material we know about. At Manchester

:18:24.:18:33.

University, they won a nobody bell prize for their work on graphene.

:18:33.:18:42.

In this job the lab is doing is to commercialise it. The Government

:18:42.:18:46.

has thrown �50 million of it. Following the noble prize interest

:18:47.:18:55.

we got lots of interest through the press. It wasn't until the

:18:55.:18:58.

Government made the announcement that we saucerous interest for

:18:58.:19:03.

established companies to work for us. Companies then said this stuff

:19:03.:19:06.

here, now we know the British Government likes it, we like it

:19:06.:19:10.

too? It is a compelling case, and you know, having that message from

:19:11.:19:15.

central Government was very persuasive in their mind for co--

:19:15.:19:19.

locating here with us, and sharing the responsibility. So graphene

:19:19.:19:24.

proves two things. One, Brits are still very good at geeky science,

:19:24.:19:29.

two, picking winners, Government- backing for individual companies,

:19:29.:19:33.

technologies and sectors is back. The problem is, everybody else in

:19:33.:19:39.

the world is doing it. Graphene alone won't turn around the North

:19:39.:19:43.

West's economy, or Britain's, any time soon.

:19:43.:19:46.

The decline of manufacturing has left its mark. Here in the North

:19:46.:19:50.

West, and in much of the country outside London, low paid jobs, low

:19:50.:19:56.

GDP per head, fractured communities. Some think eventhough we want to

:19:56.:20:00.

leave this old model behind, it is going to be hard.

:20:00.:20:06.

Britain has a serious structural problem. The structural problems

:20:06.:20:10.

put simply, is we have retreated from tradable goods and

:20:10.:20:15.

manufacturing, and lost 4.5 million jobs. Good jobs in manufacturing.

:20:16.:20:21.

And piled up a huge trade deficit that sucks demand out of the

:20:21.:20:24.

economy. This school of economists, based

:20:24.:20:29.

here at Manchester University, wants Government to move towards

:20:29.:20:32.

highly-targeted support for individual economic sectors.

:20:32.:20:40.

short answer is there isn't one technically correct quick-fix. I

:20:40.:20:44.

think instead you have to think of the long, slow slog of building the

:20:44.:20:49.

sectors, which have been run down in the last 30 years, and building

:20:49.:20:55.

the networks and clusters of activity, instead of worshiping

:20:55.:20:58.

generic enterprise and individual firms as successive Governments

:20:58.:21:03.

have. This is what it looks like when it

:21:03.:21:08.

works. Eden Biodesign, in Liverpool, started with �50,000 ten years ago,

:21:08.:21:15.

now it is a multimillion pound business, with a work force of 125.

:21:15.:21:18.

They research and make biomedicines, they have seen Government

:21:18.:21:22.

initiatives come and go. Most recently Government funding for

:21:22.:21:25.

their biotech cluster group has gone. Where there are good strong

:21:25.:21:29.

clusters, it is focusing, and supporting and consistency of

:21:29.:21:33.

funding rather than a slug of capital, a banner headline and then

:21:33.:21:40.

a disapassion of that activity. Con-- dispassion of that activity.

:21:40.:21:50.

Consistency is very important. that happened in the past? Clearly,

:21:50.:21:54.

there was Government funding that enabled the cluster to grow in the

:21:54.:22:00.

south west. The Koreans would throw huge amounts of money at it? Yes,

:22:00.:22:04.

we don't. Eden represents another British problem, access to capital,

:22:04.:22:09.

they were recently acquired by US drug giant, Watson, but the venture

:22:09.:22:13.

capital to grow the firm also came from America. British investors at

:22:13.:22:18.

the time, recoiled from the word "manufacturing". The longer you

:22:18.:22:22.

talk to the bosses who could deliver the rebalancing the

:22:22.:22:25.

Government wants, the more you realise nothing they want is rocket

:22:25.:22:29.

science, they want more consistency, tax breaks to compete with other

:22:29.:22:34.

countries, less short-termism. It seems to me, it is people, at

:22:34.:22:37.

