30/11/2011 Newsnight


30/11/2011

David Grossman and Shaun Ley assess the impact of today's strikes and examine the numbers behind the pensions dispute. Presented by Jeremy Paxman.


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Transcript


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They are frustrated and disappointed and not going to take

:00:07.:00:11.

it any more. Public sector workers close schools and operating

:00:11.:00:14.

theatres today to protest at reforms to their pensions. Even

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people who wanted to work couldn't get there, disruption, the unions

:00:19.:00:23.

said, was unfortunate, but necessary. We are all getting

:00:23.:00:27.

poorer, can we afford to pay them what they demand. A lot of people

:00:27.:00:32.

in the private sector really don't see any need for what we are doing.

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You try to justify your situation with their's, it is proving very

:00:37.:00:40.

difficult. The General Secretary of the main union involved, and the

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minister responsible are both here. Today, more evidence, as if we

:00:45.:00:48.

needed any more, that it's going to be years before incomes recover to

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the level they were at even nine years ago.

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As the experts run the numbers on yesterday's announcements, it is

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clear the poor could suffer heavily, and the pain could last a decade.

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We are committed to resolving contentious and difficult issues

:01:11.:01:15.

through dialogue. What was the LSE thinking of taking money from

:01:15.:01:24.

Muammar Gaddafi's son, we speak to his examiner.

:01:24.:01:27.

There were teachers, council officials, health workers and even

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a light dusting of weather forecasters out on strike about

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their pensions today. The gaze of the media settled on demonstrations,

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television loves a bit of shouting. Facts are another story, it is

:01:40.:01:43.

claimed that two million people were on strike, it is also claimed

:01:43.:01:47.

that only one in three civil servants went out. The Prime

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Minister called the protests a damp squib.

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According to the TUC, this was the biggest day of industrial action in

:01:56.:02:00.

a generation. According to the Prime Minister: It looks like

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something of a damp squib. At the start of the march in

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central London, there was competition between the unions to

:02:09.:02:14.

get the most placards into the marchers hands. Get rite of that.

:02:14.:02:18.

Even the police were giving stuff out. Usefully the police have

:02:18.:02:23.

handed out these leaflets so everyone can know what to expected.

:02:23.:02:27.

We will look at what officers will be wearing, you can expect to see

:02:27.:02:32.

officers in yellow jackets and traditional police hats, check!

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There was no such discernable dress code for the marchers. There was a

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smattering of performance art radical. But mostly, staff went

:02:45.:02:49.

casual, for whom this was no fun day out, but a regretable and

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necessary protest. If you are going to get a pension based on average

:02:55.:03:00.

earnings over the years, in the 1970s I used to take home �20 a

:03:00.:03:03.

week, if that was put into an average pension, it is nothing, it

:03:03.:03:09.

is an insult. That part of it would be index-linked, it is still better

:03:09.:03:13.

than most people in the private sector can ever hope to get?

:03:13.:03:18.

wouldn't say so. You wouldn't? That is what the statistics say, isn't

:03:18.:03:22.

it? I wouldn't say so. I would say society needs to look at stopping

:03:22.:03:26.

rich people choosing whether they pay tax, and that those people who

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make communities function pay the tax to keep the communities

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functioning. The destination of this march was Westminster.

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Although the demonstration itself was still about two hours away, the

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controversy was swifter. Arriving in time for Prime Minister's

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Questions. Why does the Prime Minister think so many decent, hard

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working public sector workers, many of whom have never been on strike

:03:50.:03:56.

before, feel the Government simply isn't listening. The reason people

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are going on strike is because they object to the reforms that we are

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making to public sector pensions. But I believe those reforms are

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absolutely essential, and as the former Labour pensions secretary,

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Lord Hutton said, and he said this, "It is hard to imagine a better

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deal than this". He is privately delighted the unions have walked

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into his trap. That is the reality, he's been spoiling for this fight.

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Today, he now backs the strikes, why? Because he's irresponsible,

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left-wing and weak. The Prime Minister has dismissed

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today's action as something of a damp squib. However, the politics

:04:41.:04:44.

of this isn't quite fully formed. That is why the parties are having

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to rather gingerly find their way around it. The big question is this,

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where does the average voter put themselves today? Are they, even if

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they are not here in person, marching alongside these public

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sector workers, angry at what they think is a deal that has been

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imposed on them. Or are they at home, looking at their own finances,

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feeling the pinch of these austere times, feeling these people have it

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easy. In the battle of public opinion, affordability and fairness

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are two key measures. This graph from the Hutton Report into pension,

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show seen before most of the changes made, the cost of public

:05:25.:05:28.

sector pensions as a proportion of GDP is coming down and will

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continue to do so well into the future. Affordability, then, is not

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the most compelling argument. cost of public service pensions is

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forecast, by the Government, to decline as a share of national

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income going forwards. We can afford that, if we want to. But a

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far smarter question, is it the best use of our money, or should we

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be making less generous promises to public sector workers, freeing up

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resources to spend elsewhere, lower taxes or higher spending elsewhere,

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you make the choice. Was it a mistake to introduce the question

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of affordability as being one of the factors here in this debate.

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Afterall, you will be aware of the graph, the graph that everyone

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keeps showing us of declining proportion of GDP going to public

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sector pensions in the future? that graph is one where they have

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already factored in the reforms that the Government have made. What

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Lord Hutton is saying...Some them, only the change to the

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inflation uprating, the other changes aren't in that graph?

