12/01/2012 Newsnight


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


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


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


of business and economics are here to tell us.


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


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


welfare bill in tatters. The Employment Minister will face a


disability campaigner here in the studio.


Britain's spy agencies will face a criminal investigation into


allegations they were complicit in the rendition and torture of


Libyans and their families. The intelligence people have been


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


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


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


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


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


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


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


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


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


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


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


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


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


where the Superman cloak of economic salvation will have to


come from. For decades now, this has been the


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


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


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


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


above all, shopping. For centuries our most magnificent


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


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


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


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


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


boom lasted the wisdom was if manufacturing and exports shrank,


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


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


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


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


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


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


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


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


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


starting to be rewarded with increased volumes, and noise around


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


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


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


recession, consumer spending reaches its maximum. If you want


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


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


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


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


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


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


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


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


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


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


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


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


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


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


before. Between August and September, production overall


remained flat. This is exactly the sort of company


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


successful manufacturer, that earns money through exports.


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


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


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


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


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


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


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


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


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


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


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


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


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


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


based on quality and service. manufacturers believe if the


Government wants more businesses like this, it will take proper


commitment, including Government money. We can invest in the


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


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


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


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


big, big danger that is now disappearing.


Counting on property, financial services and shopping, may have


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


struggling to compete against countries like India and China,


that are turning out thousands of technicians and mathematitions.


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


what private investment does. We know that private investment is


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


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


interest reductions during the booms, now during the bust,


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


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


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


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


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


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


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


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


doing is moving things like money from welfare spending into


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


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


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


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


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


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


global economy is not exactly booming. The kind of conversation


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


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


through a decade where people are far too dazzled by financial


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


enough diversification. Similar to the conversations they are having


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


of manufacturing it would be a problem, too little manufacturing


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


Manchester United size the days when manufacturing was -


romanticise the days when manufacturing was strong and qalty.


It is not just the size of manufacturing but the quality


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


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


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


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


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


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


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


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


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


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


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


economic polarisation, and labour market polarisation, that are


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


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


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


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


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


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


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


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


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


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


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


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


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


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


ofed good education. Deborah, when we are talking about


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


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


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


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


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


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


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


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


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


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


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


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


Britain has to rediscover its entreprenurial spirit. One of the


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


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


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


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


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


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


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


trace their funding, their development and the vision back to


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


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


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


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


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


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


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


there are a lot of niche opportunities at the moment and


there are some agricultural engineers in my constituency who


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


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


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


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


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


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


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


Government has protect research spending, and said it is very


important that we maintain our premier position in the world,


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


decades of loss. With changes to the welfare system


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


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


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


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


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


campaigner. Let's start where the Government


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


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


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


picture. Local authorities and HMRC also administer an overlapping and


confusing system. All collecting similar data and dealing with many


of the same people. Not surprisingly error and fraud costs


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


of working-aged a dults are not in work.


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


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


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


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


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


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


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


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


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


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


employable they became, they became lifetime recipients of benefit.


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


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


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


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


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


year, maximum. The Government is having difficulty


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


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


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


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


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


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


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


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


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


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


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


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


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


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


decency for cutting back on benefits for patients suffering


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


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


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


message across, that this change would not affect the sickest


recipients benefits, and only affect those with significant


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


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


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


somewhere else in the benefits budget. That means finding other


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


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


difficult choice to make. Generations of politicians have had


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


Secretary patrols a �75 billion system, groaning with complexity


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


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


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


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


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


was the only area where our popularity increased in the period


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


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


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


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


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


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


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


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


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


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


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


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


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


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


what we are doing. That was presumably understood pretty well


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


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


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


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


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


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


other financial means, they could receive for example a substantial


inheritance, they are still able to unconditionally receive benefit


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


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


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


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


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


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


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


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


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


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


should have an entitlement in adulthood for an independent income.


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


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


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


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


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


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


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


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


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


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


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


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


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


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


Six months you would get unconditional support, if you were


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


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


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


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


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


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


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


the long-term group that receive unconditional support from the


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


office. We have introduced changes consciously intended to provide


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


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


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


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


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


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


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


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


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


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


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


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


right support. When ESA was originally designed, they thought


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


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


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


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


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


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


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


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


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


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


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


Government, successive Governments have tried and failed on the


benefits system. You have legal challenges with the unemployment


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


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


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


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


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


done through the revolutionary work programme, a payments by results


basis. We have organisations that are delivering personalised support


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


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


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


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


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


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


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


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


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


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


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


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


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


that we are about to change direction massively on child


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


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


efficiently as possible. Scotland Yard has launched a


criminal inquiry over claims that British spies were involved in the


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


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


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


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


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


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


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


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


up distinctly today. The announcement of a police, formal


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


alleged British involvement in torture, connected with the


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


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


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


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


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


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


I understand the inquiry has announced it will be reviewing the


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


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


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


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


something as important and serious as this range of allegations.


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


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


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


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


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


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


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


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


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


not present themselves for questioning because they are out of


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


could provide a point of conflict between investigators and the


secret world. Hillary Clinton tonight told of her


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


model not to fear but to follow in Japan.


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


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


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


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


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


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


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


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


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


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


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


lagged behind the west. But other indicators suggest a different


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


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


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


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


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


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


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


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


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


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


That brings the social cohesion, absolutely.


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


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


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


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


postponed. Gillian Tett is still with me. From


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


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


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


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


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


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


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


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


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


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


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


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


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


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


suggesting that growth is probably understated by western accounting


standards. There are various reasons for that. There are


enormous accounting issues in how growth is calculate. The Japanese


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


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


incontravertable, Japan is doing well. This throws our received


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


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


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


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


wisdom -- cherished pieces of received wisdom have been


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


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


important factor people forget is the Japanesep population has been


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


Hello Widespread frost tomorrow morning.


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


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


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


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


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


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


conditions in the morning. Particularly acrossle central and


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


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


Western Isles and some rain developing. The difference between


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


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


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


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


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