22/05/2012 Newsnight

Economy in trouble, the IMF chief says she still believes the deficit

cutting must go on. But Lagarde warned the Chancellor that Plan B

might soon be needed, more money printing by the Bank of England,

even cuts in VAT or national insurance.

We have got the Treasury, and the opposition, live in the studio.

Lucas Papademos, the former Greek Prime Minister, talks -- George

Papandreou, the former Greek Prime Minister, talks to Newsnight

exclusively. What will happen when people say, well Greece did this,

why not anyone else. Also tonight:

Can the John Lewis model save the British taxpayer. I don't feel the

need to move our position, I think we pay people enough. When you come

to work for the partnership, it is about more than just pay.

Julie Meyer is here to debate whether the idea is being knowingly

oversold. Good evening, the economy may be

sinking no a second recession, but the romance still seems to be

blooming. George Osborne remains "dear George", Christine Lagarde

paid tribute to him and his effort to cut the deficit. That was cited

Be Here from the Treasury, and the opposition and the opposition in a

moment. First this. If only the people who run The

Chelsea Flower Show were running the economy, there is no problem

with growth here, even in the least likeliest circumstances, like up a

ZAF folding tower. So much of British politics now is about

growth, and who has the right plan for the economy. Not surprisingly -

- scaffolding tower. So much of British politics is now about

growth, who has the right plan for the economy. Today's IMF report has

something for everyone in it, over there in the Treasury it will point

to you the bits where it says the UK economic policy mix is about

spot on, as is the Treasury's emphasis on definite reduction. The

opposition, though, will probably direct you to the bits in here

where it says how badly the UK economy is currently

underperforming, and that if this continues, well, the Government may

have to alter its course in terms of deficit reduction.

Until not that long ago, Christine Lagarde was the French Finance

Minister, and given the state of the eurozone, not everyone thinks

this is necessarily any qualification for passing judgment

on other economies. But, nonetheless, her appearance at

the Treasury this morning was eagerly attended. In essence, her

message was that the UK has done the right things, but, it is just

that we're getting the wrong results. Unfot in thely the

economic recovery -- unfortunately, the economic recovery in the UK has

not taken hold and uncertainty bounds. Growth is too slow and

unemployment, including youth unemployment, is too high. Policies

to bolster demand, before low growth becomes entrenched, are

needed. Policies like cutting interest rates from where they are

now, which is at virtually nothing, to actually nothing.

Plus, another bout of quanative easing.

And, if all that doesn't work, well it is time for a new plan. If the

economy turns out to be significantly weaker than forecast,

fiscal easing should be ard. Again, the measure -- considered. Again,

the focus would have to be on growth and lowering unemployment.

This would be a good use of the hard-won credibility of fiscal

policy and institutions in the UK. The IMF hasn't said it is time for

a full scale Plan B, slowing the pace of cuts, and spending more

money and borrowing it from the markets. But what it has said, is

that the Government can and should use fiscal policy to stimulate

growth. It can do this by cutting measures that have a low impact on

growth, such as transfers to the better-off, perhaps, Winter Fuel

Payments to the better-off, and tax contributions by the top earners,

and use that money to invest in infrastructure for the UK, and a

direct shot in the arm for the UK. The Chancellor declared himself

delighted with the assessment. Particularly coming on the day that

inflation dropped to its lowest level for two years. This morning

we had the news that inflation was down, and within 1% of the Bank of

England's target, falling from 3.5% to 3%. It means that, for the first

time since I became Chancellor, I have not this morning received the

letter from the governor of the Bank of England, explaining why

inflation is off target indeed, it is the first time since 2009 this

has happened. This brings welcome relief to

families on tight budgets. surprisingly, Labour didn't share

this assessment. The Government has to say they got it wrong. The plan

didn't work, they need a more balanced approach, that says, yes,

tough decisions on spending and tax, but without jobs and growth we

can't get the deficit down. We said a temporary cut in VAT, the IMF

agrees, bring forward infrastructure, I agree, help for

small businesses, things the Chancellor should do now. What

matters politically is what the public make of all this. Labour's

top team were today touring Olympic venues, but voters don't seem ready

to hand them any economic gold medals yet. Although they are

closing on the Government. The Conservatives have a seven-

point lead over Labour, over which of the two parties people most

trust to run the economy. We have been asking people also whether or

not they support what is known as Plan A or Plan B, with the deficit

reduction should be slower than the Government is proposing or whether

they support the Government's plan. People throughout the parliament

has been very split on it, 50-50 split, currently people are still

trusting the Conservatives more than Labour to run the economy.