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graph that Lord Hutton produced, after we had already announced

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changes that affected the contribution rates, that is one of

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the biggest reforms we are making, they are baked into that graph.

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Lord Hutton has said the deal we are putting forward is necessary,

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right and generous. Affordability, sustainability, the different sides

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of the same coin. So, that's it, we have reached the

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end of the march. Big Ben is over there, the question is, what

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happens now, where does this wave of public sector anger go next?

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With us now is the cabinet office minister, Francis Maude. Do you

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understand why so many people are angry? I understand that they are

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concerned about what their pensions are going to look like, and what

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they are going to be. We're steadily explaining that actually

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the cost of public sector pensions has risen by a third, by �10

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billion in the last ten years, and actually, the costs has fallen on

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the general taxpayer. People are living much longer, so we need to

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expect people, generally, to work longer. These people already have a

:07:38.:07:42.

pay freeze, they learned yesterday if they get a pay rise at the end

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of that freeze it will be 1%, they have learned also that 700,000

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posts in their fields are going to disappear. You can't be surprised

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if they come to the conclusion that there is an agenda going on here

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that is not about the public finances? The agenda is completely

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about having, on pensions, about having sustainable and good public

:08:06.:08:12.

sector pensions for the future. But they have to be sustainable and on

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a basis that is fair to public sector workers and fair to the tax-

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payers whose taxes support these pensions. Since there is a

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proportion of GDP, the burden of these pensions is falling. It is

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clearly not just about money, it is about politics too isn't it?

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burden is falling, because of the reforms. There were a number of our

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reforms which were already factored into that graph. And there were

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other reforms which were projected under the last Government, and

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hadn't been implemented, and the detail hadn't been worked out and

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put in. The Institute of Fiscal studies says it is all affordable?

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Anything is affordable if you are willing to sacrifice other things.

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The office of budget responsibility projected that without reform the

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cost to the taxpayer would be an additional several thousand pounds

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individually. You want to take this money and spent it on something

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else, to penalise them? We are not penalising them. For those wanting

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reforms, we need to know what will we cut �7 billion from. At the end

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of these reforms, public sector workers on lower and middle incomes

:09:29.:09:34.

will be able to retire on a pension at least as good, in many cases

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they expect, many will be expected to work longer. Because they are

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long to live longer. They will be asked to pay more towards it, so

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there is a fairer balance to what they put towards their pensions and

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the employer, the taxpayer puts towards them. Is there a question

:09:50.:09:58.

of 3.2%, is that negotiable at all for you? We said that there f there

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are ways the unions can put forward delivering those pension schemes

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delivering those savings, we are willing to listen. I have to tell

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you, no suggestions have been put forward.

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The baseline for everything that you are saying, both in this and

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yesterday, is that we have all got to accept that life is going to get

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a lot worse, isn't it? Life will be tough. We inherited a massive

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budget deficit. The office of budget responsibility concluded in

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its analysis that the size of the boom was greater than we envisaged,

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and the deep depth of the crash, of the bust, was greater. Actually the

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consequences of that, we will have to live with and we will have to

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work our way through. I want at the end of this, there could be really

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good public sector pensions, for decent public servants, who make

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their lives devoted to this important calling of public service.

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Wouldn't you also say one of the consequences has been for you to

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abandon some of the principles you laid out at the time you were

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elected. For example, the idea that work must always pay. When you look

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at what you did to Working Tax Credits yesterday, and what you did

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to benefits, one of them being frozen and benefits rising by 5.2%.

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Don't you conclude that you have abandoned that principle? I don't

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accept that for a second. What I'm concerned with here today is with

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the reforms to public sector pensions. Just to focus on this.

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be clear about this, you wanted the job seekers allowance to go up by

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5.2%? If you want to talk about the Autumn Statement, that is fine, I'm

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here to talk about this industrial relations dispute, and the case for

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public sector pensions reform. you want the jobseeker's allowance

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to go up by that much? I'm here to talk about the strikes today and

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the case for reform of public sector pensions. It is worth making

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the point that there are negotiations going on a daily basis

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here. You said your final offer was on November 2nd, this whole thing

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is in the context of your attitude to work. I ask you again, did you

:12:06.:12:10.

want the jobseeker's allowance to go up by 5.2%? I'm not getting into

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all of that. The fact is...That what the Lib Dems got out of the

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Autumn Statement, wasn't it? have had a tough set of decisions

:12:22.:12:25.

to make in the Autumn Statement. As a Government we work together very

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closely this is a Government that has come together, two parties

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coming together, to work in the national interest, to clear up the

:12:31.:12:35.

mess left by the last Government. Actually, putting all of this

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together, in a way that has delivered a credible plan for

:12:39.:12:42.

reducing the deficit, which gives us the lowest interest rates. We

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were able to actually have a lower interest rates, even than Germany,

:12:48.:12:52.

that takes quite a lot of determination and loadership and a

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long-term view of what's -- leadingship and a long-term view of

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what's going to work. We will go back to negotiate public sector

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pensions. I thought you made your final offer? There are discussions

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all the time. It wasn't the final offer? There were negotiations with

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the civil ser service. I hope you will ask Mark Serwotka when he

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comes on, why he wasn't on those discussions yesterday. Bear with us,

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and we will come to that. Reform of public sector pensions necessary,

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the Government says, because of the dismal state of the country's

