:00:13. > :00:17.The weather's lovely, summer is here, the world is coming to enjoy
:00:17. > :00:21.London 2012, there is just one catch, the British economy is
:00:21. > :00:24.shrinking at an alarming rate, down 0.7% last quarter.
:00:24. > :00:29.According to the Government's original plan, the economy should
:00:29. > :00:33.now have grown by 5%. Instead, it is smaller than when they took over.
:00:33. > :00:37.Closing the deficit of the purpose of the coalition, and the
:00:37. > :00:43.Chancellor. So can either survive if they fail?
:00:43. > :00:46.The Business Secretary, Vince Cable, tell us us it is disappointing, and
:00:46. > :00:50.-- tells us it is disappointing, and discusses his job prospects.
:00:50. > :00:54.REPORTER: Do you think you would make a good Chancellor? I would,
:00:54. > :00:57.but George Osborne is doing it well, and we are doing it as part of a
:00:57. > :00:59.team, we are not suggesting changing the arrangements. We will
:00:59. > :01:04.hear from economists and leading business people.
:01:04. > :01:09.Nine athletes are banned from the 2012 Olympics for doping. Newsnight
:01:09. > :01:13.uncovers new methods cheats are using to avoid detection. To be
:01:13. > :01:17.able to prove that would be great, but at the moment the standard of
:01:17. > :01:27.the drug testing isn't quite at the level where everybody can believe
:01:27. > :01:27.
:01:27. > :01:32.in the system. Good evening, idea that this summer
:01:32. > :01:35.we might finally see the end to the recession was dashed today, by
:01:35. > :01:38.figures which show the British economy shrank by 0.7% from April
:01:39. > :01:43.to June. The figures could be corrected up or down, the message
:01:43. > :01:47.is clear, Something isn't working. The TUC said the Government had
:01:47. > :01:50.wiped out the recovery. Others directly blame George Osborne, one
:01:50. > :01:54.Lib Dem peer suggested he was like a Chancellor on work experience,
:01:54. > :01:58.and should be moved in favour of the Business Secretary, Vince Cable.
:01:58. > :02:06.We will hear from Mr Cable about his job prospects in a moment.
:02:06. > :02:11.First here is Paul Mason. To lose two quarters growth might
:02:11. > :02:15.be regarded as misfortune, to lose a third, big time, might be seen as
:02:15. > :02:22.carelessness. Today, George Osborne had to face
:02:22. > :02:27.the fact, never mind the rain, the Jubilee, a 0.7% shrinkage in just
:02:27. > :02:31.three months, is bad. Of course, there are one-off factors like the
:02:31. > :02:34.bank hole day, that is not an excuse I'm using. Frankly, even
:02:34. > :02:37.without that, these would be disappointing numbers. They remind
:02:38. > :02:43.us that Britain has some deep- rooted economic problems, that will
:02:43. > :02:47.take time to solve. This is what a double-dip looks like. Deep falls
:02:47. > :02:50.in growth, after Lehman Brothers, nearly four years ago, then
:02:51. > :02:55.recoverry, and since the coalition took power, shrinkage in more
:02:55. > :03:01.quarters than not. It put Labour, which warned of
:03:01. > :03:04.exactly this, on the front foot. Today is the day we see that this
:03:04. > :03:08.Government's economic plan has failed. They promised change, they
:03:08. > :03:13.promised people that the pain they were inflicting would put our
:03:13. > :03:16.economy back on track. But month- on-month, year-on-year, we see
:03:16. > :03:21.things getting worse, not better. It is families and businesses that
:03:21. > :03:25.are paying the price. And an influential Lib Dem peer,
:03:25. > :03:30.and friend of Vince Cable, said George Osborne should be sacked.
