20/02/2012 Newsnight


20/02/2012

In-depth investigation and analysis of the stories behind the day's headlines with Jeremy Paxman.


Similar Content

Browse content similar to 20/02/2012. Check below for episodes and series from the same categories and more!

Transcript


LineFromTo

Sometime tonight, the Greek financial crisis will be settled

:00:08.:00:12.

and Europe will live happily ever after. Or so we're asked to believe.

:00:12.:00:16.

But even if finance ministers do strike a deal to let Greece borrow

:00:16.:00:19.

more money, are the people of the country willing to suffer for the

:00:19.:00:23.

sake of foreign banks? And will they accept European commissars on

:00:23.:00:26.

the ground dictating day to day policy as some in Northern Europe

:00:26.:00:33.

want..We'll hear from a Greek cabinet minister. And how did

:00:33.:00:36.

Greece get itself into this mess? Step forward Goldman Sachs, the

:00:36.:00:40.

bank that helped to make the books look balanced. And the European

:00:40.:00:50.

officials who like to say yes. wrote to deck Tate letter to

:00:50.:00:55.

Eurostat. Six months later, we got a letter back, saying they veted

:00:55.:01:01.

and we better shut up. Here the coalition wrangles of the budget s

:01:01.:01:05.

the new tension in Government how far to penalise the wealthy to

:01:05.:01:09.

protect the less wealthy. ambition is to end the period of

:01:09.:01:14.

austerity in terms of the incomes of low and middle income families.

:01:14.:01:24.

Our new political editor is here. That language from David Laws man

:01:24.:01:27.

who was the first Chief Secretary to the Treasury in this Government,

:01:27.:01:36.

and is still a big noise in the Lib Dems is illuminating because

:01:36.:01:41.

austerity isn't something the Government likes to boast about.

:01:41.:01:44.

And our borders. It is all right the Greek financial crisis will

:01:44.:01:49.

soon be over, that's what officials close to the negotiations going on

:01:49.:01:53.

in Brussels tonight say. Accept of course it won't be over, the Greeks

:01:53.:01:57.

will merely have succeeded in borrowing billions more to try to

:01:57.:02:00.

pay off billions they've already borrowed while the northern

:02:00.:02:03.

Europeans who got to pay the bill will have got some conditions they

:02:03.:02:07.

attached they believe they can sell to their people. The dux Finance

:02:07.:02:12.

Minister, for example wants a team of commissars installed in Athens

:02:12.:02:18.

to make sure the Greeks stick to the rules. First up Joe Lynam

:02:18.:02:28.
:02:28.:02:29.

Lent starts this week, followed by 40 days of abstinence and self-

:02:29.:02:32.

denial. Forever many Greeks this week will trigger a decade of

:02:32.:02:37.

economic stress and collapse in their living standards.

:02:37.:02:41.

Their fate was sealed 2,000 piles away in Brussels, where eurozone

:02:41.:02:46.

finance ministers arrived to get a special pleading from the Greek

:02:46.:02:50.

Prime Minister himself. Lucas Papademos argued that Greece had

:02:50.:02:57.

met all that was asked of his people, and was entitle today a

:02:57.:03:02.

further 130 billion euros in loans and guarantees. His audience seemed

:03:02.:03:06.

more responsive than they were a week ago.

:03:06.:03:10.

TRANSLATION: Greece has made very important efforts but we need to

:03:10.:03:13.

continue the work now and all parties need to provide their

:03:13.:03:18.

contribution. The IMF is part of it and working on it.

:03:18.:03:23.

It is the intention of nobody to have Greece outside the Euro area,

:03:23.:03:31.

this would be a big solution for reason. It would be nonetheless but

:03:31.:03:38.

situation for the Euro area. Then came the Dutch finance Prime

:03:38.:03:42.

Minister pouring cold water. He wants to see the troika, based full

:03:42.:03:47.

time in Athens, something which will make the southern Europeans

:03:47.:03:55.

lived. I am, myself, I am in favour of a permanent troika, in Athens.

:03:55.:04:00.

That's my personal position, yes. I think permanent - when you look at

:04:00.:04:06.

the derailment in Greece, which has occurred several times now, it is

:04:06.:04:12.

probably necessary that, some kind of permanent presence of the troika

:04:12.:04:16.

in Athens, not every three months but on a permanent basis. I'm in

:04:16.:04:22.

fave of it that. The comments is schism between the north and south

:04:22.:04:28.

of Europe is real and won't be papered over by warm words. They

:04:28.:04:33.

feel they've been misled by Greek politicians in the past so Cher'

:04:33.:04:40.

exactly a stiff price from ordinary citizens. In a second bail out

:04:40.:04:45.

worth 130 billion euros, Greece has cut tenses of jobs and public

:04:45.:04:50.

sector pensions. Going forward, they agreed to have every key state

:04:50.:04:58.

asset and get used to troika's hot breath over their shoulders, to see

:04:58.:05:04.

they don't deviate. Is it workable? Austerity, won't work, and we've

:05:04.:05:09.

been going down the path for the past few years. We've seen

:05:09.:05:13.

depression level contractions in Greece, and without any economic

:05:13.:05:18.

relief, that is some growth, I don't think you can expect a

:05:18.:05:22.

country such as Greece, to itchment reforms, structural reforms that it

:05:22.:05:27.

needs to do in order to become sustainable, a sustainable member

:05:28.:05:35.

of the eurozone. With youth unemployment at 50% and

:05:35.:05:39.

increasingly angry Greek youth could make any deal signed

:05:39.:05:44.

unimplementable on the ground. we're moving into is a crisis of

:05:45.:05:49.

democracy. Because the Euro as a currency is public good for the

:05:49.:05:55.

citizens of the eurozone. But the decisions taken to the safety of

:05:55.:05:58.

eurozone are taken by individual countries, and might impose,

:05:58.:06:05.

undemocratic, and to a large extent unacceptable constraints on other

:06:05.:06:11.

eurozone countries. This week the Greek Parliament is set to activate

:06:11.:06:16.

a collective action clause, to force all bond holders to take a

:06:16.:06:22.

compulsory hair cut or right down of 70%. The international swaps and

:06:22.:06:27.

derivatives association will decide whether a Greek bail out is in fact

:06:27.:06:32.

a messy default or an awe dor of to a Lehman Brothers moment.

