12/01/2012 Newsnight


12/01/2012

As the Tesco share price sinks, Andrew Verity considers whether the British economy will ever wean itself off shopping and the City. Presented by Emily Maitlis.


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Transcript


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Tonight, grim news from the UK's biggest retailer, if shopping slows

:00:07.:00:12.

down, does the UK economy have anything else to take its place?

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If this is struggling, can we get more of this? Voices from the world

:00:17.:00:22.

of business and economics are here to tell us.

:00:22.:00:25.

The benefits trap, a dramatic defeat in the Lords last night, a

:00:25.:00:29.

legal challenge today. Is the Government's big plan to slash the

:00:29.:00:34.

welfare bill in tatters. The Employment Minister will face a

:00:34.:00:36.

disability campaigner here in the studio.

:00:36.:00:39.

Britain's spy agencies will face a criminal investigation into

:00:39.:00:42.

allegations they were complicit in the rendition and torture of

:00:42.:00:46.

Libyans and their families. The intelligence people have been

:00:46.:00:51.

caught by the tides events, the fall of the Gaddafi regime has

:00:51.:00:55.

produced documents, testimony and hard questions for the UK to answer.

:00:55.:01:01.

As the west's economy continues to falter, we look at Japan's called -

:01:01.:01:07.

- called decade, were they really lost, or can the Japanese really

:01:07.:01:14.

teach us how to handle a slump. Good evening. The dark Satanic

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mills have long shut down, the mines have closed and the steel

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franc dk factories of Sheffield are now retail parks. We Brits don't

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know how to make things any more, but at least we know how to shop.

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Buted today's round retail figures suggest even that is no longer fail

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safe. Many big high street chains have seen the worst figures for

:01:38.:01:46.

years. Tesco, which has bucked every downturn trend, their shares

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dropped 15%, nearly a billion was wiped off the stock market value.

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When Tesco is pale, all bets are out. With exports also down, we ask

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where the Superman cloak of economic salvation will have to

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come from. For decades now, this has been the

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new Jerusalem. On the outskirts are man chest, the taffrord centre is

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no dark Satanic mill, but a glitzy architecture showing its place at

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the heart of the economic life. In future there will be no heavy

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industry, but there would be financial service, new flats, and

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above all, shopping. For centuries our most magnificent

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buildings were religious, now these are the cathedrals. This is where

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we worship. But now, there is a growing bod hey of opinion among

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economists -- body of opinion, but among economists there is a growing

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opinion that reliance on retailing is tooer far, we have to break our

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dependance on it if we are to have a sustainable recovery. While the

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boom lasted the wisdom was if manufacturing and exports shrank,

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it didn't matter, as long as rising house prices kept the consumer

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confident and spending, the economy would grow. Today came a shock,

:03:00.:03:02.

that hadn't happened even in the great recession of three years ago.

:03:02.:03:06.

After two decades of rapid growth, Tesco shares plunged after it

:03:06.:03:10.

announced that on a fair comparison of last year, sales over Christmas

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fell, and profits would be squeezed. The shares ended the day down 16%.

:03:16.:03:19.

We always felt the most important thing to do was makep shopping

:03:19.:03:24.

better for our customers -- make shopping better for our customers

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the we made a big of move on prices in the run up to Christmas,

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starting to be rewarded with increased volumes, and noise around

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Christmas, the message didn't cut through. Economists say less retail

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spending is what we if we want to rebalance our lob sided economy

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away from retail. Retail has limits, incomes lag behind inflation in a

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recession, consumer spending reaches its maximum. If you want

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economic growth you can't rely on jobs in retail, you have to have

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jobs in manufacturing, consumer goods, the higher value items.

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Here is where the money used to flow into our economy, down the

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Manchester ship canal. In would come see -- sea-going ships, with

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raw cotton and sugar, out would go manufacturing goods of all kinds.

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The scale of this canal shows just how confident we once were that the

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rest of the world would want to buy our exported goods. Since the 1970s

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when the ships stopped coming and going, we have had a different idea

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of what a modern economy is. One based on retail developments and

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construction. Now it looks like that idea has run its course, and

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we will have to find another idea of what our economic direction is.

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The hope is, that growth will now come from of manufacturing and

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exports, but is it really any more than a hope. In September UK

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industrial output fell by 0.7%, compared to the same month a year

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before. Between August and September, production overall

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remained flat. This is exactly the sort of company

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that is supposed to benefit from this great economic rebalancing. A

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successful manufacturer, that earns money through exports.

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This is a wheel set that is virtually finished, it has been

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through a number of stages to get here. When I'm up and down the

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country on a train, that is what I'm riding on? Absolutely. Let's

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say that each carriage you would be in would have four of those

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underneath. The factory has been here for more than 100 years. There

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there is nothing old fashioned about its machinery, it may no

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longer be British owned, but last year at full tilt sold 40,000 train

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wheels. That export boom is flagging now The trade deficit is

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growing. In spite of the weak pound, it it is not easy to compete on

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price. If we were only supplying single components like the wheels

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on their own, we would have a difficulty in competing against

:06:00.:06:04.

imported, Chinese, or wheels from any low-cost country. However, what

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we do, is that weed add value. We have n this country and company, we

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have a culture, --, in this country and company, we have a culture

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based on quality and service. manufacturers believe if the

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Government wants more businesses like this, it will take proper

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commitment, including Government money. We can invest in the

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technology, we can bring the people, we can find the people with the

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right attitude, but then, I think, we need help to get us over that

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next step. We have taken that step, and we have invested ourselves, and

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we have had some funding, some support on funding. But there is a

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big, big danger that is now disappearing.

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Counting on property, financial services and shopping, may have

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seemed like our economic future 20 years ago. But nothing dates like a

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vision of the future. And the hope that exports will drive a recovery

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right now looks like little more than a hope. We may know that we

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want to rebalance our economy, what we are yet to work out is how.