Politically, probably the most significant thing said all day was

during the Q & A session at the Treasury. We can assume ministers

are trying to work out how to get this on an election poster. When I

think back to May 2010, when the UK deficit was at 11%. I tried to

imagine what the situation would be like today, if no such fiscal

consolidation programme had been decided. I shiver.

Chloe Smith from the Treasury is here, first we talk to Rachel

Reeves, shadow Treasury Minister. Strong consolidations under way,

and the deficit reduction remains essential. They couldn't be any

clearer, are they wrong? Definite reduction is important, but you

can't do that without jobs and growth. That is why this Government

are now borrowing �150 billion more than they had planned, because the

economy is in a double-dip recession, unemployment is at 2.6

million, and youth unemployment at a record high. If you have more

people out of work getting benefits and fewer people paying taxes, it

makes it hard Tory reduce the deficit. You heard from George

Osborne today, and was it wrong? Christine Lagarde has said before

that growth is absolutely essential, to get the public finances back in

order. You need growth to get the economy back on track. That is what

Labour have been arguing for consistently. But what Christine

Lagarde is saying. She's barking up the wrong tree today, is that what

you are saying? Christine Lagarde and the IMF today are saying, is

you need to have plans to boost growth, unless you are going to

have low growth entrenched. The real risk is, that the policies

that the Government have assumed, which is cutting too far and too

fast, have choked off growth, and going to cause long-term damage to

our economy, because you have people out of work, you have now

got long-term unemployment at the highest rate for a generation.

heard what she said, she said the whole idea that she was left with

in May 2010, if no such programme had been implemented, made her

shiver? Yes, and Alistair Darling's programme for deficit

reduction...Wasn't Going to come in for another year after, that it

made her shiver? That is not the case. Alistair Darling's plan for

deficit reduction, would have seen the deficit come down by more.

would not have had any cuts until 2011? That is not the case.

Alistair Darling's programme for deficit reduction, would have

halved the deficit during the course of this parliament. Now the

Government's plans are so off track that they are now borrowing more

than the plans that Alistair Darling left in place. That is

because this Government have failed to secure the recovery that you

need to get the deficit down. So you do need a deficit reduction,

but this Government aren't achieving what they set out to

achieve, because they have unemployment too high, and because

the economy is back in recession, because of the skhoiss that this

Government made, -- choices that this Government made, it is causing

long-term damage, as Christine Lagarde has said, to the British

economy. Isn't the worry for you, when she talks in those terms about

her idea of what would have happened in May 2010, when Labour

had left power, sending shivers down her back, she echos many

people in the public who think that is exactly the state that Labour

would be leaving us in now? Christine Lagarde is right, if

there hadn't been a plan for deficit reduction, and the deficit

had stayed at the levels it was after the global financial crisis,

that would be very worrying indeed. But as I said, Alistair Darling's

plans for deficit reduction, would have included increases in taxes.

We would have kept the 50p rate of tax, which has brought in �3

billion. You would bring that in? We are voting against it in the

budget, which is going through parliament at the moment. As a

policy you would bring it back in? We wouldn't be getting rid of it.

It is gone, you would bring it back in? In the budget we are voting not

to go ahead with it, 2 it hasn't gone yet. When the vote comes back

to rplt pa, we will vote against the reduction -- parliament, we

will vote against the reduction in a policy that gives money to

millionaires. That is one policy to reverse, while this Government is

giving money away to the people who need it least.

