13/03/2012 Newsnight


13/03/2012

The big picture on gvt finances. What can the state afford in twenty years time? And meet the Royal Ballet principal dancer who quit. With Kirsty Wark.


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Transcript


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Take a leap into the future with Newsnight. The budget next week

:00:07.:00:11.

will be firefighting today's problems, but we are facing a

:00:11.:00:14.

monumental change in our society in the next 20 years, with a black

:00:14.:00:18.

hole looming which is deeper than we ever imagined. So tonight,

:00:18.:00:25.

saying the unsayable, on health, welfare, pensions, entitlements,

:00:25.:00:28.

personal responsibility, can we get ourselves out of trouble before the

:00:28.:00:32.

crisis hits. We know our children will probably

:00:32.:00:36.

grow up to be poorer than us, what we probably didn't realise is they

:00:36.:00:39.

could be living in a state that's gone bankrupt.

:00:39.:00:44.

Do our politicians really know how bad it might get? Would any of them

:00:44.:00:47.

dare admit it? Four economic brains, including a

:00:47.:00:51.

former Chancellor, and a leading trade unionist, explore how we can

:00:51.:00:57.

address the bigger black hole. Former News of the World editor,

:00:57.:01:01.

Rebekah Brooks, is arrested again, this time along with her husband.

:01:01.:01:04.

How can an inquiry into press freedom and a criminal

:01:04.:01:09.

investigation run at the same time. Also tonight:

:01:09.:01:15.

The first broadcast interview with the wunder kind, who became the

:01:15.:01:18.

youngest-ever principal dancer at the Royal Ballet aged 19 and then

:01:18.:01:23.

suddenly quit, why? I felt like the artist of me was dying a bit. If

:01:23.:01:27.

you don't explore these things the artist dies, if you don't give him

:01:27.:01:37.
:01:37.:01:40.

a freedom. The coalition is apparently bickering over next

:01:40.:01:43.

week's budget, that is rather like fiddling while Rome burns, even the

:01:43.:01:47.

Government's own figures say Britain is in danger of

:01:47.:01:50.

disappearing down a bigger black hole than we ever imagined. So out

:01:50.:01:54.

of kilter are the revenue and spending projections, that by 2050

:01:54.:01:58.

we could be well and truly bust, more people living longer, fewer

:01:58.:02:04.

people paying for them, resources dwindling, the welfare bill half of

:02:04.:02:08.

public spending, and it goes on, worried yet? You should be. In the

:02:08.:02:13.

last half hour the Government has come up with one money-making

:02:13.:02:16.

wheeze, 100-year bonds. First theic about pure with Paul

:02:16.:02:19.

Mason. This is the graph that has defined

:02:19.:02:22.

British politics for the past three years and will go on defining it

:02:22.:02:28.

for years to come. The size of the national debt, versus GDP. Until

:02:28.:02:32.

the Lehman crisis it was relatively stable and projected to remain

:02:32.:02:37.

there, below 50% of GDP well into the future, with the financial

:02:37.:02:40.

crisis, the debt started to rocket, only the austerity measures

:02:40.:02:45.

announced first by Labour, and then by the coalition, make this

:02:45.:02:50.

projection possible. That debt peeks around 2015 and, because of

:02:50.:02:52.

the biggest austerity programme since the war, right at the

:02:52.:02:56.

beginning there, begins to fall back, getting to, if we want it to

:02:56.:03:01.

be, zero around 2050. Now the risks to that projection are large. It

:03:01.:03:05.

relies on growth recovering, and the cuts actually working, but here

:03:05.:03:09.

is the hard part, the projection does not take account of population

:03:09.:03:14.

change. The impact of ageing on spending, on the tax base, and on

:03:14.:03:18.

pension costs. Now here is what happens when you do factor in the

:03:18.:03:23.

costs of an ageing population. The debt does not fall back, like we

:03:23.:03:29.

saw, but it actually just dips after 2016 down to 60% of GDP and

:03:30.:03:36.

rockets up to above 100% of GDP by the 2050s, this is a Government

:03:36.:03:42.

graph showing what happens, even if George Osborne's austerity package,

:03:42.:03:46.

agreed until 2017 actually happens. Why? The Government's experts point

:03:46.:03:51.

to spending as the main problem. Ageing will increase the demand for

:03:51.:03:55.

healthcare to 10% of GDP, adding a third to the cost of state pensions,

:03:55.:03:59.

and the costs of social care will nearly double. By now you will be

:03:59.:04:04.

asking what can we do about it. For economists the answers lie not at

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the level of detail, but four basic directions, there could be a lot

:04:09.:04:14.

more austerity, so shrink the state, or a lot more growth. In its

:04:14.:04:19.

Keynsian form, this remedy might mean a switch to protectionism, or

:04:19.:04:24.

more state intervention. With the Government floating the idea of a

:04:25.:04:27.

100-year bond, so you lend your money forever to the Government,

:04:27.:04:32.

minds are folk uss caned on using inflation to erode the value --

:04:32.:04:36.

focused on using inflation to erode the value of savings, and you look

:04:36.:04:39.

at where people could save their money, that is called financial

:04:40.:04:44.

repression. As we are always reminded by the newspapers, there

:04:44.:04:48.

is plain old default like Greece just did. It is unlikely any of

:04:48.:04:51.

these options will be acceptable to the political mainstream now. But

:04:51.:04:54.

the strategic debate should be starting somewhere, soon, shouldn't

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it, Kirsty? We will discuss that tonight, it

:04:57.:05:01.

seems pretty stark. But why aren't our politicians even really talking

:05:01.:05:11.
:05:11.:05:14.

about it? Where are their big ideas. Here is our political editor.

