24/05/2012 Newsnight


24/05/2012

Deputy prime minister Nick Clegg on the UK's growth downgrade and the Eurozone crisis. Plus, the vast sums of money the NHS pays for gluten-free foods. With Emily Maitlis.


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Transcript


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Think a Greek exit from the euro might be a good thing? The deputy

:00:14.:00:18.

PM says you are deluded. Faced with the shrinking economy at home, Nick

:00:18.:00:23.

Clegg was in Berlin today, and says Britain faces dire consequences if

:00:23.:00:28.

Greece leaves. I don't think the break-up of the eurozone, or Greece

:00:28.:00:32.

coming out of the eurozone, can in any way be described as a recipe

:00:32.:00:37.

for success. Instead, I see it as a harsh begin injure, if it were to

:00:37.:00:43.

happen, of even greater instability. For a view of what the future holds,

:00:43.:00:48.

we hear from the former Foreign Secretary, and head of the high

:00:48.:00:55.

street chain Next, Simon Wolfson. Why did the Prime Minister put his

:00:55.:01:01.

culture secretary in charge of the BSkyB deal, when he told him weeks

:01:01.:01:07.

before he was in favour of the deal. Disgraceful misuse of public money,

:01:07.:01:15.

a whistle-blower tells MPs that corruption at A4e was widespread.

:01:15.:01:21.

The company is accused by the audit of systemic abuse, and this time on

:01:21.:01:26.

the coalition's watch. We will ask Chris Grayling if we can trust how

:01:26.:01:34.

public money is being spent. A pizza base on prescription for �17.

:01:34.:01:44.
:01:44.:01:49.

We reveal the vast sums of money paid out for glutton-free food.

:01:49.:01:53.

Nick Clegg has warned of dire consequences if Greece leaves the

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euro. Unemployment would go up and a grinding slowdown in economic

:01:56.:02:01.

activity, he says. His words come as latest figures show the economy

:02:01.:02:05.

shrank more at the beginning of the year than previously thought.

:02:05.:02:12.

Suggesting the double-dip recession could be prolonged.

:02:12.:02:18.

Greece only accounts for half of a per cent of Britain's exports, the

:02:18.:02:23.

equivalent of a corner shop in a big city. However its leaving the

:02:23.:02:28.

euro would be catastrophic, according to the Deputy Prime

:02:28.:02:35.

Minister. No-one should labour under the false hope that some how

:02:35.:02:41.

Greece leaving the eurozone can provide instant relief to the

:02:41.:02:45.

problems we face. But Mr Clegg's partner in Government, David

:02:45.:02:51.

Cameron, was an awful lot more equivocal. The eurozone is at a

:02:51.:02:56.

crossroads, it either has to make- up, or it is looking at a potential

:02:56.:03:02.

break-up. That was a view shared in Germany, when the Bundesbank said

:03:02.:03:09.

the Greek exit would be regretable, but manageable. Further bail out

:03:09.:03:14.

fees should be paid to Greece once Athens makes the cuts announced

:03:14.:03:18.

last March. It appears a schism is developing in Europe, between those

:03:18.:03:23.

who think Europe will get over a Greek exit, and those who think it

:03:23.:03:28.

should be avoided at all costs. Lofg aside the horrendous impact of

:03:28.:03:32.

a return to the drachma for Greece itself what would it mean here to

:03:32.:03:37.

the UK economy. The immediate but most intannable

:03:37.:03:42.

impact will be on confidence. -- intangible impact will be on

:03:42.:03:44.

confidence. You wouldn't know it from those enjoying the sunshine

:03:44.:03:48.

today, but Britain is in recession, and figures show it is even deeper

:03:48.:03:54.

than we thought. A break up of the single currency would accentuate

:03:54.:03:57.

and prolong that. British firms sitting on a cash pile worth

:03:57.:04:01.

billions, would hold off even longer before hiring new staff or

:04:01.:04:06.

making big investments. That would create another credit crunch, where

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banks would be aed frayed to lend to each other and other countries,

:04:11.:04:16.

damaging exports. 40% of British exports are sold into the eurozone,

:04:16.:04:20.

and 15% to the weakest countries in the eurozone. If there was to be a

:04:20.:04:26.

Greek exit, it makes selling goods into those markets extra tough. Add

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in a stronger pound, you can see why British exporters are

:04:31.:04:34.

particularly worried. The best estimates of what would happen if

:04:34.:04:40.

the Greeks left in a disorderly fast,, is a serious recession in

:04:40.:04:45.

Europe, with the loss of up to 6% of GDP across the euro area over

:04:45.:04:50.

the next two to three years, that is the optimistic case pr. It to be

:04:50.:04:55.

a serious financial crisis then the element of damage to GDP would be

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worse than that, and the impact on UK exports would be more severe.

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The most severe impact will be felt in the services sector.

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The services sector is the single biggest component in the British

:05:08.:05:13.

economy, it includes our lawyers, doctors, dentists, and, of course,

:05:13.:05:17.

our bankers. The instability caused by a Greek exit from the eurozone

:05:17.:05:21.

could be immense, especially to the financial services sector. In the

:05:21.:05:25.

past few weeks we have already seen some turmoil in the financial

:05:25.:05:28.

markets, equity prices falling sharply in the UK as well as

:05:28.:05:30.

elsewhere. We are already seeing the effects on the financial sector

:05:30.:05:37.

in the UK. If we do see a wider eurozone meltdown o even just a

:05:37.:05:40.

contained break-up, -- meltdown or even a contained break up, that

:05:40.:05:45.

will have an effect on the banking system. Because that is so

:05:45.:05:52.

important to the economy, it would have wider impact. British tourists

:05:52.:05:58.

might benefit, the cost of a holiday in Corfu would half, and

:05:58.:06:01.

other Greek products would be cheaper. Either way, contingency

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plans are being drawn up all over Europe to mitigate what many fear

:06:06.:06:13.

would be Europe's Lehman moment. Earlier I spoke to the Deputy Prime

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Minister, I started by asking whether the break-up of the

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eurozone is something he could countenance? No, I don't believe

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the eurozone will break up. It is hitting the most serious crisis

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since it was formed, and arguably this is the most serious economic

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and political crisis that the European Union as a whole has faced,

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I would say, since the early 1970s. With the benefit of hien sight, it,

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of course, -- hindsight, it was of course tragic that the monetary

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union was established in a way in which the rules were not adhered to,

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and the homework, the reforms that should have accompanied the launch

:06:53.:06:56.

of the monetary union, never took place, partly, frankly, because

:06:56.:07:00.

money was so cheap, money was sloshing around. Everyone was able

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to borrow money at extraordinarily low rates, everyone lived on the

:07:04.:07:07.

never-never. That has caught up with the whole European continent.

