12/01/2012 Newsnight

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