:03:30. > :03:36.the beginning of this Government we had three out of the five Liberal
:03:36. > :03:40.Democrat cabinet ministers, with great business experience and
:03:40. > :03:46.economic expertise, Vince Cable, Chris Huhne and David Laws, Vince
:03:46. > :03:49.Cable is available, but if the others are available soon we would
:03:49. > :03:54.like to see them back at the heart of economic policy. Are you
:03:54. > :03:59.suggesting one of them should be the Chancellor? Yes. Today's news
:03:59. > :04:04.is particularly bad because exactly the sectors said would lead Britain
:04:04. > :04:07.back into recovery, are themselves into bad and deep recession.
:04:07. > :04:10.Construction down 10% in the last nine months, and production,
:04:10. > :04:15.leading all the manufacturing industries, down more than 2%. It
:04:15. > :04:20.is all so far away from what the Treasury's own independent experts
:04:20. > :04:25.predicted two years ago. George Osborne's basic problem is
:04:25. > :04:29.none of the projections he based his strategy on has come true. The
:04:29. > :04:33.economy was supposed to rebalance, it hasn't, manufacturing was
:04:33. > :04:41.supposed to recover rapidly, it hasn't. And as for the growth
:04:41. > :04:45.figures, well, 2010 was supposed to be 1.8, wrong, 2.4% in 2011, wrong,
:04:45. > :04:53.2.9% this year, badly wrong, because we are in recession, as for
:04:53. > :04:57.2.8% next year, again, not likely. So why so bad for so long. Interest
:04:57. > :05:00.rates are near zero and the Bank of England has pumped more than �300
:05:00. > :05:03.billion to the economy, through printing it. Those on the right of
:05:03. > :05:07.economics say the Chancellor is just not implementing the policies
:05:07. > :05:13.needed for the private sector to offset the cuts in public spending.
:05:13. > :05:17.A lot of it is policy induced. The refusal to rapidly cut the size of
:05:17. > :05:20.the public sector, but also the refusal to pursue key
:05:20. > :05:23.liberalisations of the labour market, energy markets, where it is
:05:23. > :05:27.piling more costs on businesses. Also, I think it has been too weak
:05:27. > :05:30.in the field of liberalising planning as well. Meanwhile, from
:05:30. > :05:34.the other side of the coalition, there is frustration, at the
:05:34. > :05:39.absence of a state-backed growth plan. Vince Cable's leaked letter,
:05:39. > :05:44.in February this year, warned George Osborne the Government was
:05:44. > :05:48."missing a compelling vision...a clear and confident message about
:05:48. > :05:55.how we will earn our living in the future ". Last work the IMF gave
:05:55. > :05:59.the Government a nudge towards more infrastructure spending, not so far
:06:00. > :06:02.reciprocated The IMF says he should use the fiscal space they regard
:06:02. > :06:07.the Treasury to have at the moment, because of the low interest rates,
:06:07. > :06:10.to get money spent quickly on key infrastructure projects. That could
:06:10. > :06:15.be the high-speed rail being discussed, or new toll roads, it
:06:15. > :06:18.could be the energy infrastructure we need to decarbonise the economy.
:06:18. > :06:22.It could be housing, a housing shortage in the UK at the moment.
:06:22. > :06:25.All those things desperately need doing at the moment, there isn't
:06:25. > :06:28.enough private sector investment, and the Government is able to
:06:28. > :06:33.borrow at rates we haven't had for generations. What the Government
:06:33. > :06:38.has effectively done for the last two years to swap a recovery for
:06:38. > :06:43.fiscal stability, that is no mean achievement when the rest of Europe
:06:43. > :06:46.is howevering on the brink of chaos. But it is whether the markets
:06:46. > :06:50.continue to believe his deficit reduction plan.
:06:51. > :06:56.This is the plan, currently, tax rises in blue, spending cuts in red.
:06:56. > :07:00.And the biggest years of cuts ahead of us, including two extra years
:07:00. > :07:04.after the 2015 election, added once the Government accepted its
:07:04. > :07:08.original projections were wrong. Two things happen if we are right
:07:08. > :07:12.about the figures today, first we will be borrowing more this year
:07:12. > :07:17.than intended. We may end up borrowing more than last year.