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Let's start there, how can the economy be rebalanced. I'm joined

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by the businesswoman and Dragon's Den Deborah Meaden, and Elizabeth

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Truss a Conservative, and Gillian Tett from the Financial Times.

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Thank you very much for coming in. Should we be worrying, first of all,

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Deborah Meaden, that the retail base seems to be slowing down, is

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thated good news, or is it just bad news? I think certainly basing the

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entire notion that it is slowing down on the Tesco's' results a

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slight overreaction. Tesco's may have issues and it probably does in

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itself, however, within Tesco's. won't be the first or the last of

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the Christmas season we have seen? When you look at the retail sector,

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without a doubt, people are feeling nervous, if they have money they

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are finding it difficult to spend it. They don't want to spend it,

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they are feeling nervous. It is, really, if shopping is slowing down,

:08:15.:08:20.

and George Osborne said it would be an export-led recovery, 18 months

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on we are in a pretty dire place? think the issue is, these policies

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take a while to take effect. We're talking about welfare reform,

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education reform. I think one of the big issues we have as a country,

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and why we're not as competitive as we should be, is our skills base is

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not as good as Germany, it is not even as good as the US. We're

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struggling to compete against countries like India and China,

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that are turning out thousands of technicians and mathematitions.

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We're 28th in the world for Maths. Those things take a while to

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address, we are getting the free schools in place and the academys

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in place, they don't happen overnight. Would you say we have

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got the balance wrong, in the way the stress and balances are put on?

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We spent too much money we didn't have, both consumers and Government,

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spent money we didn't have, we consumed more than we should have

:09:12.:09:15.

done. Given the amount of money we were earning. We weren't paying our

:09:15.:09:19.

way in the world. I'm afraid this is the period of reconciliation of

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that. We have to start paying that money back. We need to become more

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competitive, and more productive as a country. Because it is simply not

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right that people in other countries, who may be earning lower

:09:31.:09:34.

wages, have higher skills than us. That can't go on in the long-term.

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We have to rebalance that. And this is not just one Government, this is

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not just a Conservative Government, this is a succession of bad

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Government decisions, isn't it? think so. Just coming back to the

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retail issue, the news from today. I'm just not sure why anyone is

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surprised. In fact, what Government should be doing, is counter acting

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what private investment does. We know that private investment is

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pro-cyclical, too much during booms and too little in bust. The

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Government has copied that, too much credit and too much tax and

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interest reductions during the booms, now during the bust,

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increase in VAT, freeze in public sector wages. So what is lagging

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not inspiring? It it is right we shouldn't have spent too much in

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the boom, but now we are in a position of massive debt. The issue

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is, if we don't reduce the debt the credit rating will be affected and

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interest rates will go up, that will affect mortgage holders and

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the country's long-term viability. We have got to have a careful

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balance between those things. I think George Osborne's got it right.

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What wr doing is we are moving money from things -- what we are

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doing is moving things like money from welfare spending into

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infrastructure spending. That is a positive way to see growth, first

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in the short-term and certainly in the long-term. Infrastructure is

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another area where Britain is not competitive. It is still peanuts

:10:59.:11:04.

what we are seeing now. Is there a solution staring you in the face,

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in terms of the way that we should be redressing that imbalance?

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reality is, it is a terrible time to produce exports, because the

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global economy is not exactly booming. The kind of conversation

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we are having here is not different from the conversation you might

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have in America at the moment. Certainly, we have just gone

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through a decade where people are far too dazzled by financial

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services and consumption, and all the froth, and there really wasn't

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enough diversification. Similar to the conversations they are having

:11:35.:11:39.

in Germany? It certainly is. Where they have managed to keep their

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manufacturing base very strong, even exporting to China, how did

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they pull that off? Unfortunately the UK has underemphasised the type

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of skills you need to support a manufacturing base, and as I say,

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has been far too dazzled by all the consumption-driven economies.

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issue is, there is at short-term issue and the long-term issue,

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actually we live in a short-term society, we are all looking for

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quite quick results. The truth of the matter is the answer to this is

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very long-term. We need a long-term plan. And my worry is that the

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Government is forced to, because society is looking for the answer

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now, the Government is forced to coming up with answers now that

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don't change long-term. Can I remind viewers, Deborah was talking

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about the long-term, if you take us back to the 1970s, you can see that

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cut, that split between the service industry, the service and

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manufacturing industry is roughly half, and then to where we are now,

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when you can see how much the manufacturing has been eaten away.

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Was that somewhere along the line a deliberate decision, wasn't it?

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think it was a decision. We decided to become a service-led country. I

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think it was the wrong decision. I think that balance is always the

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answer. And there is always the tipping point, if we were totally

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of manufacturing it would be a problem, too little manufacturing

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it is a problem. That is where we are now. It is very easy to row

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Manchester United size the days when manufacturing was -

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romanticise the days when manufacturing was strong and qalty.

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It is not just the size of manufacturing but the quality

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produced. When Seimens won the contract some months ago, and it is

:13:23.:13:30.

how are we giving the national contract to a international firm,

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why is a surprise that giving it to one of the greenest companies in

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Europe, spending 6% of its money on GDP, was it surprising they

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produced the company that is going to produce the high-speed green,

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fast modern trains in the UK. Alongside the question about the

:13:49.:13:52.

quality of manufacturing skills, there is the question of what kind

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of jobs you are creating in the service sector. Certainly, it does

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appear the service sector is marked by the elite doing the sexy stuff,

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the brain-power stuff. You have the mass of workers not doing very

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exciting jobs in the service sector at all. That lead into issues about

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economic polarisation, and labour market polarisation, that are

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incredibly serious for the Anglo- Saxon economies today. We have an

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hourglass economy, the jobs at the top are increasing, the technical

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and professional jobs, the service jobs are increatesing. Those jobs

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in the middle, -- increasing. The jobs in the middle, the plumbers

:14:31.:14:33.