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Politics likes dramatic metaphors, a Government budget has a black

:05:17.:05:21.

hole, except in a dictionary definition it is usually nothing of

:05:21.:05:25.

the sort. A black hole is a void that sucks stuff in, there is no

:05:25.:05:30.

return. Look toe the future of the UK's

:05:30.:05:33.

public finance -- look to the future of the UK's public finances

:05:33.:05:37.

and this becomes more true. The official forecastsers show on the

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horizon the cost of the state goes right up, and the means to pay

:05:41.:05:46.

shrinks, money gets sucked in. Now that is a black hole. When we talk

:05:46.:05:50.

about the debt and deficit right now, we are only in the foot hills

:05:50.:05:54.

of a much larger debate about the public finances. The Institute for

:05:54.:05:56.

Fiscal Studies thinks on current costs the amount we will be

:05:56.:06:00.

spending on health and pensions will go up by as much as 5% of

:06:00.:06:02.

national income. In other calculation they have done, they

:06:02.:06:10.

think, all in, we will be looking to find an extra �100 billion, per

:06:10.:06:14.

year, for a generation. Everything we see today is the biggest

:06:14.:06:17.

challenge any Government has faced, which is our deficit, any progress

:06:17.:06:23.

we make today is completely overridden by this problem.

:06:23.:06:29.

It is very hard always to cut out services. Because if the politician

:06:29.:06:34.

says to you, what can you cut out, you can always show that it is very

:06:34.:06:40.

difficult to cut anything out. Government's own Office for Budget

:06:40.:06:44.

Responsibility shows that by 2060 the cost of social care for the

:06:44.:06:49.

elderly, state pensions and the NHS will go up by 5.4%, some streams of

:06:49.:06:54.

revenue will have been turned off. North Sea oil will be much

:06:54.:06:58.

diminished, so too fuel duty, as cars get more efficient, we will

:06:58.:07:02.

all be drinking and smoking less. The tax base will be up to 2% lower

:07:02.:07:06.

over the next 20 years, a small number, but a massive loss of

:07:06.:07:10.

Government revenue. There will be, of course, be

:07:10.:07:13.

different ideas for eradicating the black hole, from opposite ends of

:07:13.:07:18.

the political spectrum. Labour also have to think about

:07:18.:07:21.

which public services to prioritise, making difficult choices about

:07:21.:07:25.

which things first, and have a debate about the tax base,

:07:25.:07:28.

stragically thinking how do you get a broad resilient tax base in the

:07:28.:07:33.

future. For the Conservatives it is much easier, the predill Lynx will

:07:33.:07:38.

be to shrink where they can, and cut it to the core, stop cutting

:07:38.:07:41.

things the market will provide. They will say we will tax you less

:07:41.:07:46.

and you use your money to spend on services. Pensions are one part of

:07:46.:07:51.

the problem. In 2011, 17% of the population were over the age of 65,

:07:51.:08:01.
:08:01.:08:08.

and pensions cost the state 5.5% of The Treasury didn't support a

:08:08.:08:10.

recent reinstatement of a link between earnings and pensions

:08:10.:08:14.

because of this. What can be done about this? You start again on

:08:14.:08:17.

pensions, you accept that your policy to increase the state

:08:17.:08:22.

pension in line with earnings is going to blow all of your deficit

:08:22.:08:25.

plans out of the water in years to come. You look again at that.

:08:25.:08:29.

Pensions are the big part of it, but others will go much further,

:08:29.:08:34.

taking away benefits for this group as well. The grey vote tends to

:08:34.:08:38.

vote Conservative more than Labour, and there will come a point when

:08:38.:08:43.

these generational injustices can no longer be defended, the older

:08:43.:08:46.

people keep everything and younger people don't get anything like as

:08:46.:08:50.

much. Then the bulk of the problem, put to side the cost of ageing and

:08:50.:08:55.

in 2015 health spending will be 7% of national income. But by 2060 it

:08:55.:09:00.

could be as much as 15%. Many think this will force change. I love the

:09:00.:09:05.

NHS, I want to protect and defend the NHS, but it will have to wash

:09:05.:09:09.

its face. This frames very nicely this debate we are having about the

:09:09.:09:13.

Health and Social Care Bill, which says we are facing enormous upward

:09:13.:09:16.

pressure on these incredible national assets, in terms of

:09:16.:09:19.

additional cost, we have to make sure money is being spent and

:09:19.:09:23.

delivered to the frontline. In the face of this kind of support for

:09:23.:09:25.

the NHS from Conservatives, it is some in the Labour Party who are

:09:25.:09:29.

thinking of going further. They wonder whether the entire funding

:09:29.:09:33.

of the welfare state on all services, not just the NHS, needs

:09:33.:09:36.

to change. I think you have to bring in a form of extra charging

:09:36.:09:40.

for people who use and benefit from the services. In most cases both

:09:40.:09:44.

the society as a whole, and the individual user benefit from a

:09:44.:09:48.

service. But the question is, if the user isn't paying, then the

:09:48.:09:53.

state can't afford to keep going at the full level. Take the example of

:09:53.:09:56.

motorway tolls, for example, many countries charge tolls to go on

:09:56.:09:59.

motorways, because the state benefits from having a good

:09:59.:10:03.

motorway system, so do the lorry drivers and cars who use it. So, we

:10:03.:10:06.

have been talking about spending, there are those who want to talk

:10:06.:10:11.

about tax rises too? You look at VAT, and you say you won't accept

:10:11.:10:15.

�40 billion lost a year because of the exemptions in VAT like food, so

:10:15.:10:20.

you look at that. You also say that this problem does not get smaller,

:10:20.:10:25.

if you put it off, it gets bigger. There is, of course, the

:10:25.:10:28.

possibility that the black hole forecast is wrong, if the

:10:28.:10:32.

Government can get the economy going again, the problem recedes.

:10:32.:10:37.

Politicians get elected for five- year terms, but are increasingly

:10:37.:10:40.

facing 50-year problems. They may want to set a course and stick to

:10:40.:10:44.

it, but at the next election, unpopular ideas get tested.

:10:44.:10:47.

Politicians are always understandably wanting to get a

:10:47.:10:50.

quart out of a pintpot, they want better public services, the public

:10:50.:10:54.

want better public service, but they don't want to pay any more tax,

:10:54.:10:57.