:07:17. > :07:20.Secondly, we won't go through to 2015 and 2016 in terms of cuts, we
:07:20. > :07:23.may go to 2017 and beyond, if the Office of Budget Responsibility
:07:23. > :07:27.says to the Chancellor this is a permanent reduction in economic
:07:27. > :07:31.output. For the Treasury, the bottom line
:07:31. > :07:37.is this, the UK economy is shrinking, and shrinking economies
:07:37. > :07:42.have trouble paying their debts. Paul is here now, along with our
:07:42. > :07:45.political editor, Allegra Stratton. Where does this leave the deficit
:07:46. > :07:49.reduction strategy, Paul? A big question mark over it. You now have
:07:49. > :07:55.people in the bond markets tonight saying, this is a country already
:07:55. > :07:58.on negative watch for its triple-A rating, and if it goes much further.
:07:58. > :08:02.Look, there is one story in the world, that is debt, and people
:08:02. > :08:05.paying down their debt, sometimes so fast that the economy shrinks
:08:05. > :08:08.and then you can't pay back your debts. It is a vicious circle.
:08:08. > :08:12.Britain stayed out of that for two years, but if we have another
:08:12. > :08:18.quarter of 0.7, or if this carries on for any great length of time, we
:08:18. > :08:22.will be part of that story. Even if you don't want to be at the edge of
:08:22. > :08:25.a vortex, you don't want to be sucked into it. Where does this
:08:25. > :08:32.leave George Osborne, then? I don't think he thinks he's on work
:08:32. > :08:36.experience, if he does, he thinks he's a graduate of work experience.
:08:36. > :08:40.Bad experience! Who would the Prime Minister turn if he was looking to
:08:40. > :08:42.reshuffle George Osborne? It would be George Osborne, he's the Prime
:08:43. > :08:46.Minister's chief economic and political adviser, the idea he
:08:46. > :08:49.would be shuffled is one of the follies of current politics, it is
:08:49. > :08:54.mad. If the deficit reduction strategy goes, or rather if he goes,
:08:54. > :09:00.the deficit reduction strategy goes, not only the Tories' main plan, but
:09:00. > :09:03.also the called, in their -- Tory's main plan, but also in their words,
:09:04. > :09:08.the glue of the coalition goes. Today, there are terrible figure,
:09:08. > :09:12.and everybody is genuinely shocked by the figure, something the
:09:12. > :09:15.viewers won't be comforted by, the idea they were blind sided by them,
:09:15. > :09:21.nevertheless, we have already had the deficit reduction programme
:09:21. > :09:25.extended by two years. They did so, for me, it was quite Houdiniesque,
:09:25. > :09:28.first it was at the end of the parliament, then extending by the
:09:28. > :09:33.two years, they got away with it. They have got away with the pushing
:09:33. > :09:39.back, now we are seeing more bad news, but equally, compared to that,
:09:39. > :09:43.I don't think it is massively worse news. The idea that he goes
:09:43. > :09:46.anywhere is fanciful. Is bad news for the economy, at
:09:46. > :09:51.least in political, narrow political terms, good news for
:09:51. > :09:54.Labour, because they can say "I told you so". Ed Balls has based
:09:54. > :09:58.his entire political career on being right, that Osborne would not
:09:58. > :10:01.only crash the economy, but in crashing it he would crash the
:10:01. > :10:05.deficit reduction target. The problem s you saw my graph in the
:10:05. > :10:09.report, Labour doesn't even have a deficit reduction tart t gave up on
:10:10. > :10:13.trying to have one when it -- target, it gave up on trying to
:10:13. > :10:17.have one when it all went wrong in last November, you couldn't compare
:10:17. > :10:20.like with like for the last Government, the figures were so
:10:20. > :10:24.different. The problem now is, if the Office for Budget
:10:24. > :10:28.Responsibility says the 0.7% is real, we are cutting that from the
:10:28. > :10:34.UK economy, what that means is an in coming Labour Government f it
:10:34. > :10:38.wanted to even match, pound-for- pound, the general proposal of the
:10:38. > :10:44.outgoing Lib Dem and Conservative one, would be facing scales of cuts
:10:44. > :10:47.and tax increases, that they can't yet contemplate. But they are
:10:47. > :10:50.contemplating, this is what is so fascinating for us in our jobs,
:10:50. > :10:54.firstly, you have this �10.5 billion of welfare cuts that we
:10:54. > :11:00.have done on the programme before. There are many people, including, I
:11:00. > :11:05.don't know, but Rachel Reeves, who will you speak to in a empt mo,
:11:05. > :11:08.that they probably have to accept those at the next election, because
:11:09. > :11:13.welfare, our viewers won't like this, it does resonate so much with
:11:13. > :11:19.people that it has to be cut. Lots of people in Labourite now are
:11:19. > :11:23.thinking, how do we answer this in a particularly Labour, socially
:11:23. > :11:27.democratic way, that is one of the ideas bubbling around at the moment.
