:00:13. > :00:17.Economy in trouble, the IMF chief says she still believes the deficit
:00:17. > :00:20.cutting must go on. But Lagarde warned the Chancellor that Plan B
:00:20. > :00:22.might soon be needed, more money printing by the Bank of England,
:00:22. > :00:30.even cuts in VAT or national insurance.
:00:30. > :00:34.We have got the Treasury, and the opposition, live in the studio.
:00:34. > :00:40.Lucas Papademos, the former Greek Prime Minister, talks -- George
:00:40. > :00:47.Papandreou, the former Greek Prime Minister, talks to Newsnight
:00:47. > :00:53.exclusively. What will happen when people say, well Greece did this,
:00:53. > :01:01.why not anyone else. Also tonight:
:01:01. > :01:05.Can the John Lewis model save the British taxpayer. I don't feel the
:01:05. > :01:08.need to move our position, I think we pay people enough. When you come
:01:08. > :01:11.to work for the partnership, it is about more than just pay.
:01:11. > :01:21.Julie Meyer is here to debate whether the idea is being knowingly
:01:21. > :01:23.
:01:23. > :01:32.oversold. Good evening, the economy may be
:01:32. > :01:36.sinking no a second recession, but the romance still seems to be
:01:36. > :01:42.blooming. George Osborne remains "dear George", Christine Lagarde
:01:42. > :01:51.paid tribute to him and his effort to cut the deficit. That was cited
:01:51. > :01:58.Be Here from the Treasury, and the opposition and the opposition in a
:01:58. > :02:00.moment. First this. If only the people who run The
:02:01. > :02:05.Chelsea Flower Show were running the economy, there is no problem
:02:05. > :02:08.with growth here, even in the least likeliest circumstances, like up a
:02:08. > :02:16.ZAF folding tower. So much of British politics now is about
:02:16. > :02:20.growth, and who has the right plan for the economy. Not surprisingly -
:02:20. > :02:24.- scaffolding tower. So much of British politics is now about
:02:24. > :02:27.growth, who has the right plan for the economy. Today's IMF report has
:02:27. > :02:31.something for everyone in it, over there in the Treasury it will point
:02:31. > :02:36.to you the bits where it says the UK economic policy mix is about
:02:36. > :02:39.spot on, as is the Treasury's emphasis on definite reduction. The
:02:39. > :02:43.opposition, though, will probably direct you to the bits in here
:02:43. > :02:47.where it says how badly the UK economy is currently
:02:47. > :02:52.underperforming, and that if this continues, well, the Government may
:02:52. > :02:56.have to alter its course in terms of deficit reduction.
:02:56. > :03:01.Until not that long ago, Christine Lagarde was the French Finance
:03:01. > :03:03.Minister, and given the state of the eurozone, not everyone thinks
:03:03. > :03:07.this is necessarily any qualification for passing judgment
:03:07. > :03:11.on other economies. But, nonetheless, her appearance at
:03:11. > :03:14.the Treasury this morning was eagerly attended. In essence, her
:03:15. > :03:19.message was that the UK has done the right things, but, it is just
:03:19. > :03:24.that we're getting the wrong results. Unfot in thely the
:03:24. > :03:31.economic recovery -- unfortunately, the economic recovery in the UK has
:03:32. > :03:37.not taken hold and uncertainty bounds. Growth is too slow and
:03:37. > :03:41.unemployment, including youth unemployment, is too high. Policies
:03:41. > :03:44.to bolster demand, before low growth becomes entrenched, are
:03:44. > :03:47.needed. Policies like cutting interest rates from where they are
:03:47. > :03:50.now, which is at virtually nothing, to actually nothing.
:03:50. > :03:56.Plus, another bout of quanative easing.
:03:56. > :04:02.And, if all that doesn't work, well it is time for a new plan. If the
:04:02. > :04:09.economy turns out to be significantly weaker than forecast,
:04:09. > :04:12.fiscal easing should be ard. Again, the measure -- considered. Again,
:04:12. > :04:16.the focus would have to be on growth and lowering unemployment.
:04:16. > :04:21.This would be a good use of the hard-won credibility of fiscal
:04:21. > :04:25.policy and institutions in the UK. The IMF hasn't said it is time for
:04:25. > :04:29.a full scale Plan B, slowing the pace of cuts, and spending more
:04:29. > :04:32.money and borrowing it from the markets. But what it has said, is
:04:32. > :04:36.that the Government can and should use fiscal policy to stimulate
:04:36. > :04:42.growth. It can do this by cutting measures that have a low impact on
:04:42. > :04:47.growth, such as transfers to the better-off, perhaps, Winter Fuel
:04:47. > :04:51.Payments to the better-off, and tax contributions by the top earners,
:04:51. > :04:55.and use that money to invest in infrastructure for the UK, and a
:04:55. > :04:59.direct shot in the arm for the UK. The Chancellor declared himself
:04:59. > :05:01.delighted with the assessment. Particularly coming on the day that
:05:01. > :05:06.inflation dropped to its lowest level for two years. This morning
:05:06. > :05:11.we had the news that inflation was down, and within 1% of the Bank of
:05:11. > :05:15.England's target, falling from 3.5% to 3%. It means that, for the first
:05:15. > :05:19.time since I became Chancellor, I have not this morning received the
:05:19. > :05:22.letter from the governor of the Bank of England, explaining why
:05:22. > :05:27.inflation is off target indeed, it is the first time since 2009 this
:05:27. > :05:32.has happened. This brings welcome relief to
:05:32. > :05:36.families on tight budgets. surprisingly, Labour didn't share
:05:36. > :05:40.this assessment. The Government has to say they got it wrong. The plan
:05:40. > :05:45.didn't work, they need a more balanced approach, that says, yes,
:05:45. > :05:50.tough decisions on spending and tax, but without jobs and growth we
:05:50. > :05:54.can't get the deficit down. We said a temporary cut in VAT, the IMF
:05:54. > :05:57.agrees, bring forward infrastructure, I agree, help for
:05:57. > :06:00.small businesses, things the Chancellor should do now. What
:06:00. > :06:05.matters politically is what the public make of all this. Labour's
:06:05. > :06:09.top team were today touring Olympic venues, but voters don't seem ready
:06:09. > :06:13.to hand them any economic gold medals yet. Although they are
:06:13. > :06:17.closing on the Government. The Conservatives have a seven-
:06:17. > :06:21.point lead over Labour, over which of the two parties people most
:06:21. > :06:26.trust to run the economy. We have been asking people also whether or
:06:26. > :06:31.not they support what is known as Plan A or Plan B, with the deficit
:06:31. > :06:33.reduction should be slower than the Government is proposing or whether
:06:33. > :06:38.they support the Government's plan. People throughout the parliament
:06:38. > :06:42.has been very split on it, 50-50 split, currently people are still
:06:42. > :06:45.trusting the Conservatives more than Labour to run the economy.