Manchester University they are trying to be a world centre of

:22:38.:22:41.

advanced research, and applied science. But, brain power can go

:22:41.:22:45.

anywhere in the world it wants to. And the problem in Britain is,

:22:45.:22:49.

incredibly, given the unemployment rate, we are actually short of the

:22:49.:22:54.

skills we need. We have actually got a massive skills shortage at

:22:54.:22:58.

the moment. We are probably short of about 200 engineers across the

:22:58.:23:04.

company, across the UK. Probably 100 of those in the North West.

:23:04.:23:12.

Morris, on the banks of the machine -- Morson, they design nuclear

:23:12.:23:16.

reactors and other things, they stress test them virtually, right

:23:16.:23:19.

down to the individual screw. The company is successful and growing,

:23:19.:23:24.

they want Government to do what other countries do, put tax-payers'

:23:24.:23:28.

money into high-skilled training. We see a lot of graduates every day,

:23:28.:23:34.

working in taxies, and shops, they have engineering degrees. And yet

:23:34.:23:39.

we have skills shortages. We have several partners in Europe and

:23:39.:23:45.

Germany, France and Spain. I see quite a different approach from

:23:45.:23:50.

their Governments. In terms of supporting graduate raining, and

:23:50.:23:56.

actual funding of training. So the Governments will pay to bridge that

:23:56.:24:02.

gap between college and the work place? Yes. Whether it is on skills,

:24:02.:24:05.

investment or research, rebalancing Britain all comes down to whether

:24:05.:24:11.

the state can find a new role. It is worth rembering, this, the

:24:11.:24:13.

first-ever piece of industrial infrastructure, was built, by act

:24:13.:24:18.

of parliament, and never made a profit.

:24:18.:24:22.

When it comes to reindustrialising Britain, a lot will depend on what

:24:22.:24:25.

happens in the rest of the world. Because, when they built this,

:24:25.:24:29.

Britain was the dominant power. We could do what we liked. By the time

:24:29.:24:34.

they built the factory behind me, in the Edwardian period, it was

:24:34.:24:39.

already a world of cut-throat competition between states. As this

:24:39.:24:46.

crisis drags on, it is again. 200 years ago the canals of

:24:46.:24:49.

Lancashire pointed British manufactured goods, like a guided

:24:49.:24:52.

weapon into the world economy. Today, again, there is huge

:24:52.:25:00.

investment going in, to the mercy and to the ship canal -- Mersey and

:25:00.:25:05.

the ship canal. The canals date back to the Industrial Revolution,

:25:05.:25:10.

we are taking the old assets and modernising them and making them

:25:10.:25:14.

applicable to the modern economy. We are aim to go spend �500 million

:25:14.:25:19.

over the next few years, creating a new river terminal in the river

:25:19.:25:27.

Mersey, and creating mu -- new buildings down the canal banks.

:25:27.:25:30.

Itly allow us to be more efficient into the northern half of the

:25:30.:25:34.

country. It creates thousands of new jobs, that will kick start the

:25:34.:25:40.

economy. But the fact remains, if things stay the way they are,

:25:40.:25:44.

Liverpool's Newport facilities will see more imports an exports. The

:25:44.:25:48.

true measure of success will be to reverse the flow of trade. That is

:25:48.:25:51.

not just an idle dream. Virtually the whole of the Government's

:25:51.:25:55.

growth and budget plans rest on reindustrialising Britain.

:25:55.:26:00.

What to look for now is if anybody in politics has a practical clue of

:26:00.:26:06.

how it will be achieved. Britain isn't, of course, the only

:26:06.:26:10.

country to have a hole where it ought to have a budget. Pre-

:26:10.:26:14.

eminently there is the world's one remaining superpower. The military,

:26:14.:26:21.

which enables America to stride the world like a kollos SAS, faces huge

:26:21.:26:25.

cuts in its budget, which, if extended, the US Defence Secretary

:26:25.:26:28.

said could turn the country into a paper tiger. Could this be the

:26:28.:26:34.

beginning of the end of an unprecedented global dominance. I

:26:34.:26:37.

will be talking to the new chairman of the Joint Chiefs of Staff, the

:26:37.:26:47.
:26:47.:26:49.

most powerful military man in the world. First we have this. It is an

:26:49.:26:55.

unenviable job, tackling wars, while a country takes an axe to its

:26:55.:26:58.

military budget. Since September, General Martin Dempsey, has had the

:26:58.:27:02.

top US forces job. A globe-trotting mission, thwarting enemies, and

:27:03.:27:09.

trying not to let down friends. But his prese dessor, rather unhelpful

:27:09.:27:14.