Governments want to keep the tax down. There is always this pressure,

:10:57.:11:02.

and it takes the form of wanting the Civil Service, in particular,

:11:02.:11:06.

to become more and more efficient. That is the pressure for better

:11:06.:11:09.

management in the Civil Service. At the same time regulation increases,

:11:09.:11:15.

and so it is always very difficult to get all these things reconciled.

:11:15.:11:21.

Of course, the difference geen the mystical laws of the universe --

:11:21.:11:26.

between the fiscal laws of the universe, is we can better manage

:11:26.:11:31.

the from whom and who it is divided up, the debate will hone how we

:11:31.:11:36.

will do it. We will hear more later to discuss the growing black hole.

:11:36.:11:42.

I'm joined bit former Chancellor, Lord Lawson, Lord Skidelsky, the

:11:42.:11:45.

head of the Economic and Social Affairs of the Trades Union

:11:45.:11:48.

Congress, Nicola Smith, and Ruth Porter of the Institute for

:11:48.:11:50.

Economic affairs. Lord Lawson, is this the moment for the Government

:11:50.:11:54.

to re-think what it can do for us, and for us to think what the

:11:54.:11:57.

Government should do for us? Your disaster scenario may or may not

:11:57.:12:02.

prove the case, nobody knows. It is impossible to do these sorts of

:12:02.:12:04.

predictions. Nevertheless it is right to be cautious. It could

:12:04.:12:08.

happen like that, and so I do think that the Government is absolutely

:12:08.:12:14.

right now to be engaged in major fiscal consolidation, reducing the

:12:14.:12:19.

deficit, because in addition to the immediate crisis, which they

:12:19.:12:25.

inherited, there is this long-term problem. It is the long-term

:12:25.:12:29.

problem that we are addressing. How much you want might to alleviate

:12:29.:12:34.

problems today, the fact is, that demographics will rule out a lot of

:12:34.:12:41.

options, won't they? Whatever the crisis is, in the long-term, in the

:12:41.:12:45.

long-term structure of these services we have been talking about,

:12:45.:12:49.

it will be much easier to manage if we get some growth in the economy.

:12:49.:12:53.

It won't solve all of them, you will still need reforms, but growth

:12:53.:12:57.

is an essential, necessary condition. And my criticism of

:12:57.:13:02.

what's happening now, is that there is no growth policy. The debt

:13:02.:13:05.

versus growth scenario isn't playing out well at the moment?

:13:05.:13:08.

wouldn't say it was debt versus growth, I would say growth is a way

:13:09.:13:14.

of reducing the debt in the long- term. We need to look at the

:13:14.:13:17.

context here, what is interesting about the current situation is we

:13:17.:13:20.

are already in an unsustainable area, so the Government's spending

:13:20.:13:25.

more than 50% of GDP, and more than half of that is going on welfare at

:13:25.:13:28.

the moment. If you then factor in the demographic changes, and you

:13:28.:13:33.

fast forward, by the time you get to say, if you take 2030, you know,

:13:33.:13:37.

for the average girl, who is born that year, her life expectancy,

:13:37.:13:41.

will be 95, and you factor in the additional costs and the strains

:13:41.:13:45.

which that is going to put on our health spending and state pensions,

:13:45.:13:51.

and it is unsustainable. There will be radical welfare reform, that is

:13:51.:13:57.

what it is needed, actuarillay that is what is needed? I disagree with

:13:57.:14:00.

the way the situation was presented, there will be challenges for the

:14:00.:14:06.

public finances, but as you said, this is by no means a zero sum game.

:14:06.:14:09.

We have huge up certainties forecast, based on firstly how many

:14:09.:14:13.

people we have moving into work, and how productive our economy is,

:14:13.:14:17.

and we know how much revenue we choose to raise. The money from

:14:17.:14:20.

North Sea oil will run out, people are living longer who will need

:14:21.:14:24.

more social care, who will make more demands on the state pension,

:14:24.:14:30.

and we are not going to be able to pay? There is clearly big

:14:30.:14:34.

demographic challenges, growth is by no means a zero sum game. There

:14:34.:14:37.

are huge opportunities going forward. Over the last 30 years the

:14:37.:14:41.

UK's investment into the economy has been the lowest in the G7, if

:14:41.:14:45.

we turn it around we have real opportunities to grow the economy

:14:45.:14:47.

going forward. The Government should accrue debt, that is the

:14:47.:14:51.

only way to do it? The only way to get sustainable public finances in

:14:51.:14:54.

the long-term is to secure stronger growth for the long-term going

:14:54.:14:57.

forward. We need to be ambitious about becoming the strongest

:14:57.:15:04.

competitor in green economies across the world The realities is

:15:04.:15:07.

slower growth? This is a well known road to disaster, to assume you

:15:07.:15:11.

will get greater growth. We would all like to see it. But to assume

:15:11.:15:15.

you will get greater growth and allow public expenditure plans to

:15:15.:15:18.

be based on that, and then of course, if you don't get the growth,

:15:18.:15:24.

and you might not, then the disaster comes. There is plenty to

:15:24.:15:27.

been to. The ageing of the population, you have focused on

:15:27.:15:32.

that particularly, rightly, the age of retirement has got to go

:15:32.:15:37.

substantially higher, I'm 80 and still working. How old are you?

:15:37.:15:42.

You are both still working. still working. I'm very active.

:15:42.:15:46.

are both still working, do you claim your winter fuel allowance?

:15:46.:15:50.

Of course. Do you claim your winter fuel allowance? Yes, I think I do.

:15:51.:16:00.

But I don't claim my old age pension. But anyhow, the age of the

:16:00.:16:04.

Government retirement is cien he ised but not nearly -- increased

:16:04.:16:08.

but nearly enough. In erpls it of health, because obviously -- in

:16:08.:16:13.

terms of health, obvious low, increasingly a an older population

:16:13.:16:17.

makes more demands, you have to have more charging.

:16:17.:16:22.