:13:22.:13:25.

finances. Between a fifth-and-a- quarter of people with a job work

:13:25.:13:31.

for the state. Although in some warts of the -- parts of the

:13:31.:13:34.

country it is a higher proportion. Many of those who work in the

:13:34.:13:40.

private sector and contribute to the taxes that fund private sector

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workers' pensions say they don't know they are born. We have been

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finding out who is really better off, public or private. A show of

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strength on the streets of Birmingham. Several thousand

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workers from the public sector foregoing a day's wages, in the

:13:56.:14:03.

hope of, as they see it, protecting years of their pension. Meet

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Theresa Footes, husband Tom and daughter Kyra. She's a primary

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school teacher aged 36, because of the increase in the pension age,

:14:12.:14:22.
:14:22.:14:23.

she will retire on �12,000 on the age of 68, she had been expecting

:14:23.:14:26.

�18,000. I paid into the pension, I knew what I was getting out of it.

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Now it is taken away from us. Now it is not Martin McGuinness what we

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pay in, pay more and work longer. As her husband acknowledges, that

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argument -- Now it doesn't matter what you pay in, pay more and work

:14:44.:14:50.

longer. Her house acknowledges that argument is difficult to accept.

:14:50.:14:52.

is difficult because of the situation people find themselves in,

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you try to justify your situation with their's, it is really very

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difficult. At this cash and carry in the city centre, strike day

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means more people shopping but fewer to serve them. About a fifth

:15:03.:15:06.

of staff are parents who have stayed home because schools have

:15:06.:15:11.

closed. For a worker in the private sector, it can be hard to feel much

:15:11.:15:16.

sympathy for those on strike. Sumeet Chadha is marketing manager,

:15:16.:15:19.

a-year-older than Teresa, his salary is about the same as her's.

:15:19.:15:23.

He has made no pension provision, eventhough he could have paid into

:15:23.:15:28.

a company scheme. I do feel that most people are to blame for their

:15:28.:15:32.

own situations. I can understand the people going on strike, on the

:15:32.:15:36.

one side of things, and the other side I can understand why the

:15:36.:15:42.

Government is doing this. Should that have been in place in the firs

:15:42.:15:46.

understand stand, were there too many -- first instance, were there

:15:46.:15:50.

too many benefits paid out? There is a deficit, to get the economy

:15:50.:15:54.

back on track something needs to be done. The other big benefit is

:15:55.:15:57.

wages, do public sector workers get a better deal there. It is

:15:57.:16:00.

difficult to measure. But the Institute for Fiscal Studies has

:16:00.:16:05.

had a go. Above the horizontal line is where public sector wages

:16:05.:16:09.

exceeded those in the private sector. Women have consistently

:16:09.:16:16.

done better. Throughout the 1990s, for both sexes, the public sector

:16:16.:16:20.

gap narrowed. Men with private sector jobs were made more than

:16:20.:16:25.

those in the public sector. The difference has grown again,

:16:25.:16:27.

accelerating dramatically in the time of the financial crisis, that

:16:27.:16:32.

cut private sector wages more than the public sector. The IFS thinks

:16:32.:16:39.

that won't last. In recent years public sector pay has moved ahead

:16:39.:16:44.

of private sector pay. Not by design, it is just private sector

:16:44.:16:48.

pay growth has been subdued in the recession. There is two years of

:16:48.:16:55.

pay squeeze with another two years coming. By 2014/15, comparing a

:16:55.:16:59.

like-for-like basis, this would be sufficient to erode away the public

:16:59.:17:03.

sector premium for men that we currently believe exists. They have

:17:03.:17:10.

put on quite a display today, and a pretty noisy one at that, once all

:17:10.:17:14.

the shouting has faded away. The question for the future is whether

:17:14.:17:18.

the unions will be able to capitalise on that, and expand

:17:18.:17:21.

support on voters, many not benefiting from the pensions they

:17:21.:17:26.

would like to protect for the future, or whether this disruption

:17:26.:17:29.

will alienate precisely the people whose support they so desperately

:17:29.:17:33.

need. The Government wants to cut the bill to the taxpayer, but if

:17:33.:17:37.

public sector workers won't make the higher contributions ministers

:17:37.:17:40.

expect, and join the millions in the private sector who don't save

:17:40.:17:44.

at all for their old age, then the next generation may be facing a

:17:44.:17:47.

much bigger bill. Mark Serwotka, the General

:17:47.:17:50.

Secretary of the Public and Commercial Services Nuion, is with

:17:50.:17:55.

us now. And Francis Maude is still here. Let me speak to you for a few

:17:55.:18:01.

minutes first. Are you embarrassed that so many of your members

:18:01.:18:04.

protesting today have better conditions and pensions to look

:18:05.:18:09.

forward to than many people in the private sector? I'm not embarrassed

:18:09.:18:13.

about that at all. It makes me determined to make the case that

:18:13.:18:16.

there should be fair pensions for all, and the problems in the

:18:16.:18:20.

private sector won't be solved by slashing the hard-earned public

:18:20.:18:23.

sector pensions of which people were promised for decades. Where do

:18:23.:18:28.

you think all the tax income will come from? As you have just seen in

:18:28.:18:32.

your report, the cost of public sector pensions, as a proportion of

:18:32.:18:36.