-- predecessor, rather unhelpfully said, America's budget deficit is

:27:14.:27:17.

America's biggest threat, that hardly helps the new man protect

:27:17.:27:20.

his money. Whether or not he was right, the problem with the

:27:20.:27:23.

formation from the defence department's point of view, the

:27:23.:27:27.

only thing the defence department can do to address that threat is to

:27:27.:27:31.

cut its own budget. That happened and now General Dempsey is saying

:27:31.:27:35.

we can't afford to cut it any further, without imposing other

:27:35.:27:40.

national security problems on ourselves. We are now cutting into

:27:40.:27:45.

bone, and muscle. We are having to make tough choices about America's

:27:45.:27:53.

role in the world. The Pentagon spends $700 billion

:27:53.:27:58.

per year, and is already facing $400 billion in cuts over the next

:27:58.:28:02.

eight years. The federal budget crisis means the team sent to run

:28:02.:28:05.

the military this summer is now being threatened with the same

:28:05.:28:09.

again, or even more, prompting the Defence Secretary to raise the

:28:09.:28:17.

specter of a hollow military. a ship without sailors, it is a

:28:17.:28:22.

brigade without bullets, it is an air wing without enough trained

:28:22.:28:28.

pilots. It is a paper tiger. press has started in August of

:28:28.:28:32.

10...This New threat to the Pentagon arises because of the

:28:32.:28:35.

gridlock in Congress over the budget deficit. Many Republicans

:28:35.:28:39.

say the military must be sparred, and Democrats, that they must share

:28:39.:28:44.

the pain. But the point is, that the consensus that funded President

:28:44.:28:48.

Bush's wars has gone, and threats to defence spending are now part of

:28:49.:28:54.

the negotiating process. We have a good chance of actually getting the

:28:54.:29:00.

big package, the big definite reduction in 2012, for two or three

:29:00.:29:04.

reasons. First, the knives that I mentioned that were over our heads,

:29:04.:29:13.

the Bush tax cuts expire in 2013, sequestation goes into effect then.

:29:13.:29:17.

As we get closer and closer the pressure on both parties to come

:29:17.:29:21.

together in the middle, provided we don't remove one of those knives,

:29:21.:29:25.

like taking defence off the table, is going to be stronger and

:29:25.:29:29.

stronger. So, if the bugetry pressures are

:29:29.:29:34.

intense, what about their consequences in the wider world. In

:29:34.:29:38.

Iraq, the imminent final US withdrawal has been blamed, in part,

:29:38.:29:44.

by some critics, on a desire to trade security for money. Meanwhile,

:29:44.:29:50.

in Afghanistan and Pakistan, plans to accelerate the drawdown there

:29:50.:29:54.

have increased tensions with local politicians, who were playing to

:29:54.:29:57.

anti-American public opinion. When there is a mistake, on the

:29:57.:30:03.

scale of Saturday's bombing of a Pakistani border post, killing 24

:30:03.:30:11.

of their soldiers, the damage to US interests is even greater.

:30:11.:30:16.

Not only I, the whole nation condemns it. Whatever has happened,

:30:16.:30:22.

we don't and never expected it would happen. While Pakistan has

:30:22.:30:27.

cut NATO supplies, and co-operation, before, and then quietly reversed

:30:27.:30:31.

the decision, some in the Pentagon are coming to the conclusion that

:30:31.:30:35.

they and President Karzai's gofpl, want to make America's --

:30:35.:30:39.

Government, want to make America's exit as undignified as possible.

:30:39.:30:47.

The US remains the world's most mill tearly powerful nation by a --

:30:47.:30:52.

militarily powerful nation by a long way. It is thought that a

:30:52.:30:58.

country like Iran might underestimate America's weakness or

:30:58.:31:02.

unwillingness to intervene. Hallmark of the last 20 years the

:31:02.:31:08.