and electrician, they are decreasing in number. We have to

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get the skills up. You asked a question about Germany, what

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Germany did, in 200, when they had issues -- 2000, when they had

:14:42.:14:45.

issues with the education system, they doubled the length of the

:14:45.:14:49.

school day. They upped the level academic suggests in schools. They

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did something about it. My fear for the country is we have serious

:14:52.:14:57.

problems with the skills base. are too short-termist in the

:14:57.:15:00.

political decisions? I don't think we realise how serious the issue is

:15:00.:15:05.

with our education system. Michael Gove gets that, but do we as a

:15:05.:15:10.

country understand how vital it is for everybody to get a basic level

:15:10.:15:13.

ofed good education. Deborah, when we are talking about

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education now, we are basically recognising that this is, what 20

:15:17.:15:20.

years away, if this is the beginning of a cycle, we are not

:15:20.:15:24.

going to address the economy, if it needs a new skills base, a new

:15:24.:15:29.

education, a new re-think, that's what long-term means, isn't it?

:15:29.:15:33.

There are two parts to this. So it would be wrong to sit here and say

:15:33.:15:37.

the only answer is long-term, now we have to tackle our future. We

:15:37.:15:41.

need to look forward and say what do we want to be, and how do we

:15:41.:15:44.

need to prepare our young people to take us there. That's the long-term

:15:44.:15:49.

plan. We can't, therefore, say that's it. What do you d'oh we want

:15:49.:15:54.

to be, do you think? We have -- what do we want to be? We have to

:15:54.:15:57.

recognise we have to be better in the next five years. Everybody

:15:57.:16:01.

wants to be the next Steve Jobs? That is quite a good example.

:16:01.:16:07.

Britain has to rediscover its entreprenurial spirit. One of the

:16:07.:16:10.

most inspiring stories I have heard recently, was a mother and daughter

:16:10.:16:14.

in Cambridge, couldn't pay the school fees, went out and created a

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company, the Sachle company, they start not only of manufacturing

:16:18.:16:21.

them in England and selling across the world, they are about to hit

:16:22.:16:26.

New York. That is the example we need to build on. I'm glad we

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brought up Steve Jobs, he was a genius, but every little bit of the

:16:31.:16:36.

iPhone and I pad trace their funding, their development d iPad,

:16:36.:16:40.

trace their funding, their development and the vision back to

:16:40.:16:43.

state investment. The Internet, the communication technology, the touch

:16:43.:16:48.

screen was all state funded in the United States of America. We can't

:16:48.:16:53.

afford that any more. Why not, we do quanative easing? We do have

:16:53.:16:56.

great research and development in this country, it is one of

:16:56.:16:59.

Britain's comparative advantages, what we need to get is the rest of

:16:59.:17:02.

the education system up to standard, so it is absorbed better into the

:17:02.:17:05.

economy. But I just want to say one positive thing had, I do think

:17:05.:17:09.

there are a lot of niche opportunities at the moment and

:17:09.:17:12.

there are some agricultural engineers in my constituency who

:17:12.:17:18.

have seen their order books rise, because eastern Europeans are now

:17:18.:17:28.
:17:28.:17:44.

Mick cannising their farming. There are opportunities out there. Where

:17:44.:17:50.

would you focus the state funding? The green area, this is where the

:17:50.:17:53.

different types of expertise in the country that could be applied to.

:17:53.:17:58.

The UK spends more on furniture than on green. George Osborne has

:17:58.:18:01.

pretty must said, the green issues must come second to growth in the

:18:01.:18:05.

economy now? I don't think he has said that. What we have done is the

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Government has protect research spending, and said it is very

:18:09.:18:11.

important that we maintain our premier position in the world,

:18:11.:18:16.

which we do have in research. And those opportunities are being

:18:16.:18:19.

developed by our universities. I think it is right that academics

:18:19.:18:23.

come up with the ideas that we choose the best people, and we

:18:23.:18:28.

allow them to think innovatively. Turin came up with the idea of the

:18:28.:18:31.

computer, he didn't know how it would be going out in the world. It

:18:31.:18:35.

it was because he had that academic freedom to pursue that, that he was

:18:35.:18:39.

able to come up with those new ideas. What I do worry about is

:18:39.:18:42.

following the latest fashion, or the latest trend about where we

:18:42.:18:47.

might think the idea is coming from. I think we should actually be more

:18:47.:18:52.

open than that. I want to bring this back to you Deborah, as a

:18:52.:18:56.

hand-on businesswoman. You said that Tesco had made mistakes. If

:18:56.:19:02.

you are looking to actually put your finger on what went wrong with

:19:02.:19:06.

Britain's biggest retailer? They know, the one thing I would never,

:19:06.:19:10.

ever do in business, is set my business, set my store out on price

:19:10.:19:14.

and price alone. I think Tesco's did that. It is aled golden rule

:19:14.:19:18.

for me. We will never fight on price. We will fight on good value,

:19:18.:19:22.

on quality, I will never, ever fight on price. That is what

:19:22.:19:25.

Tesco's did. I think Tesco's know they have got it wrong. Do you

:19:25.:19:30.

think there will be a big shake-up, the papers are saying they have of

:19:30.:19:36.

to have a re-think? The other supermarkets didn't enter the

:19:36.:19:40.

battle, they set their stall out. The end of the Tesco empire?

:19:40.:19:42.

because they are smart enough to recognise it T they have already

:19:43.:19:49.

recogniseded it, they will change -- -- it, they have already

:19:49.:19:53.

recognised it, they will change it. If Britain is to face years of flat

:19:54.:20:01.

growth, what can we learn from Japan, who have suffered two

:20:01.:20:04.

decades of loss. With changes to the welfare system

:20:04.:20:10.

and plans to cuts and payments to young people, the accusations from

:20:11.:20:13.