:06:32.:06:36.

Joe Lynam is with us in the studio now. Is there going to be a deal

:06:36.:06:39.

tonight? They're talking, eight hours after they started. That

:06:39.:06:43.

means they haven't got the deal they had hoped. They're going to be

:06:43.:06:46.

talking about the monitoring I was referring to there, the

:06:46.:06:52.

surveillance where the hot breath of the troika, the IMF and ECB will

:06:52.:06:55.

be breatheing down on Greek officials and ministers so they

:06:55.:06:59.

don't stray off the path. They're talking about the account in which

:06:59.:07:04.

they will pay the money. It is like giving someone a �0 note with a

:07:04.:07:07.

chain attached to it, because the Greeks won't have access to the

:07:07.:07:12.

money, because the troika will be controlling that account. And even

:07:12.:07:17.

at the end of all that, all they'll have succeeded in doing is

:07:17.:07:21.

borrowing money against imminent rainy day, which will have to be

:07:21.:07:26.

paid off at some point? Will have to be paid, all going for the Greek,

:07:26.:07:34.

all going well they will get the debt down to 120GDP, that's

:07:34.:07:38.

unsustainable by any measure, that's if the economy recovering.

:07:38.:07:45.

It shrank by 7%, that's a depression not recession. For that

:07:45.:07:48.

who happened, there needs to be private sector investment. The rich

:07:48.:07:52.

people are squirrelling their money away out of the country, so the

:07:52.:07:56.

private sector-led recovery, will be a tough one. Why has the mood

:07:56.:08:00.

changed so much snx the mood from north to south has changed, the

:08:00.:08:07.

Germans, and Dutch and Finns, to vote on the bail out deal, may not

:08:07.:08:11.

approve it, saying, we have been lied to by Greek politicians, we

:08:11.:08:15.

don't want to be lieed again, it is moly the triple-A rated countries

:08:15.:08:20.

will put their money on the line. Thank you very much. Now the Greek

:08:20.:08:27.

crisis is not an zept T has human causes. On the one side is the mess

:08:27.:08:31.

Sianic on the political class, and the elass it can view of what

:08:31.:08:34.

constitutes sound Government and good management of the economy. The

:08:34.:08:38.

country's adited to borrowing. Yet, was commit after joining the Euro

:08:38.:08:43.

to cutity debt. How is it to do so? It didn't. It turned instead to one

:08:43.:08:46.

of the world's biggest investment banks, for help in getting around

:08:46.:08:54.

the deficit rules. It was nick Nick Dunbar, author of "The Devil's

:08:54.:08:57.

Derivatives", how Goldman Sachs did Greece a big favour. For the first

:08:57.:09:04.

time, some of those who did the deal talk publicly.

:09:04.:09:10.

The sales, it is a sexy story, between two singers, but the

:09:10.:09:16.

European crisis is not the child of the sex we had.

:09:16.:09:22.

With Goldman Sachs. Perhaps as an electorate we might have agreed

:09:22.:09:28.

this is what we want to, it was nef we were nef consulted and we nef

:09:28.:09:33.

knew. Greece is teetering on the brink. Poor man of the eurozone,

:09:33.:09:38.

dependent on the EU for bail out loans, mistrusted by creditors and

:09:38.:09:44.

poised to default. How did it bring itself to the edge and how did 2.8

:09:44.:09:52.

billion euros of debt disappear in the wind? In 2003, I exposed

:09:52.:09:55.

Greece's attempt with Goldman Sachs to conceal the size of its debt. At

:09:55.:10:01.

that time the Greek authority say I was making something out of nothing.

:10:01.:10:06.

So now I'm back in Athens, to understand how and why the deal was

:10:06.:10:12.

done. What was the deal's cost to Greece, at a profit to Goldman and

:10:12.:10:22.
:10:22.:10:23.

why were EU watchdogs insistent they knew nothing until 2010? In

:10:23.:10:29.

2001, in a wrestle how to qualify for Euro membership, the Government

:10:29.:10:34.

argued how they could kick the habit of debt. Greece had to

:10:34.:10:39.

promise to show directionability, the debt ratio had to go down every

:10:39.:10:46.

year. With events like the 2004 Olympics coming up, that wouldn't

:10:46.:10:52.

be easy. For the civil servants, an easier solution of at hand., why

:10:52.:10:58.

not hide the borrowing instead? Among the banksers who flocked to

:10:58.:11:04.

and theen, was head of fixed income sales at Goldman Sachs. In 2001,

:11:04.:11:07.

she came to the table with one of the most important deals of her

:11:07.:11:11.

career. She had found a way to give the Greeks what they were looking

:11:11.:11:16.

for, a way of shrinking their debt that was legal and completely

:11:16.:11:22.

secret. I'm going to meet the man tasked by the Government at the

:11:22.:11:27.

time with getting Greece ago debt moving in the right direction. The

:11:27.:11:33.

deal involves swaps, bets to hedge risks. He says from the start he

:11:33.:11:38.

wasn't able to disclose the deal to the market. If you go to the open

:11:38.:11:43.

market, as a secret agent trying to sell bonds, you make allowances

:11:43.:11:46.

because you want to attract investors. When you do it is as a

:11:46.:11:50.

bilateral deal, you don't make announcements about it. No-one did

:11:51.:11:56.

it at that time. If you look around Europe, nobody announces the swaps

:11:56.:12:02.

they did with every counter party. And that was the tradition.