:11:27. > :11:33.In Government one of the problems for them, I wonder if today is not
:11:33. > :11:38.proob embl, that it is so bad, it is pull ow -- problem, that it is
:11:38. > :11:42.so bad, it is pull out every drawer and bring out what you can. Do you
:11:42. > :11:45.do massive investment but do it in a way that is lots of public money
:11:46. > :11:50.that doesn't affect the deficit or levels of debt. Not everyone in the
:11:50. > :11:54.Treasury likes that? They hate it, that is why it is not forth coming
:11:54. > :11:57.so far. We will save it for another day. I caught up with Vince Cable
:11:57. > :12:01.in his departmental offices in central London today.
:12:01. > :12:07.When you were made aware of these figures yesterday, what did you
:12:07. > :12:11.think? I was disappointed. We know that the economy has got a lot of
:12:11. > :12:15.difficulties. They are frequently rehearsed. We have the problems of
:12:15. > :12:20.banks that don't work effectively, we have a shortage of demand,
:12:21. > :12:24.because of consumer debt, we are trying to deal with our deficit
:12:24. > :12:27.which affects consumer spending. Above all, we have this very
:12:27. > :12:30.difficult situation in the eurozone, which is affecting our exports. It
:12:30. > :12:34.is not surprising that we are struggling with economic difficulty.
:12:34. > :12:37.Not surprising? I think the scale of the downturn was disappointing,
:12:37. > :12:41.we acknowledge. That You say it is not surprising, but this is the
:12:41. > :12:46.very core of Government policy, this is what you are about, trying
:12:46. > :12:49.to bear down on the deficit, while increasing growth. You are failing
:12:49. > :12:53.at both. That is not surprising? They are not happening as rapidly
:12:54. > :12:59.as we would want. But, just to put the other side of the case, there
:12:59. > :13:03.are some positive things happening. There is a lot of private sector
:13:03. > :13:07.job growth, 800,000 over the last two years. There are some very good
:13:07. > :13:13.industrial success stories. I was unable to refer to them this
:13:13. > :13:18.morning, the Jaguar Land Rover, the 1,100 new jobs, on top of the 8,000
:13:18. > :13:22.they have already done. A lot happening with hit tachy and trains.
:13:22. > :13:25.The overall growth picture is not good. The figures show the reason
:13:25. > :13:29.why. Predominantly because of weakness in construction. If you
:13:29. > :13:35.take credit for some of the good news, presumably, you have to take
:13:35. > :13:38.the blame for the bad news, it is pretty appalling? These are not
:13:38. > :13:43.good figures. There is no point denying they are not good figures.