I know you didn't want to debate directly, Chloe Smith, but the IMF

there said the British economy had been flat, it hasn't been flat, has

it, it has been in recession is, we have shrunk, you dream of flat,

probably? There is no masking the difficult circumstances I think

that face us. I would be delighted to debate Rachel on any day of the

week on some of the confusion that she laid out. You refused to debate

on the programme, if you want to, great, you declined that

opportunity. The circumstances that face us include the on going

eurozone crisis, very difficult, indeed also global oil prices, very

difficult. There are a number of things going on at present which do

mean there are challenges to the UK economy. The IMF's view today is

crystal clear, which is this Government has taken the

appropriate actions. We are on track, says the OECD as well. Takes

down the deficit is incredibly important. We have already removed

a quarter of the debt that Labour left. I'm wondering how much

attention to you pay to the IMF, given they calculated back in

September that there was a 17% chance of us going into recession,

we were practically in T why are you taking these reductions and

saying you cut it by a quarter? Because the latter statement,

excuse me, the latter statement is true. You have cut the deficit not

the debt? The deficit indeed is down by a quarter, that is what we

are tackling. The debts keep on going up, that is the point? We are

on track indeed for both of the targets we have set ourselves

fiscally speaking. The OECD confirms we are on track. I'm

quoting them there. Those two reports today show we are taking

the appropriate action. The OECD report is interesting, it is there

they confirm the actions we are taking are right for growth in the

short and long-term. The IMF report again shows the credibility we have

earned, the space we have earned for ourselves and the British

economy, putting it back on track, allows us to turn to jobs' measures,

such as supporting more infrastructure, supporting houses

and businesses. You are pretty happy with where things are, you

say we are back on track? I quote the EOCD as being on track for the

plan, but circumstances arele cha eings. The report today shows our -

- are challenges. The report today shows our plans are right.

don't need a back up plan? challenges facing us now are very

serious, the actions we are taking now are the right ones. So you

don't need a back-up plan? Government keeps track of the

circumstances at random. Are you privately talking about things you

must implement if this goes wrong? Any Government, of course, keeps a

track of what goes on. Any Government has sets of plans. Our

plans for now are the right one, they are taking the right actions.

But what are those plans that are some where down the pipeline. You

heard Lagarde there talking about the need, possibly to consider VAT

cuts, national insurance cuts, are these part of what you might call

your Plan B? I think Christine Lagarde was clear today in the

point, she thought those policies may come into their own. Do you?

The point is, today's actions are the right ones for where we are, we

need to keep control of the deficit. Unlike the uncosted confusion you

have heard from Rachel and others today. We need to keep track on

those plans. Why is the head of the IMF thinking of a down-the-line

tragedy for you, when it sounds as if you are not. Why is George

Osborne making contingency plans for the eurozone f he can't admit

he's making con-- if he can't admit he's making contingency plans for

his own economy here? Circumstances are very challenges, the eurozone

is one of the largest of those things. If you look at Christine

Lagarde said, the shiver that went down her spine is at the deficit

Labour left us. That was at Greek levels. If we had not acted fa, we

don't continue to act to keep the economy on track, that is where

potential trouble could come from. It is that action that is

appropriate and right today that the IMF confirms. You heard Lagarde

saying clearly, that she would urgently consider more action, the

need for quanative easing, would you welcome that? Any such decision

would be operationally for the Bank of England to do, of course, but it

is, indeed, one of the next lines of defences. The Chancellor has to

approve that, would you like to see him say that? He has said today it

is one of the obvious tools. It is one of the tools available in the

economy at present. It can simulate demand, there are a number of

things we need to work on in the British economy, that may be one of

the tools, others are getting credit to businesses, more

infrastructure and housing. bring you back in, what was the

point you -- I will bring you back in, what was the point you wanted

to make? It is staggeringly complacent, we are �150 billion off

track when it comes to the economy, and the economy is in a double-dip

recession. That is not on track, that is seriously off track. The

IMF have said, for almost a year now, if things get worse, they have

to think about a Plan B. Last word for you, Chloe Smith. Are you

thinking about Plan B, what will that be, people are desperately

crying out for it. I cite the OECDn that we are taking the right plans

and the appropriate actions for now, that has made Britain aself and

credible place. -- a safe and credible place.