:12:02.:12:07.

swap that Goldman offered Greece would shrink the debt, use ago

:12:07.:12:17.
:12:17.:12:17.

foreign exchange transaction. In the same way you or I convert our

:12:17.:12:19.

currency when we come back from holiday, international brotherers

:12:19.:12:25.

convert the foreign bonds into domestic debt. Goldman used a

:12:25.:12:28.

fictitious exchange rate to make the country's debt appear smaller.

:12:28.:12:33.

In this way, 2.8 billion euros, suddenly disappeared, giving the

:12:33.:12:37.

false impression that Greece was convergeing with the Maastricht

:12:37.:12:42.

rules. The debt hadn't really disappeared. In reality, Goldman

:12:42.:12:49.

had secretly lent Greece, 2.8 billion your euros as part of the

:12:49.:12:55.

swap. In an attempt to paying it back with big interest interest

:12:55.:12:59.

rate delts, there was further debt. A year after the Government

:13:00.:13:05.

chaickds. The new Government revealed the spiralling costs of

:13:05.:13:14.

the Goldman deal. TRANSLATION: The dretrimental swap

:13:14.:13:18.

agreement, led to the debt. The swap agreement had a direct cost of

:13:18.:13:27.

500 million euros, and indirect cost of one billion euros. The new

:13:27.:13:32.

boss of Greece's public debt management agency, says the deal

:13:32.:13:36.

ostensibly achieved what the previous Government set out to do.

:13:36.:13:40.

They hid the debt, so they were in agreement, with requirement to be a

:13:40.:13:46.

member of the eurozone, right. But the cost was huge. And when finally

:13:46.:13:51.

they had to come out in the open and acknowledge this debt, this

:13:51.:14:00.

debt ballooned. But big debt? big debt. A bad bet? In prospect

:14:00.:14:08.

yes. Vul of the bets not working out,

:14:08.:14:15.

the loan mushroomed to 5.1 billion, Goldman involved tweaks to ensure

:14:15.:14:19.

the dice was loaded against Greece and in favour of Goldman who were

:14:19.:14:25.

making millions from the deal. asked Goldman to eliminate this

:14:25.:14:30.

feature that was not usual on the market. They refused to. I

:14:30.:14:36.

recommended to write a letter high up to, get rid of this, without any

:14:36.:14:40.

come pen says. But they were asked they couldn't do that, because the

:14:40.:14:45.

traders were in position, and they may lose money. He sympathises with

:14:45.:14:52.

the position his predecessor was in? He was riped off by Goldman. I

:14:52.:14:56.

don't blame him. Because, he was scared and could not go to the

:14:56.:15:00.

market and check, and was asked by the Government to do that.

:15:00.:15:04.

might wonder how such a deal could be allowed, but it was legal.

:15:04.:15:08.

Goldman wanted to be sure, it wouldn't get into trouble for

:15:08.:15:13.

helping the Greek with such a bear- faced trick, so the company said it

:15:13.:15:18.

spoke to the EU accounting agency about the deal, and provided

:15:18.:15:24.

Newsnight, that discusses took place. We asked Eurostat but they

:15:24.:15:34.
:15:34.:15:52.

For many, questions remain. Why wasn't Eurostat looking out for

:15:52.:15:57.

Greece in the interest of the Euro in the whole. The deal was well

:15:57.:16:03.

known. How could Eurostat stay bliss flee unaware until 2010?

:16:03.:16:06.

Greeks were trying to warn about the dodgy stat in their own

:16:07.:16:12.

country? In 2005, we wrote a detailed letter to Eurostat, dobing

:16:12.:16:19.

in your Government at the time. For, what they were doing in fiddling

:16:19.:16:25.

the Greek's statistics. Three months later, we say they

:16:25.:16:29.

investigated everything and it was above board, so we better shut up.

:16:29.:16:33.

The billions oweed upped the Goldman swap is a small piece of

:16:33.:16:37.

the 350 billion euros, that Greece owes today, only a fraction that

:16:37.:16:45.

will ever be repaid. That 5.7 billion simpliess the sip tenseives

:16:45.:16:48.

for Greeks to fiddle debt, and banks to cook up deals, and

:16:48.:16:55.

Brussels institution toss look the other way. If, you put me back to

:16:55.:17:00.

2001, would you do that again, I would say, no not because of the

:17:00.:17:05.

economics behind it, probably design it a little bit differently,

:17:05.:17:12.

if I knew that September 2011 would happen, but I would never do the

:17:12.:17:18.

type of business because of the political handling and risks of

:17:18.:17:22.

this deal afterwards. Newsnight approached Goldman Sachs but they

:17:22.:17:32.
:17:32.:17:51.

declined. In a statement they told In and thes today, the legacy of

:17:51.:17:55.

Utopian financial experiment is unstable angry society, reeling

:17:55.:18:00.

from four years of recession, with no end in sight. The Greeks, who

:18:00.:18:05.

itchmented and analyseed these transactions, agree it was a toxic

:18:05.:18:12.

import that played on the weakness,s a sub-prime in the US

:18:12.:18:19.

bankers played on the weak necessarys. The Euro failed the

:18:19.:18:26.

Greeks. Greece is poise today default on the debt and leave the

:18:26.:18:29.

eurozone. Germany and EU institutions expressed outrage how

:18:29.:18:34.

the Greeks cheated their way to disaster. That's hypocrisy. Back in

:18:34.:18:39.

2003, the story of how legalised financial trickery was roting the

:18:39.:18:43.

eurozone from the inside wasn't something the guardians of the Euro

:18:43.:18:48.

want to hear, so they ignored it. It is tempting to ask, whether a

:18:48.:18:54.

single currency, held together with such toxic glue is actually worth

:18:54.:19:01.

saving. Well, joining us now from Athens, is Giorgos Papaconstantinou,

:19:01.:19:06.

until the middle of last year, he was Greece as financial minister,

:19:06.:19:11.

now he is minister for the environment. And also with us, is

:19:11.:19:17.