GDP is falling. We have made the changes, five years ago, that

:18:37.:18:40.

modernised the scheme, took account of people working longer. And the

:18:41.:18:48.

result of that is they fall from 1.9% to 1.4% of GDP. You don't deny

:18:48.:18:52.

people are living longer, you presumably accept there is a need

:18:52.:18:55.

for change occasionally? There was a need for change five years ago,

:18:56.:19:00.

we did a deal with the then Labour Government. We were told it would

:19:00.:19:04.

last for 50 years. I don't accept the premise that because everybody

:19:04.:19:08.

supposedly lives longer we have to work lot longer. Many people will

:19:08.:19:12.

never live to 68 and see the pension that many of them have

:19:12.:19:17.

worked so hard for. I don't buy into the notion that in the sixth

:19:17.:19:20.

biggest economy in the world that if you live longer you work until

:19:20.:19:25.

you drop. If the case was so transparent, why did so much of the

:19:25.:19:30.

Civil Service come out on strike today -- fail to come out on strike

:19:30.:19:33.

today? It was somewhere between a quarter and a third of the Civil

:19:33.:19:38.

Service, the majority were working. He has had a good go, let me make

:19:38.:19:42.

the point. The Government's behaviour has been extraordinary?

:19:42.:19:45.

We are not talking about that, I'm asking you why so many people

:19:45.:19:49.

failed to come out today? saying two million people were on

:19:49.:19:55.

strike. Nonsense. 90% of the PCS members. They weren't u know

:19:55.:20:02.

perfectly well it is not true. will be able to analyse that in the

:20:02.:20:05.

future. It is the latest example of a Government who is either

:20:05.:20:09.

deliberately misleading people or doesn't understand what the issues

:20:09.:20:14.

are. Anybody who left parliament. Check the methodology. Did you get

:20:14.:20:18.

people to count how many people weren't at work today? It is

:20:18.:20:25.

146,000, I have it down to the last number. You claim it is 146,246,

:20:25.:20:29.

even if everyone was at work, the idea they could get that figure

:20:29.:20:33.

within five hours is laughable. We know this is paysically an attempt

:20:33.:20:37.

to try and see. The Civil Service doesn't work that fast? They are

:20:37.:20:40.

not there. Senior Civil Service members on

:20:40.:20:45.

strike. Are you accusing the minister of making it up?

:20:45.:20:49.

accusing the minister of misleading and potentially lying to people

:20:49.:20:53.

about a number of questions. That is a serious accusation to make.

:20:53.:20:57.

will back it up. Mr Maude says what he knows to be untrue, that people

:20:57.:21:01.

will get better pensions if they are lower or middle incomes, proved

:21:01.:21:08.

to be put to him earlier. Mr Maude also said. Let me say what I said.

:21:08.:21:13.

Just hear what he said. Quickly put him right? You are putting up an

:21:13.:21:17.

aunt Sally to knock it down. I have said explicitly that people on

:21:17.:21:22.

lower and middle incomes will retire on a pension which is as

:21:22.:21:26.

good, and in many cases better, than what they currently expect to

:21:26.:21:31.

retire on. They may work longer and they will pay more towards it.

:21:31.:21:36.

your researchers go on the pensions calculator, it shows that is

:21:36.:21:42.

nonsense. It is also nonsense. are not comparing like with like.

:21:42.:21:45.

It is your calculator. It is nonsense that the Hutton graph

:21:45.:21:52.

assumed the reforms, do your homework, three major reforms, it

:21:52.:21:57.

dopbl factored one. The national saud dit office accept the changes

:21:57.:22:03.

a few years ago cut the contributions by 14%. We have an

:22:03.:22:07.

extraordinary case of minutes tears hurling insults like school boys,

:22:07.:22:13.

making up fantasy figures and refusing to talk about the issues.

:22:13.:22:19.

Not a pen of the money. Why don't they enter discussions, the other

:22:20.:22:23.

union leaders were there and engaging in a serious way with the

:22:23.:22:28.

issues which matter to your members, you weren't there. You haven't

:22:28.:22:32.

negotiated. Let me finish. haven't answered the question yet,

:22:32.:22:36.

why didn't you go? They weren't negotiations. You chose not to go,

:22:36.:22:41.

how do you know? My General Secretary goes, and all they are is

:22:41.:22:47.

exchanges of information between officials. Nonsense, utter nonsense.

:22:47.:22:50.

Let me finish, the negotiations are with Government officials, what

:22:50.:22:54.

they have said to us is, that is our final offer, as you correctly

:22:54.:22:58.

put, now we want our officials to talk to you about how to share out

:22:58.:23:01.

the pain. We are saying we're not interested in sharing out the pain.

:23:01.:23:05.

You need to make concessions on the big question of forcing people to

:23:05.:23:10.

work longer, forcing them to pay more money in. Not a penny of which

:23:10.:23:15.

goes into any pension fund, it all goes to George Osborne's coffers.

:23:15.:23:20.