Labour come, ministers say they will press ahead with reform,

:20:13.:20:17.

despite a legal challenge today and defeat in the Lords. Chris Grayling

:20:17.:20:20.

said tough decisions had to be taken to tackle the deficit. Is he

:20:20.:20:24.

right? In a moment we will hear from him and a disability

:20:24.:20:27.

campaigner. Let's start where the Government

:20:27.:20:34.

has, with the soaring cost of working-age benefits, up 40% in

:20:34.:20:41.

real terms since 1997. They are fiendishly complex, the rulebook

:20:41.:20:45.

for the DWP runs to nearly 9,000 pages. This is only part of the

:20:45.:20:52.

picture. Local authorities and HMRC also administer an overlapping and

:20:52.:20:55.

confusing system. All collecting similar data and dealing with many

:20:55.:20:59.

of the same people. Not surprisingly error and fraud costs

:20:59.:21:04.

an estimated �5.2 billion a year. At the end of all this, one quarter

:21:04.:21:08.

of working-aged a dults are not in work.

:21:08.:21:14.

-- working aged a dults are not in work. The incentives for taking a

:21:14.:21:19.

job are overwhelming people. From 600,000 people, for every pound

:21:19.:21:24.

they would earn 90% would be lost in tax or withdrawn benefits. The

:21:24.:21:28.

first law of welfare spending is unreformed, it will rise and rise.

:21:28.:21:32.

If you look, when I looked at it, I found most of the growth was

:21:32.:21:35.

increasing numbers of people getting on to benefit. They may get

:21:36.:21:38.

on to benefit temporarily through a recession or something, and then

:21:39.:21:43.

they find they can live there, on it, and they don't come off. The

:21:43.:21:46.

system didn't encourage them to come off and help them to come off.

:21:46.:21:51.

The longer they remained on, the more demoraliseded, the less

:21:51.:21:56.

employable they became, they became lifetime recipients of benefit.

:21:56.:22:01.

Government's plan is wholesale reform. Out will go income support,

:22:01.:22:05.

income-based jobseeker's allowance, income-relateded employment and

:22:05.:22:08.

support allowance, housing benefit, Child Tax Credit and Working Tax

:22:08.:22:13.

Credit. All to be replaceded by one Universal Credit. That, will be --

:22:13.:22:17.

replaced by one Universal Credit. That will be capped at �26,000 a

:22:17.:22:19.

year, maximum. The Government is having difficulty

:22:19.:22:22.

over changes that will come in before the Universal Credit arrives.

:22:22.:22:27.

At present, if you have made the right NI contribution, you can get

:22:27.:22:30.

employment support allowance for as long as you are out of work. The

:22:30.:22:34.

Government wants to cap it at a year. Last night, ministers were

:22:34.:22:38.

defeated on this in the Lords. is a pretty big rebellion last

:22:38.:22:42.

night, know it is mainly crossbenchers, an awful lot of

:22:42.:22:46.

Liberal Democrats be a taind. I think we have -- abstained, we have

:22:46.:22:50.

to try to convince our party. I don't expect to be able to convince

:22:50.:22:53.

the Conservatives, that we don't want to be a nasy party. We want to

:22:53.:22:58.

protect d nasty party. We want to protect the poor and disadvantaged

:22:58.:23:01.

and the sick. I know it is trite saying that, that is a basic

:23:01.:23:05.

principle we have had in our party. The Government was defeated three

:23:06.:23:09.

times in the Lords. A Labour amendment raised the one-year cap

:23:09.:23:14.

to two years. Last night they tried to cross a basic line of public

:23:14.:23:19.

decency for cutting back on benefits for patients suffering

:23:20.:23:25.

cancer and young people suffering disabilities. We were right to say

:23:25.:23:28.

to Chris Grayling these ideas were wrong and take them off the table

:23:28.:23:31.

and bring something better back. The Government is trying to get its

:23:31.:23:38.

message across, that this change would not affect the sickest

:23:38.:23:40.

recipients benefits, and only affect those with significant

:23:40.:23:44.

savings or other income. This is introduced because of the economic

:23:45.:23:48.

climate, nobody wants these sorts of changes. But the Labour

:23:48.:23:52.

proposelals would cost �1.6 billion, that money would have to come from

:23:52.:23:55.

somewhere else in the benefits budget. That means finding other

:23:55.:23:59.

people to take money away from. And they haven't made any suggestions

:23:59.:24:02.

where that money would come from. I think that would be extremely

:24:02.:24:06.

difficult choice to make. Generations of politicians have had

:24:06.:24:12.

to grapple with, essentially, the same problem. The Social Security

:24:12.:24:17.

Secretary patrols a �75 billion system, groaning with complexity

:24:17.:24:21.

and contradiction. Peter Lilly knows what it is like to patrol

:24:21.:24:27.

welfare, but he says it should be a vote-winner? When I wandered

:24:27.:24:34.

through the less sal lubous places in the country, they would say,

:24:34.:24:38.

you're that man, keep it up. But in the posh Hampstead, they would say

:24:38.:24:44.

I was cruel and unthinking, I had the mass of people on my side. It

:24:44.:24:48.

was the only area where our popularity increased in the period

:24:48.:24:54.

192 to 1997. But perhaps the biggest problem with welfare reform

:24:54.:25:02.

is rather well exsemplified by this, frankly, baffling Government advert

:25:02.:25:08.

for tax credits in 1999. The system is so complex, hardly anyone

:25:08.:25:13.

understands what is going on. Joining me now is the Employment

:25:13.:25:19.

Minister, Chris Grayling, and disability campaigner, Sue Marsh.

:25:19.:25:23.