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We have to deal with this huge hangover of that credit binge,

:07:12.:07:17.

which went on for so long. And I think it is really important that

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the eurozone now re constitutes itself, on a more balanced footing,

:07:27.:07:30.

that requires monetary regulation, long-term competitiveness, making

:07:30.:07:34.

sure the banks are properly capitalised. Sharing some kind of

:07:34.:07:38.

fiscal arrangement, so richer parts of the eurozone could help poorer

:07:38.:07:42.

parts and so on. What is missing is putting all those things together n

:07:42.:07:47.

a grand bargain, at the same time. The point is, David Cameron has

:07:47.:07:52.

said very clearly, make-up or break-up. He has countenanceed that,

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does it borey you? I don't think the break -- worry you? I don't

:07:58.:08:02.

think the break-up of the eurozone or Greece coming out, can in any

:08:02.:08:10.

way be described as a recipe for success. I see it as a harbing er,

:08:10.:08:13.

of greater uncertainty and instability. Not just in Greece or

:08:13.:08:16.

south-east Europe, but across Europe, in the UK, and the global

:08:16.:08:21.

economy as a whole. When our economies are as fragile as they

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are, I don't think anyone rationally could advocate that

:08:25.:08:30.

degree of further instability as a route out of the problems we

:08:30.:08:33.

presently face. That is what, by the way, the Prime Minister

:08:33.:08:37.

believes as well. Can you paint a picture of us of what you think

:08:37.:08:40.

Britain would be like if Greece left the euro, practically, what

:08:40.:08:45.

would we see? I think the potential risk is what you get then is an

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immediate question mark about the ability of Portugal, Spain, Italy

:08:50.:08:58.

and other, bigger countries, to pay their way, sort out their public

:08:58.:09:04.

finances, and rescue their sick banking system. That in turn has a

:09:04.:09:07.

knock-on effect on the British banking system which, is very

:09:07.:09:11.

exposed, one way or another, to those other economies. Then, of

:09:11.:09:15.

course, that, in turn, could set off a chain of uncertainty. The

:09:15.:09:22.

thing that is most person ni, to an emerging economic recovery, is more

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uncertainty, more big question marks about the future. That is

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what we must avoid, I have no doubt in my own mind, that Greece exiting

:09:29.:09:32.

from the eurozone increases rather than decreases those question marks.

:09:32.:09:36.

Apart from a sense of uncertainty, do you think it would mean more

:09:36.:09:40.

unemployment, less growth, that we would stay in recession for longer?

:09:40.:09:47.

I have no doubt in my mind that if you have a chain reaction in the

:09:47.:09:50.

eurozone, where you get this contagion effect, as they call it

:09:50.:09:56.

in the jargon, from Greece to other, bigger countries, that will

:09:56.:10:00.

undoubted lie lead and could lead to higher unemployment --

:10:01.:10:04.

undoubtedly lead and could lead to higher unemployment, less foreign

:10:04.:10:08.

investment, companies sitting on their hands. Not investing in new

:10:08.:10:13.

plant machinery, and factories like this. In other words, a grinding

:10:13.:10:17.

slowdown in economic activity, which is already fairly fra guy. It

:10:17.:10:23.

is something that I think nobody -- fairly fragile, I think it is

:10:23.:10:29.

something nobody could rationally wish for. You say that the economy

:10:29.:10:33.

is on the road gently to recovery, people would say we are going the

:10:33.:10:38.

other way in recession, downgraded growth today, but the rest of the

:10:38.:10:42.

eurozone is stable? It is disappointing enough that the

:10:42.:10:46.

figures for GDP in the first quarter were negative, and they

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have been downgraded further. I think it means we need as a

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Government to shift up a gear, to redouble our efforts, to do more to

:10:55.:10:58.

help support demand in the British economy, whilst, of course, at the

:10:58.:11:04.

same time, making sure that we continue to enjoy the confidence of

:11:04.:11:08.

the market, so we have the space to do those things. What do I mean by

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that? Well, I think the fact that we have done this heavy lifting

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over the last two years, to prove our credentials in sorting out the

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sky high structural deficit that this country has inherited from the

:11:21.:11:24.

previous Government, should now be used, that credibility should now

:11:24.:11:29.

be used as a guarantee, if you like, as an insurance kol policy to get

:11:29.:11:33.

more money into the British -- insurance policy to get more money

:11:33.:11:38.

into the British economy, into homes, and small and medium-sized

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enterprise who can't get hold of credit from banks at reasonable

:11:42.:11:45.

rates, and creating more jobs for young people. With me now to

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discuss the difficulties in the eurozone and at home, the chief

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executive of Next, and Tory peer, Lord Wolfson, and David Miliband,

:11:56.:12:02.

is here also. I'm wondering when you look at the eurozone, Simon

:12:02.:12:06.

Wolfson, do you think we are beyond political solutions, what does the

:12:06.:12:09.

hard-headed businessman want to do? I think the biggest problem in the

:12:09.:12:14.

eurozone is being largely ignored. The biggest problem in the eurozone

:12:14.:12:17.

is the structural lack of competitiveness of places like

:12:17.:12:20.