:06:45. > :06:50.Politically, probably the most significant thing said all day was
:06:50. > :06:55.during the Q & A session at the Treasury. We can assume ministers
:06:55. > :07:01.are trying to work out how to get this on an election poster. When I
:07:01. > :07:07.think back to May 2010, when the UK deficit was at 11%. I tried to
:07:07. > :07:12.imagine what the situation would be like today, if no such fiscal
:07:12. > :07:17.consolidation programme had been decided. I shiver.
:07:17. > :07:26.Chloe Smith from the Treasury is here, first we talk to Rachel
:07:27. > :07:30.Reeves, shadow Treasury Minister. Strong consolidations under way,
:07:30. > :07:36.and the deficit reduction remains essential. They couldn't be any
:07:36. > :07:40.clearer, are they wrong? Definite reduction is important, but you
:07:40. > :07:44.can't do that without jobs and growth. That is why this Government
:07:44. > :07:50.are now borrowing �150 billion more than they had planned, because the
:07:50. > :07:53.economy is in a double-dip recession, unemployment is at 2.6
:07:53. > :07:57.million, and youth unemployment at a record high. If you have more
:07:57. > :08:00.people out of work getting benefits and fewer people paying taxes, it
:08:00. > :08:04.makes it hard Tory reduce the deficit. You heard from George
:08:04. > :08:07.Osborne today, and was it wrong? Christine Lagarde has said before
:08:07. > :08:11.that growth is absolutely essential, to get the public finances back in
:08:11. > :08:15.order. You need growth to get the economy back on track. That is what
:08:15. > :08:19.Labour have been arguing for consistently. But what Christine
:08:19. > :08:23.Lagarde is saying. She's barking up the wrong tree today, is that what
:08:23. > :08:27.you are saying? Christine Lagarde and the IMF today are saying, is
:08:27. > :08:30.you need to have plans to boost growth, unless you are going to
:08:30. > :08:33.have low growth entrenched. The real risk is, that the policies
:08:33. > :08:37.that the Government have assumed, which is cutting too far and too
:08:37. > :08:40.fast, have choked off growth, and going to cause long-term damage to
:08:40. > :08:43.our economy, because you have people out of work, you have now
:08:43. > :08:47.got long-term unemployment at the highest rate for a generation.
:08:47. > :08:52.heard what she said, she said the whole idea that she was left with
:08:52. > :08:57.in May 2010, if no such programme had been implemented, made her
:08:57. > :09:00.shiver? Yes, and Alistair Darling's programme for deficit
:09:00. > :09:05.reduction...Wasn't Going to come in for another year after, that it
:09:05. > :09:08.made her shiver? That is not the case. Alistair Darling's plan for
:09:08. > :09:13.deficit reduction, would have seen the deficit come down by more.
:09:13. > :09:16.would not have had any cuts until 2011? That is not the case.
:09:16. > :09:19.Alistair Darling's programme for deficit reduction, would have
:09:19. > :09:23.halved the deficit during the course of this parliament. Now the
:09:23. > :09:25.Government's plans are so off track that they are now borrowing more
:09:25. > :09:28.than the plans that Alistair Darling left in place. That is
:09:28. > :09:33.because this Government have failed to secure the recovery that you
:09:33. > :09:36.need to get the deficit down. So you do need a deficit reduction,
:09:36. > :09:38.but this Government aren't achieving what they set out to
:09:38. > :09:42.achieve, because they have unemployment too high, and because
:09:42. > :09:46.the economy is back in recession, because of the skhoiss that this
:09:46. > :09:49.Government made, -- choices that this Government made, it is causing
:09:49. > :09:53.long-term damage, as Christine Lagarde has said, to the British
:09:53. > :09:56.economy. Isn't the worry for you, when she talks in those terms about
:09:56. > :10:02.her idea of what would have happened in May 2010, when Labour
:10:02. > :10:06.had left power, sending shivers down her back, she echos many
:10:06. > :10:09.people in the public who think that is exactly the state that Labour
:10:09. > :10:14.would be leaving us in now? Christine Lagarde is right, if
:10:14. > :10:17.there hadn't been a plan for deficit reduction, and the deficit
:10:17. > :10:22.had stayed at the levels it was after the global financial crisis,
:10:22. > :10:26.that would be very worrying indeed. But as I said, Alistair Darling's
:10:26. > :10:31.plans for deficit reduction, would have included increases in taxes.
:10:31. > :10:35.We would have kept the 50p rate of tax, which has brought in �3
:10:35. > :10:37.billion. You would bring that in? We are voting against it in the
:10:37. > :10:42.budget, which is going through parliament at the moment. As a
:10:43. > :10:47.policy you would bring it back in? We wouldn't be getting rid of it.
:10:47. > :10:51.It is gone, you would bring it back in? In the budget we are voting not
:10:51. > :10:56.to go ahead with it, 2 it hasn't gone yet. When the vote comes back
:10:56. > :11:02.to rplt pa, we will vote against the reduction -- parliament, we
:11:02. > :11:06.will vote against the reduction in a policy that gives money to
:11:06. > :11:10.millionaires. That is one policy to reverse, while this Government is
:11:10. > :11:15.giving money away to the people who need it least.