US military capacity to inject a sizeable UK force anywhere in the

:31:08.:31:13.

globe. If we implement the cuts being contemplated, that capacity

:31:13.:31:17.

would be put in jeopardy. That has a profound effect on American grand

:31:17.:31:21.

strategy. We wouldn't be able to afford the grand strategy that we

:31:21.:31:27.

have had for the last two decades. The US remains the world's most

:31:27.:31:36.

militarily powerful nation by a long Martin. The financial crash

:31:36.:31:42.

and cuts provide dangers, that Iran might underestimate America's

:31:42.:31:46.

weakness or unwillingness to intervene. The top serviceman took

:31:46.:31:51.

time at a flux, the scale of cuts that will emerge from congressional

:31:51.:31:55.

budget arrangements isn't clear. The salient thing is the post-9/11

:31:55.:31:59.

consensus about funding the military is over, and America's

:31:59.:32:05.

politicians are no longer in step. I spoke to General Martin Dempsey,

:32:05.:32:07.

chairman of the Joint Chiefs of Staff, down at the Ministry of

:32:07.:32:10.

Defence here in London, earlier this evening.

:32:10.:32:15.

What has it been like to take over the military at a time when it is

:32:15.:32:19.

in decline? I'm not in decline. We are not in decline. You know.

:32:19.:32:24.

big was the army when you joined it? Yeah. It is a lot smaller now

:32:24.:32:29.

than it was? You know the incline or decline is not a function of

:32:29.:32:32.

size but capability. I would suggest to you that over the last

:32:32.:32:40.

ten years we have learned a lot. We have adapted our formations. We

:32:40.:32:45.

tend to faced a verse rees that don't mass against us but decentral

:32:45.:32:49.

-- adversaries that don't mass against us but decentralise, we

:32:49.:32:55.

have had to adapt. When it is said the security of your country is in

:32:55.:32:59.

peril because of budget cuts, they are wrong? They are correct. But

:32:59.:33:04.

they have also said the initial budget cut of $450 billion plus,

:33:04.:33:09.

they have used the phrase "hard but managable", even before I became

:33:09.:33:13.

chairman they said that. I agree with that characterisation.

:33:13.:33:16.

Anything more will not be managable? It will be harder and

:33:16.:33:21.

reach the point of becoming unmanagable. Could you fight two

:33:21.:33:25.

wars simultaneously? We can, we will never be a military that can

:33:25.:33:29.

only do one thing at a time. Despite the fact that your army

:33:29.:33:35.

will be smaller than it has been since 1940, the Navy will be the

:33:35.:33:44.

smallest it has been since 1914. You are reading the language of

:33:44.:33:47.

sequestation. I'm reading the language of Leon Panetta? He's

:33:47.:33:51.

using that language and finding the job over the next five years.

:33:51.:33:56.

we talk about Pakistan, how long could the mission in Afghanistan

:33:56.:33:59.

continue if the Pakistanies shut the supply routes through their

:33:59.:34:04.

country? The Pakistani decision, made, first let me say, since you

:34:04.:34:09.

brought up Pakistan. I really would like to explain that this is just a

:34:09.:34:15.

tragedy for all of us. In particular a tragedy for the 4

:34:15.:34:19.

Pakistani soldiers their families. My -- 24 Pakistani soldiers and

:34:19.:34:23.

their families. My immediate reaction was to pick up the phone

:34:23.:34:27.

for their phone, a man I have known for 24 years. This will make it

:34:28.:34:32.

difficult, we will find a way to sustain our effort in Afghanistan,

:34:32.:34:37.

even if the Pakistanis make the unfortunate decision of closing the

:34:37.:34:41.

locks. This sort of action, in which you say, two dozen Pakistani

:34:41.:34:45.

soldiers lost Tony Blair lives. Is that the consequence of ignorance

:34:45.:34:52.

or ineptness? Well, I chuckle because that is a pretty stark

:34:52.:34:59.

choice. It is, it is one or the other? I wouldn't say so. Ineptness

:34:59.:35:03.

and incompetence. Irregular nor rapbs? You could see incompetence,

:35:03.:35:08.