Greece and Spain. Over the last ten years wages in Spain and Greece

:12:20.:12:26.

have gone up by 20-30% relative to Germany. Their goods are simply too

:12:26.:12:29.

expensive. It used to be cheap to go on holiday to Spain or Greece,

:12:29.:12:35.

now it is expensive. That lack of competitiveness means they have

:12:35.:12:39.

between 20-25% unemployment. How can an economy dig itself out of a

:12:39.:12:43.

hole when it has 25% unemployment. Even those people advocating

:12:43.:12:46.

helping them are saying you have to have less austerity. You are sort

:12:46.:12:51.

of saying free them from this, get them out? It is difficult to see

:12:51.:12:53.

how anything other than devaluation can get them out of the hole they

:12:53.:12:57.

are in. That means leaving the euro? Exactly. David Miliband, it

:12:57.:13:01.

is ironic that such a deeply undemocratic institution like the

:13:01.:13:06.

EU is now having its fate decided by the electorate in Greece?

:13:06.:13:10.

don't accept that, what is happening is that Greece, a

:13:10.:13:15.

relatively small part of the European economy, with a deep-

:13:15.:13:18.

seated set of problems, that weren't address two or three years

:13:18.:13:23.

ago, is threatening to upend the whole of the European project. The

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economics and politics are pulling in opposite directions. The first,

:13:26.:13:30.

best solution, is actually to keep Greece in. To avoid the risks that

:13:30.:13:35.

are attendant on its department tue, but just mudling along, and failing

:13:35.:13:39.

to address the lack of debt mutualisation, on the one hand, the

:13:39.:13:43.

financial instability in the Spanish banks, remember Spain and

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Greece are not in the same catagory. You think they are mudling along?

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There has been a chronic lack of leadership. What has happened since

:13:58.:14:04.

the famous walk on the beach in Deauville, and President Sarkozy

:14:04.:14:08.

basically rolled over, for the past few years you have had Mrs Merkel

:14:08.:14:12.

with no counter balance in Europe to Germany orthodoxy. The one hope

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is the election of President Hollande in France does change the

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balance. There is a chance, not to put off reform, but to combine

:14:19.:14:23.

reform, with a change to this austerity package, which frankly,

:14:24.:14:29.

is killing any chance of growing the European economy. Is Hollande a

:14:29.:14:36.

game-changer here, he spooked the austerity central politicians

:14:36.:14:41.

hasn't he? He has, unfortunately, a little less austerity, there will

:14:41.:14:45.

be austerity in Spain and other places anywhere, but it won't get

:14:45.:14:51.

them out of the hole. It comes back to the lack of competitiveness. The

:14:51.:14:58.

Germans are to lend more money to keep things going, there is no

:14:58.:15:02.

state solution here, it is just a Band Aid. Do you think we have to

:15:02.:15:05.

see Merkel cave on this one? That is down to the German people.

:15:05.:15:09.

Ultimately the German people and the Government are the people being

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asked to pay. I don't think that for British politicians or

:15:13.:15:16.

businessmen to dictate to the German people, they have to make

:15:16.:15:19.

that decision themselves. Do you notice the rhetoric changing now

:15:19.:15:26.

since Hollande won, do you think the left here is learning lessons

:15:26.:15:30.

from Hollande? Remember Prime Minister Monti, a centreist

:15:30.:15:36.

technocrat, and in Spain, they are desperate for a way out of this

:15:36.:15:40.

Bermuda triangle they have got. On the one hand they have deficits and

:15:40.:15:42.

debts, and then financial institutions and then no growth.

:15:42.:15:46.

They have to break out of that. The election of President Hollande

:15:46.:15:49.

offers them a chance to join the debate they can't start but want to

:15:50.:15:53.

be part of. I think what has happened is collective austerity,

:15:53.:15:56.

everybody cutting their budgets at the same time has fallen foul of

:15:57.:16:00.

the basic rules of economics, if consumers aren't spending and

:16:01.:16:03.

businesses aren't investing, export markets are down and Government

:16:03.:16:07.

starts cutting. Germany is doing well on it? It is exporting to

:16:08.:16:12.

China. The truth about the rest of the eurozone and us is more than

:16:12.:16:17.

50% of our trade is with each other. We are a case study of that in the

:16:17.:16:22.

UK. I guess the business model, if these countries, if the pigs,

:16:22.:16:26.

receipt let's say, were not doing well as independent parts of your

:16:26.:16:32.

venture, you would let them go, you can't do that politically?

:16:32.:16:35.

someone is so burdened with debt, they never have a chance to pay you

:16:35.:16:39.

back, they can't go out and get a job, because they are so busy

:16:39.:16:42.

labours to pay your debt, then you have to say you will have to write

:16:42.:16:46.

some of that debt off. You will have to put them back in a position

:16:46.:16:50.

where they can begin to grow. I can't see how that will happen

:16:50.:16:54.

without devaluation. One thing I don't agree with David, I don't

:16:54.:16:58.

think Europe can borrow its way out of a debt crises. What about the

:16:58.:17:03.

bigger question of a referendum on EU membership, it is looking almost

:17:03.:17:07.

certain that Labour would put it in the next election manifesto, should

:17:07.:17:10.

they? I voted in the House of Commons last year against a

:17:10.:17:13.

referendum to be held at the moment. The priority is jobs and the

:17:13.:17:15.

priority is getting to grips with this eurozone cry is is. The

:17:15.:17:19.

tragedy in Britain at the moment -- crisis. The tragedy in Britain at

:17:19.:17:21.

the moment, is on the economics the Government are backing the wrong

:17:21.:17:25.

horse, which has led to a double- dip recession. On the politics they

:17:25.:17:32.

have withdrawn to the edge Europe. When people say to me, look this

:17:32.:17:35.

fiscal pact, are you for it origins it, I'm against it for different

:17:36.:17:39.

reasons to David Cameron. He's against it on political ground this

:17:39.:17:42.

fiscal pact, which is about the here and now of the European

:17:42.:17:45.

economy. I'm against it on economic grounds, that is the agenda that

:17:45.:17:49.