John Redwood. Mr Giorgos Papaconstantinou, forgive me, I'm

:19:17.:19:23.

so sorry, when you look at that inkoch tense, it is not surprising

:19:23.:19:28.

the northern Europeans want to keep a very close eye on how you get

:19:28.:19:35.

access to any further loans? I can see how the Goldman Sachs story is

:19:36.:19:42.

sexy as your video says. But I don't think it is justice to what

:19:42.:19:47.

is happening in Brussels tonight which is a bigger picture. A few

:19:47.:19:51.

points, point number one, everybody was doing it. Every country in the

:19:51.:19:55.

eurozone was using these kinds of tricks to reduce their debt back

:19:55.:20:00.

then. The difference with Greece is when the rules changeed in 2008,

:20:00.:20:04.

the same Finance Minister you had in the video, saying how terrible

:20:04.:20:12.

it was, forgot to declare it with Eurostat. To pack maick it

:20:12.:20:15.

absolutely clear, this was after the entry in the eurozone, so it

:20:15.:20:24.

had no effect for the rules of us entering. And the debt of 160% of

:20:24.:20:28.

GDP, those% the Goldman Sachs swap was about, is important but it is

:20:28.:20:33.

not the story. The story is about overspending, and receiving less

:20:33.:20:38.

than the taxes that were due to the state. Over years and years, this

:20:38.:20:43.

is where we're at. We will come to tonight in a moment or two. First

:20:43.:20:47.

on the Goldman Sachs story, you used to work in the banking world,

:20:47.:20:52.

what do you make of it? I'm not surprised that Goldman Sachs went

:20:52.:20:57.

off and came up with a clever scheme, which rewarded them as well,

:20:57.:21:05.

because that was the brief they were given. An alleged 600 million

:21:05.:21:10.

Euros. But the mainvilleens in the story are the sponsoring Government

:21:10.:21:15.

that want to do this kind of thing and lost the money, and the

:21:15.:21:20.

European authority who seem to connive at it. Nobody was saying it

:21:20.:21:24.

was illegal, it was Legal Business, and they got the reduction of debt

:21:24.:21:29.

for the period of time they want. What do you make the European

:21:29.:21:33.

authority signed off on it? It is quite wrong, but we know, as we've

:21:33.:21:37.

been hearing from Greece, a lot of countries, massageed or arrangeed

:21:38.:21:42.

their figures to get in the Euro and some carried on doing so

:21:42.:21:45.

afterwards to conform with the sensible rules. We know it was

:21:45.:21:49.

because, most countries ignoreed the rules and got into the Euro,

:21:49.:21:52.

when their figures was way out of order, that we have the crisis

:21:52.:21:56.

we're now facing. There is a big question, these people ought to be

:21:56.:22:00.

answering, why did they turn their backs on it, they must have known

:22:00.:22:04.

what was going on, both the "euroland" people and the national

:22:04.:22:07.

state Government have access to great financial and legal advice,

:22:07.:22:13.

so it is difficult to believe they didn't know what Goldman Sachs was

:22:13.:22:19.

doing. So they turned a blind eye. Mr Papaconstantinou, let talk about

:22:20.:22:25.

tonight and what's going to happen. One more point on the previous

:22:25.:22:30.

story. It is important to remember, the two countries that breached the

:22:30.:22:34.

Maastricht criteria were France and Germany. When Eurostat asked for

:22:34.:22:39.

audit powers to be able to know exactly what's going on in the

:22:39.:22:42.

various countries, the cubs that did the not give them audit powers

:22:42.:22:47.

from the large countries, against France and Germany. And yauro stat

:22:48.:22:52.

only got audit powers after the Greeks statistical mess came to

:22:52.:22:56.

light, after we came claep - the new Government at the time, what

:22:56.:23:03.

the you in numbers were. This is a telling story, of the failings.

:23:03.:23:08.

Everybody was up to no good in one form or another. Let's turn to

:23:08.:23:11.

tonight, are you confident there will be a deal? I think there will

:23:11.:23:16.

be a deal. My understanding is as we speak, the differences are

:23:16.:23:23.

narrowing, it is a question of getting the projection of the debt

:23:23.:23:28.

in 2020 to be around 120%, which the European council decided and

:23:29.:23:32.

the assurance that is will make the finance ministers of the eurozone

:23:33.:23:36.

members comfortable for the new package for Greece. It is an

:23:36.:23:40.

important decision. Because it can turn the page for Greece. It can

:23:40.:23:45.

stabilise the rest of the eurozone. And we can move forward. Do you

:23:45.:23:50.

think it will turn the page as we've just heard? No I'm afraid it

:23:50.:23:54.

won't. The great tragedy is we may get a deal tonight but it delays

:23:54.:23:59.

making the necessary adjustments, the need to be made to give the

:23:59.:24:03.

Greek economy some chance of recovery. We've had several years

:24:03.:24:08.

of depression or recession, because they're locked into a system that

:24:08.:24:14.

doesn't work for them and the wrong exchange rate. If they patch it, it

:24:14.:24:17.

doesn't produce a miracle cure. Why would the second package work when

:24:17.:24:24.

the first one didn't. If the Dutch have their way, there will be

:24:24.:24:28.

representatives of the three main financial institutions involved, in

:24:28.:24:33.

Athens, making sure that you do as you say you'll do. Will the Greeks

:24:33.:24:38.

accept that? Well, let not make a big deal what is actually pretty

:24:38.:24:43.

much common practice. The IMF has a resident office in France, they're

:24:43.:24:48.

there all the time. So I don't think there's an issue in having a

:24:48.:24:54.

permanent presence of the troika. If I could respond, the two ways to

:24:54.:24:57.

go forward. One is to declare bankruptcy and leave the Euro. A

:24:57.:25:02.

lot of people say that. Those who say it, seriously underestimate the

:25:02.:25:07.

economic and social cost for the Greeks, the Greek economy, and the

:25:07.:25:11.

repercussions on the rest of tkpwruerp Europe. The other way is

:25:11.:25:17.

hard, go forward by the necessary austerity and structural reforms

:25:17.:25:23.

that give the country a capacity to grow again. It is not an easy road

:25:23.:25:27.

and there's no magic bullets. We need the first programme, because

:25:27.:25:32.

the first one did not have enough time to get the job done. This is

:25:32.:25:38.

the better of the two roads. What would happen if you left the Euro?