On this question of retirement, Nicola, the idea that people are

:16:22.:16:27.

going to retire successively at 66, 68.5, that is just tinkering,

:16:28.:16:32.

people are healthy, they are able to contribute to society, we should

:16:32.:16:37.

be retiring at 70? The idea of removing the state pension from

:16:37.:16:41.

people, at a higher age than they have at the moment is fundamentally

:16:41.:16:46.

unfair and misguided. Why? When we are talking about retirement age,

:16:46.:16:49.

thats not attached to the state pension. When you move the state

:16:49.:16:54.

pension higher, you deny people on the lowest incomes all their life

:16:54.:16:58.

and a lower life expectancy, a larger proportion of their state

:16:59.:17:02.

pension. It is burying our heads in the sand, what we need to be

:17:02.:17:05.

actually doing, even looking at far more radical solutions, which are

:17:05.:17:08.

more long-term, and saying we need flexibility. Different people will

:17:09.:17:14.

want to retire at different ages, we could look at as an alternative,

:17:14.:17:19.

fadesing out the state pension and introducing compulsory saving.

:17:19.:17:25.

should make it financially possible for people to choose their age of

:17:25.:17:28.

retirement and not to be penaliseded if they go on working.

:17:28.:17:31.

We have all been assuming that there is a simple tax limit, which

:17:31.:17:35.

is roughly what we have got. In fact, people now want to reduce the

:17:35.:17:39.

top rate. We can increase taxes. That is an option. I'm not saying

:17:39.:17:46.

it is a politically acceptable option, but an economic option.

:17:46.:17:51.

want to talk about tax, but if you look at health, social care, state

:17:51.:17:57.

pension, half public spending goes on all these, universal ity of

:17:57.:18:01.

contributions, we need to end it, perhaps you could opt out of some

:18:01.:18:05.

if you are not using the state provision? The level of spending on

:18:05.:18:09.

social security has remained pretty much constant as a proportion of

:18:09.:18:13.

GDP since the formation of the modern welfare state. It is not

:18:13.:18:16.

rising more quickly than it has been. The period where it was

:18:16.:18:22.

rising more slowly was when we had higher employment growth which was

:18:22.:18:26.

when the social security went down. �50 more has been spent on social

:18:26.:18:30.

security, the way to get social security spending down is to get

:18:30.:18:37.

more people into work. Obviously there is that relationship, I mean,

:18:37.:18:40.

the fuller the employment of the economy, on the whole, the smaller

:18:40.:18:45.

the bills for unemployment benefit and other kinds of benefit. That

:18:45.:18:49.

doesn't affect the main spending items for economic growth, which

:18:49.:18:53.

are health, education. Let's talk about health particularly. The

:18:53.:18:56.

exponential rise of that, because there are new treatments, and

:18:56.:19:02.

people are living longer, people are also attracting at the moment,

:19:02.:19:05.

there are definite issues at the moment about whether people should

:19:05.:19:09.

be taking care of their own health and penalised if they don't. Will

:19:09.:19:13.

we move to a situation where diabetes will rise by 50%, that

:19:13.:19:19.

there will be an onus on people to marshall their own health? If we

:19:19.:19:22.

want access to good quality healthcare and other services we

:19:22.:19:26.

need to move in all these areas, to allowing people to take more

:19:26.:19:31.

responsibility. So we do need to look at things like reducing demand

:19:31.:19:35.

by introing, for example, small charges when you go to A&E --

:19:35.:19:40.

introducing, for example, small charges when you go to A&E and the

:19:40.:19:44.

GP. What about different doctors and motorway tolls, that people

:19:44.:19:50.

will have to take responsibility for paying for the things they want

:19:50.:19:56.

to have? Charging, there has to be more. There is now less proportion

:19:56.:20:01.

for finance through charges, than when Nye Bevan first set the health

:20:01.:20:05.

service up. It is absolutely absurd. There has to be charges. Charging,

:20:05.:20:10.

and of course the poorest will not have to pay the charges, there will

:20:10.:20:13.

always be a safety net for the poorest. What happens is you will

:20:14.:20:17.

also reduce, to some extent, the demand, if you have charging. You

:20:18.:20:22.

have a double benefit. That will have to come. There is charging or

:20:22.:20:27.

rationing? We know what charging means t means reducing services for

:20:27.:20:31.

people across the economy. People across the UK don't want poor

:20:31.:20:35.

people not able to access healthcare. We don't want the

:20:35.:20:38.

situation in America, people can't move from welfare into work,

:20:38.:20:43.

because they can't afford to lose the free healthcare they get.

:20:43.:20:47.

choices are going to have to be made to save the central elements

:20:47.:20:57.

of the NHS. We will have to move to a different model? We can raise

:20:57.:21:01.

taxes, have charges or better control over people's lifestyles,

:21:01.:21:03.

encourage them to lead healthier lives. Somewhere between those

:21:03.:21:10.

three we are going to find a solution. I don't know in what

:21:10.:21:13.

proportions. What about taxation, coming on to wholesale reform of

:21:13.:21:18.

taxation. We have heard everything from a tycoon tax, a land tax, a

:21:18.:21:22.

mansion tax, that is just tinkering isn't it? We need to look overall

:21:22.:21:25.

at, the point that was made about economic growth, we will not see

:21:25.:21:30.

growth in the economy until we cut the public sector down. Why not?

:21:30.:21:35.

Because we need space for the private sector. We need the room

:21:35.:21:39.

for tax cuts, at the moment we don't have that. Looking at the

:21:39.:21:42.

demographics of it, the Government should be really aim to go get the

:21:42.:21:46.

size of the state down to 30%, that would allow massive tax cuts across

:21:46.:21:49.

the board. Then we would see savings, savings is the key. What

:21:49.:21:56.

happens while you are doing it? can phase it in. Unless we build a

:21:56.:22:01.

savings culture, we won't be able to tackle these problems. The idea

:22:01.:22:05.

of the public sector squeezing out the private sector is ridiculous,

:22:05.:22:08.

the public sector is losing jobs at a higher rate than the private

:22:08.:22:12.

sector is creating them. One private sector is created for every

:22:12.:22:16.