:13:44. > :13:48.It is easier to understand, I think, the deep factors, which we are
:13:48. > :13:54.struggling with. The IFS says that the figures are so bad you might
:13:54. > :13:57.need even more cuts in 2017, can you actually foresee going into the
:13:57. > :14:03.next general election saying, we may need more cuts in 2017, to get
:14:03. > :14:08.on the course we set for ourselves? We are taking the programme of cuts,
:14:08. > :14:12.which we have to undertake in order to get massive deficit down. And
:14:12. > :14:15.that is in a measured way. We have been flexible about this. The
:14:15. > :14:19.Government's objective when we came into office was to try to deal with
:14:19. > :14:24.the structural deficit in four years. We have accepted and
:14:24. > :14:27.practised that it is six years in the November statement. We are
:14:27. > :14:33.flexible in the speed with which this is being applied. There could
:14:33. > :14:36.be more cuts in 2017, it could be inevitable? It could well be. The
:14:36. > :14:39.Prime Minister is talking about the whole process taking a decade. That
:14:39. > :14:44.is a reflection of the massive scale of the problem we are dealing
:14:44. > :14:48.with. The economy is smaller now than when you became Business
:14:48. > :14:51.Secretary, you didn't presumably go into politics to preside over a
:14:51. > :14:55.shrinking economy, or a lost decade for the British economy? I didn't
:14:55. > :14:58.go into Government to preside over a shrifpbging economy. I did go
:14:58. > :15:03.into Government to -- shrinking economy. I did go into Government
:15:03. > :15:09.to deal with massive economic problem. This is something we
:15:09. > :15:12.haven't dealt with in my lifetime, theing collapse, and the
:15:12. > :15:16.existential crisis in the eurozone affecting our economy, and dealing
:15:16. > :15:21.with a massive deficit problem. These are not easy things. I take
:15:21. > :15:23.it as part of a challenge to be part of the team dealing with it.
:15:23. > :15:26.don't think anyone would underestimate the challenge facing
:15:26. > :15:30.any Government with these problems. As you know, Conservatives say, we
:15:30. > :15:33.need more deregulation, we need more cuts, and people on the left,
:15:33. > :15:38.including some within your own party, would like to see more
:15:38. > :15:42.investment, more public spending, and inevitably more borrowing, you
:15:42. > :15:48.are wobbling between the two? not wobbling, I don't think the
:15:48. > :15:53.issue is predominantly a problem caused by lack of deregulation or
:15:54. > :15:57.lack of cuts. I don't buy that, sometimes in jargon called, the
:15:57. > :15:59.supply side agenda. We have to regulate, I don't think that is the
:16:00. > :16:03.problem, we have very flexible labour markets in this country.
:16:03. > :16:07.That is one of the main attractions for the big inward investments we
:16:07. > :16:10.have succeeded in attracting here. The basic problem is one of demand.
:16:10. > :16:15.This is, of course, made more difficult by the fact that the
:16:15. > :16:20.Government, and any Government trying to deal with a deficit, adds
:16:20. > :16:22.to that problem. We tried to offset it by very, very active, vigorous
:16:22. > :16:24.policy by the Bank of England. The Bank of England has been very
:16:24. > :16:29.supportive. It was during the crisis under the last Government,
:16:29. > :16:34.it continues to be here. That is an essential part of the mix. Could
:16:34. > :16:40.you, given that analysis, couldn't you do what the IMF is ugt ising
:16:40. > :16:48.you have room to do. You -- is suggesting you do, you have room to
:16:48. > :16:51.spend more on infrastructure growth, to help the economy and boost
:16:51. > :16:55.through the construction sector, which you identified as a problem?