You want them then to get tens of thousands left. It is daylight

:23:20.:23:23.

robbery, that is why you will not debate the issues, there is smoke

:23:23.:23:31.

screens all over the place. If it is so wrong to move to CPI rating,

:23:31.:23:36.

why is in the own pension scheme for your own staff members, you

:23:36.:23:44.

have moved from RPI uprate to go CPI. You have increased your

:23:44.:23:50.

pension contributions for your own staff, not the modest 3.2%, but 10%,

:23:50.:23:55.

why? Moralise, come down to union headquarters, we haven't increased

:23:55.:23:58.

the contributions, we don't have any. We are consulting and

:23:58.:24:01.

negotiating with our staff union about changes to a scheme, which

:24:01.:24:06.

has had a valuation. Unlike the Civil Service scheme which hasn't

:24:06.:24:10.

had a valuation. It is only because you are making those changes. J

:24:10.:24:16.

where we are trying to see if the scheme can be stablised and giving

:24:16.:24:20.

people fairly generous pay offers, you are giving us a cut over four

:24:21.:24:26.

years, and asking public sector workers to pay more and it all goes

:24:26.:24:30.

to George Osborne. Not to George Osborne personally, that is absurd.

:24:30.:24:36.

To his coffers in the Treasury. Is it into pensions. I want to give

:24:36.:24:40.

Francis Maude a very quick opportunity to respond to this

:24:40.:24:49.

accusation that you lied? It is not a new one from Mark. What I would

:24:50.:24:54.

just say is come, put your pride aside, come to the negotiating

:24:54.:25:00.

table, engage as all the other union General Secretarys engaging,

:25:00.:25:04.

come and talk, you may find there might be something to the benefit

:25:04.:25:08.

of union members. If you wear your blinkers and refuse to engage you

:25:09.:25:14.

are letting down your members. up Lionel Barber's offer, get your

:25:14.:25:17.

ministers into negotiations with us tomorrow, we will all about there.

:25:17.:25:21.

We are not talking to official about difficultying up the pain.

:25:22.:25:29.

You must negotiate about stop -- difficult -- divvying up the pain.

:25:29.:25:34.

J Get off your high horse and come. You get off your high horse when

:25:34.:25:37.

you have millions in the bank and low paid workers suffer.

:25:37.:25:46.

All this discussion takes place in the murky gloom cast by yesterday's

:25:46.:25:50.

resitation of the awful mess we are in by the economy.

:25:50.:25:54.

Now the words to describe Britain is the lost decade. Comparisons

:25:54.:25:59.

with Japan in the 1990s, the only straw to be grasped at, and an

:25:59.:26:02.

imaginary one, is the decade might have begun a few years ago, then it

:26:03.:26:07.

may not be a decade at all. It could be much longer. Our economics

:26:07.:26:16.

editor, Paul Mason, takes a mosh bid interest in this sort of thing.

:26:16.:26:20.

-- morbid interest in these sorts of things. Good news today?

:26:20.:26:23.

thing happening on the global front is the equivalent of the doctor

:26:23.:26:27.

walking into the waiting room and saying hey, everybody, it is great

:26:28.:26:34.

we have a whole new supply of vaccine against but Bonnic plague,

:26:34.:26:37.

and the patients go why do we need it? The central banks today have

:26:37.:26:41.

come out and pumped a lot of dollars into the global system. The

:26:41.:26:46.

reason is, that the European banking system is short of dollars,

:26:46.:26:50.

this is like filling up the ATMs in case there is a run on the banks.

:26:50.:26:55.

It is a big gesture, it sent the markets wild for a few hours,

:26:55.:26:59.

really, the reason they have done it is because we are entering a

:26:59.:27:03.

period of sisters now and the European Summit on the 9th of

:27:03.:27:08.

December. They want to make sure no accidents take place. Going back to

:27:08.:27:17.

yesterday's news, which was really, really bad. Does it look like a

:27:17.:27:20.

lost decade? The Institute of Fiscal studies, which tries to rake

:27:20.:27:23.

through the figures and find out what they really mean, has been

:27:23.:27:28.

delivering its verdict today. We have some of the graphs to show you.

:27:28.:27:32.

This is one. I don't know what year you were born in. I was born in

:27:32.:27:41.

1960. This graph here shows the shape of debt in our lifetime. The

:27:41.:27:45.

changing shape of public spending over the years. As you can see, in

:27:45.:27:50.

the last 10-15 years, we have this Labour period when it generally

:27:51.:27:55.

rose every year. If you look at the general historical trend it has

:27:55.:28:00.

been patchy. Now, what the IFS has said, is look, we are going into

:28:00.:28:03.

seven years where it always falls. If you compare it to the historic

:28:03.:28:10.

trend, we have never had a period like it. This is by way of

:28:10.:28:12.

explanation to the rancour we are now hearing. We are going into a

:28:12.:28:17.

period of toughness. Here is another graph. This is departmental

:28:17.:28:22.

spending, it looks a bit like a mountain, since 1998, it is

:28:22.:28:28.

generally gone up as a pro-portion of GDP. Now it is set to generally

:28:28.:28:33.

go down. Back to below where it was in the late 1990s. It is a big sea

:28:33.:28:36.

change in almost every figure we look at.

:28:36.:28:40.

How does this relate to what it feels lick? You can feel the

:28:40.:28:47.

rancour there. Let's look at one thing. We are talking here about

:28:47.:28:52.

much of yesterday being dominated by public sector workers. The

:28:52.:28:56.

Institute for Fiscal Studies has done calculation on how badly it

:28:56.:29:01.

will affect general workers standard of living. What we see, a

:29:01.:29:08.

7.5% in real incomes for households. Between 2009 and next year. That is

:29:08.:29:18.
:29:18.:29:22.

why it feels so bad pltd. -- so bad. That is why it is feeling rancour

:29:22.:29:32.
:29:32.:29:36.

ous on the streets. When will it come back? It comes back in 20 26.