:11:15. > :11:19.I know you didn't want to debate directly, Chloe Smith, but the IMF
:11:19. > :11:24.there said the British economy had been flat, it hasn't been flat, has
:11:24. > :11:28.it, it has been in recession is, we have shrunk, you dream of flat,
:11:28. > :11:35.probably? There is no masking the difficult circumstances I think
:11:35. > :11:40.that face us. I would be delighted to debate Rachel on any day of the
:11:40. > :11:43.week on some of the confusion that she laid out. You refused to debate
:11:43. > :11:47.on the programme, if you want to, great, you declined that
:11:47. > :11:51.opportunity. The circumstances that face us include the on going
:11:51. > :11:55.eurozone crisis, very difficult, indeed also global oil prices, very
:11:55. > :12:00.difficult. There are a number of things going on at present which do
:12:00. > :12:03.mean there are challenges to the UK economy. The IMF's view today is
:12:03. > :12:07.crystal clear, which is this Government has taken the
:12:07. > :12:11.appropriate actions. We are on track, says the OECD as well. Takes
:12:11. > :12:14.down the deficit is incredibly important. We have already removed
:12:15. > :12:20.a quarter of the debt that Labour left. I'm wondering how much
:12:20. > :12:23.attention to you pay to the IMF, given they calculated back in
:12:23. > :12:27.September that there was a 17% chance of us going into recession,
:12:27. > :12:31.we were practically in T why are you taking these reductions and
:12:31. > :12:36.saying you cut it by a quarter? Because the latter statement,
:12:36. > :12:41.excuse me, the latter statement is true. You have cut the deficit not
:12:41. > :12:44.the debt? The deficit indeed is down by a quarter, that is what we
:12:44. > :12:50.are tackling. The debts keep on going up, that is the point? We are
:12:50. > :12:53.on track indeed for both of the targets we have set ourselves
:12:53. > :12:58.fiscally speaking. The OECD confirms we are on track. I'm
:12:58. > :13:01.quoting them there. Those two reports today show we are taking
:13:01. > :13:05.the appropriate action. The OECD report is interesting, it is there
:13:05. > :13:10.they confirm the actions we are taking are right for growth in the
:13:10. > :13:12.short and long-term. The IMF report again shows the credibility we have
:13:12. > :13:17.earned, the space we have earned for ourselves and the British
:13:17. > :13:21.economy, putting it back on track, allows us to turn to jobs' measures,
:13:21. > :13:25.such as supporting more infrastructure, supporting houses
:13:25. > :13:32.and businesses. You are pretty happy with where things are, you
:13:32. > :13:38.say we are back on track? I quote the EOCD as being on track for the
:13:38. > :13:42.plan, but circumstances arele cha eings. The report today shows our -
:13:42. > :13:47.- are challenges. The report today shows our plans are right.
:13:47. > :13:51.don't need a back up plan? challenges facing us now are very
:13:51. > :13:56.serious, the actions we are taking now are the right ones. So you
:13:56. > :14:00.don't need a back-up plan? Government keeps track of the
:14:00. > :14:03.circumstances at random. Are you privately talking about things you
:14:03. > :14:06.must implement if this goes wrong? Any Government, of course, keeps a
:14:06. > :14:10.track of what goes on. Any Government has sets of plans. Our
:14:10. > :14:14.plans for now are the right one, they are taking the right actions.
:14:14. > :14:19.But what are those plans that are some where down the pipeline. You
:14:19. > :14:22.heard Lagarde there talking about the need, possibly to consider VAT
:14:22. > :14:26.cuts, national insurance cuts, are these part of what you might call
:14:26. > :14:31.your Plan B? I think Christine Lagarde was clear today in the
:14:31. > :14:35.point, she thought those policies may come into their own. Do you?
:14:35. > :14:39.The point is, today's actions are the right ones for where we are, we
:14:39. > :14:43.need to keep control of the deficit. Unlike the uncosted confusion you
:14:43. > :14:47.have heard from Rachel and others today. We need to keep track on
:14:47. > :14:52.those plans. Why is the head of the IMF thinking of a down-the-line
:14:52. > :14:56.tragedy for you, when it sounds as if you are not. Why is George
:14:57. > :15:01.Osborne making contingency plans for the eurozone f he can't admit
:15:01. > :15:05.he's making con-- if he can't admit he's making contingency plans for
:15:05. > :15:09.his own economy here? Circumstances are very challenges, the eurozone
:15:09. > :15:13.is one of the largest of those things. If you look at Christine
:15:13. > :15:18.Lagarde said, the shiver that went down her spine is at the deficit
:15:18. > :15:21.Labour left us. That was at Greek levels. If we had not acted fa, we
:15:21. > :15:24.don't continue to act to keep the economy on track, that is where
:15:24. > :15:30.potential trouble could come from. It is that action that is
:15:30. > :15:33.appropriate and right today that the IMF confirms. You heard Lagarde
:15:33. > :15:36.saying clearly, that she would urgently consider more action, the
:15:36. > :15:40.need for quanative easing, would you welcome that? Any such decision
:15:40. > :15:44.would be operationally for the Bank of England to do, of course, but it
:15:44. > :15:50.is, indeed, one of the next lines of defences. The Chancellor has to
:15:50. > :15:54.approve that, would you like to see him say that? He has said today it
:15:54. > :15:58.is one of the obvious tools. It is one of the tools available in the
:15:58. > :16:02.economy at present. It can simulate demand, there are a number of
:16:02. > :16:07.things we need to work on in the British economy, that may be one of
:16:07. > :16:11.the tools, others are getting credit to businesses, more
:16:11. > :16:15.infrastructure and housing. bring you back in, what was the
:16:15. > :16:21.point you -- I will bring you back in, what was the point you wanted
:16:21. > :16:24.to make? It is staggeringly complacent, we are �150 billion off
:16:24. > :16:28.track when it comes to the economy, and the economy is in a double-dip
:16:28. > :16:32.recession. That is not on track, that is seriously off track. The
:16:32. > :16:37.IMF have said, for almost a year now, if things get worse, they have
:16:37. > :16:40.to think about a Plan B. Last word for you, Chloe Smith. Are you
:16:40. > :16:45.thinking about Plan B, what will that be, people are desperately
:16:45. > :16:48.crying out for it. I cite the OECDn that we are taking the right plans
:16:48. > :16:54.and the appropriate actions for now, that has made Britain aself and
:16:54. > :16:57.credible place. -- a safe and credible place.