economic secretary to the President, we have just done that, let's move

on. The leader of Greece's far left anti-austerity party headed out and

said they would remain in the euro if they won the election. Alexis

Tsipras is out looking for support. Bill Clinton offered strong words

of advice on day 959 of the Greek crisis, we are counting. You cannot

get blood out of a turnip, you can't constrict public sector

activity, in the face of private restriction, and expect growth to

occur, because a confidence fairy appears on your shoulder. The

people who have put out all this money, and demanded 100 cents on

the dollar, at zero inflation, so their investment will never be

rewarded in any shape or form, all they are doing is narrowing and

narrowing the pools of future investment. Bill Clinton speaking

just outside London a little bit earlier today. Joe Lynam is here to

take us through some of the new thoughts. There is some quite

interesting zeitgeist words popping up here. The pan-European deposit

grouornity, what do they mean by that -- guarantee, what do they

mean? This is discussed in the European body politic. It is

discussed at the highest levels of the ECBT means you collectively

guarantee savers' deposits. If a bank goes bankrupt in one country,

the saver will get the money back. The idea that the European and --

the UK would bail out different people's savers, it would likely to

be Germany. It will be mentioned at the informal summit tomorrow.

we talk about project bombs, what is that about? That is the other

big thing. The markets got very excited about that today. Mostly

because project bomb sounds a bit like -- project bonds sounds a bit

like eurobonds, they will fund things like rail and infrastructure.

They want to use the European Central Bank to leverage money

already there to leverage those projects and stimulate growth. That

is going along the lines of Francois Hollande, who is having

the first council meeting tomorrow evening. Do you get the sense

either of these will go ahead? Project bonds definitely L and the

pan-European guarantee will be whispered over the can pays. The

collective pooling of euro debt, the Germans are against that, and

they have resisted proposals from the European Commission and nine

months later implemented them. former Greek Prime Minister, George

Papandreou was in London for the Google zeitgeist conference, he

spoke exclusively to us. What chance is there of Greece

staying in the euro? The Greek people, in the massive majority,

are in favour of staying in the euro. Polls say 75%. Of course,

that does mean we have to follow a difficult programme. There may be

some changes in this programme, but not huge margins of change.

that's depending on those parties taking the, the parties during the

election, who wish to produce the austerity plan, and push it through,

winning, Syriza looks as if it will may be on target, on the 17th of

June elections, to be the one that holds the key. If they hold the key,

no austerity? We have to make a choice, obviously the Greek people

in previous elections vented a lot of anger, despair, pain, because it

has been very painful in Greece, I would say we have lost a lot of our

income. GDP has gone down, in a very short time, not only because

of Greece, but a wider recessionary situation in Europe. And that, I

think, was expressed, not that Greeks don't want change, Greeks do

want change. Of korts, in Greece, if there are parties -- of course,

in Greece, if there are parties that don't want to do this, and

think it will be easy that you can have your cake and eat it too, that

will push us towards the exit. as David Cameron is saying, it will

be a referendum on the euro, is this election essentially a

referendum on the euro? I had proposed the referendum. Elections

are different. It will, of course, be in way ways a referendum, but

not a real one. When you have a number of parties, Syriza is one of

them, it is easy to say, let's have our cake and eat it too.

That's a very nice proposal, but it's outside of reality. When you

suggested a referendum, you were not backed by other European

leaders, most notably President Sarkozy. If you had been backed and

there was a referendum, would Greece be in this mess now? There

would have been a clear answer, that is very democratic. The Greek

people would have decided. They would have owned whatever decision

we would have made. Why was Sarkozy particularly against it? Again, I

would say, to go to the referendum, I believe even then the Greek

people would have said, yes, in favour of remaining in the euro,

with a package, which we then negotiated with the European Union.

I really don't understand, there were a number of reasons, possibly

he was against this referendum, that didn't help my position, of

course, in Greece. Of course now many people are um can go around to

say this is something that -- are coming around to say this is

something that should have happened. Does that mean you were deposed by

Merkel and Sarkozy? I wouldn't put it that way, that is very, very

harsh. That is a harsh decision. I think it was, what we have in

Europe, I think, is Europe has to be managed in a more open,

democratic way, where we bring in our citizens to own this process.

Europe has to become much more a construction by the citizens.