:29:36.:29:43.

We have an adviser to George Osborne, and the Professor of

:29:43.:29:47.

political economy at the University of Warwick, and written several buy

:29:48.:29:57.

oing fees of John Ke ynes. Does it feel like a lost decade to you?

:29:57.:30:03.

does, if you look behind all the clatter and clamour of the last few

:30:03.:30:08.

days, and as you have just had, the real story is this time it is

:30:08.:30:13.

really different. You and I have lived through a lot of booms and

:30:13.:30:18.

busts, Barber, Lawson and the rest. They have been like hangovers from

:30:18.:30:22.

a wild party, people have taken the pay, and life has continued as

:30:22.:30:28.

usual. I think what has crystalised this week is it will not be like

:30:28.:30:33.

that. We will lose through this a large chunk of our national income,

:30:33.:30:41.

and people's earnings and standard of living will not shift over two

:30:41.:30:46.

years. Have you ever seen anything like this? It is compared to the

:30:46.:30:51.

great depression of 1929-1932. It is not as deep, but lasting a bit

:30:51.:30:57.

longer. I think there is a great chance there will be a lost decade,

:30:57.:31:01.

a miserable decade. It is sometimes called the new realisim, it need

:31:01.:31:07.

not be. It is a consequence of policy. You mean to say we need not

:31:07.:31:17.

have a lost decade. The solution is keepbsian? It is. I believe -

:31:17.:31:21.

Keynesian. It is, I believe you need to build up not cut down. If

:31:21.:31:24.

you cut down you will not cure your deficit, and the income of the

:31:24.:31:28.

economy, the economy will shrink. The country is bankrupt? No it is

:31:28.:31:36.

not. When you have lots of, that is talking in money terms, that is

:31:36.:31:40.

just money. If you have a lot of long-term resources that are idle,

:31:40.:31:44.

20% of capacity isn't being used, how can you talk about being

:31:44.:31:50.

bankrupt. Are you looking forward to a lost decade? Based on the

:31:50.:31:56.

numbers, the decade starred five years ago. We have the biggest boom

:31:56.:32:06.
:32:06.:32:06.

and bust in history. I'm with two clever economists here. In the real

:32:06.:32:15.

world, I think the idea that we have a problem based on borrowing,

:32:15.:32:20.

and the solution is to have more borrowing to get the borrowing down,

:32:20.:32:23.

and in the process sacrificing interest rates, as of yesterday

:32:23.:32:28.

lower than Germans, doesn't stack up. You don't believe that will

:32:28.:32:33.

last? It has lasts for over a year now. This is the Government line.

:32:33.:32:37.

It isn't. If you look at what has happened to interest rates, Britain

:32:37.:32:41.

has been a safe haven, rates have come down, that is worth �10

:32:41.:32:46.

billion, a pretty big fiscal stimulus to mortgage holders across

:32:46.:32:51.

the country. You save on interest rates by having interest rates very

:32:51.:32:55.

interest rate interests, �28 billion from the Chancellor. If, in

:32:55.:33:01.

order to get that, you are reducing your revenues by �50 billion, you

:33:01.:33:07.

have a negative number. That is the consequence of cutting down. Other

:33:07.:33:12.

economists do disagree with you on this point, Sir. Economists never

:33:12.:33:21.

agree on anything. The collective noun should be disagreement. We

:33:21.:33:25.

have a debt problem, we need to grow our way out of it. Yesterday

:33:25.:33:29.

the business leaders welcomed what was said, against very little

:33:29.:33:33.

fiscal head room. I don't think in my constituency this feels like a

:33:33.:33:39.

lost decade, but a difficult deck taid. I wonder if it is not just a

:33:39.:33:43.

decade, are we not getting to the point of reckoning, which is the

:33:43.:33:48.

consequence of decade of post-war spend anything this country.

:33:48.:33:52.

not going to intrude on the economics argument, except to say

:33:52.:33:58.

we have lost a big chunk of our national wealth, already.

:33:58.:34:03.

That means, when we come out the other side of this, even if we grow

:34:03.:34:06.

strongly from now on, Britain will be another country, a different

:34:06.:34:14.

place. What sort of place will it be? We will have a smaller economy,

:34:14.:34:19.

and a smaller rather more select Comic Relief welfare state. I'm not

:34:19.:34:24.

advocating this as policy, this is the facts of life. We will have a

:34:24.:34:29.

smaller international footprint, no more Afghanistans, no more Iraqs,

:34:29.:34:33.

no more aircraft carriers or fancy planes to fly off them. We will

:34:33.:34:38.

have to own up, as a still pretty wealthy, middle-ranking country,

:34:38.:34:48.

with a lotless in terms of pretensions. You don't still think

:34:48.:34:54.

we will sit at the top table? a delve fulfiling prophesy, of

:34:54.:34:59.

course we will have a smaller economy if we declare a quarters of

:34:59.:35:02.

the population is redundant. By definition we have a smaller

:35:02.:35:05.

economy. What is happening at the moment is their skills and spirit

:35:05.:35:09.

is simply being rusted away by them not being employed. I agree

:35:09.:35:13.

entirely with you when you said you need growth. I'm glad you said that.

:35:13.:35:19.

You have to grow your way out of debt, not cut your way out of debt.

:35:19.:35:22.