they would be synonymous. You have been to Afghanistan and walked the

:35:08.:35:12.

hills. You know that although we have become extraordinary as a

:35:12.:35:20.

military, as being precise and accomplishes, and get the outcome

:35:20.:35:25.

we seek. This is still warfare, it breeds fog and friction and

:35:25.:35:29.

complexity. I don't know what happened in the hills of the

:35:29.:35:32.

province on the border between Afghanistan and Pakistan. We will

:35:32.:35:35.

find out. Looking at the broader picture in Afghanistan, do you

:35:35.:35:42.

think it was a tactical mistake to put 2014 as a finish date?

:35:42.:35:52.
:35:52.:35:53.

increased the risk. But there is a school of report that if you put a

:35:53.:36:00.

timeline in place your enemies wait it out. My personal military

:36:00.:36:05.

judgment is there have been times in my career where a milestone has

:36:05.:36:09.

pulled me along. Done correctly, that is what we are trying to do,

:36:09.:36:15.

is the milestone has that effect. It pulls us along, focuses our

:36:15.:36:19.

energise and transition, and deliver the outcome we promised as

:36:19.:36:24.

an alliance at Lisbon. The Taliban won't be defeated by 2014? I think

:36:24.:36:31.

they can be defeated. Militarily the word "defeat" means you render

:36:31.:36:37.

incapable the enemy of impoetsing itself. We would say over--

:36:37.:36:40.

imposing itself. We would say overthrowing the Government of

:36:40.:36:42.

Pakistan would be that. They will never be destroyed, which means

:36:42.:36:46.

they will never go away. The Taliban are part of the fabric of

:36:46.:36:50.

that part of the world and will have to be dealt with. They will

:36:50.:36:55.

still be there in 2014? Sure, those that are he can consielable, could

:36:55.:36:58.

be reconciled, those not, could be the enemies of the Afghan state,

:36:58.:37:04.

they will be in support of the Afghans to do that. Can we ask

:37:04.:37:09.

briefly about Iran, if Iran were to have deployable nuclear weapons,

:37:09.:37:18.

how serious a matter would that be? We have said we wouldn't allow Iran

:37:18.:37:22.

to be a nuclear power. If you were tasked to destroy nuclear

:37:23.:37:26.

capability that Iran might possess or be on the brink of po tesing,

:37:26.:37:33.

could you do that? I won't speak -- Possessing, could you do that?

:37:33.:37:38.

won't speak about our capability. Our policy is economics and

:37:38.:37:41.

diplomacy. We have conscious low stated we won't take military

:37:41.:37:45.

options off the table either. Implicit in that is the belief you

:37:45.:37:52.

could do it if you had to? As we are asked what options we can

:37:52.:37:56.

provide to our authorities, we, of course, lay those out, both in

:37:56.:38:00.

terms of their capability and the risk associated with them. I'm not

:38:00.:38:03.

prepared to talk about that publicly.

:38:03.:38:08.

General,thank you. A very large number of Egyptians

:38:08.:38:11.

tund out today at the start of elections there. -- turned out

:38:11.:38:17.

today at the start of elections there. It is a fiendishly

:38:17.:38:20.

complicated system that would baffle voters in our system. They

:38:20.:38:27.

turned out in lines a mile long. Amid the queues and hopefulness and

:38:27.:38:33.

inked fingers, much remains unresolved, and much of whether the

:38:33.:38:39.

military will ever give up power. Revolutions don't always move fast.

:38:39.:38:46.

Today at this women-only polling station in south Cairo, as at

:38:46.:38:50.

others across Egypt, they shuffled towards democracy. A two-hour wait

:38:50.:38:54.

to vote here. Most found it thrilling. I feel so excited about

:38:54.:38:58.

it, it is my first time to go for elections. For the first time we

:38:58.:39:02.

have to choose someone who will represent our choice in the

:39:02.:39:06.

parliaments, and I think that is very important. Before that we

:39:06.:39:10.

didn't have any choice for anything. I'm shocked that we can do, and

:39:10.:39:16.

think like that. I didn't expect it. Not in a thousand years.

:39:17.:39:23.