British people want to address. Sure, you can come to questions of

:17:49.:17:53.

the democratic deficit in Europe, what exists today is a delivery

:17:53.:17:58.

deficit, and the lack of leadership is an absolutely chronic problem.

:17:58.:18:02.

This is beigeer question, it will increase as a bigger - bigger

:18:02.:18:06.

question, it will increase as a bigger problem. Would you call for

:18:06.:18:09.

a referendum on something that is clearly a big part of what the

:18:09.:18:13.

British public are talking about? I'm sure that Ed would advise me,

:18:13.:18:18.

rather than me advising him, if I want to offer him advice I will do

:18:18.:18:22.

that through him and not through you. It is a empt iting offer you

:18:22.:18:26.

are giving me. There is -- tempting offer you are giving me. There is a

:18:26.:18:28.

bigger game here, what is the politics and economics of the

:18:28.:18:31.

future of Europe. I think it is very important that we understand

:18:31.:18:35.

that for 40 years British Governments, Tory and Labour, Mrs

:18:35.:18:38.

Thatcher and Tony Blair, have insisted Britain has to be at the

:18:38.:18:44.

top table. The truth today is we are not in the room. Would you go

:18:44.:18:48.

for a referendum on this? I don't think so, the membership of the EU

:18:48.:18:51.

is another matter all together. We have to focus on preparing Britain

:18:51.:18:55.

for the impending crisis in the eurozone, there is a lot that can

:18:55.:19:01.

be and needs to be done. If someone wrote you a note saying

:19:01.:19:05.

something would be a great thing, would you assume they were neutral

:19:05.:19:10.

enough to oversee a judgment about that thing. That is the question

:19:10.:19:15.

the Prime Minister faces after another day of the Leveson Inquiry.

:19:15.:19:22.

The inquiry was told that Jeremy Hunt had written to his boss four

:19:22.:19:26.

weeks before he was put in charge of the judicial decision that he

:19:26.:19:30.

thought the deal was a good idea. We watched the day in court.

:19:30.:19:35.

In this massive sprawling inquiry, there have been many highlights,

:19:35.:19:40.

but perhaps the most incendiary part was the publication last month

:19:40.:19:46.

of the 163-pages of e-mails, that suggested, at least, a remarkable

:19:46.:19:50.

level of collusion, between a company making a commercial kid bid,

:19:50.:19:54.

and the minister deciding the -- commercial bid, and the minister

:19:54.:19:59.

deciding the fate of that bid. For the most part the e-mails were

:20:00.:20:03.

written by this chap, Frederic Michel, head of corporate affairs

:20:03.:20:06.

for News Corporation in Europe. There were reports back to his

:20:06.:20:12.

colleagues about his contact with this chap. Adam Smith, was, until

:20:12.:20:18.

recently, special advise Tory the Culture Secretary, Jeremy Hunt. --

:20:18.:20:22.

adviser to Culture Secretary, Jeremy Hunt. Today we got to hear

:20:22.:20:30.

from both people. Frederic Michel repeatedly had the question, did

:20:30.:20:34.

the e-mail reflect what he had said, or had he puffed himself up to

:20:34.:20:41.

impress his boss. My memos, internal e-mails, were an accurate

:20:41.:20:45.

account of conversations we had. it that you believe this is a

:20:45.:20:49.

communication with the Secretary of State, through the mouth of Mr

:20:49.:20:53.

Smith? I believe that whatever Mr Smith tells me represents the view

:20:53.:20:57.

of the Secretary of State. Time and to imagain, Mr Michel denied that

:20:57.:21:03.

there was -- time and time again Mr Michel denied there was anything

:21:03.:21:07.

improper with this contact. Time and time again he also denied he

:21:07.:21:11.

had any clue of what Jeremy Hunt's view of the bid was. It is

:21:11.:21:15.

something I can't say. Counsel for the inquiry seemed to have some

:21:15.:21:20.

trouble with this account of events. Particularly as he began to take

:21:20.:21:26.

the witness through pages and pages of e-mails. One in particular, from

:21:26.:21:31.

January 23rd of 2011. Again, it is a report back from a

:21:31.:21:35.

conversation with Smith, decribing Jeremy Hunt's view, it is almost,

:21:35.:21:39.

he writes, game over for the opposition. He says that he

:21:39.:21:43.

specifically said he was keen to get the same outcome and wanted JRM,

:21:43.:21:47.

that is James Murdoch, to understand he needs to build some

:21:47.:21:51.

political cover over the process. Later he says, that they would get

:21:51.:21:55.

there in the end, and that he shared their objectives. That means

:21:55.:22:00.

only one thing, that he shared the ultimate objective of News

:22:00.:22:04.

Corporation, which was to secure the remaining shares in BSkyB.

:22:04.:22:08.

with due respect, you wouldn't take that leap in terms of interpreting

:22:09.:22:14.

it. Next up, was, Adam Smith, he's already resigned from his job as

:22:14.:22:18.

special adviser to hunt hut hunt, over this affair. He told the

:22:18.:22:23.

inquiry that he saw his role at the time as acting as a sort of point

:22:23.:22:27.

of contact for the interested parties in the bid. However, under

:22:27.:22:31.

questioning, he conceded that the only interested party that he had

:22:31.:22:34.

any contact with, whatsoever during this whole time, was, News

:22:34.:22:39.

Corporation. As Mr Smith approached to give

:22:39.:22:44.

evidence, he gave the briefest glance at Frederic Michel, who was

:22:44.:22:49.

leaving. Mr Smith refused to accept that his old boss was always a

:22:49.:22:52.

committed supporter of the bid, that he had already made up his

:22:52.:23:00.

mind. Today, though, he was presented with a memo. Written to

:23:00.:23:09.

David Cameron on the 19th 2010, he writes, James Murdoch is pretty

:23:09.:23:14.

furious at Vince Cable's referral to Ofcom. He writes that if they

:23:14.:23:18.

block their media sector they will suffer for years. He thinks it

:23:18.:23:26.

would be totally wrong to cave into the Mark Thompson/Channel

:23:26.:23:31.