:25:38.:25:44.

Well, last Sunday the Greek Parliament voted on the new

:25:44.:25:48.

austerity package, by a large two- thirds majority. If it voted

:25:48.:25:53.

against, then the eurozone would stop, the aid programme for Greece,

:25:53.:26:00.

and then in the next morning you would have queues outside the banks,

:26:00.:26:04.

people trying to send the money out of the country. By midday, would

:26:04.:26:08.

you have to shut down the banking system, by the end of the day, you

:26:08.:26:12.

couldn't buy medicines from abroad or fuel, oil and gas, and soon we

:26:12.:26:16.

wouldn't pay pensions and salaries. That's what would happen. People

:26:16.:26:22.

talk about the exit of the Euro, if they can be done in an automatic

:26:22.:26:30.

way. That's not the way it works. If you are outside, you can think

:26:30.:26:32.

about dedevalueing, you do the adjustments that are necessary to

:26:32.:26:37.

stay within the eurozone in a competitive world. John Redwood who

:26:37.:26:44.

do you think what would happen? you plan it, it wouldn't happen. 87

:26:44.:26:50.

countries, have left single currency, since the Second World

:26:50.:26:58.

War, you plan it, and on a given day, announce the day, and it

:26:58.:27:02.

hasity powers to protectity banks and print the currency. You devalue

:27:02.:27:07.

and establish a new market rate, and that cut your debt burden and

:27:07.:27:11.

makes you competitive. From that moment, you have a chance of

:27:11.:27:15.

recovery. Iceland did it, and Iceland are in a better position

:27:15.:27:21.

than Greece that is old yerg on. Now, tonight, it's my pleasure to

:27:21.:27:25.

introduce our new political editor, Allegra Stratton once a producer on

:27:25.:27:32.

this programme and latterly of the Guardian, it is always about

:27:32.:27:39.

finding diamonds in dunghills, but there have been few from Allegra.

:27:39.:27:43.

Lib Dems want a significant policy to lift the rate of income tax. So

:27:43.:27:49.

before that level, you wouldn't pay any income tax and they want to

:27:49.:27:54.

bring that 2010. Tories liked that, so it baims a coalition pledge. Now

:27:54.:27:58.

what we're hearing is the Lib Dems think this should be faster,

:27:58.:28:02.

furious further. And we don't know what the Tories think, because they

:28:02.:28:06.

think they're not going public how they will negotiate ahead of the

:28:06.:28:11.

Budget. Today we're talking to David Laws why they want to go

:28:11.:28:20.

further, faster, more furious, what I find is if it could be brought in

:28:20.:28:25.

more quickly T would end austerity. I haven't talked to anyone that

:28:26.:28:32.

thinks there's a silver bullet, for austerity and yet this is what the

:28:32.:28:37.

Lib Dems want to that end. He is for many Conservatives, their

:28:37.:28:44.

favourite Lib Dem. When David was in charge of Treasury and in charge

:28:44.:28:47.

of spending cut, George Osborne said it was as if he was put on

:28:47.:28:53.

earth to do the job that was asked of him. But now, in his first

:28:53.:28:56.

television interview, since resigning from the cabinet, David

:28:56.:29:02.

Laws stels George Osborne the time has come to begin answered to

:29:02.:29:06.

austerity. We have to distinguish between the period of austerity for

:29:06.:29:08.

public spending, and public services which is clearly going to

:29:08.:29:15.

go on for a period of time, from the austerity we've seen for

:29:15.:29:18.

household budgets. They've been falling since 2008. Now we've

:29:18.:29:22.

completed most of the tax increases, now we're seeing inflation this

:29:22.:29:27.

year, on a firm downward track, that gives us the opportunity, if

:29:27.:29:32.

we can make these other reductions in taxation, by increasing the

:29:32.:29:36.

income tax thresh holds, as Nick Clegg has suggested, that gives us

:29:36.:29:40.

the opportunity of ending the austerity and household budgets and

:29:40.:29:44.

allowing the Budget of most people, the household budgets of most

:29:44.:29:48.

people, to start expanded from this year to next year. That would make

:29:48.:29:51.

a big difference to the economy and millions of people, who have been

:29:51.:29:56.

through one of the toughest periods in terms of household budgets in

:29:56.:30:00.

living memory. Nick Clegg called for an increase in personal

:30:00.:30:04.

allowances for low and middle earners, but now unone of the

:30:04.:30:09.

advisers raced the stakes. By making the claim it would end

:30:09.:30:13.

austerity, language used by the Opposition, David Laws is telling

:30:13.:30:15.

the Chancellor there's an alternative. The big question

:30:15.:30:21.

remains, how will they pay for it? Will they, for instance, rule out

:30:21.:30:25.

cuts on low and middle income earners to fund the policy. In

:30:25.:30:29.

terms of the party's principles, is it your bottom line now, that any

:30:29.:30:34.

of this, income and thresh holds has to be funded from the well off,

:30:34.:30:39.

it cannot be funded from taking of tax credits? We certainly don't

:30:39.:30:44.

want to be see any measures that would fund the personal allowance

:30:44.:30:50.

that would be regressive. It would be bizarre to take from low incomes,

:30:50.:30:56.

to other people. You're ruling that out? Yes. Measures that would fund

:30:56.:30:59.

the personal allowance by taking money off people on middle and low

:30:59.:31:04.

incomes. The pensions of the most wealthy appear to be in their

:31:04.:31:08.

sights? I suspect what the Government will look at is whether,

:31:08.:31:14.

for the most of fluent, 5%, and 5% of people, across all the

:31:14.:31:18.

allowances, in the system for people, we can make changes, that

:31:18.:31:25.

take away some of the subs zis that are going to the top 1% or 5% delix,

:31:25.:31:29.

and get to them where they're needed. Green faxes has been

:31:29.:31:35.

floated, can you go for a green tax, when that might push up bills more?