13 public sector jobs lost, and Britain is sitting on surplus of

:22:16.:22:20.

50% of GDP. I don't want to hark back, but we have been through this

:22:20.:22:28.

before. During my time as Chancellor I cut tax rates, I

:22:29.:22:33.

was not a sovereign wealth fund, that would have given us a piggy

:22:33.:22:37.

back? I had tough policy on public spending, we had growth and budget

:22:37.:22:44.

surplus, you can do it. Looking back do you think you would like a

:22:44.:22:49.

sovereign wealth fund like Norway? Norway has a massive North Sea oil

:22:49.:22:52.

and gas industry, which is a huge proportion of its economy. For us

:22:52.:22:57.

it was never more than 5% of the peak. To finish off, on the news

:22:57.:23:01.

tonight that is on the front of the FT? I have a comment on that.

:23:01.:23:05.

are out of time, on the news tonight from one of the planes

:23:05.:23:07.

travelling to America with the Chancellor and the Prime Minister,

:23:07.:23:12.

is they have dreamt up the idea of a 100-year bond, good idea?

:23:12.:23:16.

people are prepared to buy it, why not. Are they prepared to buy it,

:23:16.:23:20.

will they put their faith into it? I don't know if it will happen, we

:23:20.:23:23.

shall see, you test the market. There is a lot of nonsense to be

:23:23.:23:27.

cut out of public spending, if we don't go ahead with high-speed rail,

:23:27.:23:32.

that would be a good start. 100- year bond? We will have to see, it

:23:32.:23:39.

is an attempt to get the yield up of Government debt, but I don't

:23:39.:23:47.

know. I only heard about it a minute ago.

:23:47.:23:51.

Thank you very much, we have been listening to that debate. Any sense

:23:51.:23:55.

of a possible direction of travel, Paul? To recap, the headline news

:23:55.:23:59.

out of the Government's report last year, buried at the back of it,

:23:59.:24:02.

fair enough, is that ageing completely changes the direction of

:24:02.:24:07.

travel, on the debt, even if we do austerity. We end up going bankrupt,

:24:07.:24:16.

some time in the 21st century. What I think if you can get politicians

:24:16.:24:20.

to look five years ahead you are lucky. If you look 50 years ahead,

:24:20.:24:25.

there is a lot of individual policy remedies, and they are not

:24:25.:24:30.

important. What is important is the big levers you can pull. One not

:24:30.:24:33.

explored is migration. The OBR which dreamt up the original graph

:24:33.:24:37.

we showed, that assumed that migration falls back to half its

:24:37.:24:41.

current rate. There are people who would like it to, and believe it

:24:41.:24:44.

will maintain its current rate and even grow. That would solve things

:24:44.:24:48.

for about a century. So because you then get a young population, paying

:24:48.:24:54.

for us all. Skilled? Old codgers, if they can find jobs, and doing

:24:54.:24:59.

some of that work. I think what we are finally coming to, three or

:24:59.:25:04.

four years after the Lehman crises, is a debate about a kind of

:25:04.:25:08.

Conservatism, that is small state, or high-tax, unusual, or a form of

:25:08.:25:12.

social democracy that is very low welfare. That might be the future

:25:12.:25:16.

of politics. In fact you have actually Labour, look at Charles

:25:16.:25:20.

Clarke, saying the unsayable, which actually won't let the

:25:20.:25:23.

Conservatives say at the moment? Charles Clarke is an outlayer at

:25:23.:25:32.

the moment. Following on from your point. Where he had politics on the

:25:32.:25:38.

centre ground, that is what we are used to. You heard Lord Lawson

:25:38.:25:42.

talking about user charges. More and more Tory MPs talking about

:25:42.:25:45.

user charges, they are not bashful talking about what many people will

:25:45.:25:49.

call privatisation. On the one hand you have a new generation happy to

:25:49.:25:51.

talk about it, on the other hand a generation of Labour politicians

:25:51.:25:55.

talking about a greater role for the state. Let's just take the

:25:55.:26:00.

major sucker up of money, the health service. Lord Lawson said it

:26:00.:26:05.

is the nearest thing we have to national religion, the NHS. By the

:26:05.:26:10.

locks of the rows in the coalition and the position David Cameron is

:26:10.:26:15.

taking, it is sacrosanct, how long is that for? Rationing is starting,

:26:15.:26:21.

on the near term political horizon. If you go back to the Government's

:26:21.:26:24.

projections, this projection of going bust by the mid-century, only

:26:24.:26:29.

happens if we don't spend more per head on health as people get sicker

:26:29.:26:35.

and older. All the Ricks are on the upside. -- risks are on the upside.

:26:35.:26:40.

A way of getting health spending as a proportion of GDP, with or

:26:40.:26:44.

without rising public spending is there. I think consensus is

:26:44.:26:48.

withering, this is not a future debate, we have a debate now on

:26:48.:26:52.

social care, how do we pay for the costs of looking after ourselves

:26:52.:26:56.

when we get older. It is in aspect, the Treasury can't come up with a

:26:56.:27:00.

way that doesn't involve public money up front. You have members of

:27:00.:27:03.

the coalition saying they are not happy to use the lower paid to look

:27:03.:27:07.

after those with lots of assets who should be able to look after

:27:07.:27:13.

themselves. This is not very far away, it is going on now.

:27:13.:27:17.

Rebekah Brooks, the former chief executive of News International,

:27:17.:27:23.

spent the day in the salubrious surroundings of a Police Station in

:27:23.:27:27.

Oxfordshire, with her husband in one in Buckinghamshire, helping

:27:27.:27:33.

police with their investigations on the phone hacking cover-ups. At the

:27:33.:27:36.

Leveson Inquiry, the head of Scotland Yard had to deny

:27:36.:27:44.

allegation that is he lent Mrs Brooks a retired police horse so

:27:44.:27:50.

gain work experience for his son at the News of the World.

:27:50.:27:57.

Racing tips are notorious low unwry liable, but race horse trainer

:27:57.:28:07.
:28:07.:28:08.