4/Guardian line that this represents substantial change of

:23:31.:23:34.

control. In terms of his judgment he was favourable to the bid?

:23:34.:23:40.

I suppose the personal view there was, yes. This personal view wasn't,

:23:40.:23:43.

as it were, a revelation, it is true it has been communicated

:23:43.:23:48.

privately to the Prime Minister, but it is a view which you knew any

:23:48.:23:56.

way? And had been publicly stated. I asked you a quarter of an hour

:23:56.:24:01.

ago was he supportive of the bill, you gave me a non-committal answer.

:24:01.:24:04.

We are now reaching a point where you might agree with me that he was

:24:05.:24:08.

supportive of the bid. One month after he wrote this memo, hupbtd

:24:08.:24:12.

Hunt was handed responsibility for -- Jeremy Hunt was handed

:24:12.:24:16.

responsibility for the bid. Vince Cable was striped of the role,

:24:16.:24:23.

having been caught on tape by undercover reporters that he had

:24:23.:24:26.

declared war on Rupert Murdoch. There were questions for Jeremy

:24:26.:24:30.

Hunt, he insisted he followed the advice of independent regulators

:24:30.:24:33.

and hasn't done anything wrong. There are questions too for the

:24:33.:24:37.

Prime Minister, not least, if Vince Cable was unsuitable to decide the

:24:37.:24:43.

bid, because he had declared strong views on the subject, why was

:24:43.:24:47.

Jeremy Hunt suitable to decide the bid, when he had already declared

:24:48.:24:51.

his views, although in the opposite direction. Tomorrow Adam Smith will

:24:51.:24:55.

continue his evidence, perhaps as early as next week, his former boss

:24:55.:25:03.

too will take the stand. Is the welfare-to-work business, a

:25:03.:25:07.

multibillion pound scandal, that is what a former auditor told

:25:07.:25:11.

parliament in secret this week, now we can reveal the testimony in full.

:25:11.:25:15.

He claims there is an unethical culture at companies like A4e,

:25:15.:25:22.

fraud is rife, and the bosses are dishonest, and untalented, but pay

:25:22.:25:26.

themselves handsomely. Public money is being chronically misused. The

:25:26.:25:33.

document put before MPs describes serious problems at another body

:25:33.:25:37.

called Working Links, part-owned by the Government.

:25:37.:25:42.

We will put that to Chris Grayling in a moment. First we have this.

:25:42.:25:47.

This is a story about a company that has just been cleared of

:25:47.:25:51.

systemic fraud. About civil servants who don't see the point of

:25:51.:25:54.

investigating that company's past activities, and a committee of

:25:54.:25:58.

companies who didn't want you to hear the evidence you are about to.

:25:58.:26:05.

The company is A4e. Its only source of income is contracts from the

:26:05.:26:08.

Government, main low placing unemployed people into jobs. A

:26:08.:26:11.

business -- main low placing unemployed people into jobs. A

:26:12.:26:17.

business that made Emma Harrison, the head, millions last year. A man

:26:17.:26:21.

called Eddie Hutchinson has told companies the company tolerated

:26:22.:26:27.

systemic fraud. Mr Hutchinson joined A4e in October 2010, about a

:26:27.:26:33.

year before David Cameron made this official visit to the firm. Soon

:26:33.:26:36.

the whistle-blower became concerned of the incidents of frauds and

:26:36.:26:39.

irregularities, there is no suggestion that anybody in these

:26:39.:26:44.

pictures is involved. But, the whistle-blower says, he ran up

:26:44.:26:47.

against a complete absence of corporate governance and

:26:47.:26:51.

accountability. On Tuesday, the whistle-blower told this committee

:26:51.:26:56.

of companies, sitting in private, that the frauds generally involved

:26:56.:27:00.

falsifying the outcome of job placements, for the which the

:27:00.:27:04.

company was paid thousands at a time. He said some of the issues

:27:04.:27:09.

had existed for a considerable time, including systemic fraud, that had

:27:09.:27:12.

been perpetrated and continued to be undertaken within the company's

:27:12.:27:19.

operations. It gets curiouser, a year before Mr Hutchinson joined

:27:19.:27:23.

the company, this report, leaked to Newsnight two months ago, was drawn

:27:23.:27:29.

up by one of his predecessor, in it there is a warning of potential,

:27:29.:27:34.

systematic failure, to mitigate the risk, towards fraud. Knowing the

:27:34.:27:38.

DWP was suggesting A4e, we handed this report to civil servants, now

:27:38.:27:42.

we know what happened to it. What should be published and what

:27:42.:27:47.

should not be published when it comes to an internal investigation?

:27:47.:27:51.

Once the committee went into public session, the civil servant in

:27:51.:27:55.

charge told MPs his investigators were focusing on the current risk

:27:55.:28:02.

of fraud in A4e, not those revealed in the 2009 document. You were

:28:02.:28:07.

happy to say that only three, A4e, it tells you nothing about the

:28:07.:28:10.

company, does it? Let me say it again, that report says they

:28:10.:28:15.

believe there could be fraud in nine case. A4e as a company believe

:28:15.:28:19.

they did further investigation to conclude only three of them were

:28:19.:28:24.

fraudulent. You are quite happy. am not quite happy, my letter makes

:28:24.:28:32.

it very clear I am now reviewing every single one of the nine cases.

:28:32.:28:36.

When Mr Hutchinson, the whistle- blower, found out about this report

:28:36.:28:41.

he was puzzled. The civil servants had already been assured that

:28:41.:28:51.
:28:51.:28:51.

nothing was wrong before this. He This is what Mr Hutchinson has to

:28:51.:28:56.

say about the bosses of A4e, and another company called Working

:28:56.:29:00.

Links, where he worked and claimed to have found similar evidence of

:29:00.:29:05.

fraud. While many people employed in these organisations are honest,

:29:05.:29:09.

highly capable and talented individuals, I do not see the same

:29:09.:29:12.

characteristics in others in the most senior positions in these

:29:12.:29:16.

companies, whose interests, it would appear, is to serve only

:29:16.:29:21.

themselves, regardless of unethical behaviour persisting around them.