I didn't expect to go an election in my lifetime. Some people say

:39:23.:39:30.

these elections will make no difference? OK. It won't make any

:39:30.:39:37.

difference. But it changed me. It changed me.

:39:37.:39:42.

I can feel it, down deep in me. Me I am changed.

:39:42.:39:46.

Last week these elections were overshadowed by the violence on

:39:46.:39:50.

Tahrir Square. And worries about the continuing role of the army in

:39:50.:39:56.

politics. But now the days Day has come, it is the sheer exhileration

:39:56.:40:00.

of voting that counts most for many Egyptians, they Israel yois as the

:40:00.:40:06.

future of their country is decide - - realise that as the future of

:40:06.:40:14.

their country is decided there is plenty to play for. 150 candidates

:40:14.:40:18.

in this multimember constituency to be elected according to a

:40:18.:40:22.

bewilderingly complex system. It has been made deliberately complex,

:40:22.:40:26.

by Egypt's ruling generals, who won't want voters to give a clear

:40:26.:40:30.

answer, and intend, many believe, to stay in charge, despite this

:40:30.:40:34.

year's revolution. TRANSLATION: It is great to have

:40:34.:40:38.

elections. But they say no matter what weather we vote or not, the

:40:38.:40:41.

parliament won't form the Government, or control it. The

:40:41.:40:45.

Military Council said that. So what use is voting? We don't want a

:40:45.:40:49.

parliament like in Mubarak's time. But hire, away from Tahrir Square,

:40:49.:40:55.

the -- here, away from Tahrir Square, the military has its

:40:55.:40:58.

defenders too? TRANSLATION: We need the army to control the situation,

:40:58.:41:03.

who else can run Egypt but the army. If they can hand over power to the

:41:03.:41:07.

civilian Government in a peaceful way, the army will go back to the

:41:07.:41:11.

barracks. Even this stalwart of the square, standing as an independent

:41:11.:41:14.

on the revolutionary credentials, is happy for the vote to go ahead.

:41:14.:41:19.

While the army is still in power. Isn't that a bit of a climb-down?

:41:19.:41:23.

We need to put pressure on the Military Council from parliament

:41:23.:41:27.

and the electorate at the same time. We have to pursue all and every

:41:27.:41:32.

option. Auk med has a problem, in a -- Ahmed has a problem, in a

:41:32.:41:37.

country where a third of candidate's are illiterate, each

:41:37.:41:46.

candidate has a symbol, a camera, a bank, but Ahmed's logo has been

:41:46.:41:51.

messed up on the ballot paper. People think mine is a bus not a

:41:51.:41:56.

microbus. It says "one of the people from Tahrir Square". Funnily

:41:56.:42:02.

enough when I met him at the start of his campaign, he was also having

:42:02.:42:05.

problems. Ernest revolutionaries like him are power on the square

:42:05.:42:11.

but not the street. I had some of my banners here, you can see it was

:42:11.:42:16.

taiched to the banners, it was ripped off. -- attached to the

:42:16.:42:21.

banners, it was ripped off. I posted 20 seven metre banners

:42:21.:42:27.

yesterday, only five remain. They were shredded by another contestant

:42:27.:42:31.

or another competitor shreds them. But this time they have completely

:42:32.:42:35.

disappeared, it is very strange. It didn't take 24 hours. The police

:42:35.:42:40.

weren't very interested. Ahmed was already at a disadvantage. With not

:42:40.:42:47.

much more than �10,000 to spend on his whole campaign.

:42:47.:42:54.

This is another candidate with plenty of cash has been going down

:42:54.:43:01.

the back constituency lanes. This is an oil tycoon that used to

:43:01.:43:06.

belong to Mubarak's banned party. Consequently, his symbol is the

:43:06.:43:10.

tank. To revolutionaries he's a dangerous remnant of the old regime.

:43:10.:43:16.

He has done a lot to help poor people like these, even in

:43:16.:43:24.

revolutionary times they can't live by principle alone. TRANSLATION: Be

:43:24.:43:28.

I want someone who help us where they k I want someone to mend

:43:28.:43:34.

things and provide food. I would vote for this.

:43:34.:43:38.