:16:57. > :17:05.economic secretary to the President, we have just done that, let's move
:17:05. > :17:10.on. The leader of Greece's far left anti-austerity party headed out and
:17:10. > :17:15.said they would remain in the euro if they won the election. Alexis
:17:15. > :17:20.Tsipras is out looking for support. Bill Clinton offered strong words
:17:20. > :17:24.of advice on day 959 of the Greek crisis, we are counting. You cannot
:17:24. > :17:29.get blood out of a turnip, you can't constrict public sector
:17:29. > :17:33.activity, in the face of private restriction, and expect growth to
:17:33. > :17:37.occur, because a confidence fairy appears on your shoulder. The
:17:37. > :17:41.people who have put out all this money, and demanded 100 cents on
:17:41. > :17:45.the dollar, at zero inflation, so their investment will never be
:17:45. > :17:49.rewarded in any shape or form, all they are doing is narrowing and
:17:49. > :17:53.narrowing the pools of future investment. Bill Clinton speaking
:17:53. > :17:58.just outside London a little bit earlier today. Joe Lynam is here to
:17:58. > :18:04.take us through some of the new thoughts. There is some quite
:18:05. > :18:09.interesting zeitgeist words popping up here. The pan-European deposit
:18:09. > :18:12.grouornity, what do they mean by that -- guarantee, what do they
:18:12. > :18:20.mean? This is discussed in the European body politic. It is
:18:20. > :18:26.discussed at the highest levels of the ECBT means you collectively
:18:26. > :18:34.guarantee savers' deposits. If a bank goes bankrupt in one country,
:18:34. > :18:40.the saver will get the money back. The idea that the European and --
:18:40. > :18:44.the UK would bail out different people's savers, it would likely to
:18:44. > :18:47.be Germany. It will be mentioned at the informal summit tomorrow.
:18:47. > :18:51.we talk about project bombs, what is that about? That is the other
:18:51. > :19:00.big thing. The markets got very excited about that today. Mostly
:19:00. > :19:04.because project bomb sounds a bit like -- project bonds sounds a bit
:19:04. > :19:09.like eurobonds, they will fund things like rail and infrastructure.
:19:09. > :19:12.They want to use the European Central Bank to leverage money
:19:12. > :19:15.already there to leverage those projects and stimulate growth. That
:19:15. > :19:18.is going along the lines of Francois Hollande, who is having
:19:18. > :19:24.the first council meeting tomorrow evening. Do you get the sense
:19:25. > :19:34.either of these will go ahead? Project bonds definitely L and the
:19:34. > :19:37.pan-European guarantee will be whispered over the can pays. The
:19:37. > :19:41.collective pooling of euro debt, the Germans are against that, and
:19:41. > :19:47.they have resisted proposals from the European Commission and nine
:19:47. > :19:53.months later implemented them. former Greek Prime Minister, George
:19:53. > :19:57.Papandreou was in London for the Google zeitgeist conference, he
:19:57. > :20:01.spoke exclusively to us. What chance is there of Greece
:20:01. > :20:06.staying in the euro? The Greek people, in the massive majority,
:20:06. > :20:10.are in favour of staying in the euro. Polls say 75%. Of course,
:20:10. > :20:15.that does mean we have to follow a difficult programme. There may be
:20:15. > :20:19.some changes in this programme, but not huge margins of change.
:20:19. > :20:24.that's depending on those parties taking the, the parties during the
:20:24. > :20:30.election, who wish to produce the austerity plan, and push it through,
:20:30. > :20:36.winning, Syriza looks as if it will may be on target, on the 17th of
:20:36. > :20:40.June elections, to be the one that holds the key. If they hold the key,
:20:40. > :20:46.no austerity? We have to make a choice, obviously the Greek people
:20:46. > :20:51.in previous elections vented a lot of anger, despair, pain, because it
:20:52. > :20:56.has been very painful in Greece, I would say we have lost a lot of our
:20:56. > :20:59.income. GDP has gone down, in a very short time, not only because
:20:59. > :21:04.of Greece, but a wider recessionary situation in Europe. And that, I
:21:04. > :21:07.think, was expressed, not that Greeks don't want change, Greeks do
:21:08. > :21:11.want change. Of korts, in Greece, if there are parties -- of course,
:21:11. > :21:15.in Greece, if there are parties that don't want to do this, and
:21:15. > :21:19.think it will be easy that you can have your cake and eat it too, that
:21:19. > :21:23.will push us towards the exit. as David Cameron is saying, it will
:21:23. > :21:26.be a referendum on the euro, is this election essentially a
:21:26. > :21:31.referendum on the euro? I had proposed the referendum. Elections
:21:31. > :21:35.are different. It will, of course, be in way ways a referendum, but
:21:35. > :21:41.not a real one. When you have a number of parties, Syriza is one of
:21:41. > :21:47.them, it is easy to say, let's have our cake and eat it too.
:21:47. > :21:50.That's a very nice proposal, but it's outside of reality. When you
:21:50. > :21:58.suggested a referendum, you were not backed by other European
:21:58. > :22:01.leaders, most notably President Sarkozy. If you had been backed and
:22:01. > :22:05.there was a referendum, would Greece be in this mess now? There
:22:05. > :22:09.would have been a clear answer, that is very democratic. The Greek
:22:09. > :22:13.people would have decided. They would have owned whatever decision
:22:13. > :22:17.we would have made. Why was Sarkozy particularly against it? Again, I
:22:17. > :22:22.would say, to go to the referendum, I believe even then the Greek
:22:22. > :22:25.people would have said, yes, in favour of remaining in the euro,
:22:25. > :22:29.with a package, which we then negotiated with the European Union.
:22:29. > :22:33.I really don't understand, there were a number of reasons, possibly
:22:33. > :22:38.he was against this referendum, that didn't help my position, of
:22:38. > :22:42.course, in Greece. Of course now many people are um can go around to
:22:42. > :22:45.say this is something that -- are coming around to say this is
:22:45. > :22:50.something that should have happened. Does that mean you were deposed by
:22:50. > :22:57.Merkel and Sarkozy? I wouldn't put it that way, that is very, very
:22:57. > :23:02.harsh. That is a harsh decision. I think it was, what we have in
:23:02. > :23:06.Europe, I think, is Europe has to be managed in a more open,
:23:06. > :23:10.democratic way, where we bring in our citizens to own this process.
:23:10. > :23:15.Europe has to become much more a construction by the citizens.
:23:15. > :23:19.Germany have to behave differently? The Germans, they put up a lot of
:23:19. > :23:26.money, but if we had put up this money in a different way. For
:23:26. > :23:31.example, to create eurobond, to create a stronger firewall in the
:23:31. > :23:36.markets, to support growth, to give more time, and I'm very glad to now
:23:36. > :23:42.Mr Hollande, President Hollande in France, just reading with the new
:23:42. > :23:47.leader of PASOK, saying let's give Greece more time. You back that?