Charley Brooks statement in a Not this year, three hours before

:28:08.:28:16.

the first race, instead of talking tack and tactics over a pint in the

:28:16.:28:19.

Gloucestershire sunshine, Charley Brooks was in police custody,

:28:19.:28:25.

having been arrested in a 5.00am raid on his house. Rebekah Brooks

:28:25.:28:30.

was also arrested, his wife, former News of the World editor, and

:28:30.:28:33.

normer News International chief executive. They spent the day being

:28:34.:28:38.

questioned on suspicion of conspiracy to pervert the course of

:28:38.:28:43.

justice. This is an amazing turn of events. Obvious low Rebekah Brooks

:28:43.:28:48.

had been previously arrested -- obviously Rebekah Brooks had been

:28:48.:28:51.

previously arrested for conspiracy to intercept voicemails, this is a

:28:51.:28:56.

much more serious charge. There is a big contrast with Rebekah Brooks

:28:56.:29:00.

previous arrest last July, then, rather than the dawn raid, she was

:29:00.:29:05.

invited to attend a Police Station. Evidence, according to some, of an

:29:05.:29:08.

all too cosy relationship with the police, who, we learned last month,

:29:08.:29:12.

loaned her a retired police horse, to be kept at the Brooks stables in

:29:12.:29:15.

the constituency of the Prime Minister.

:29:15.:29:19.

Charley Brooks is an old school friend of Mr Cameron. One of the

:29:19.:29:23.

more comical elements of the story was the effort Downing Street put

:29:23.:29:27.

in trying not to confirm that Mr Cameron had actually ridden the

:29:27.:29:31.

retired Metropolitan Police police horse, while visiting the --

:29:31.:29:34.

Metropolitan Police horse while visiting the Brooks property, until

:29:34.:29:39.

the story could be resisted no longer. Before the election I did

:29:39.:29:44.

go riding with him, he has a um in of horses, one of the horses was a

:29:44.:29:51.

former police force Razor, that I did ride. I'm sorry to hear Razor

:29:51.:29:56.

is no longer with us. I don't think I will be getting back into the

:29:56.:30:00.

saddle soon. David Cameron has shown a woeful lack of judgment in

:30:00.:30:03.

his relations with senior News International executives. Remember

:30:03.:30:08.

he hired Andy Coulson, after he had to stop being editor of the News of

:30:08.:30:11.

the World, because phone hacking had been going on when he was

:30:11.:30:14.

editor, despite the warnings, he took him right into the heart of

:30:14.:30:18.

Downing Street. David Cameron, of course, isn't the

:30:18.:30:22.

first Prime Minister to have close relationships with News

:30:22.:30:25.

International executives. Tony Blair was, on kissing terms,

:30:25.:30:30.

although his minders didn't want it filmed, and Gordon Brown's wife

:30:30.:30:35.

hosted a slumber party for Rebekah Brooks at Chequers.

:30:35.:30:39.

Partly in an effort to defuse political heat, David Cameron set

:30:39.:30:43.

up the Leveson Inquiry, but could this inquiry now be jeopardising

:30:43.:30:47.

any chance of a fair trial, if charges are brought.

:30:47.:30:57.
:30:57.:31:05.

In a newspaper article, Rebekah Last month Deputy Assistant

:31:05.:31:08.

Commissioner, Sue Akers, leading the police investigation into

:31:08.:31:12.

hacking and corrupt payments to police and other officials, gave

:31:12.:31:22.
:31:22.:31:38.

evidence to the inquiry. She said: MPs are also investigating hacking,

:31:38.:31:41.

and have made strenuous efforts not to prejudice the police

:31:41.:31:45.

investigation. One of the MPs on the Culture, Media and Sport

:31:45.:31:49.

Commitee says the Leveson Inquiry is on tricky ground. I think you

:31:49.:31:53.

need to look at the set-up and conduct of the Leveson Inquiry,

:31:53.:31:58.

there is a point to be made that Mrs Brooks should have been given

:31:58.:32:01.

core participant status in the Leveson Inquiry. It is quite right

:32:01.:32:04.

that things are being said about people to which they apparently

:32:04.:32:08.

have no right of response. Things are out there in the media that

:32:08.:32:12.

which are no doubt prejudicial. I fully support the Leveson Inquiry,

:32:12.:32:15.

it is a very important inquiry, we had to have it, but at the same

:32:15.:32:18.

time we have to be sure that in Leveson trying to get to fairness

:32:18.:32:23.

in the media, that we also have fairness to people who may be

:32:23.:32:26.

charged with criminal offences. That is an important part of our

:32:26.:32:30.

system as well. As a racing man Charley Brooks understands odds,

:32:30.:32:35.

his and the other suspects' chances of being charged is not as yet

:32:35.:32:38.

clear. Tonight five of the six people arrested today were released

:32:38.:32:42.

on police bail. No-one, however, would bet that this is the end of

:32:42.:32:48.

the matter. With me are Tim Luckhurst Professor

:32:48.:32:52.

of Journal at Kent university, and Charlotte Harris, a lawyer who has

:32:52.:32:57.

represented phone hacking victims. First of all, 44 arrests so far, no

:32:57.:33:02.

charges, and Stephen Parkinson, Rebekah Brooks lawyer has said, she

:33:02.:33:07.

was released today, without charge, that in the end if there are trials,

:33:07.:33:11.

they could be a problem. I think there could be a problem. I think

:33:11.:33:16.

what we are seeing is the Leveson Inquiry was a panicked response by

:33:16.:33:21.

politicians, to a genuine crisis but a crisis that largely involved

:33:21.:33:26.

criminality at one newspaper group. What the newspaper inquiry has done

:33:26.:33:30.

is to conflate criminality with a press regulation. That is raising a

:33:30.:33:36.

risk, that witnesses are being allowed to say things that could

:33:36.:33:40.

prejudice criminal trials. Do you accept that argument that it could

:33:40.:33:47.

prejudice criminal trials? Having taken part in the trial, very

:33:47.:33:50.