Germany have to behave differently? The Germans, they put up a lot of

money, but if we had put up this money in a different way. For

example, to create eurobond, to create a stronger firewall in the

markets, to support growth, to give more time, and I'm very glad to now

Mr Hollande, President Hollande in France, just reading with the new

leader of PASOK, saying let's give Greece more time. You back that?

do, and I want eurobonds, this is something I have been talking about

since 2009. Two questions in one, what happens if the election

doesn't go your way on the 17th of June, and you will eventually loaf

the euro, and presumably you will default like Iceland and Argentina.

The second question, what happens to the rest of Europe? The Greek

people don't want to leave the euro, it gives securities, even with

difficulties. If we leave the euro, I can tell you it isn't like

Argentina, they were pegged to the dollar, we are not pegged to the

euro, we ous it in every day life, in our contracts and banks, this is

what we have. To change the euro would mean a huge reorganisation.

But at the same time there would be a bank run, people would pull their

money out. If the drachma comes in and we devalue three or four times,

price also go up and we will destroy our economy. Maybe that

would be better for the rest of Europe? For the rest of Europe I

think that would be a negative precedent. What will happen when

people start to say, Greece did this, you know, why not Portugal or

another country. I don't want to call flames, because it becomes a

self-full -- names, but it becomes a self-fulfiling prophesy. Who

knows, somewhere down the line another country does what Greece

has done, that means that the markets will not invest in those

countries. We have to be able to say this is a stable currency, it

won't break up. We have to make decisions, not in Greece, but in

Europe also, that we do want to create the necessary structures to

make sure this currency is a currency that can stay alive. And

it can, but we have to make those decisions. Thank you very much.

The John Lewis partnership model has come a long way since 1928,

when it was formed as a way of heading off rising communist

sentiment. It has earned its place in British psyche as the cuddley

face of capitalism. Hailed by the Prime Minister as a responsible

business model. It is shared or owned by 80,000 members of staff.

Is it the panacea the economy is crying out for, could it be adopted

more widely. I will ask the John Lewis chairman

directly in a moment. First, Allegra Stratton.

Waitrose in well-heeled Marylebone. Oysters, ready to go, a stand

devoted to the different brands of pink, yes pink, champagne. Its

relevance to the rest of Britain may seem limited, but this Waitrose,

and its mother shop, John Lewis, is a blueprint for how to run public

and private realms.. Today in places across the mini-empire will

explain some of the lines, including blue berries. Running a

shop, you don't know what is happening, the sun is shining, we

are selling 100% more of strawberries and rasberries than if

the sun wasn't shining. You have to respond to, that and bring someone

here who knows about that as well as working in wine and all sorts.

Blue berries powers the sales and the in turn that powers the

powerhouse. I have come in and done extra hours to make the sandwiches.

I have. Do you get more money? you do the thing it makes the place

run smoother and making everybody happy, us happy, and the customers

happy. The Government have been shopping for ideas at John Lewis

for a long time. They like the idea of shared employee ownership, that

employees here have a meaningful stake in the economy. They believe

-- company, they believe it could work in the public sector and the

private sector to push forward a different form of capitalism. There

are those who say it is inexactly applied, and that the John Lewis

model has never knowingly been understood. Charley Mayfield is the

chairman of the John Lewis group, he's leading us through the

plumbing of the group. He explains the political attempts to

appropriate it. The Kay John Lewis's name is being used, it is

shorthand for different kinds of ownership. I'm very pleased there

is interest in a different kind of ownership, there is a risk in that,

people oversimplify it, and the message is, this is all about the

John Lewis partnership model. Shorthand, but it should be

accurate, can a John Lewis model be transplanted into the running of

public serves? I have been to some of the pilots, NHS schemes. You are

talking about people trying to do a good job, and when you create

around them a culture and give them the right information and

empowerment to do that job well, they do start preparing better.

Here you have everybody talking about getting an 80% bonus, that

fodback mechanism isn't there in public services. -- feedback

mechanism isn't there in public services, people wanting to do a

good job is always there.? profit sharing we do here, is very

important. But is it the one thing that motivates everybody every

single day. Certainly it is not the only thing. Up on the seventh floor

is what they call the partners' dining room, there partners explain

the motivation. You understood the other people out there are all your

partners, you all work as hard. You do give more. Do you work overtime?