:23:47. > :23:52.do, and I want eurobonds, this is something I have been talking about
:23:52. > :23:57.since 2009. Two questions in one, what happens if the election
:23:57. > :24:01.doesn't go your way on the 17th of June, and you will eventually loaf
:24:01. > :24:05.the euro, and presumably you will default like Iceland and Argentina.
:24:05. > :24:10.The second question, what happens to the rest of Europe? The Greek
:24:10. > :24:16.people don't want to leave the euro, it gives securities, even with
:24:16. > :24:19.difficulties. If we leave the euro, I can tell you it isn't like
:24:19. > :24:24.Argentina, they were pegged to the dollar, we are not pegged to the
:24:24. > :24:29.euro, we ous it in every day life, in our contracts and banks, this is
:24:29. > :24:33.what we have. To change the euro would mean a huge reorganisation.
:24:33. > :24:39.But at the same time there would be a bank run, people would pull their
:24:39. > :24:42.money out. If the drachma comes in and we devalue three or four times,
:24:42. > :24:46.price also go up and we will destroy our economy. Maybe that
:24:46. > :24:52.would be better for the rest of Europe? For the rest of Europe I
:24:52. > :24:58.think that would be a negative precedent. What will happen when
:24:58. > :25:01.people start to say, Greece did this, you know, why not Portugal or
:25:01. > :25:07.another country. I don't want to call flames, because it becomes a
:25:07. > :25:11.self-full -- names, but it becomes a self-fulfiling prophesy. Who
:25:11. > :25:14.knows, somewhere down the line another country does what Greece
:25:14. > :25:18.has done, that means that the markets will not invest in those
:25:18. > :25:21.countries. We have to be able to say this is a stable currency, it
:25:21. > :25:26.won't break up. We have to make decisions, not in Greece, but in
:25:26. > :25:30.Europe also, that we do want to create the necessary structures to
:25:30. > :25:36.make sure this currency is a currency that can stay alive. And
:25:36. > :25:39.it can, but we have to make those decisions. Thank you very much.
:25:40. > :25:44.The John Lewis partnership model has come a long way since 1928,
:25:44. > :25:48.when it was formed as a way of heading off rising communist
:25:48. > :25:53.sentiment. It has earned its place in British psyche as the cuddley
:25:53. > :25:57.face of capitalism. Hailed by the Prime Minister as a responsible
:25:57. > :26:02.business model. It is shared or owned by 80,000 members of staff.
:26:02. > :26:06.Is it the panacea the economy is crying out for, could it be adopted
:26:06. > :26:14.more widely. I will ask the John Lewis chairman
:26:14. > :26:20.directly in a moment. First, Allegra Stratton.
:26:20. > :26:24.Waitrose in well-heeled Marylebone. Oysters, ready to go, a stand
:26:24. > :26:29.devoted to the different brands of pink, yes pink, champagne. Its
:26:29. > :26:33.relevance to the rest of Britain may seem limited, but this Waitrose,
:26:33. > :26:40.and its mother shop, John Lewis, is a blueprint for how to run public
:26:40. > :26:44.and private realms.. Today in places across the mini-empire will
:26:44. > :26:49.explain some of the lines, including blue berries. Running a
:26:49. > :26:53.shop, you don't know what is happening, the sun is shining, we
:26:53. > :26:57.are selling 100% more of strawberries and rasberries than if
:26:57. > :27:04.the sun wasn't shining. You have to respond to, that and bring someone
:27:04. > :27:11.here who knows about that as well as working in wine and all sorts.
:27:11. > :27:17.Blue berries powers the sales and the in turn that powers the
:27:17. > :27:23.powerhouse. I have come in and done extra hours to make the sandwiches.
:27:23. > :27:30.I have. Do you get more money? you do the thing it makes the place
:27:30. > :27:36.run smoother and making everybody happy, us happy, and the customers
:27:36. > :27:41.happy. The Government have been shopping for ideas at John Lewis
:27:41. > :27:47.for a long time. They like the idea of shared employee ownership, that
:27:47. > :27:50.employees here have a meaningful stake in the economy. They believe
:27:50. > :27:54.-- company, they believe it could work in the public sector and the
:27:54. > :28:00.private sector to push forward a different form of capitalism. There
:28:00. > :28:06.are those who say it is inexactly applied, and that the John Lewis
:28:06. > :28:11.model has never knowingly been understood. Charley Mayfield is the
:28:11. > :28:15.chairman of the John Lewis group, he's leading us through the
:28:15. > :28:20.plumbing of the group. He explains the political attempts to
:28:20. > :28:24.appropriate it. The Kay John Lewis's name is being used, it is
:28:24. > :28:31.shorthand for different kinds of ownership. I'm very pleased there
:28:31. > :28:35.is interest in a different kind of ownership, there is a risk in that,
:28:35. > :28:40.people oversimplify it, and the message is, this is all about the
:28:40. > :28:45.John Lewis partnership model. Shorthand, but it should be
:28:45. > :28:49.accurate, can a John Lewis model be transplanted into the running of
:28:49. > :28:54.public serves? I have been to some of the pilots, NHS schemes. You are
:28:54. > :28:58.talking about people trying to do a good job, and when you create
:28:58. > :29:03.around them a culture and give them the right information and
:29:03. > :29:09.empowerment to do that job well, they do start preparing better.
:29:09. > :29:13.Here you have everybody talking about getting an 80% bonus, that
:29:13. > :29:16.fodback mechanism isn't there in public services. -- feedback
:29:16. > :29:21.mechanism isn't there in public services, people wanting to do a
:29:21. > :29:25.good job is always there.? profit sharing we do here, is very
:29:25. > :29:30.important. But is it the one thing that motivates everybody every
:29:30. > :29:35.single day. Certainly it is not the only thing. Up on the seventh floor
:29:35. > :29:39.is what they call the partners' dining room, there partners explain
:29:39. > :29:43.the motivation. You understood the other people out there are all your
:29:43. > :29:48.partners, you all work as hard. You do give more. Do you work overtime?
:29:48. > :29:53.Yes, I do. If need be. They get a bonus linked today their
:29:53. > :29:58.company's performance, it goes some way to blunting the disparity
:29:58. > :30:03.between their wage and the chairman's, a differential of 60-1.