careful work done by the barristers and Lord Leveson in terms of trying

:33:50.:33:54.

to protect information that might be prejudicial to trials. We are in

:33:54.:33:57.

a very difficult situation at the moment. What should have happened

:33:58.:34:02.

in the normal set of events, it should have been that when the

:34:02.:34:09.

police found out that criminal activity took place, arrested

:34:09.:34:11.

should have been made there and a proper investigation. Everything is

:34:11.:34:16.

out of time. The public inquiry might be a spops, but without it we

:34:16.:34:21.

might -- response, but without it? But with prejudice, is that a risk

:34:21.:34:25.

you have to take? I hope it won't with prejudice it, I hope it will

:34:25.:34:29.

be dealt with properly within the inquiry. They are very careful

:34:29.:34:33.

about what is said? Do you think News International are more likely

:34:33.:34:37.

to co-operate with the police because of Leveson? They may well

:34:37.:34:42.

be, I'm not here to defend news interle that. If there is serious

:34:42.:34:45.

criminal wrongdoing, it should be prosecuted. The thing is, there was

:34:45.:34:49.

no need to have the public inquiry into the standards and practice and

:34:49.:34:52.

ethics of the press at the same time of the criminal investigation.

:34:52.:34:54.

Do you think the criminal investigation has been undermined?

:34:54.:35:00.

Yes, I think the value for public inquiry has been diluted. You have

:35:00.:35:03.

the sight of people coming to a public inquiry and not being able

:35:03.:35:08.

to say anything? There is also the civil situation. That when you have

:35:08.:35:11.

got the civil claimants, who are forcing News International and

:35:11.:35:17.

others to come to the table, having not been investigated by the police,

:35:17.:35:21.

News International didn't want to go to trial, clearly. All the cases

:35:21.:35:26.

in the first SETIle. Within the civil actions, what we find out is

:35:26.:35:34.

there are efpd and evidential problems then -- evidence and

:35:34.:35:37.

evidential problems. The police could have f they wanted to, they

:35:37.:35:41.

started making arrested some time ago, tried to call a halt to the

:35:41.:35:45.

civil action. They didn't. The horse has bolted. In terms of the

:35:45.:35:49.

public inquiry, it is all a bit late to worry about it. I don't

:35:49.:35:53.

agree, I think it is very important that we have a public inquiry into

:35:53.:35:56.

the standards and ethics of the police, or at least into the

:35:56.:36:00.

standards and ethics of the red top tabloid press. What we are having

:36:00.:36:07.

as a comigs that of the two events is an Anne -- comcation of the two

:36:07.:36:13.

events is a red top inquiry. It is, in fact, a very dangerous high bred,

:36:13.:36:19.

which is risks damage to criminal cases and free press in this

:36:19.:36:22.

country. Conflating tabloid newspapers with those of a broad

:36:22.:36:28.

range of newspapers not engaging in those activities. I feel that is

:36:28.:36:33.

very resistant to what the inquiry is about. It is very easy to come

:36:33.:36:38.

into this at this stage, having not seen the resistance that we had, as

:36:38.:36:42.

lawyers do. Getting anything other than this is a one rogue defence.

:36:42.:36:46.

When you say that the inquiry is conflating two issues. It is

:36:46.:36:50.

actually dealing with different issues. When you have criminality

:36:50.:36:58.

springing from the press, and not just the red tops. We were looking

:36:58.:37:01.

for criminality in terms of the police and so on. You were saying

:37:01.:37:05.

earlier you were not sure it will prejudice cases? I don't think it

:37:05.:37:11.

will. To characterise the inquiry as only being there to have a go at

:37:11.:37:18.

the red tops isn't right. Was it politically expedient to have a

:37:18.:37:22.

public inquiry? Yes, that is precisely right. Charlotte, it

:37:22.:37:26.

wasn't the intention of the inquiry, it is not Lord justice Leveson's

:37:26.:37:32.

fault, but the conflation of these two issues has turned the Leveson

:37:32.:37:36.

Inquiry as essentially an inquiry into one newspaper group, News

:37:37.:37:39.

International. I think we need generally better than that, we need

:37:39.:37:43.

an inquiry that looks at the standards, ethics and practices of

:37:43.:37:46.

the British press, we are not having that. Is it having an impact

:37:46.:37:50.

on the press and the way things are reported at the moment? It is

:37:50.:37:54.

having an additional minor chilling effect. The biggest chilling effect

:37:54.:37:57.

comes as a result of privacy rulings and defamation and so on.

:37:57.:38:01.

One of the great things about the inquiry has been that it has given

:38:01.:38:09.

the public an opportunity to hear the victims' stories. And to allow

:38:09.:38:14.

them time, not by selling their story to a newspaper, or giving an

:38:15.:38:19.

interview, in a forum which seemed appropriate, and they weren't being

:38:19.:38:23.

paid, or nobody could accuse them of that, to simply answer questions

:38:23.:38:27.

about how they feel. And I think that's been very useful. I think it

:38:27.:38:31.

has changed attitudes as to what the public want. They can see the

:38:31.:38:34.

story and the effect and the emotion behind it. Thank you very

:38:34.:38:40.

much. He's the young dancer many compared

:38:40.:38:46.

to Nureyev and Baryshnikov. The prodigy who at 19 became the

:38:46.:38:50.

youngest ever principal dancer with the Royal Ballet. But Sergei

:38:50.:38:57.

Polunin shocked the dance world in January, when he walked out of the

:38:57.:39:03.

role. The dancer, who likes to be likened to James Dean, and has a

:39:03.:39:07.

tattoo parlour, returned to the stage at Sadler's Wells. He spoke

:39:07.:39:14.

about why he walked out on his dream.

:39:14.:39:18.