Yes, I do. If need be. They get a bonus linked today their

company's performance, it goes some way to blunting the disparity

between their wage and the chairman's, a differential of 60-1.

Do you think it will go down beneath 60? I think it is important,

we can't ignore the market we are in. We have to attract people into

the partnership and pay them to do so. I'm comfortable with the policy.

What is happening since it was set is the rest of the market has gone

away from us, and we haven't moved our position. I don't feel the need

to move our position, I think we pay people enough, and when you

come to work for the partnership it is about more than just pay.

getting from the ideas warehouse to people's homes, it has not been a

simple process of click and collect, at first the emphasis was on the

public sector and what lessons the John Lewis model will have for that.

Except the public sector doesn't make a profit, so it was felt to be

inproper inappropriate from the model. Many feel a private

partnership is more appropriate. Critics of rolling it out across

the economy point out at the extreme end Lehman Brothers and

Enron fitted this model. You are exactly saying these shares need to

be locked into a company, so people, if a company was looking like it

was going down, those people's entire livelihoods, their jobs

would be lost or any assets or share they had would struggle?

model works extremely W one of the characteristics that makes it

powerful for us, is people's interests are locked into the

business, now and in the future. I don't think we will go bust, but

we actually run the business on the basis that never happens. Today the

partnership has 80,000 partners in it, when it was founded, it only

had 500. We were comparatively, a relatively small business then. And

we have grown, without external shareholder investment, to being

what we are today. That has happened because we have had to

rely on our performance, and latterly we have been able to

borrow from banks and other people as well. But there have been times

during our history, where partners have said we will forego bonus this

year, or two or three years, because the business is going

through a difficult patch. There is instances where people have been

asked to put money into the partnership, that was after the war.

It can gobble your money, as a partner or customer, but it remains

politicians' favourite shop. Charley Mayfield has joined us in

the studio, the chairman of John Lewis. We have the CEO of a high-

tech company, Thank you all of you for coming in. Norman Lamb, can the

rest of British business learn from that kind of partnership model. We

know that Nick Clegg, your leader, has been very keen on this? I think

it is an immensely pour powerful concept. If you give people a stake

in the enterprise where they work, it is not rocket science, but they

are likely to be more committed to it, give them some responsibility.

It is likely to drive productivity gains. All the studies show

employee-owned businesses perform better, particularly in the smaller

sized businesses. Some business schools have shown to be more

resilient through difficult economic times and more profitable.

This is a more powerful concept. And it is try to unlock the

potential of it in the economy. Surely it must feel they are coming

to you and talking about the John Lewis model because we are in

desperate times now? I don't think it is just because we are in

desperate times. What has happened is people are having a re-think

about how to run and own companies. What we have had in the UK for a

long time is a real monoculture, where people focus on a plc form of

ownership: that is not the same in other successful markets. There is

now a welcome interest in different ways to own and run companies, and

if we are an example of that, that is obviously something I'm pleased

about. Can you give more than an example, can you be a blueprint?

I'm nervous about saying to people, take on the way we run our business.

It may not be their cup of tea. Companies are successful if they

really engage their people, one way is to give them a an ownership

stake, and create the structures and culture that makes them feel

truly engaged and empowered and rewarded for their efforts.

wouldn't you endorse it, you saw happy workers making sandwiches

there, what further evidence do you need? John Lewis is a specific

treasure in the economy. It was founded as a family business for 56

years before being mutuallised. The two key features absent from any of

the Government mutuallisation so far, is the idea of the trust. It

cannot be demutuallised. That is what we are proposing with the Post

Office, the idea of a mutually owned Post Office network could be

really powerful, delivering services in the public interest,

and that model locked in for the long-term. If you look at Germany,

for example, where the workers also took a pay cut in the middle of a

boom to restructure the corporate governance there, it is worth

looking at a balance of interest in that corporate governance between

workers and leaders. Do you think it still applies to have winners

and losers in capitalism? That is just a fact, I don't think that

will ever change. The question is can we reduce, can we make it more

equitable, and make it some how that the loss is not as desperate.