:30:03. > :30:07.Do you think it will go down beneath 60? I think it is important,
:30:07. > :30:11.we can't ignore the market we are in. We have to attract people into
:30:11. > :30:14.the partnership and pay them to do so. I'm comfortable with the policy.
:30:14. > :30:18.What is happening since it was set is the rest of the market has gone
:30:18. > :30:22.away from us, and we haven't moved our position. I don't feel the need
:30:22. > :30:26.to move our position, I think we pay people enough, and when you
:30:26. > :30:31.come to work for the partnership it is about more than just pay.
:30:31. > :30:34.getting from the ideas warehouse to people's homes, it has not been a
:30:35. > :30:40.simple process of click and collect, at first the emphasis was on the
:30:40. > :30:48.public sector and what lessons the John Lewis model will have for that.
:30:48. > :30:51.Except the public sector doesn't make a profit, so it was felt to be
:30:51. > :30:56.inproper inappropriate from the model. Many feel a private
:30:56. > :31:02.partnership is more appropriate. Critics of rolling it out across
:31:02. > :31:06.the economy point out at the extreme end Lehman Brothers and
:31:06. > :31:10.Enron fitted this model. You are exactly saying these shares need to
:31:10. > :31:15.be locked into a company, so people, if a company was looking like it
:31:15. > :31:21.was going down, those people's entire livelihoods, their jobs
:31:21. > :31:25.would be lost or any assets or share they had would struggle?
:31:25. > :31:28.model works extremely W one of the characteristics that makes it
:31:28. > :31:35.powerful for us, is people's interests are locked into the
:31:35. > :31:40.business, now and in the future. I don't think we will go bust, but
:31:40. > :31:45.we actually run the business on the basis that never happens. Today the
:31:46. > :31:50.partnership has 80,000 partners in it, when it was founded, it only
:31:50. > :31:53.had 500. We were comparatively, a relatively small business then. And
:31:53. > :31:56.we have grown, without external shareholder investment, to being
:31:56. > :32:00.what we are today. That has happened because we have had to
:32:00. > :32:03.rely on our performance, and latterly we have been able to
:32:04. > :32:07.borrow from banks and other people as well. But there have been times
:32:07. > :32:11.during our history, where partners have said we will forego bonus this
:32:11. > :32:15.year, or two or three years, because the business is going
:32:15. > :32:19.through a difficult patch. There is instances where people have been
:32:19. > :32:25.asked to put money into the partnership, that was after the war.
:32:25. > :32:31.It can gobble your money, as a partner or customer, but it remains
:32:31. > :32:37.politicians' favourite shop. Charley Mayfield has joined us in
:32:37. > :32:45.the studio, the chairman of John Lewis. We have the CEO of a high-
:32:45. > :32:49.tech company, Thank you all of you for coming in. Norman Lamb, can the
:32:49. > :32:53.rest of British business learn from that kind of partnership model. We
:32:53. > :32:57.know that Nick Clegg, your leader, has been very keen on this? I think
:32:57. > :33:01.it is an immensely pour powerful concept. If you give people a stake
:33:01. > :33:04.in the enterprise where they work, it is not rocket science, but they
:33:04. > :33:11.are likely to be more committed to it, give them some responsibility.
:33:11. > :33:17.It is likely to drive productivity gains. All the studies show
:33:17. > :33:21.employee-owned businesses perform better, particularly in the smaller
:33:21. > :33:24.sized businesses. Some business schools have shown to be more
:33:24. > :33:31.resilient through difficult economic times and more profitable.
:33:31. > :33:35.This is a more powerful concept. And it is try to unlock the
:33:35. > :33:39.potential of it in the economy. Surely it must feel they are coming
:33:39. > :33:42.to you and talking about the John Lewis model because we are in
:33:42. > :33:45.desperate times now? I don't think it is just because we are in
:33:45. > :33:50.desperate times. What has happened is people are having a re-think
:33:50. > :33:56.about how to run and own companies. What we have had in the UK for a
:33:56. > :34:00.long time is a real monoculture, where people focus on a plc form of
:34:00. > :34:03.ownership: that is not the same in other successful markets. There is
:34:03. > :34:08.now a welcome interest in different ways to own and run companies, and
:34:08. > :34:14.if we are an example of that, that is obviously something I'm pleased
:34:14. > :34:21.about. Can you give more than an example, can you be a blueprint?
:34:21. > :34:26.I'm nervous about saying to people, take on the way we run our business.
:34:26. > :34:31.It may not be their cup of tea. Companies are successful if they
:34:31. > :34:36.really engage their people, one way is to give them a an ownership
:34:36. > :34:39.stake, and create the structures and culture that makes them feel
:34:39. > :34:44.truly engaged and empowered and rewarded for their efforts.
:34:45. > :34:50.wouldn't you endorse it, you saw happy workers making sandwiches
:34:50. > :34:54.there, what further evidence do you need? John Lewis is a specific
:34:54. > :35:00.treasure in the economy. It was founded as a family business for 56
:35:00. > :35:04.years before being mutuallised. The two key features absent from any of
:35:04. > :35:09.the Government mutuallisation so far, is the idea of the trust. It
:35:09. > :35:13.cannot be demutuallised. That is what we are proposing with the Post
:35:13. > :35:15.Office, the idea of a mutually owned Post Office network could be
:35:15. > :35:19.really powerful, delivering services in the public interest,
:35:19. > :35:25.and that model locked in for the long-term. If you look at Germany,
:35:25. > :35:29.for example, where the workers also took a pay cut in the middle of a
:35:29. > :35:34.boom to restructure the corporate governance there, it is worth
:35:34. > :35:38.looking at a balance of interest in that corporate governance between
:35:38. > :35:42.workers and leaders. Do you think it still applies to have winners
:35:42. > :35:47.and losers in capitalism? That is just a fact, I don't think that
:35:47. > :35:53.will ever change. The question is can we reduce, can we make it more
:35:53. > :35:58.equitable, and make it some how that the loss is not as desperate.
:35:58. > :36:06.And the people who are winning still have a stake in the outcome
:36:06. > :36:10.to create a win-win-win. In the businesses with capital and
:36:10. > :36:14.venture-backed businesses, with the IPO of Facebook, and the sale of
:36:14. > :36:19.autonomy of Hewlett Packard not so long ago. Every time in the
:36:19. > :36:23.technology world a big win happens, what happens is a lot of money make
:36:24. > :36:27.money, some to set up her firms, so the to invest in other businesses,
:36:27. > :36:31.others have lots of money to do good things with that money as well.