:31:35.:31:39.

There is a real issue in the short- term, about whether we would want

:31:39.:31:44.

to add, for example, to petrol and energy bills at a time when oil

:31:44.:31:49.

prices have spiraled higher and people's household budgets have

:31:49.:31:53.

been squeezed. To add further to the green taxes with high energy

:31:53.:31:56.

price sincere, something that would not be sensible to do in the short-

:31:56.:32:02.

term. Let look at two alternative ideas being floated, the

:32:02.:32:06.

Conservatives, are our old friend an anonymous sources, why not use

:32:06.:32:11.

the money you are suggested that can be found, use with employers to

:32:11.:32:18.

help with national insurance, so they hire more people? The agreed

:32:18.:32:23.

priority on tax, if the coalition Government is to raise the personal

:32:23.:32:28.

allowance to �10,000, that's what we agreed when the two party got

:32:28.:32:32.

together. That takes precedence over all the other tax priority.

:32:32.:32:36.

Are the libkems right? Could their policy unsqueeze the squeezed

:32:36.:32:41.

middle? Our forecasts take thoo account policies that are announced

:32:41.:32:47.

and middle income is to fall slightly in 2012, but it wouldn't

:32:47.:32:52.

take much to reverse that, and have a small rise, like a give away in a

:32:52.:32:56.

higher personal allowance. Are the Lib Dems, now, Britain's tax

:32:56.:33:02.

cutting party? I think that we are. That will make Conservatives

:33:02.:33:06.

bristle. Opinion on their side ranges the Chancellor should not

:33:06.:33:10.

allow the Lib Dems to own the proposal. Then there is some that

:33:10.:33:15.

propose different tax cuts. And others of a recent warning of the

:33:15.:33:19.

down grade in credit rating, allowance no room for manoeuvre.

:33:19.:33:23.

Conservatives are saying the lick democrat may get the increaseness

:33:23.:33:28.

that Lib Dems, like David Laws are calling for, but there's irritation

:33:28.:33:33.

in the manner if not not the substantial. Is They don't

:33:33.:33:39.

understand why they went early, when David Cameron's loyal advisers,

:33:39.:33:44.

met to discuss long-term strategy, they talked about whether the Lib

:33:44.:33:50.

Dem bail earlier from Government. Do you understand why people are

:33:51.:33:55.

irritated? What I would say as a strong supporter of the coalition,

:33:55.:34:00.

you don't end up with a destructive prose, where both parties are

:34:00.:34:06.

trying to block the proposals, so you independent up with a paralysis,

:34:06.:34:11.

where the Government doesn't get things done. A constructive one

:34:11.:34:13.

will make the coalition more sustainable because the two party

:34:13.:34:17.

will feel happier. And it leads to a competition of ideas, which is

:34:17.:34:22.

potentially good for the country. The Lib Dems have put down a marker

:34:23.:34:27.

they think they can ease the squeeze for the less well off. They

:34:27.:34:31.

want credit from the electorate for trying to do so, if it happens or

:34:31.:34:37.

not. With many cut yet to take effect, the credibility of their

:34:37.:34:44.

claim will be tested. Allegra is still here. I think I can see why

:34:44.:34:49.

you journalists are exr excited about it, but for the public why is

:34:49.:34:55.

it significant? Because, the general public, they know all three

:34:55.:35:01.

political leaders talk about the squeezed middle. It is Ed Miliband

:35:01.:35:09.

phrase, but the other two have jumped on the wagon. When for the

:35:09.:35:12.

previous three years, no-one's talked about the squeezed middle,

:35:13.:35:17.

like it is an easy thing that can go away. We knew they wanted it

:35:17.:35:23.

from the Budget, but we didn't know what magic wand it would end up

:35:23.:35:28.

being. Everybody I talked to over the past year or two years, when

:35:28.:35:31.

you talked about the squeezed middle, for many out there, it is

:35:31.:35:35.

not a theme, it is a way of life, I understand that. But in terms of

:35:35.:35:39.

the political leaders, if they thought it was a way to solve it

:35:39.:35:43.

like that, they would have done it. There's no doubt that David Laws is

:35:43.:35:51.

speaking for the party here? don't doubt it. He is one of Nick

:35:51.:35:56.

Clegg's closest advisers, he doesn't absolve from that label. He

:35:56.:35:59.

is one of the most respected economic minds in not just the Lib

:35:59.:36:05.

Dems but the Government. He is also a big, as he said in the package, a

:36:05.:36:12.

big zel leb for the coalition, still. First, Daniel Finkelstein

:36:13.:36:16.

and Steve Richards are here to shed more light on this. What do you

:36:16.:36:23.

make of it? Well, two things, first, the Lib Dems, even the so-called,

:36:23.:36:27.

orange book Lib Dems, like Nick Clegg and David Laws were always

:36:27.:36:30.

pretty ardent, believers in redistribution through tax. I

:36:30.:36:34.

remember before the election, they were more overt about their support

:36:34.:36:38.

for redistribution, the Gordon Brown, who never used the word,

:36:38.:36:42.

redistribution, didn't dare do so, even though policies did it.

:36:42.:36:46.