Is there an argument for quality of growth. You mentioned skills, a

:35:22.:35:26.

very important point. One of the things I see as a governor of two

:35:26.:35:30.

schools in my constituency, is a complete sea change in the way

:35:30.:35:33.

people think of basic qualifications, no more gaming the

:35:33.:35:38.

league tables that only a civil servant in Whitehall reads. Let's

:35:38.:35:44.

make sure every child gets at least a C in GCSE mathematics. We have

:35:44.:35:48.

let a generation down by not doing that.

:35:48.:35:57.

A slightly separate point. Can I ask your economist friend here. How

:35:57.:36:01.

much do you think of the pretence being maintained of our position in

:36:01.:36:11.
:36:11.:36:12.

the world, is if based on an illusion for the last 20 years.

:36:13.:36:18.

With respect the two are absolutely linked. Stature in the world, it

:36:18.:36:22.

was Admiral Mike mull lan, the head of the American Armed Forces, who

:36:22.:36:24.

said the biggest threat to our security and position in the world

:36:24.:36:33.

is the state of our economy. The two are linked. If our economy was

:36:33.:36:40.

based, as it was, I think, on, if you like, a rather fraudulent

:36:41.:36:47.

belief had a -- that the financial sector would produce vast amounts

:36:47.:36:51.

of tax revenue forever and ever. It is now clear it is not going to. We

:36:51.:36:55.

have to make that adjustment and adjust our view of ourself in the

:36:55.:37:00.

world as well. The figures are against you. I was very struck by

:37:00.:37:07.

the graph we had of a huge boom in spending, from 2002 on wards that

:37:07.:37:10.

was fuelled by borrowing. The Government spent more than it took

:37:10.:37:16.

in taxes every year, whether we agree to do that going forward, and

:37:16.:37:18.

an expectation of continuing financial services taxation. These

:37:18.:37:23.

are choices to make. For me, the choices are about getting back to

:37:23.:37:28.

an economy that is built on private sector growth. Where Government is

:37:28.:37:33.

on the side of businesses rather than meaningless regulation in

:37:33.:37:39.

their way, giving our young people the best skills they could get, and

:37:39.:37:42.

building infrastructure, creaking in this country. These are all

:37:42.:37:46.

things the Government is saying is critical choices we want to make

:37:46.:37:51.

with limited monetary head room. We could be in a better position after

:37:51.:37:59.

the last five years, and a more sustainable position. First of all,

:37:59.:38:04.

the deficit was extremely small in the years of the Labour Government

:38:04.:38:08.

Not oh aye what's that then cording to the IFS, they called it a drift,

:38:08.:38:15.

every year from 2005. A very small drift, and people confuse the issue

:38:15.:38:18.

by talking about structural deficits. I don't think you will

:38:18.:38:23.

want to have a big discussion on what is a structural deficit.

:38:23.:38:27.

come another night with a lot of time. You need a lot of time and it

:38:27.:38:32.

is all based on dubious figures of one kind and another. The gap

:38:32.:38:35.

between what you take in taxes and you spend. In the real world people

:38:35.:38:40.

understand what that is. Robert seeps to think, I don't think we

:38:40.:38:45.

should be in total thrall to the bond markets. But he seems to think

:38:45.:38:48.

we can have Keynesianism in one country, that we can do what we

:38:48.:38:52.

like in terms of borrowing and spending. And our interest rates

:38:52.:38:56.

will stay at Germany levels. think both Ed Balls and George

:38:56.:39:06.
:39:06.:39:07.

Osborne have a point. Oh dear. I think we have to be realistic,

:39:07.:39:11.

you can't ignore what used to be known as the zur Rick, now spread

:39:11.:39:19.

more evenly throughout the world. Two quick points, firgs of all --

:39:19.:39:24.

first of all, our success rates were not entirely an illusion, and

:39:24.:39:29.

depended on fictional money. They were unsustainable. They were

:39:30.:39:33.

unsustainable because they weren't sustained. Everything's

:39:33.:39:39.

unsustainable that collapses in retrospect. That doesn't mean it

:39:39.:39:42.

wasn't sustainable at the time. have the highest level of public

:39:42.:39:46.

and private debt all through that period. The argument that we have

:39:46.:39:50.

low interest rates because everyone has enormous confidence in the

:39:50.:39:53.

Government's fiscal policy. We have very low interest rates, partly

:39:53.:39:57.

because people don't know where else to put their money, partly

:39:57.:40:00.

because the Bank of England has been printing money. Thank you very

:40:00.:40:05.

much. One of Britain's most prestigious

:40:05.:40:09.

universities, took something of a pasting today. It learned what an

:40:09.:40:13.

independent inquiry had to say about its decision to take money

:40:13.:40:18.

from Colonel Gaddafi's son, only weeks after giving him a doctorate.

:40:18.:40:21.

The London School of Economics boasts of 16 Nobel Prize winners,

:40:21.:40:26.

there was no danger of the Libyan dictator's son joining them. There

:40:27.:40:32.

was some uncertainty whether he was entitled to his PhD.

:40:32.:40:37.

1234 The Gaddafi Foundation devotes itself to humanitarian work,

:40:37.:40:41.

especially in the social, economic, and culturally, and the human

:40:41.:40:45.

rights field. The human rights field under

:40:45.:40:51.

Gaddafi. Saif is committed to resolving

:40:51.:40:54.

contentious international and domestic issues, through dialogue,

:40:54.:41:01.

debate and peaceful negotiations. Dialogue and negotiations, under

:41:01.:41:06.