:36:31. > :36:36.There is lots of ways you can win. But capitalism as a tool, yeah,
:36:36. > :36:42.some people will win and some people had lose, that doesn't mean
:36:42. > :36:45.even, hey I have lost, I have had to dust myself off and go back out
:36:45. > :36:50.there again. You are smart if you learn when you lose. It is riot,
:36:50. > :36:55.got the lesson, how can -- it is right, got the lesson, how can I
:36:55. > :36:59.share it. How do you put it into practice, what are the things from
:36:59. > :37:04.within Government you can do? you discover is there are all sorts
:37:04. > :37:08.of barriers, one of them is a complete lack of awareness for the
:37:09. > :37:12.potential for it. We are looking for the right to request, giving
:37:12. > :37:17.employees the right to request their companies set up an employee
:37:17. > :37:23.share scheme, not forcing, but asking firms to consider it. It is
:37:23. > :37:27.not very scary? It gets the debate going and raises awareness, both
:37:27. > :37:32.amongst employees and the companies that receive it. Also looking at
:37:32. > :37:36.the idea of a single company model which could be taken off the shelf
:37:37. > :37:40.and employed when someone wants to set up a business. Is that right?
:37:40. > :37:44.The key thing is which is engaging the energy of the work force.
:37:44. > :37:48.is the key. Then it is the long- term stable relationships within
:37:48. > :37:52.the organisation. It can work in both the public sector. The John
:37:53. > :37:58.Lewis model is only one variant of that. I think it is trou, that
:37:58. > :38:03.there has been this monoculture -- true, that there has been this
:38:03. > :38:08.monoculture. If you are an enprepen you are in, you are probably not
:38:08. > :38:11.aware -- enprenen you are in, you are probably not aware of it, and
:38:11. > :38:18.the advice is not there. The regulatory system and the tax
:38:18. > :38:24.system, actually, current, disincentivise people from doing
:38:24. > :38:26.this. You brought in tax breaks as a thought, now you are reviewing?
:38:26. > :38:31.The Chancellor announced in the budget there would be a Treasury
:38:31. > :38:34.review, that is a good start. a slow start, isn't that the
:38:35. > :38:39.trouble with any sort of mutual t slows everything down? It won't go
:38:39. > :38:43.on for that long. We want to get it right and make sure we get the
:38:43. > :38:48.incentives right to ensure we can make it happen. When a business
:38:48. > :38:52.owner is want to go retire, succession is a key moment to
:38:52. > :38:55.create an employee and own business, they want to leave a legacy. The
:38:55. > :38:59.tax breaks that might be available at that point might be critical to
:38:59. > :39:03.make that happen. Another part of the trend towards ownership and
:39:03. > :39:06.having a stake in the outcome is about the fact that more and more
:39:06. > :39:10.young people are setting up their own businesses. That is part of the
:39:10. > :39:17.same trend. People want to feel the ownership, but be the owner, they
:39:18. > :39:22.are willing to do that. Why aren't there John Lewises all over the
:39:22. > :39:27.place, you say lack of awareness, that isn't it? You don't have to go
:39:27. > :39:32.back very far to a time when there were many more alternatively owned
:39:32. > :39:39.businesss in the UK and the United States. Up until about the 1970s,
:39:39. > :39:42.80% of financial institutions were in some kind of mutual interest.
:39:42. > :39:49.They demutuallised and you can see what happened as a consequence.
:39:49. > :39:53.Something interesting is the culture of ownership. The great
:39:53. > :39:58.question is how do we get growth and a form of acceptable capitalism.
:39:58. > :40:01.The tools people look to are regulatory ones and others. In my
:40:01. > :40:05.experience, regulation almost always comes second to culture. In
:40:05. > :40:09.our business, we have 80,000 people in working in Waitrose and John
:40:09. > :40:15.Lewis. How it works is those 80,000 people own the business, and they
:40:15. > :40:20.work a bit harder every single day. It is a powerful and cultural model.
:40:21. > :40:24.Let's talk about that, people have fallen out of love with big
:40:24. > :40:29.business, big angry capitalism? biggest trend out there is not big
:40:29. > :40:33.business, it is setting up your own business. Not looking for a job,
:40:33. > :40:38.but creating your own job. Individual capitalists, and bes
:40:38. > :40:41.your on boss, by kids in their -- being your own boss, kids in their
:40:42. > :40:46.20s can have a swing at it and start their own business. Do you
:40:46. > :40:52.think this can work in public services, if we take it out of the
:40:52. > :40:56.private spear, can you put it into health? There would have to be a
:40:56. > :41:02.significant change. One of the incredible, durable successes of
:41:02. > :41:10.John Lewis, is to be contrasted with Northern Rock, the northern
:41:10. > :41:15.counties business established before that, embedded in the north-
:41:15. > :41:18.east. Within 12 years of demutuallisation was a basket case.
:41:18. > :41:22.Capitalism puts pressure on the financialisation of the assets.
:41:22. > :41:28.That is why the idea of a trust is huge. In relation to public
:41:28. > :41:31.services I go to a different model, a third, a third, a third. A third
:41:31. > :41:36.workers, a third local authority or state. Would you like to see this
:41:36. > :41:40.applied to public services? could be immensely powerful, you go
:41:40. > :41:43.to central Surrey health, where they have services, and every
:41:43. > :41:48.employy has a stake in the organisation. They have the ethos
:41:48. > :41:53.of the public sector, but they have the fleet of foot that the public
:41:53. > :42:02.sector doesn't have. Some may think, privatisation by the back door?
:42:02. > :42:07.isn't, it is all about getting the best out of your staff. If you can
:42:07. > :42:11.empower people and give them responsibility then it will help.
:42:12. > :42:17.think it is true, and I share the ownership of my business with my
:42:17. > :42:21.management team, it incentivises them. We are not just employees and
:42:21. > :42:25.employ ers, we are sit ens in a market place and an economy, when
:42:25. > :42:29.business is -- citizens in a market place and the economy, and when
:42:29. > :42:32.business is good it benefits all of us. It is true but not sufficient
:42:32. > :42:36.to say if you give ownership to everybody, the business will
:42:36. > :42:39.therefore be more profitable. Most of the time it will, but it is not
:42:39. > :42:44.necessarily true that. I want to talk about the climate
:42:44. > :42:49.you feel we are in now. Firstly, economic, and is it an anti-
:42:49. > :42:52.business climate at the moment. Is that the vibe you are getting?