Rehearsing in a Top Gun T-shirt, the tattoo-sporting ballet star,

:39:18.:39:23.

who had the world at his highly- prized feet, only to turn his back

:39:23.:39:28.

on it. Sergei Polunin, whom we found rehearsing for a new show,

:39:28.:39:32.

sensationally quit the Royal Ballet, where he was the youngest-ever

:39:32.:39:40.

principal dancer at the tender age of 19. In his first television

:39:40.:39:45.

interview since that dramatic exit, Polunin, flunked by his friend and

:39:45.:39:49.

collaborator, Ivan Putrov, began by discussing whether he still has an

:39:49.:39:53.

appetite for dance. Sergei, how was that for you, you're not the

:39:53.:39:59.

keenest on rehearsing, is that right? It is not my favourite thing

:39:59.:40:09.

to do, no. I have been working quite hard for this. Learning new

:40:09.:40:13.

pieces. Is it like athletes, you read about, footballers, they hate

:40:13.:40:17.

training, they can only really get involved when it is the big

:40:17.:40:24.

occasion? That is the only time I would enjoy professionally in that

:40:24.:40:28.

way. It is communicating with people. It is quite like you

:40:28.:40:34.

learned a lot and you practice a lot, so for months, maybe, you

:40:35.:40:40.

sometimes argue, you sometimes, it is like nine hours a day. So when

:40:40.:40:45.

you final low are on stage, especially when it is finished, you

:40:45.:40:55.
:40:55.:41:04.

have so much adrenaline and so much Polunin said it had been his dream

:41:04.:41:14.
:41:14.:41:15.

to become principal dancer with the Royal Ballet. So what went wrong?

:41:15.:41:25.
:41:25.:41:26.

In a way, I did feel like the artist in me was dying a little bit.

:41:26.:41:33.

And I wasn't giving the best of myself, and to put creativity in it

:41:33.:41:42.

as I should and as I I have in me. So I do agree, if you don't explore

:41:42.:41:47.

these things and the artist just dies, if you don't give him a

:41:47.:41:51.

freedom. Was that the issue, it sounds as if you have more freedom

:41:51.:41:58.

now, you are happier now, perhaps you didn't have sufficient before?

:41:58.:42:07.

I can't say like I'm happy now. I'm still finding my way, what I'm

:42:07.:42:11.

going to do, what is the thing to do. I'm going to explore different

:42:11.:42:21.
:42:21.:42:22.

directions. I did feel so comfortable that I

:42:22.:42:27.

stopped being involved as a person and an artist, that is what I want.

:42:27.:42:34.

I don't want to be comfort, I don't want to have family, so I destroyed

:42:34.:42:38.

in a way everything I had. You felt you had to destroy everything you

:42:38.:42:43.

had, that you worked so hard for, before you could move on and find

:42:43.:42:48.

ourself again? It is basically, yes, it is almost like a delete button,

:42:48.:42:56.

you just want to start fresh. feels good? It did, in a way,

:42:56.:43:02.

because you just throw everything you had, you just clean yourself,

:43:02.:43:11.

in a way. The only thing I didn't do was change the country. Were you

:43:11.:43:21.
:43:21.:43:21.

surprised by the reaction to it? I was, because I never thought, I

:43:21.:43:26.

just wanted to go quietly. But it is amazing, it is, in a way,

:43:26.:43:30.

supported me, because if you come back home and you destroyed

:43:30.:43:37.

everything you had, it feels really weird. I have built something for

:43:37.:43:47.

seven years and now it is gone. Now I gather you quite like a

:43:47.:43:52.

tattoo? One on the wrist. They are all random, I just do them on the

:43:52.:43:58.

day. I don't plan them. I have maybe 11. Have you? Quite a lot.

:43:58.:44:08.
:44:08.:44:08.

What I like about tattoo is the atmosphere. It is like a lot of

:44:09.:44:13.

friends, a lot of normal people there. It is just fun. Do you think

:44:13.:44:22.

that you will still be dancing in four, five years time? At the

:44:22.:44:26.

moment I don't think I wouldn't, not in six years. I would love to

:44:27.:44:31.

achieve something else in a different profession. Because once

:44:31.:44:41.
:44:41.:44:45.

you achieve something, you just Sergei Polunin, tomorrow morning's

:44:45.:44:50.

front pages, that 100-year bond, Osborne bond to lock in low

:44:50.:44:54.

interest rates. Rebekah Brooks and her husband on the right hand side.

:44:54.:45:00.

Osborne to issue Great War bonds to raise cash. There is Michelle Obama

:45:00.:45:04.

and Samantha Cameron on the other and Samantha Cameron on the other

:45:04.:45:08.

side. The Independent has Russia saying

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

they are happy to sell arms to That's all from Newsnight tonight.

:45:18.:45:21.

Emily is back tomorrow with more good cheer. From all of us tomorrow,

:45:21.:45:31.
:45:31.:45:57.

Low cloud, mist and fog a problem tonight and tomorrow morning. A

:45:57.:46:02.

gloomy start to the day, light rain or drizzle in the south west, most

:46:02.:46:06.

will have a dry day and a lightning of the skies. Struggling to the

:46:06.:46:10.

North West of England. A bit of brightness, the east of the Pennine,

:46:10.:46:16.

it may be up to 13 or 14. Parts of East Midlands could be best

:46:16.:46:20.

favoured for holding on to the grey, misty low cloud. To the south west,

:46:20.:46:26.

after that foggy start, bestens cha of sunshine across Wales. With

:46:26.:46:31.

winds light, 14, 15, with one or two spots holding on to the cloud.

:46:31.:46:34.

Maybe around the coast, probably most likely it will only be eight

:46:34.:46:37.

or nine degrees. In Northern Ireland a brighter day than recent

:46:38.:46:42.

low, the cloud thinning and breaking. So too to the north-east

:46:42.:46:47.

of Scotland, a pleasant day. The Moray firth, the cloud thick enough

:46:47.:46:53.

for one or two showers. A bit more cloud across the south

:46:53.:46:56.

west of Ireland and Northern Ireland, elsewhere reasonably dry

:46:56.:47:00.

and bright. For southern parts of England and Wales, increasing

:47:00.:47:03.

amounts of sunshine once again. That is boasting the temperatures.

:47:04.:47:07.

The south-east seeing longest spells of sunshine through the day.

:47:07.:47:10.

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