Saif and his family. I have come to know Saif as someone who looks to

:41:06.:41:15.

democracy, civil society, and deep liberal values. The Professor was a

:41:15.:41:20.

big fan of Saif Gaddafi, he was his mentor and securing the �1.5

:41:20.:41:26.

million donation. This all makes him as the Pearsonification and

:41:26.:41:33.

naivity of the LSE. There was a chapter of failures in the report

:41:33.:41:38.

identified. Saying the LSE allowing links between it and Libya to

:41:38.:41:41.

become overwhelming, affecting judgments across the board.

:41:41.:41:45.

Although three departments refused to teach him on the grounds he

:41:45.:41:49.

wasn't up to it. The fourth, philosophy, accepted him, they

:41:49.:41:53.

wanted to believe Saif Gaddafi was a good guy, representing hope. He

:41:53.:42:02.

was charm itself, addressing an LSE audience last year, his tongue

:42:02.:42:11.

Albanian chic over his father's ways. In theory, Libya is the most

:42:11.:42:18.

democratic place in the world. APPLAUSE

:42:18.:42:24.

Because, in theory, in theory. And then months later, back in

:42:24.:42:28.

Tripoli, there was Saif, on TV, threatening rivers of blood if the

:42:28.:42:33.

protests didn't stop. It is not as though they weren't warned. Lord

:42:33.:42:38.

Woolf wolf noted that a Professor here spoke of the risky gamble of

:42:38.:42:44.

tying the LSE's reputation so close to Saif Gaddafi. What he turned out

:42:44.:42:53.

not to be a reform at all. It came to pass, Lord Woolf wolf says the

:42:53.:42:58.

London School of Economics goes under known name, the Libyan School

:42:58.:43:02.

of Economics. For students at the LSE, the Gaddafi affair can be

:43:02.:43:06.

regarded as an object lesson in ethics and economics, a course they

:43:06.:43:13.

may have not signed up to, but are learning fast. At the student

:43:13.:43:19.

newspaper, they see money as the root of the problem. The LSE has

:43:19.:43:25.

the reputation as an institute that drives for money. This was another

:43:25.:43:31.

project to desperately to up what we have. The young Gaddafi was no

:43:31.:43:37.

genius, he duped his supervisors by using the works of others. Another

:43:37.:43:46.

suggested Saif purchased his degree. The �1.5 million was pledged weeks

:43:46.:43:54.

after his PhD. The leadership denies the claims. There was no

:43:54.:43:59.

evidence in the report that we sold a doctorate. We deny that

:43:59.:44:02.

completely. I'm sure you are aware from the report, that, in fact, we

:44:02.:44:06.

reduced to take any money, while he was a student, that is a very, very

:44:06.:44:15.

strict policy. He was, in some senses, the LSE's star student, and

:44:15.:44:19.

now Saif Gaddafi stands indicted for war crimes. They must wish they

:44:19.:44:29.
:44:29.:44:29.

kept the doors locked. With us is Lord Desai, one of Saif Gaddafi's

:44:29.:44:38.

PhD examiners at the LSE? Was he a talented student? Yes. At that

:44:38.:44:43.

what? Talented as an LSE student. Did you know his essays had been

:44:43.:44:47.

written by somebody else? Not that, I wasn't involved in t I was only

:44:47.:44:53.

involved with his PhD, I examined his PhD. Which also was written by

:44:53.:44:58.

someone else, wasn't it? I went through the oral examination, for

:44:58.:45:02.

two-and-a-half hours, with myself and fellow examiner, from

:45:02.:45:09.

Southampton. And he did all right, we were able to question him, and

:45:09.:45:16.

he answered the questions, then we asked him to do more work, because

:45:16.:45:19.

we were not happy with the thesis as it was, and it was submitted.

:45:19.:45:23.

Are you sure he wrote the bit he submitted to you? You can't be

:45:23.:45:30.

subjected to that rigorous, oral examination, on top of what you

:45:30.:45:34.

have written. What do you think about the fact that while he was

:45:34.:45:38.

rewriting it, he was actually asked for a large dop lol of cash for the

:45:38.:45:47.

LSE? -- dollop of cash for the LSE? I was not aware of it until I read

:45:47.:45:51.

the report. We were, as an exampler, I was absolutely following the

:45:51.:45:56.

rules. -- examiner I was following the rules. In your judgment he was

:45:56.:46:00.

entitled to the PhD? He was entitled or I wouldn't have signed

:46:00.:46:03.

the form. There is no shadow of doubt in your mind that he might

:46:03.:46:09.

have been admitted to the LSE because he was the son of a filthy

:46:09.:46:13.

rich dictator? Originally there was a debate he shouldn't be admitted

:46:13.:46:20.

because he was the son of a filthy rich David Kelly Tateor, I would

:46:20.:46:24.

suggest if you admit someone you don't look at who their mother or

:46:24.:46:28.

father is. This is enormously damaging for the LSE? It is a huge

:46:28.:46:34.

damage to the brand. As the report shows, it was, when confronted with

:46:34.:46:39.

power and money, we let our standards go. Why doesn't the LSE

:46:39.:46:49.
:46:49.:46:50.

withdraw his PhD, at least? It is not up to the LSE to withdraw a PhD

:46:50.:46:55.

after it is given, because just the LSE didn't do due diligence on

:46:55.:46:59.

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