TRANSLATION: There are no sewers in this area, eventhough we have been

:43:38.:43:42.

living here for 14 years. A contractor came to put them in, he

:43:42.:43:47.

took the money and left. Nobody does anything about it now.

:43:47.:43:51.

Before I leave this constituency, I wanted to meet a young man called

:43:51.:43:56.

Ali, whom I last saw in January. At the funeral of a friend of his.

:43:56.:44:04.

Shot by police in the revolution. The dead of the 17-year-old and

:44:04.:44:08.

main others helped bring Egypt to today's historic elections. What

:44:08.:44:15.

did it bring his own family, or the struggling neighbourhood.

:44:15.:44:19.

TRANSLATION: Since the revolution, nothing has changed. There has been

:44:19.:44:22.

no compensation for the martyrs, we are hoping after the elections they

:44:22.:44:25.

will do something about it. Everything is the same as before,

:44:25.:44:32.

except for one thing, unemployment has got even worse.

:44:32.:44:37.

These people want subjectings now citizens, -- once subjects now

:44:37.:44:41.

citizens, know the first few months of the parliament they are electing

:44:41.:44:48.

will be dominated with rouse over the constitutions, the army versus

:44:48.:44:53.

civilians, civilians versus the secular.

:44:53.:44:57.

It won't bring more daily bread, that is what most thought they were

:44:57.:45:07.
:45:07.:45:26.

That's all tonight. The death was announced today of the film

:45:27.:45:33.

director, Ken Russell, the one-time enfrant terrible was 84. We folk --

:45:33.:45:41.

enfant terrible, was 84, we spoke to Martin Scorsese today. Having

:45:41.:45:46.

seen Women In Love and The Devils, and the production design is strong

:45:46.:45:50.

stuff. He wasn't afraid of anything. He said what he had to say and did

:45:50.:45:55.

it. But, what I really felt really should be seen again, particularly

:45:55.:46:03.

in America, are the black and white films he made at the BBC.

:46:03.:46:12.

Omnibus, Dealius? Yes and Sabalius and the other one on Isodora Duncan.

:46:12.:46:17.

They were amazing and revelations. Who are we to disagree with Martin

:46:17.:46:23.

Scorsese. I want you to write down a new opening to our our people, I

:46:23.:46:27.

don't like that title, call it Song Of Summer. I want you to imagine we

:46:27.:46:32.

are sitting on the cliffs in the heather looking out over the sea.

:46:32.:46:35.

The sustained chord in the high strings suggests the clear sky and

:46:35.:46:41.

the stillness and calmness of the scene. Now then, seven four in a

:46:41.:46:48.

bar, four plus three, divided strings, chord of D major, A, D, F

:46:48.:46:58.
:46:58.:46:59.

sharp, the lowest note the A strings on the violass.

:46:59.:47:04.

-- violas. Heavy rain and squally winds

:47:04.:47:06.

driving across the country. Amber driving across the country. Amber

:47:06.:47:09.

warning from the Met Office. It dries up in the morning, across

:47:09.:47:12.

Northern Ireland. Wet weather sweeping into England and Wales, it

:47:12.:47:16.

doesn't reach the eastern side of England until late in the day.

:47:16.:47:22.

Heavy rain arriving on to the Pennines by 3.00pm. Largely dry.

:47:22.:47:27.

Windy, the strongest winds with the rain. They will be heavy and

:47:27.:47:31.

squally too. The winds dying down eventually across the south west of

:47:31.:47:39.

England and Wales. As the more persistent rain clears it may turn

:47:39.:47:42.

wintry in Snowdonia. A wet start in Northern Ireland, but clearing

:47:42.:47:46.

later on in the morning, sunshine in the afternoon, but showers. It

:47:46.:47:51.

doesn't half feel qolder and colder in Scotland as well -- colder and

:47:51.:47:56.

colder in Scotland as well. It will be a very wet morning across

:47:56.:48:00.

Scotland and Northern Ireland. We will see showers gathering here

:48:00.:48:06.

again on Wednesday. Further south, the band of rain sweeping eastwards

:48:06.:48:10.

during Tuesday, squally rain, heavy rain, potentially damaging and

:48:10.:48:14.

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