Liam Byrne accused you of crossing the line of decency, is it more

:25:23.:25:26.

important for you to save money, even if you face that kind of

:25:26.:25:31.

accusation? I think he's just plain wrong. In the Labour Party last

:25:31.:25:34.

week, Liam Byrne was talking about the need to take tough decisions on

:25:34.:25:39.

welfare, and he's doing the opposite. We are not taking away

:25:39.:25:42.

benefits from people who have no other income. We are not taking

:25:42.:25:45.

away benefit who is are not going to be able to work again. We are

:25:45.:25:48.

making changes for people who have got another income, or who have

:25:48.:25:51.

thousands of pounds of savings in the bank. That's the principle of

:25:51.:25:54.

what we are doing. That was presumably understood pretty well

:25:54.:25:59.

by those in the Lords. Lord Patel saying he's sympathetic to cutting

:25:59.:26:02.

the deficit, but highly sympathetic to something that will make the

:26:02.:26:06.

lives of weak and vulnerable people even more miserable. This is why it

:26:06.:26:09.

is being shout down now? If you take the example of one of the

:26:09.:26:13.

amendments last night, on young people. What we have is a situation

:26:13.:26:16.

right now, where if a young person reaches adult life, and they have

:26:16.:26:21.

other financial means, they could receive for example a substantial

:26:21.:26:24.

inheritance, they are still able to unconditionally receive benefit

:26:24.:26:27.

support for an on going period. If they are never going to be able to

:26:28.:26:31.

work, the situation won't change for them. If they are in a position

:26:31.:26:35.

where with the right help and through or work programme, we have

:26:35.:26:37.

put in place specialist support to help people who have the potential

:26:37.:26:41.

to return to work to do so, I don't think it is right that somebody who

:26:41.:26:44.

has other financial means, should depend on tax-payers who are on

:26:44.:26:49.

reallyively low incomes themselves, very often, to pay the money to

:26:49.:26:53.

help people who also have money themselves. What is is wrong with

:26:53.:26:59.

that? What the amendment was about, we felt, was children who were born

:26:59.:27:04.

profoundly disabled, who might not be able to work when they get older,

:27:04.:27:08.

should have an entitlement in adulthood for an independent income.

:27:08.:27:12.

They shouldn't have to rely oned adults or family to look after them.

:27:12.:27:18.

If you are born that profoundly disabled you should have a right to

:27:18.:27:25.

that money. You will be allowed a benefit with more unconditional

:27:25.:27:29.

support than other Governments. Those people won't be in a

:27:29.:27:36.

different position, it will remain unchanged. It is so easy to

:27:36.:27:39.

demonise the Government in an emotive issue, they are saying the

:27:39.:27:43.

support group will not change the benefits structure, this is only

:27:43.:27:45.

about people who presumably you would want to see getting back to

:27:45.:27:49.

work? Firstly, we don't think enough people are going into the

:27:50.:27:53.

support group. That is one of the big flaws, we don't believe enough

:27:53.:27:55.

people with long-term conditions are getting that long-term support.

:27:56.:27:59.

That is not about an amendment to the reform? The amendments

:27:59.:28:04.

yesterday, we were sitting watching the debate, one of the debates was

:28:04.:28:09.

about how terminally ill do you have to be to apply for benefits.

:28:09.:28:13.

Six months you would get unconditional support, if you were

:28:13.:28:15.

terminally ill for three or four years you wouldn't get the support.

:28:15.:28:20.

I find it shocking that I'm living in a country where I sit there and

:28:20.:28:24.

hear ministers and Lords arguing over how terminally ill you have to

:28:24.:28:29.

be to get benefits If you didn't have the problems you have, would

:28:29.:28:32.

you still want this reform? would want to change the welfare

:28:32.:28:36.

state and make it back to the core objective, helping people back to

:28:37.:28:40.

work and disabled people into work. The point about the support group,

:28:40.:28:43.

the long-term group that receive unconditional support from the

:28:43.:28:47.

state, we have grown that in the past year. Bigger than we took

:28:47.:28:51.

office. We have introduced changes consciously intended to provide

:28:51.:28:55.

better support for people with long-term mental health problems.

:28:55.:28:59.

We are having to take difficult decisions because of the deficit,

:28:59.:29:02.

across a whole range of different areas. There are things we are

:29:02.:29:06.

having to do we would rather not, we are certainly trying to get the

:29:06.:29:10.

balance right. It would be very easy, wouldn't it, to say, once

:29:10.:29:14.

somebody has been classified as disabled, or a chronic sufferer,

:29:14.:29:18.

they need never be assessed again, that might not help the state or

:29:18.:29:22.

individual? That isn't what the debate was about yesterday. We

:29:22.:29:24.

weren't talking about the assessments. One of the other votes

:29:24.:29:28.

that failed, was for a one-year time limit on employment support

:29:28.:29:33.

allowance, not people in the unconditional group, but the people

:29:33.:29:37.

judge unwell, unfit to work, but could get back to work with the

:29:37.:29:41.

right support. When ESA was originally designed, they thought

:29:42.:29:46.

it would take 2-5 years for those people, with the right support, to

:29:46.:29:52.

get back into work. Introducing a one-year time limit, means someone

:29:52.:29:57.

like me, very ill for 7 years, when I go into that support group, I

:29:57.:30:02.

will be entirely dependant on my husband to survive. There are

:30:02.:30:05.

people on benefit, who don't want to live on it, they want to get

:30:05.:30:14.

back to work? No problem with that. The people happy with that. Do you

:30:14.:30:17.

think that is right to have no means assessment? Nobody has called

:30:17.:30:21.

for that. We need a fair assessment, looking at people's condition

:30:21.:30:25.

individually. I don't think we can have a tick box system, of 15

:30:25.:30:30.

questions, where you sit in front of somebody, and they say you have

:30:30.:30:35.

to fit the rigid scale. We have seen a lot of u-turns on your

:30:35.:30:39.