:29:21.:29:26.

He says it was disgraceful misuse of Government and taxpayer funding,

:29:27.:29:31.

characterised by unethical behaviour, mismanagement,

:29:31.:29:34.

inadequate corporate governance and risk management. And excessive

:29:34.:29:38.

payments, in the form of salaries and bow news et cetera. Paid to

:29:38.:29:43.

those who head up these organisations. In short, I see it

:29:43.:29:50.

as a multibillion pound scandal. Both A4e and Working Links, deny

:29:50.:29:54.

widespread fraud within their organisations.

:29:54.:29:58.

A4e told us in statement tonight, the majority of allegations made by

:29:58.:30:01.

Mr Hutchinson are unfounded and unstrew. From the evidence we have

:30:01.:30:05.

seen, we can state the remaining small number of allegations, which

:30:05.:30:10.

had any substance, were fully examined, in all but one of those

:30:10.:30:14.

cases, it was concluded there was no case to answer. None of the

:30:14.:30:19.

issues raised prove there was systemic fraud, at A4e, all relate

:30:19.:30:23.

to historic contracts. Chris Grayling joins me now. Let's go

:30:23.:30:26.

through some of the quotes from Eddie Hutchinson now. The incidents

:30:26.:30:30.

of fraud and irregularities was a major problem for the company, ever

:30:30.:30:34.

increasing volume of frauds, a multibillion pound scandal. Is this

:30:34.:30:37.

something you are going to reinvestigate? Let's be clear.

:30:37.:30:42.

First of all, important to say this is not about the coalition's work

:30:42.:30:46.

programme. There is no suggestion in any of this, the NAO, the

:30:46.:30:51.

National Audit Office, has given it a completely clean bill of health.

:30:51.:30:55.

We have ring-fenced the taxpayer, the money into welfare-to-work is

:30:55.:30:59.

paid for by companies like A4e themselves, we only pay them months

:30:59.:31:03.

down the track when someone is in work. There is a lot of contracts

:31:03.:31:10.

that have been awarded, this comes 2010, 2011, when you were in power?

:31:10.:31:13.

We are talking about the tailend of the contracts introduced by the

:31:13.:31:18.

previous Government. The ones we scrapped a few months into taking

:31:18.:31:22.

office. Paul Mason made reference to the document made two months ago.

:31:22.:31:30.

Two months ago we decommissioned a detailed investigation. We sent in

:31:30.:31:33.

independent accountants, and called in a third firm of independent

:31:33.:31:36.

accountants to look at the issue. Are you saying it is completely

:31:36.:31:40.

clean now? They have come back to us and said they have found no

:31:40.:31:46.

evidence of systemic fraud. What they did find was evidence of lax

:31:46.:31:50.

management in one contract, I terminated the contract. If I find

:31:50.:31:55.

it again I will terminate other contracts. We have not found

:31:55.:31:59.

evidence of systemic fraud. There has been no contract issued since

:31:59.:32:04.

this was looked under, all those contracts are now ended?

:32:04.:32:10.

contracts have all ended, more than a year ago. This is from 2010-2011,

:32:10.:32:15.

it can't have ended, he is talking about that? The work programme took

:32:15.:32:20.

over from all programmes in 2011, it is a payments by results. We

:32:20.:32:24.

don't pay anything other sthan a small attachment fee until they

:32:24.:32:28.

have kept something in work for six months. At that point the taxpayer

:32:28.:32:32.

get a good deal. Is this a fit and proper company? What we have here.

:32:32.:32:36.

That is a simple question, is it a fit and proper company, from

:32:36.:32:39.

everything you have heard here? There are question marks about the

:32:39.:32:43.

evidence delivered to the select committee. This are question marks

:32:43.:32:47.

about the individual who gave that evidence. I have sent in. What does

:32:47.:32:54.

that mean, you don't believe him? won't sit in the media and give a

:32:54.:32:57.

detailed examples. I have significant doubts about the

:32:57.:33:02.

information to the select commity. I have sent our independent

:33:02.:33:07.

solicitors in to see if there is systemic fraud. They said no, they

:33:07.:33:12.

had found in one contract lax management, and I terminated the

:33:12.:33:14.

contract immediately. This company something you and the Government

:33:14.:33:19.

want to be associated with? I have to be careful. What I can't do is

:33:19.:33:22.

just terminate contracts without evidence, possibly on the say so of

:33:22.:33:26.

a former employee, who stayed for a few months. What I should do, lodge

:33:26.:33:31.

clo, is send in the accountants, and the independent auditors. And

:33:31.:33:38.

they have not found evidence of Isis temic fraud. You didn't --

:33:38.:33:42.

Systemic fraud. You didn't send them in to look at allegations in

:33:43.:33:48.

2009, and this is what we are talking about 2010/11? The things

:33:48.:33:53.

talked about we are looking at. And we are also calling on former

:33:53.:33:57.

Labour ministers, to release to us the contracts. We can't see as

:33:57.:34:01.

ministers the documents before 2010. We are asking them to make those

:34:01.:34:07.

documents public so, we can see what previous ministers, including

:34:07.:34:12.

Margaret Hodge, who was Employment Minister in the last parliament.

:34:12.:34:17.

this was a fraudulent benefit claimant, you would be in there

:34:17.:34:22.

like a tonne of bricks, why not here. If somebody walked in and

:34:22.:34:27.

said this woman is dodgy, you would not expect us to racket on the hoof

:34:27.:34:31.

and confirm up dodgey. You have to be very careful when a whistle-

:34:31.:34:35.

blower, about whom there are certainly question marks, and makes

:34:35.:34:39.

allegations which is not consistent in what independent auditors have

:34:39.:34:43.

said. A quick question on the Leveson Inquiry before, was Jeremy

:34:43.:34:47.