:42:52. > :42:55.of the conundrums is, when people talk about business as a third
:42:55. > :42:58.person, they will say bad things about it. When they talk about the
:42:58. > :43:02.business they work for, they are proud of it and will say good
:43:02. > :43:05.things about it. There is a mismatch there. This is a real
:43:06. > :43:08.issue about. We have clearly got to get the economy growing. One of the
:43:08. > :43:13.reasons I'm pleased this ownership discussion has come on to the table
:43:13. > :43:17.and is a hot area for debate, is because it can play a part in
:43:18. > :43:21.growth. As was said, one of the interesting things is employee
:43:21. > :43:25.ownership is shown to be best suited in small and medium sized
:43:25. > :43:28.enterprises, some of the ones where we will need to see most of the
:43:28. > :43:35.employment coming from going forward. Do you think the old model
:43:35. > :43:39.is dead. Do you think top-down business models are basically pre-
:43:39. > :43:44.2008? I don't think you can say one model will always be superior to
:43:44. > :43:53.another. The point is, there could be a greater peculiarity of own
:43:53. > :43:57.inship in the UK -- plurality of ownership in the UK. We are re-
:43:57. > :44:01.thinking capitalism now? It is about corporate governance and the
:44:01. > :44:05.way the work force is represented. On the board of John Lewis there is
:44:05. > :44:08.five of them representing the partnership councils, five are
:44:08. > :44:12.selected by you, and there is a working out of the common good.
:44:12. > :44:15.That can work independent of ownership as it does in Germany.
:44:15. > :44:19.There are issues, I would like to see a living wage for the
:44:19. > :44:21.contracted out cleaners and them to be included in the John Lewis
:44:21. > :44:26.partnership model. Is that something the Government would have
:44:26. > :44:30.to take on, would that be part of it? I'm interested in what Norman
:44:30. > :44:34.Lamb is saying. What the Government hasn't done so far, and the build
:44:34. > :44:40.up to the Post Office is not reassuring, I'm pleased to hear
:44:40. > :44:44.about the asset logs, but there has been the selling off of local post
:44:44. > :44:47.offices. Those are individual, private businesses, and within
:44:47. > :44:51.Royal Mail there will be employee ownership.
:44:51. > :44:54.What do you need to see from the Government for this to push
:44:54. > :45:00.further? Three things that are essential, the first is endownment,
:45:00. > :45:06.that the assets are transferred, in perpetuity, for the nation, to the
:45:06. > :45:09.stakeholders. The second, is this trust, which is that it can't be
:45:09. > :45:13.then sold off. Mutuallisation, as with Northern Rock, would be
:45:13. > :45:16.another form of financialisation and privatisation. The third thing
:45:16. > :45:21.is the corporate governance structure so the funders, the
:45:21. > :45:25.workers and the users can negotiate a common good together for much
:45:25. > :45:28.loved institutions, like the Post Office and the BBC. Will you do
:45:28. > :45:32.that? With the Post Office we are doing that, embeding that model so,
:45:32. > :45:36.it will always have to act in the public interest, but we will give
:45:36. > :45:40.everyone within the Post Office network. The sub-postmasters and
:45:40. > :45:46.the employees, a stake in the business. Interestingly what you
:45:46. > :45:53.were saying. We need it within the governance. I ThinkBroadband there
:45:53. > :46:03.is a lot of -- I think there is a lot of common broadband T can be
:46:03. > :46:05.
:46:05. > :46:09.really effective. -- a common brood bank that can be -- a common thread.
:46:09. > :46:14.You would like to see it in health, with incentivised bonuses for those
:46:15. > :46:18.who do well? Let's be open minded. We have a real challenge, we have
:46:18. > :46:23.to make the money go further with public services, this is an
:46:23. > :46:28.enormous challenge for the future, particularly with an ageing
:46:28. > :46:31.population. This can unlock productivity, and can change the
:46:31. > :46:34.culture. It is also that workers have knowledge of the details of
:46:34. > :46:41.corporate information. And so there is a public negotiation of strategy.
:46:41. > :46:48.That is the vital thing. How do you get over the fact that if something
:46:48. > :46:51.is too successful, we talked about the mutuallisation a decade ago,
:46:51. > :46:54.things demutuallise. They don't have to. One of the key successes
:46:54. > :46:59.of the partnership rests on the fact that our interests are only
:46:59. > :47:02.served by how we run the business. There is something about ownership
:47:02. > :47:06.which has come to me too much -- come to mean too much about when
:47:06. > :47:10.you sell something, you transfer ownership, rather than ownership as
:47:10. > :47:20.being something you do to make things better. Our business is all
:47:20. > :47:45.
:47:45. > :47:55.about that. Let me whisk you That's all from Newsnight tonight,
:47:55. > :48:16.
:48:16. > :48:19.Good evening, another very warm today to come for many through
:48:19. > :48:22.tomorrow. Subtle changes, a lot more cloud to begin with, for
:48:23. > :48:27.instance. Especially round the western coasts, mist and sea fog,
:48:27. > :48:31.the sea fog we see developing across eastern areas could linger
:48:31. > :48:37.some what. Inland the cloud could break up. We could see the cloud
:48:37. > :48:41.lift to higher levels. By the time we get to the afternoon isolated
:48:41. > :48:46.and well scattered thunderstorms. They will only hit one or two of
:48:46. > :48:50.you. Most of you will stay largely dry. The temperatures will be
:48:50. > :48:54.limited around the coast. Sea breezes developing. Parts of
:48:54. > :49:00.Cornwall and parts of Wales out in the west, we could see the sea fog
:49:00. > :49:04.push in every now and again in the far Weston of northern England. For
:49:04. > :49:08.Northern Ireland brightens up a bit. Sunnier as we saw through Tuesday
:49:08. > :49:12.afternoon, lots of sunshine through the bulk of Scotland. Mist and sea
:49:12. > :49:16.fog out to the coast, one or two isolated showers. The contrast
:49:16. > :49:21.between Wednesday and Thursday on the charts for northern areas.
:49:21. > :49:25.Temperatures, if anything, cloim a degree or two, as they will do