Government, successive Governments have tried and failed on the

:30:39.:30:43.

benefits system. You have legal challenges with the unemployment

:30:43.:30:47.

benefits cuts and the defeat in the Lords, are you wondering why people

:30:47.:30:50.

can't do it? This is transformation of the welfare state that is

:30:50.:30:55.

necessary. In many of our communities we have long-term,

:30:55.:30:58.

endemic worklessness, gone from generation to generation. We have a

:30:58.:31:01.

low level of people with disabilities in work. What we have

:31:01.:31:04.

done through the revolutionary work programme, a payments by results

:31:04.:31:07.

basis. We have organisations that are delivering personalised support

:31:07.:31:11.

to get people into work, from long- term benefit dependency, they have

:31:12.:31:19.

the freedom to do what -- freedom to do what works. You sound very

:31:19.:31:22.

certain you will pull this off. We have heard David Cameron hint that

:31:22.:31:26.

child benefit might be relooked at. His words were, we had always said

:31:26.:31:31.

we would look at the steepness of the curve, look at the way it is

:31:31.:31:38.

implemented, you introduced this at the Tory Conference before last.

:31:38.:31:42.

The re-think child benefit cuts, that will change? In terms of the

:31:43.:31:46.

welfare reform, there is no u-turn planned. Child benefit is done by

:31:46.:31:49.

the Treasury as part of the budget preparation, I don't know what they

:31:49.:31:54.

are doing. Would you be surpriseded for a re-think on child benefit?

:31:54.:31:57.

would be surprise. Would you be surpriseded if there was a change

:31:57.:32:02.

to that policy now? We will always, with every policy try to implement

:32:02.:32:05.

it in as sensible a way as possible. I have heard nothing to suggest

:32:06.:32:09.

that we are about to change direction massively on child

:32:09.:32:12.

benefit. The Prime Minister has said he will be careful and

:32:12.:32:17.

thoughtful about how we do it, and makes changes as effectively and

:32:17.:32:21.

efficiently as possible. Scotland Yard has launched a

:32:21.:32:24.

criminal inquiry over claims that British spies were involved in the

:32:24.:32:30.

rendition and torture of Libyans. One of the leaders of the anti-

:32:30.:32:34.

Gaddafi forces, Abdel Hakim Belhadj, a rebel command, Libyan exile, says

:32:34.:32:37.

he was tortured after being detained with his wife in 2004,

:32:38.:32:42.

when they were trying to seek asylum in the UK, and held for six

:32:42.:32:47.

years in Libyan prisons. Our correspondent is with us now. How

:32:47.:32:53.

worried should those that were in charge then be now? Up until now

:32:53.:32:56.

people have been saying we don't have a huge problem with this.

:32:56.:33:00.

People in Whitehall. It it is interesting that the heat has gone

:33:00.:33:03.

up distinctly today. The announcement of a police, formal

:33:03.:33:07.

investigation, and we hear tonight, for example, from the Independent,

:33:07.:33:11.

they have a bit of a scoop, that the police planned to talk to Jack

:33:11.:33:16.

Straw about this. The Intelligence Services's armed was everything

:33:16.:33:20.

they did in relation to these case was properly authorised. The form

:33:20.:33:23.

it takes a submission, called, to the Foreign Secretary, to seek

:33:23.:33:26.

political approval for a particular course of action. That is why the

:33:26.:33:31.

police would want to talk to Jack Straw. If he indeed did sign off on

:33:31.:33:34.

these operation, they want to know exactly under what terms and what

:33:34.:33:39.

was the arrangement. What is being alleged, in the case of Abdel Hakim

:33:39.:33:44.

Belhadj, who, of course, has come to prominence in Libya, as one of

:33:44.:33:48.

the men who took Tripoli from Colonel Gaddafi. There he is after

:33:48.:33:54.

the fall of Tripoli. Is he he was picked up with his wife, in Bangkok,

:33:55.:34:01.

they were then detained by the authorities and put on a plane. The

:34:01.:34:03.

other story, Sami Al-Saadi, said he was picked up in Hong Kong and put

:34:03.:34:07.

on a plane. Both men said he they spent years in Libyan jails being

:34:07.:34:11.

tortured. The people who did the picking up were not British, the

:34:11.:34:15.

people who put planes in to take them to Libya were not British. The

:34:15.:34:18.

allegation is British intelligence was used to tip-off the local

:34:18.:34:22.

authorities that these machine were there, to detain them, and then to

:34:22.:34:26.

grease the wheels, if you like, of the rendition machine to much match

:34:26.:34:31.

up people, places, planes and get them to Libya. That is the

:34:31.:34:37.

allegation, which would involve a lot of sophis it try if it was to

:34:37.:34:43.

stay inside the guidelines. How does it fit in with the wider

:34:43.:34:48.

graft of inquiries? A couple ended today, the Crown Prosecution

:34:48.:34:52.

Service said they decided there was no case to answer against an MI5

:34:52.:34:57.

answer referred to as Witness B, connecteded with the case of Binyam

:34:57.:35:02.

Mohamed, and an MI6 officer present at Bagram Air Base in 2002, when a

:35:02.:35:07.

suspect was being mistreat there. That's over, nothing will happen to

:35:07.:35:11.

those people. There is a bigger story, which is the Gibson Inquiry.

:35:11.:35:16.

This was supposed to look into all sorts of claims reason decision and

:35:16.:35:19.

alleged British involvement in torture, connected with the

:35:19.:35:24.

Intelligence Services in that early called war on terror period. Up

:35:24.:35:28.

until now, this inquiry has made no headway whatsoever. They said they

:35:28.:35:31.

were waiting for the decision on those two case that is we heard

:35:31.:35:35.

about today. But the lawyer for those two Libyans we heard about at

:35:35.:35:41.

the beginning, is now questioning whether the inquiry as a whole, the

:35:41.:35:46.

Gibson Inquiry into the wider issues can still go ahead at all.

:35:46.:35:49.

I understand the inquiry has announced it will be reviewing the

:35:49.:35:52.

position. From the point of view from all of the people, who I'm

:35:52.:35:57.

aware of, who are concerned, the hope is this will be the final nail

:35:57.:36:02.

in the coffin of what would have ended up being a really rather

:36:02.:36:07.

shabby excuse for an inquiry, rather than what is required about

:36:07.:36:14.

something as important and serious as this range of allegations.