Hunt the right person to put in charge in a quasi-judicial role, in

:34:47.:34:52.

a bid he clearly favoured. Was that a misjudgment by the time? The key

:34:52.:34:57.

point about Jeremy Hunt, clear all the way through. He took all the

:34:57.:35:00.

independent advice he was given, at each stage of the process, he

:35:00.:35:05.

called in the appropriate external advice. He already had a memo

:35:05.:35:10.

saying hunt unhunt was in favour of the bid, why would he do that?

:35:10.:35:14.

the hunt had been cleared publicly before that about his view. He said

:35:14.:35:17.

nothing was consistent. He took over a prohe is is, he followed the

:35:17.:35:21.

letter of the process, he took the independent advice he was supposed

:35:21.:35:25.

to take. He took the advice and followed the rulings, suggestions

:35:25.:35:28.

and advice. He think he behaved completely properly in managing the

:35:28.:35:37.

process. Lt most people order pizza picking up the phone, some do it

:35:37.:35:42.

with a prescription from the NHS. The health service spent �20

:35:42.:35:46.

million on glutton-free prescriptions, including cakes and

:35:46.:35:51.

biscuits for people who have an intolerance for wheat and glutton.

:35:51.:35:58.

What was not recorded is the handling figures. One NH Trust was

:35:58.:36:05.

led to spend �17 on a single pizza base. Many worry the hidden costs

:36:05.:36:10.

of prescriptions is giving people a bad name. We will ask if the cost

:36:10.:36:20.
:36:20.:36:23.

is prohibitive and should the NHS pay at all. Spring time in the Lake

:36:23.:36:33.
:36:33.:36:42.

District, where nicer for a little picnic.

:36:42.:36:47.

OK, I admit it, it is not the healthiest food I could have chosen.

:36:47.:36:56.

All these types of foods are available for free on the NHS.

:36:56.:37:02.

So how can this be happening? With an estimated one in 100 of us

:37:03.:37:06.

having coeliac disease, the NHS's resources are being asked to

:37:06.:37:10.

stretch to fatty foods like these, all available on prescription, from

:37:10.:37:17.

your doctor. I think it is quite perverse,

:37:17.:37:24.

considering the fact that we are facing time of global obesity. This

:37:24.:37:27.

country is now the fattest nation in Europe. As clinicians we should

:37:28.:37:33.

be doing what we think is best for our patients and their health. We

:37:33.:37:39.

are sending the round message to people if we are prescribing foods

:37:39.:37:43.

that are high in sugar and processed cash hide demonstrate.

:37:43.:37:47.

rural areas like Cumbria, the local pharmacy is the nearest source of

:37:47.:37:54.

food for coeliacs, they have an intolerance to glutton, found in

:37:54.:37:59.

wheat, Barlow and rye. Eating it can lead to debilitating health

:37:59.:38:05.

problems. Prescribing it is costing the NHS dear. Across the Pennines

:38:05.:38:09.

in Rotherham, an investigation into the rising costs led to an

:38:09.:38:16.

unappetising discovery. One prescription comes to mind, the

:38:16.:38:22.

cost of the two pizza bases was �8.99, we incurred handling charges,

:38:22.:38:27.

which made the total cost of prescription �35 for two pizza

:38:27.:38:33.

bases. Here is how it breaks down, two glutton-free pizza bases come

:38:33.:38:42.

in at �8.95, admin is �10, handling and delivery costs �13, �1.77

:38:42.:38:48.

covers formcy costs. Lofg the NHS with a bill of �-- leaving the NHS

:38:48.:38:54.

with a bill of �33.29, four-times more than the original product. It

:38:54.:38:59.

is not the only example. Dr Fayyaz Chaudri overhauled the system in

:38:59.:39:05.

Cumbria. His reforms also uncovered some indigestible hidden costs.

:39:06.:39:10.

was something we weren't really aware of until we actually started

:39:10.:39:15.

analysing the whole scheme. We were quite shocked by some of the costs

:39:15.:39:24.

we saw that there were, occasions when there was a bread loaf costing

:39:24.:39:31.

�2.50, and there was a handling fee of �32. We approached leading

:39:31.:39:34.

manufacturers who blamed extra charges on the wholesaleers. They

:39:34.:39:44.
:39:44.:39:46.

told us they would be keen to investigate any relevant cases.

:39:46.:39:52.

The arguments are having an impact on people like Geoff Martin, he

:39:52.:39:57.

lives in Oxfordshire. Another area reviewing whether to continue

:39:57.:40:00.

funding glutton-free products. He reLois on his prescription to

:40:00.:40:09.

ensure a decent range of food. is a lifetime Complaint, when you

:40:09.:40:19.
:40:19.:40:21.

have it, there is no cure for it. There is no remedy. The only

:40:21.:40:26.

solution is eating food that is glutton-free. It is different if

:40:26.:40:31.

you live near a large supermarket, this one in the Lake District

:40:31.:40:36.

stocks a big range of glutton-free products. It it is more expensive

:40:36.:40:42.

than normal food. Which is why the NHS is being asked to provide

:40:42.:40:47.

staples like bread and pasta. Only last year coeliac qu.ish oud

:40:47.:40:52.

guidelines saying foods like -- issued guidelines that foods like

:40:52.:40:56.

this should be prescribed, only in exceptional circumstances. We have

:40:56.:41:00.

heard from five NHS Trusts who haven't even issued the guidelines.

:41:00.:41:04.

We have been told that some people are getting these prescriptions

:41:04.:41:08.

from their doctors, even though they haven't been diagnosed with

:41:08.:41:14.

coeliac disease. When we reformed the prescribing of glutton-free

:41:14.:41:19.

products, the minority of people were accessing treatments and

:41:19.:41:25.

didn't have a diagnosis of coeliac disease. We have a diagnostic

:41:25.:41:35.

pathway, to make sure all patients with access to the products have a

:41:35.:41:39.

definite diagnosis of coeliac disease. If they are not diagnosed

:41:39.:41:43.

formally they shouldn't been entitled to the prescriptions at

:41:43.:41:47.

all. GPs need to be aware of that. Never the less, in Cumbria and

:41:47.:41:51.

elsewhere, the numbers of people being diagnosed are going up. For

:41:51.:41:57.

many of them, prescriptions of glutton-free foods, are an

:41:57.:42:02.

invaluable service. But hand-outs of cakes and biscuits, increasingly

:42:02.:42:07.

there being seen as rations, which the NHS can't afford.