And the people who are winning still have a stake in the outcome

to create a win-win-win. In the businesses with capital and

venture-backed businesses, with the IPO of Facebook, and the sale of

autonomy of Hewlett Packard not so long ago. Every time in the

technology world a big win happens, what happens is a lot of money make

money, some to set up her firms, so the to invest in other businesses,

others have lots of money to do good things with that money as well.

There is lots of ways you can win. But capitalism as a tool, yeah,

some people will win and some people had lose, that doesn't mean

even, hey I have lost, I have had to dust myself off and go back out

there again. You are smart if you learn when you lose. It is riot,

got the lesson, how can -- it is right, got the lesson, how can I

share it. How do you put it into practice, what are the things from

within Government you can do? you discover is there are all sorts

of barriers, one of them is a complete lack of awareness for the

potential for it. We are looking for the right to request, giving

employees the right to request their companies set up an employee

share scheme, not forcing, but asking firms to consider it. It is

not very scary? It gets the debate going and raises awareness, both

amongst employees and the companies that receive it. Also looking at

the idea of a single company model which could be taken off the shelf

and employed when someone wants to set up a business. Is that right?

The key thing is which is engaging the energy of the work force.

is the key. Then it is the long- term stable relationships within

the organisation. It can work in both the public sector. The John

Lewis model is only one variant of that. I think it is trou, that

there has been this monoculture -- true, that there has been this

monoculture. If you are an enprepen you are in, you are probably not

aware -- enprenen you are in, you are probably not aware of it, and

the advice is not there. The regulatory system and the tax

system, actually, current, disincentivise people from doing

this. You brought in tax breaks as a thought, now you are reviewing?

The Chancellor announced in the budget there would be a Treasury

review, that is a good start. a slow start, isn't that the

trouble with any sort of mutual t slows everything down? It won't go

on for that long. We want to get it right and make sure we get the

incentives right to ensure we can make it happen. When a business

owner is want to go retire, succession is a key moment to

create an employee and own business, they want to leave a legacy. The

tax breaks that might be available at that point might be critical to

make that happen. Another part of the trend towards ownership and

having a stake in the outcome is about the fact that more and more

young people are setting up their own businesses. That is part of the

same trend. People want to feel the ownership, but be the owner, they

are willing to do that. Why aren't there John Lewises all over the

place, you say lack of awareness, that isn't it? You don't have to go

back very far to a time when there were many more alternatively owned

businesss in the UK and the United States. Up until about the 1970s,

80% of financial institutions were in some kind of mutual interest.

They demutuallised and you can see what happened as a consequence.

Something interesting is the culture of ownership. The great

question is how do we get growth and a form of acceptable capitalism.

The tools people look to are regulatory ones and others. In my

experience, regulation almost always comes second to culture. In

our business, we have 80,000 people in working in Waitrose and John

Lewis. How it works is those 80,000 people own the business, and they

work a bit harder every single day. It is a powerful and cultural model.

Let's talk about that, people have fallen out of love with big

business, big angry capitalism? biggest trend out there is not big

business, it is setting up your own business. Not looking for a job,

but creating your own job. Individual capitalists, and bes

your on boss, by kids in their -- being your own boss, kids in their

20s can have a swing at it and start their own business. Do you

think this can work in public services, if we take it out of the

private spear, can you put it into health? There would have to be a

significant change. One of the incredible, durable successes of

John Lewis, is to be contrasted with Northern Rock, the northern

counties business established before that, embedded in the north-

east. Within 12 years of demutuallisation was a basket case.

Capitalism puts pressure on the financialisation of the assets.

That is why the idea of a trust is huge. In relation to public

services I go to a different model, a third, a third, a third. A third

workers, a third local authority or state. Would you like to see this

applied to public services? could be immensely powerful, you go

to central Surrey health, where they have services, and every

employy has a stake in the organisation. They have the ethos

of the public sector, but they have the fleet of foot that the public

sector doesn't have. Some may think, privatisation by the back door?

isn't, it is all about getting the best out of your staff. If you can

empower people and give them responsibility then it will help.

think it is true, and I share the ownership of my business with my

management team, it incentivises them. We are not just employees and

employ ers, we are sit ens in a market place and an economy, when

business is -- citizens in a market place and the economy, and when

business is good it benefits all of us. It is true but not sufficient

to say if you give ownership to everybody, the business will

therefore be more profitable. Most of the time it will, but it is not

necessarily true that. I want to talk about the climate

you feel we are in now. Firstly, economic, and is it an anti-

business climate at the moment. Is that the vibe you are getting?