They've been keen on the specific policy. Of course it was part of a

:36:46.:36:50.

coalition agreement they would reach, to get people out on low pay

:36:50.:36:54.

out of tax. It is more the manner in way they're promoting this

:36:54.:36:58.

particular policy now, to make it absolutely clear, to the voters,

:36:58.:37:01.

that come the Budget, this will have campaigned for something they

:37:01.:37:05.

believed to be fair, and that they're determined to be associated

:37:05.:37:12.

with, if, and when it is announced. Is George Osborne going to pay

:37:12.:37:16.

attention? He will have to, and I think he will want to. Reducing tax

:37:16.:37:21.

on people is what Conservatives believe and want to do, so

:37:21.:37:25.

therefore, this doesn't cause a fundamental problem. This is one of

:37:25.:37:31.

the glues in the amendment. I am less keen, because if you take

:37:31.:37:36.

people out of tax, they become less responsible for what we spend

:37:36.:37:40.

publicly. This proposal that David Laws goes out and tries to promote

:37:40.:37:45.

the Lib Dems doing it, the problem is in ordertor people to take this

:37:45.:37:51.

idea, they'll have to know who David Laws was and was a tax

:37:51.:37:54.

allowance was. And few people know either of one of those things.

:37:54.:37:58.

That's not cynical, that is what happens when you poll people. They

:37:58.:38:01.

don't know what these things are. They will judge, whether they're

:38:01.:38:05.

better off. It is interesting, isn't it the way in which language

:38:05.:38:09.

is changing, attitudes are changing, too, about the rich and the tax.El

:38:10.:38:14.

What's happened here, or is what happening? When there's no growth,

:38:14.:38:19.

fairness becomes a bigger issue and people get scratchy about fairness

:38:19.:38:23.

issues. Part is reflected in debate about tax, whether the well off is

:38:24.:38:30.

taxed enough and other is reflected in other issues, welfare fraud,

:38:30.:38:35.

emgration, these become emgration issue. It is a big change anding

:38:35.:38:40.

from one. I read most days, since the financial crash the debate in

:38:40.:38:46.

Britain and elsewhere, has moved to the right. Tax, in 199, Gordon

:38:46.:38:49.

Brown and Tony Blair didn't dare say thinking about putting the top

:38:49.:38:54.

rate of tax up. And now you have David Cameron and George Osborne

:38:54.:39:00.

who would die to cut that top rate and all the focus is how you get

:39:00.:39:05.

the low paid and pay less tax and as David Laws implied, get the

:39:05.:39:11.

money from the wealthy as welfare reform. So the focus has changed

:39:11.:39:15.

and to talk about redistribution in some shape or other, has become

:39:15.:39:20.

legitimate. Under Blair and Brown, they didn't utter the words.

:39:20.:39:25.

Because the economy was growing, and therefore people:. They were

:39:25.:39:29.

scared to as well. Scared because they thought they would ruin the

:39:30.:39:35.

thrust of growth. That remains a danger. If you increase tax burden

:39:35.:39:40.

on earning up on the scale, and continues to earn your money that

:39:40.:39:43.

way, you risk retarding growth and that's a risk the Government would

:39:43.:39:48.

run, if it forever, redistributed tax. This is politics, following

:39:48.:39:52.

social change is it? I think it is all created by the fact we've run

:39:52.:39:58.

out of money. In a situation where you've run out of money, how you

:39:58.:40:03.

distribute it, becomes scratchy and ditch. In the 1950s, the Labour

:40:03.:40:07.

Party said it would find it difficult to redistribute it in a

:40:07.:40:13.

situation where there wasn't any growth. He realises it becomes

:40:13.:40:20.

scratchy. It go back to a few years, Blair and Brown loved to be

:40:20.:40:26.

surrounded by bankers, they used them as a shield. Now no-one would

:40:26.:40:31.

go near a banker, so there have been deep changes, in a very short

:40:31.:40:37.

period of time. So, people can talk openly, about whether there should

:40:37.:40:44.

be another tax on banker's bonuses. You are right to raise the issue of

:40:44.:40:49.

growth. But clearly the space between the fairness in the tax

:40:49.:40:55.

system, without jeopardising growth. The important sthing intensifies

:40:55.:40:58.

fairness issues, also like welfare fraud politically, because it is

:40:58.:41:02.

all about, people feeling other people, whoever they are, are

:41:02.:41:06.

putting in, taking out when they haven't put in. When there's no

:41:06.:41:11.

growth and people are feeling pinched that feeling intensifies,

:41:11.:41:16.

not just people at the top end of the spectrum, but like the benefit

:41:16.:41:23.

cap was a popular political measure, because it goes to the bottom area

:41:23.:41:28.

as well. In the end, tax and spend, more than anything else, decides

:41:28.:41:32.

electionness Britain. Thank you. Now it is stop short of saying

:41:32.:41:37.

Britain's borders might have been more secure if they were guarded by

:41:37.:41:42.

Homer Simpson and the dog, but only just. The inquiry into how border

:41:43.:41:50.

controls was suspended, today, res vales a catalogue of ineptness, and

:41:50.:41:54.

confusion at a political level. The Home Secretary's decided as a

:41:54.:41:58.

sequence, to reorganise the whole thing.

:41:58.:42:04.

It was a David Cameron promise, and priority. Real limit, proper

:42:04.:42:09.

enforcement, real control over how many people come here and who they

:42:09.:42:14.

are. But what's transpired is chaos, resignation of a senior civil

:42:14.:42:22.

servant and blame and shame, tossed back and forth. It all invites

:42:22.:42:26.

Mickey Mouse headlines. It turns out in four years, there's no

:42:26.:42:31.

warnings index checks on EU nationals boarding Eurostar trains

:42:31.:42:37.

from EuroDisney and ski resorts. That's about half a million

:42:37.:42:42.

passengers unchecked. Passports we must note were looked at but the

:42:42.:42:47.

extra security measures were too oven suspended forgotten about. The

:42:47.:42:52.

fingerprint checks were suspended no fewer than 480 times in the last

:42:52.:42:56.

15 months. The Home Secretary, who last year, blamed the Border

:42:56.:43:02.