:42:07.:42:12.

We ask for an interview with a minister from the Department of

:42:12.:42:15.

Health, nobody was available. They have since issued a statement

:42:15.:42:25.
:42:25.:42:36.

With me now, Jeremy Woods, managing director of glutton-free company,

:42:36.:42:42.

and David Craig, order of Fleeced, locking into Government waste. Does

:42:42.:42:47.

it really cost that -- looking into Government waste. Is there really

:42:47.:42:55.

that much to do with cost, the price is exorbitant? Ten years ago

:42:55.:43:00.

the only way coeliacs, and it is a very debilitating disease. We must

:43:00.:43:04.

remember they have to have glutton- free food. Ten years ago the only

:43:04.:43:07.

way of getting it was through the pharmacies. Nowadays many

:43:07.:43:13.

supermarkets, as you showed in the film. A lot of food does not have

:43:13.:43:18.

glutton in, that they can eat. They can buy alternatives to the stuff

:43:18.:43:21.

they can't? A lot of the supermarkets have special fixtures

:43:21.:43:28.

for glutton-free food. If we follow the example of Norway, where the

:43:28.:43:33.

Government issues those prescribed with coeliac's disease with

:43:33.:43:39.

vouchers, and can redeem with a scannable barcode.

:43:39.:43:43.

Are we pulling the wrong people -- putting the wrong people in charge

:43:43.:43:47.

of this, or would it happen whatever was in charge? When it

:43:47.:43:51.

comes to the NHS, it is such a hopelessly managed organisation

:43:51.:43:58.

nothing surprises me. A couple of figures, ten years ago we had 12

:43:58.:44:08.
:44:08.:44:09.

hospital beds per manager, now it is down to four managers. In 2006

:44:09.:44:16.

we knew it was a catastrophy, it would never work, two of the major

:44:16.:44:25.

splierd said they didn't want any part of it. As an NHS stakeholder

:44:25.:44:30.

does it strike you as slightly ridiculous that you can't buy

:44:30.:44:35.

Avastin, a cancer judge, but a blueberry muffin on prescription?

:44:35.:44:41.

You can't believe the NHS, the only way ten years ago was to get a

:44:41.:44:48.

prescription from a pharmacy. You could say the NHS is slow to wake

:44:48.:44:54.

up to there beg more products available. It is really the met --

:44:54.:44:59.

being more products available. It is really the method we are arguing

:44:59.:45:03.

about here. Will people need more vouchers, will we feel better about

:45:03.:45:09.

the price of a pizza base? If it is a good idea, but with the NHS it

:45:09.:45:13.

will take five to ten years to adopt it. You can't be defeatist,

:45:14.:45:19.

and say what can be done not really what happens? The NHS has suffered

:45:19.:45:24.

for years from appallingly bad top leadership. The management leftful

:45:24.:45:30.

NHS, I have worked with -- managing level of the NHS, I have worked

:45:30.:45:36.

with them years, and they speak management that nobody understands.

:45:36.:45:46.
:45:46.:45:47.

Why do you think that level is so predictably bad? The NHS, I'm

:45:47.:45:51.

speechless, it is so badly managed, it wastes so much money. Whenever

:45:51.:45:55.

somebody tries to change the NHS, because their managers can't work

:45:55.:45:58.

with people, they bring in consultants, they are the only

:45:58.:46:03.

people who speak the same language as NHS manager. It is a

:46:03.:46:07.

catastrophic situation. We have 17,000 people a year die in the UK

:46:07.:46:14.

unnecessarily, because we can't match the same survival rates as

:46:14.:46:20.

other countries. The NHS say they are shocked, will it change?

:46:20.:46:25.

should, we have to be careful that solebacks don't lose the food

:46:25.:46:30.

available to them. It is a question of the economics of the delivery

:46:30.:46:34.

method, there is plenty of solutions as I have outlined. What

:46:34.:46:38.

we mustn't allow them to do, is say they can't have prescription food,

:46:38.:46:45.

they should be free to make their own choice.

:46:45.:46:50.

The Times has Tory MPs saying Greek MPs force a referendum, and David

:46:50.:47:00.
:47:00.:47:05.

Cameron facing demands in the Greek The Independent, Cameron knew Hunt

:47:05.:47:13.

would back the BSkyB bid, and the more Levitt. Plenty more tomorrow

:47:13.:47:23.
:47:23.:47:45.

more Levitt. Plenty more tomorrow night, that's all tonight. Goodbye.

:47:45.:47:48.

There's more very warm sunny weather to come over the next few

:47:48.:47:53.

days. We will find an easier low breeze on Friday. Particularly

:47:53.:47:57.

across the south on Friday. -- easterly breeze on Friday.

:47:57.:48:01.

Particularly across the south. A dry and sunny day. High thump

:48:01.:48:09.

temperatures to the west of the Pennines. It will be dry and sunny.

:48:09.:48:12.

Temperatures in the south-east won't be as high today. There will

:48:12.:48:15.

be that noticable breeze. That will just make it feel a little fresher,

:48:15.:48:18.

but still the sunshine will be very strong. Most of the south-west it

:48:18.:48:23.

will be a fine day, very warm start across Wales as well. Those

:48:23.:48:31.

temperatures wide low getting into the mid-20s in the sunshine. A

:48:31.:48:36.

lovely say in Northern Ireland, temperatures like today. High

:48:36.:48:40.

temperatures if inland in Scotland. Dry with no thundery showers. That

:48:40.:48:45.

low cloud takes a while to clear away. Should be sunnier and warmer

:48:45.:48:49.

on Saturday. Temperatures into the mid-20s in Manchester Friday and

:48:49.:48:53.

Saturday. High temperatures to come across the southern half of the UK.

:48:53.:48:57.

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