of the conundrums is, when people talk about business as a third

person, they will say bad things about it. When they talk about the

business they work for, they are proud of it and will say good

things about it. There is a mismatch there. This is a real

issue about. We have clearly got to get the economy growing. One of the

reasons I'm pleased this ownership discussion has come on to the table

and is a hot area for debate, is because it can play a part in

growth. As was said, one of the interesting things is employee

ownership is shown to be best suited in small and medium sized

enterprises, some of the ones where we will need to see most of the

employment coming from going forward. Do you think the old model

is dead. Do you think top-down business models are basically pre-

2008? I don't think you can say one model will always be superior to

another. The point is, there could be a greater peculiarity of own

inship in the UK -- plurality of ownership in the UK. We are re-

thinking capitalism now? It is about corporate governance and the

way the work force is represented. On the board of John Lewis there is

five of them representing the partnership councils, five are

selected by you, and there is a working out of the common good.

That can work independent of ownership as it does in Germany.

There are issues, I would like to see a living wage for the

contracted out cleaners and them to be included in the John Lewis

partnership model. Is that something the Government would have

to take on, would that be part of it? I'm interested in what Norman

Lamb is saying. What the Government hasn't done so far, and the build

up to the Post Office is not reassuring, I'm pleased to hear

about the asset logs, but there has been the selling off of local post

offices. Those are individual, private businesses, and within

Royal Mail there will be employee ownership.

What do you need to see from the Government for this to push

further? Three things that are essential, the first is endownment,

that the assets are transferred, in perpetuity, for the nation, to the

stakeholders. The second, is this trust, which is that it can't be

then sold off. Mutuallisation, as with Northern Rock, would be

another form of financialisation and privatisation. The third thing

is the corporate governance structure so the funders, the

workers and the users can negotiate a common good together for much

loved institutions, like the Post Office and the BBC. Will you do

that? With the Post Office we are doing that, embeding that model so,

it will always have to act in the public interest, but we will give

everyone within the Post Office network. The sub-postmasters and

the employees, a stake in the business. Interestingly what you

were saying. We need it within the governance. I ThinkBroadband there

is a lot of -- I think there is a lot of common broadband T can be

really effective. -- a common brood bank that can be -- a common thread.

You would like to see it in health, with incentivised bonuses for those

who do well? Let's be open minded. We have a real challenge, we have

to make the money go further with public services, this is an

enormous challenge for the future, particularly with an ageing

population. This can unlock productivity, and can change the

culture. It is also that workers have knowledge of the details of

corporate information. And so there is a public negotiation of strategy.

That is the vital thing. How do you get over the fact that if something

is too successful, we talked about the mutuallisation a decade ago,

things demutuallise. They don't have to. One of the key successes

of the partnership rests on the fact that our interests are only

served by how we run the business. There is something about ownership

which has come to me too much -- come to mean too much about when

you sell something, you transfer ownership, rather than ownership as

being something you do to make things better. Our business is all

about that. Let me whisk you That's all from Newsnight tonight,

Good evening, another very warm today to come for many through

tomorrow. Subtle changes, a lot more cloud to begin with, for

instance. Especially round the western coasts, mist and sea fog,

the sea fog we see developing across eastern areas could linger

some what. Inland the cloud could break up. We could see the cloud

lift to higher levels. By the time we get to the afternoon isolated

and well scattered thunderstorms. They will only hit one or two of

you. Most of you will stay largely dry. The temperatures will be

limited around the coast. Sea breezes developing. Parts of

Cornwall and parts of Wales out in the west, we could see the sea fog

push in every now and again in the far Weston of northern England. For

Northern Ireland brightens up a bit. Sunnier as we saw through Tuesday

afternoon, lots of sunshine through the bulk of Scotland. Mist and sea

fog out to the coast, one or two isolated showers. The contrast

between Wednesday and Thursday on the charts for northern areas.

Temperatures, if anything, cloim a degree or two, as they will do