:16:55. > :16:58.The Government is doing both of those things. The infrastructure
:16:58. > :17:01.initiative launched last week is an attempt to give the Government
:17:01. > :17:05.balance sheet, which is strengthened by the reflecting low
:17:05. > :17:10.interest rates in Government borrowing, using the Government's
:17:10. > :17:15.balance sheet to support big infrastructure projects financed by
:17:15. > :17:20.pension funds. Would you like to do more than that? Directly using low
:17:20. > :17:23.interest rates to keep interest rates lower for bank borrowers,
:17:23. > :17:26.under the National Loan Guarantee Scheme. Those ideas are already
:17:26. > :17:31.implemented. You could do more, that is the point? It may be we
:17:31. > :17:34.have to do more. Your analysis in February, and the letter published,
:17:34. > :17:37.suggested you said that you sensed that there is still something
:17:37. > :17:43.important missing, a compelling vision of where the country is
:17:43. > :17:46.heading. Many people agreed with your analysis. I take it you still
:17:46. > :17:49.agree with your analysis? What we are putting in place, I was
:17:49. > :17:53.referring to one particular aspect of policy, which is what we call
:17:53. > :17:57.industrial strategy. I think what has happened in the last few months
:17:57. > :18:01.is we have got the building blocks in place, and are accepted. What
:18:01. > :18:05.that means is getting the Government behind, things like,
:18:05. > :18:08.apprenticeships, innovation, supporting supply chains, above all,
:18:08. > :18:13.supporting a resurgence of manufacturing, which we are really
:18:14. > :18:18.beginning to see. Working in a co- operative, long-term way, with, say,
:18:18. > :18:23.the automobile industry, Aerospace, life sciences, and services, like
:18:23. > :18:25.creative industries. That structure is being put in place, and is
:18:25. > :18:28.producing results. I wrote the letter because I have
:18:28. > :18:36.responsibility for driving that agenda. Is George Osborne the man
:18:36. > :18:40.who has killed off the recovery? it is not a personal thing. He's a
:18:40. > :18:44.colleague: He is in charge? We are collective responsible, we have a
:18:44. > :18:49.common agenda. We work well as a team. There is no personal blame
:18:49. > :18:52.attached to it. He called today's figures disappointing, some people,
:18:52. > :18:57.including your friend, Lord Oakeshott, said he's disappointing,
:18:57. > :19:00.he says that the Chancellor is on work experience and could be
:19:00. > :19:03.replaced with someone with more experience, meaning you? Lord
:19:03. > :19:07.Oakeshott is a good friend, I don't agree with him on everything, this
:19:07. > :19:11.is one area I don't agree. don't agree you will make a good
:19:11. > :19:16.Chancellor? I probably would, George Osborne is doing the job and
:19:16. > :19:21.we are doing it together as part of a team. Nobody is suggesting the
:19:21. > :19:24.change. Lord Oakeshott is still your friend? Long standing for
:19:24. > :19:29.decades. Even though his judgment on this piece? We have friendly
:19:29. > :19:33.disagreements, we do on this issue. The Shadow Chief Secretary to the
:19:33. > :19:40.Treasury is here, do you think he would make a good Chancellor?
:19:40. > :19:43.couldn't do much worse than the current guy in it. Maybe a future
:19:43. > :19:48.Lib Dem-Labour coalition we will see. A serious point, you have made
:19:48. > :19:51.a lot of running as a party about the damage caused by the cut. Paul
:19:51. > :19:55.Mason's analysis is accepted by everybody, the worst of the cuts
:19:55. > :20:01.have not yet happened. So, it follows, that they can't be
:20:01. > :20:04.responsible for all of this, can they? The Government's decisions,
:20:04. > :20:08.especially around the Comprehensive Spending Review in the autumn of
:20:08. > :20:15.2010, caused this collapse in confidence, since then, the economy
:20:15. > :20:17.has contracted. The numbers over the last three successive quarters
:20:17. > :20:21.of a shrinking economy, the Government has to take large
:20:21. > :20:25.proportion of the blame. The big cuts haven't come in yet, you agree
:20:25. > :20:30.with that? The confidence was choked off at the time of the
:20:30. > :20:33.Autumn Statement in autumn 2010, since then, we have seen
:20:33. > :20:38.construction fall, we have seen manufacturing output fall, in the
:20:38. > :20:43.numbers today, service output fall as well. Of course, there are
:20:43. > :20:49.international factors at play as well. Indeed, the eurozone debt
:20:49. > :20:51.crisis, the IMF says, is part of it? Apart from Italy, one of the
:20:51. > :20:54.industrialised economies, the only one who have gone back into
:20:54. > :20:57.recession. The Government has to take a large proportion of the
:20:57. > :21:01.blame from the numbers we have seen today. The only good thing out of
:21:01. > :21:04.the nuplgs today is it is a wake-up call for the Government to change
:21:04. > :21:09.their plans. As you heard Vince Cable say, they are prepared to be
:21:09. > :21:13.flexible and do more. Ed Balls and yourself have made a lot of play
:21:13. > :21:17.with the IMF saying Britain has more to do, more room to spend and
:21:17. > :21:20.borrow a bit more. You have to accept more of the IMF's analysis
:21:20. > :21:25.then, a credible deficit reduction plan is the key to everything. They
:21:25. > :21:32.think the Chancellor has one? credible deficit reduction plan is
:21:32. > :21:40.key. You don't have one? This deficit reduction plan is two years
:21:40. > :21:46.off course. As Paul Johnson from the fiscal studies area says there
:21:46. > :21:49.is more to go. This plan no longer seems credible. The ratings
:21:49. > :21:54.agencies say that without growth the deficit reduction plan is not
:21:54. > :21:58.achievable. The Government have got themselves into a vicious circle,
:21:58. > :22:03.they see the deficit and make cuts, but as a result they choke off
:22:03. > :22:09.growth, the deficit increases, and the deficit higher than a year ago.