Agency's boss, leading him to quit, now appears to be blaming the

:43:02.:43:07.

entire agency. The Vine Report reveals a border

:43:07.:43:11.

force, that enforced checks without thing, new technologies but chose

:43:11.:43:19.

not to use them. Led to managers that did not communicate with staff,

:43:19.:43:24.

and excluded key information. she didn't say is alongside civil

:43:24.:43:28.

servants her colleagues are accused of lacking clarity, failing to

:43:28.:43:34.

communicate what the Government wanted officials to do. It singles

:43:34.:43:44.
:43:44.:43:51.

out Damian Green on suspending A former immigration adviser says

:43:51.:43:54.

ministers couldn't have asked the right questions. There was

:43:54.:43:57.

questions they should have been asking about what they were going

:43:57.:44:01.

on at the border, they didn't take interest from an med, which claims

:44:01.:44:05.

to be committed to sorting out. These are obvious questions?

:44:05.:44:09.

Obvious questions like when are the checks spwg suspended, they were

:44:09.:44:15.

supposed to be weekly reports, that they stopped getting and they

:44:15.:44:18.

didn't ask why, there was questions like how many people are turned

:44:18.:44:23.

away, those part of the information were not being given to them, but

:44:23.:44:27.

they should have asked about them. The Home Secretary suggested all

:44:27.:44:30.

the difficulties, dated back to the Labour Government, Labour accused

:44:30.:44:37.

her of ducking responsibility. The watch index checks were

:44:37.:44:45.

suspended zero times in 2007, sim times in 2009, 33 times, in 2010,

:44:45.:44:50.

and 50 times in the first, nine months of 2011. So the clear

:44:50.:44:54.

suggestion in this report is the lack of staff may have increased

:44:54.:44:57.

the problems at the borders agencies in the last year, and

:44:57.:45:01.

she's hidden that information in her statement to Parliament.

:45:01.:45:05.

course, this is all too familiar for a department which, in another

:45:05.:45:10.

context was famously said to be "unfit for purpose". Labour

:45:10.:45:15.

introduced its immigration reforms, now Theresa May say nounsed she's

:45:15.:45:20.

spliting the Border Agency in two. From the March 1, the UK brder

:45:20.:45:26.

force will be split were UCBA and will become a separate operational

:45:26.:45:31.

command with the own law enforcement, and accountability to

:45:31.:45:38.

ministers. A big structural is a class yck tactic, there might be

:45:38.:45:43.

good argument for it, for having a tightly focused boreer force, I

:45:43.:45:47.

myself are sceptical about that. The failings identifyed in this

:45:47.:45:51.

report are all about, everybody in the organisation being clear about,

:45:51.:45:56.

what the policy is and how sincere applied. If you separate it into

:45:56.:45:59.

different agencies, sometimes that gets harder. The other thing is

:45:59.:46:04.

having a big organisation at a time, when the border force is going to

:46:04.:46:09.

try with the Olympics, that's a real risk. Of course, risk is what

:46:09.:46:14.

the Border Agency, is supposed to avert. It is a tall order, and so

:46:14.:46:18.

far, no immigration controls imposed by any Government, have

:46:18.:46:23.

matched up to all the bold promise toss tighten up. Well now before we

:46:23.:46:27.

look at the papers, the Health Secretary, Andrew Lansley had a

:46:27.:46:30.

bruising confrontation with a 75- year-old former trade union rep,

:46:30.:46:38.

who tried to block his path, ahead of a meeting at the NHS reforms.

:46:38.:46:44.

promise you, waiting times in the NHS has gone down. I've had enough

:46:44.:46:52.

of you. I've had enough of you. very sorry. Go home and sit.

:46:52.:46:59.

There's no privatisation. There are cuts, don't you dare lie to mefplt

:46:59.:47:04.

Well, she made the front page of most of the newspapers in front,

:47:04.:47:09.

that lady there. She's on the front that lady there. She's on the front

:47:09.:47:13.

page of the times On the front page of the Guardian and the Independent.

:47:13.:47:19.

And Allegra Stratton is still here. What's caught your eye on

:47:19.:47:22.

tomorrow's papers. My former newspaper, they've done a poll and

:47:22.:47:27.

showed the opinion poll lead, that the David Cameron and Conservatives

:47:27.:47:31.

had post of the year, but lost that, because of the handling of the NHS.

:47:31.:47:37.

This won't be a shock, they have lots of polling, some is public, it

:47:37.:47:42.

shows they're lacking on the NHS handling area. The problem for them

:47:42.:47:45.

is the because there's so many reforms is under way, they are

:47:45.:47:50.

looking at least, worse options, you either shelf something, which

:47:50.:47:54.

is not likely and create chaos, because you Sheffield performance

:47:54.:47:59.

in process, and you shelfed something and create more chaos

:47:59.:48:06.

because reform is under way. Even know the ka kakofy grows louder, it

:48:06.:48:12.

won't budge them. It will continue. Well that's all from Newsnight

:48:12.:48:22.
:48:22.:48:27.

tonight. More tomorrow, until then Hello a much milder light tonight

:48:27.:48:32.

compared to last night, thanks to a thick blanket of cloud. Eastern

:48:32.:48:41.

areas will brighten up but will keep sunshine in the west.

:48:42.:48:47.

We'll see breaks developing in the cloud, towards north-east. Sunny

:48:48.:48:51.

spells possible across southern counties of England. If the sun

:48:51.:48:56.

pops out, temperatures will pop up, up to 1 degrees.

:48:56.:49:02.

South-west will stay cloudy and Wales. A dull damp start, rain

:49:02.:49:06.

peters out. Brighter skies over north-east Wales. The eastern half

:49:06.:49:11.

of Northern Ireland should brighten up, with sunny spells. It will stay

:49:11.:49:16.

damp, in western parts of Scotland. But across the North-East here,

:49:16.:49:25.

temperatures up to 11, and 1. Along the Murray Firth. We could reach 13

:49:25.:49:30.

on Thursday, but it won't feel like that, because of a strong wind. The

:49:30.:49:34.

Download Subtitles

SRT

ASS