:36:14.:36:17.

how real then is the danger of a whitewash in these inquiries?

:36:17.:36:22.

is what the people on that side of the argument have said they are

:36:22.:36:28.

concerned about. The chief of MI6, John Sawers, said today they would

:36:28.:36:30.

co-operate fully with the new inquiry into the Libyan cases. That

:36:31.:36:35.

they had nothing to fear from it. That it was in their interests to

:36:35.:36:38.

get the issue resolved and to move ahead with all the issues they are

:36:38.:36:42.

facing. I think there are questions though about the degree to which

:36:42.:36:47.

people like policemen can delve into the secret world. If, forks,

:36:47.:36:53.

people claim - for example, people claim not to remember things and

:36:53.:36:55.

not present themselves for questioning because they are out of

:36:55.:37:01.

the country. There are limits to push into the secret world. This

:37:01.:37:04.

could provide a point of conflict between investigators and the

:37:04.:37:08.

secret world. Hillary Clinton tonight told of her

:37:09.:37:13.

total dismay after a video showing US Marines your reignating on what

:37:13.:37:20.

are thought to be dead -- urineating on what are thought to

:37:20.:37:25.

be dead Taliban soldiers. Two of the marines had beened identified.

:37:25.:37:29.

Afghan President, Hamid Karzai brand the acts inhumane. While a

:37:29.:37:35.

member of his peace council warn the video could act as a recruiting

:37:35.:37:41.

tool for the Taliban. In the 1980s it was all about sushi, signs and

:37:41.:37:46.

neon lights. Tokyo was buzzing and the rest of the world couldn't get

:37:46.:37:51.

enough. Japan's bubble burst, the stock market crash sending the

:37:51.:37:56.

country tumbling. They call the next 20 years the dead zone of flat

:37:56.:38:00.

growth. We are looking to see if we are heading the same way. What

:38:00.:38:04.

lessons to learn to avoid it. We will learn from an economist to say

:38:04.:38:09.

it is a myth that Japan failed a over those years. And Gillian Tett

:38:09.:38:14.

who worked there for many years. Japan doesn't look like it's been

:38:15.:38:19.

stagnating for 20 years. The streets are bustling, almost half

:38:19.:38:25.

of all women have a Mike 'The Hatchet' McVitie handbag, and other

:38:25.:38:31.

luxury brands are not -- Mike 'The Hatchet' McVitie handbag, and --

:38:31.:38:35.

Louis Vuitton handbag, and other brands are not far behind. Is the

:38:35.:38:39.

model not to fear but to follow in Japan.

:38:39.:38:43.

The Full Heart Company has doubled its work force, since the bad times

:38:43.:38:48.

began. They produce panels that control the machines that make the

:38:48.:38:52.

exports Japan is famous for, cameras and cars. The jobs of the

:38:52.:38:58.

staff have never been under threat. Have you ever laid anyone off, ever

:38:58.:39:08.
:39:08.:39:10.

let anyone go? We never laid off the people. But we made the

:39:10.:39:16.

employees take the salaries down. Why have you never laid off people,

:39:16.:39:26.
:39:26.:39:27.

if the economy has been bad? Why? Because we don't have bad people.

:39:28.:39:33.

In recent years, Japan has been held up as a dreadful warning to

:39:33.:39:36.

western Governments. What the future would be like if they failed

:39:36.:39:42.

to get a grip on the economic crisis. Not just one, but two lost

:39:42.:39:49.

decades. Of little or no growth. Japan's GDP growth has certainly

:39:49.:39:53.

lagged behind the west. But other indicators suggest a different

:39:53.:40:00.

story. Per cap at that, electricity consumption grew nearly twice as

:40:00.:40:06.

quickly in Japan between 1990 and 2004, compared to the United States.

:40:06.:40:11.

59 of the world's 100 cities with the fastest broadband connections

:40:11.:40:16.

are here. Life expectancy has risen to 83, the highest in the world.

:40:16.:40:23.

The unemployment rate is just 4.5%. In Britain it is 8.3%. Keith Henry

:40:23.:40:27.

has lived in Japan for 27 years, and now advises foreign companies

:40:27.:40:36.

on doing business here. Japan has succeeded in providing a stable

:40:36.:40:41.

economic past, present and looks like, in the near term at least,

:40:41.:40:46.

economic stability. At a level wealth that the world has never

:40:46.:40:51.

seen before. That type success is then reflected in Japanese society.

:40:51.:40:57.

That brings the social cohesion, absolutely.

:40:58.:41:01.

Tokyo's skyline glitters, economic malaise or not. Perhaps not

:41:01.:41:05.

everything is bright.P Japan's national debt has soared in recent

:41:05.:41:09.

decades. The biggest now in the industrialised world. One day there

:41:09.:41:14.

may be a reckoning, an economic collapse, not avert, but merely

:41:15.:41:21.

postponed. Gillian Tett is still with me. From

:41:21.:41:24.

Tokyo we are joined by Eamonn Fingleton, who believesp Japan's

:41:24.:41:29.

failure is a fifth. We will start from you, you go against the grain

:41:29.:41:35.

on this, do you believe the lost decades were a myth? Yes, indeed.

:41:35.:41:40.

As it was pointed out, consumer living standards are very high here,

:41:40.:41:45.

and have increased. Life expectancy and so on, a greatism improvement.

:41:45.:41:51.

But also, a key thing -- a great improvement, but also a key thing

:41:51.:41:54.

people overlook is the trade situation in Japan is very strong,

:41:54.:41:59.

it was very strong in the 80s, that was the reason that the country was

:41:59.:42:06.

known as jugger naut Japan, but the current account surplus in 2010 was

:42:06.:42:16.
:42:16.:42:19.

three of-times the figure for 1989. Japan, you referred to earlier to

:42:19.:42:23.