:22:09. > :22:14.They cut a bit more and make things worse, they are in a vicious circle.
:22:14. > :22:19.Even though you accept there are other things responsible? Yeark but
:22:19. > :22:22.ripped out of the foundations of the -- yeah, but ripped out of the
:22:22. > :22:31.foundations of the house, and now we are in a more difficult position,
:22:31. > :22:38.we are not able to withstand the shocks coming our way. The IMF
:22:38. > :22:43.suggesting that there could be more cuts on to 2017, so it will be an
:22:43. > :22:45.absolute hair-shirt election, and a decade of a lost British economy,
:22:45. > :22:49.isn't it? There is nothing inevitable about this. The reason
:22:50. > :22:51.that we have got the two extra years of deficit reduction, and
:22:52. > :22:57.potentially another five years of it after this parliament, is
:22:57. > :23:00.because of the decisions that this Government have made, it is not too
:23:00. > :23:05.late for them to change course. There is a huge hole there, we have
:23:05. > :23:08.to close the deficit? It is not inevitable it has to carry on to
:23:08. > :23:12.2020. If the Government put in a strategy of jobs and growth to get
:23:12. > :23:18.the economy moving again, to help businesses succeed and get people
:23:18. > :23:22.back to work, we get to pay less in benefits and more tax rerevenue.
:23:22. > :23:26.The economy will grow gain and the deficit coming down sustainably. --
:23:26. > :23:30.grow again and the deficit coming down substantially.
:23:30. > :23:33.Are you saying you could bring the deficit down quicker than the
:23:33. > :23:37.Government? The deficit in the US is coming down at a faster rate
:23:37. > :23:41.than in the UK. In part because their economy is growing, and
:23:41. > :23:44.unemployment has been falling. You have to have tough decisions on
:23:44. > :23:48.taxation and spending to get the deficit down, but also jobs and
:23:48. > :23:52.growth as well. Without that the plan does not add up. That is why
:23:52. > :23:55.we are seeing both the deficit increasing, but also the economy
:23:55. > :24:01.back in this deeper double-dip recession.
:24:01. > :24:05.Thank you very much. What can be done to get the economy
:24:05. > :24:09.moving, what is the real problem here. I'm joined by Sir Martin
:24:09. > :24:12.Sorrell, of the advertising firm WPP. Mark Longhurst of the British
:24:12. > :24:15.chambers of commerce, Kate Barker a member of the Bank of England
:24:16. > :24:19.Monetary Policy Committee for ten years, and Vicky Pryce, formerly
:24:19. > :24:23.the head of the Government's economic service.
:24:24. > :24:29.Kate Barker, unemployment is actually going down, and so is the
:24:29. > :24:33.GDP going down, any first year economics student would say a
:24:33. > :24:40.mistake here surely. Can we believe the figures? We found the
:24:40. > :24:43.combination of pricing unemployment and rising GDP is wrong. I know
:24:43. > :24:46.they work very carefully, this is a difficult quarter to get right.