Japan as the example of advanceded manufacturing, you can see how it

:42:23.:42:29.

trades with China. It sells about $140 billion to China. It has done

:42:29.:42:32.

it from a position of weakness, if you like. If you look at growth as

:42:32.:42:39.

a measurement, nothing is happening. Is that not such a bad thing?

:42:39.:42:44.

suggesting that growth is probably understated by western accounting

:42:44.:42:49.

standards. There are various reasons for that. There are

:42:49.:42:53.

enormous accounting issues in how growth is calculate. The Japanese

:42:53.:42:59.

are very conservative on this, is my point pt if you look at the key

:42:59.:43:03.

things that are really -- if you like at the key things really

:43:03.:43:07.

incontravertable, Japan is doing well. This throws our received

:43:07.:43:12.

wisdom into a different light. Should we, you know, on the brink,

:43:12.:43:16.

or in recession be looking at Japan and saying we don't want to go that

:43:16.:43:21.

way, tell us what to do to prevent it. One of the great unexpecteded

:43:21.:43:26.

benefits of the financial crisis, is many chrished pieces of received

:43:26.:43:30.

wisdom -- cherished pieces of received wisdom have been

:43:30.:43:36.

questioned, certainly about America and Japan. And it is right, that

:43:36.:43:42.

aspects of the Japanese economy do need more praise. The GDP, one

:43:42.:43:46.

important factor people forget is the Japanesep population has been

:43:46.:43:49.

shrinking and in America increasing. That influences the numbers. I wo

:43:49.:43:54.

argue the most important point of all, is -- I would argue one of the

:43:54.:43:59.

most important points of all is the issue of social cohesion. What is

:43:59.:44:02.

striking about Japan, the level of social cohesion, the ability to

:44:02.:44:09.

share pain and pull together. are risk averse?, they do not like

:44:09.:44:15.

debt or savings? Lock at the example about the labour force --

:44:15.:44:20.

look at the example about labour force and salaries, bosses can cut

:44:20.:44:24.

workers' pay when times are bad and raise them when times are good is

:44:24.:44:27.

very important. It is not that different from Germany, but it

:44:27.:44:31.

creates a lot more flexibility and much more cohesion that helps them

:44:31.:44:36.

to wear the pad times. Eamonn Fingleton, interesting that, if

:44:36.:44:40.

social cohesion is a massive thing, if we are broadly in a similar

:44:40.:44:43.

place to where Japan was, could you really say to those of us here in

:44:43.:44:50.

the west, it doesn't matter? think the position of Britain and

:44:50.:44:54.

in the United States is much more serious than the one that Japan

:44:54.:45:00.

faced in the early 1990s. The crash, the financial crash inp Japan was

:45:00.:45:04.

truly spectacular, but -- in Japan was truly spectacular, but the

:45:04.:45:08.

effect on the economy was minimal. Basically, the undereconomy of

:45:08.:45:18.
:45:18.:45:19.

manufacturing, which is the engine in the car -- underperforming of

:45:19.:45:23.

the economy of manufacturing which is the engine of the car brought

:45:23.:45:28.

them out. The system of employment is the strength of Japan, it is

:45:28.:45:32.

often criticiseded, but this it has this great strength that it is

:45:32.:45:36.

flexible and still maintains a high level of overall employment. What

:45:36.:45:41.

about the massive debt mountain Japan has got? It is a problem. But

:45:41.:45:47.

it is partly an issue about social cohesion and shared pain. Most of

:45:47.:45:51.

the debt is held by the Japanese. 90% of the bond market is held by

:45:51.:45:55.

the Japanese. If the Japanese are collectively willing to take a

:45:55.:45:59.

haircut to suffer losses on the debts in the future, frankly, that

:45:59.:46:02.

kind of doesn't matter. If there are foreigners are fd involved, as

:46:02.:46:08.

they are in countries like the UK and the US, where half of the UK

:46:09.:46:15.

debt is held by non-investors. The question is do you pull together or

:46:15.:46:19.

not as a society. The downside is I don't think most Americans and most

:46:19.:46:24.

British people would agree to live with the kind of other side of that

:46:24.:46:28.

system consensus, namely, a very impress Sonning society, where you

:46:28.:46:34.

have to conform -- impress Sonning society where you have to conform.

:46:34.:46:40.

Would we live in a situation where many women when they get married

:46:40.:46:45.

and have children they stop work. That is the reality ofed modernp

:46:45.:46:55.
:46:55.:47:17.

Japan. It is a trade -- reality of That is all we have time for

:47:17.:47:27.
:47:27.:47:55.

Hello Widespread frost tomorrow morning.

:47:55.:48:03.

A bid of cloud and the North West England and the Midland. For much

:48:03.:48:13.

of England, crisp, clear afternoon. Closer to home it should be the way

:48:13.:48:16.

of cold. In East Anglia quite pleasant. South-West Midlands and

:48:16.:48:20.

eastern parts of Wales, we could see patchy low cloud, coming and

:48:20.:48:26.

going through the day. Some lingering in the south west. For

:48:26.:48:29.

most a dry and sunny day. In Northern Ireland the brightest

:48:29.:48:32.

conditions in the morning. Particularly acrossle central and

:48:32.:48:37.

eastern areas, to the west one or two spots of rain. Across much of

:48:37.:48:41.

Scotland enjoying a settle spell. The North West, particularly the

:48:41.:48:47.

Western Isles and some rain developing. The difference between

:48:47.:48:51.

Friday and Saturday will be a bit more clout for northern and western

:48:51.:48:55.

areas. Patchy frost -- more cloud for northern and western areas.

:48:55.:48:59.

Patchy frost. A little bit more cloud generally in the south, for

:48:59.:49:04.

the start of the weekend. That said, still a lot sunshine, some of that

:49:04.:49:08.

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