:24:46. > :24:51.They don't know the figures for June. June contained both the
:24:51. > :24:57.Jubilee and wet weather. It is likely that these figures will be
:24:57. > :25:01.revised up. That doesn't explain away the last year, it has been a
:25:01. > :25:04.year which GDP has fallen and unemployment has risen. It is not
:25:04. > :25:08.the last quarter. We are either doing incredibly badly on
:25:08. > :25:15.productivity, or the numbers are wrong. The employment figures are
:25:15. > :25:21.more reliable. Three quarters, a third quarter of constrax, it is
:25:21. > :25:25.bad news whatever way you look at it? We shouldn't panic, there are
:25:25. > :25:30.statistic issues one has to establish, and reworking of numbers
:25:31. > :25:34.over time. The biggest difference we have seen is in Q2, second
:25:34. > :25:37.calendar quarter was certainly weaker than the first calendar
:25:38. > :25:42.quarter for our clients. We saw that from across the world. The
:25:42. > :25:45.real issue is what is happening, the big difference has been the
:25:45. > :25:51.eurozone and the deterioration of the eurozone. Companies actually
:25:51. > :25:58.have very strong balance sheets, their balance sheet today compared
:25:58. > :26:02.to 2008, pre-Lehmans and post- Lehmans, is much bigger. But they
:26:02. > :26:06.are not spending? They have the confidence but the uncertainty of
:26:06. > :26:10.the eurozone. You commented on the US, my feeling would be just before
:26:10. > :26:15.the election in the United States in November, or after it. We will
:26:15. > :26:20.be finger pointing at the US not having dealt with its deficit. Not
:26:20. > :26:25.having dealt with a Simpson's bowl- type solution for it. The primary
:26:25. > :26:29.problem we see is the uncertainty in western Europe.
:26:29. > :26:33.When you talk to businesses up and down the country, they may say,
:26:33. > :26:41.that but they talk about the banks? Certainly the figures we referred
:26:41. > :26:45.to, we think, are superintendant, the last quarter. It is not
:26:45. > :26:48.unprecedented for the figures to be revised. You think they could be
:26:48. > :26:52.potentially that badly off. Are you hearing people are doing perhaps
:26:52. > :26:56.not brilliantly, but not too badly? We do the biggest business surveys
:26:56. > :27:02.in the UK. We have a pretty good idea what is going on out there.
:27:02. > :27:05.Businesses are saying it is tougher than it used to be, but we are
:27:05. > :27:08.doing OK. We are concerned about the confidence in the environment
:27:08. > :27:11.in which they are operating. Europe in particular. Those businesses
:27:11. > :27:17.with cash are not investing that cash right now. Because they are
:27:17. > :27:22.concerned about access to capital in the future. About 42% of
:27:22. > :27:25.businesses are in the high-growth, or relatively new category. They
:27:25. > :27:29.can't get access to finance. What is behind the figures?
:27:29. > :27:33.construction element is a very important one, we mustn't
:27:33. > :27:37.underestimate t I would be very surprised if it gets revised up.
:27:37. > :27:40.construction there is a problem? The Government has been cutting
:27:40. > :27:46.back capital spending very significantly. What tends to happen
:27:46. > :27:50.if you do that, is the firms you normally go to procure all the
:27:50. > :27:53.construction and everything else done, just on the jobs they would
:27:53. > :27:56.otherwise have, with the Olympics it helped a bit on the construction
:27:56. > :28:00.strike. But because of the cuts of public sector capital spending,
:28:00. > :28:05.they have not been replaced by any business investment. So we haven't
:28:05. > :28:08.actually seen factories being built, except in some very, very small
:28:08. > :28:12.examples of that happening. We have actually seen the construction
:28:12. > :28:16.figures decline very significantly. They are the swing factor here. It
:28:16. > :28:19.is not going to change, unless there is some dramatic move by the
:28:20. > :28:23.Government to spend a lot more on infrastructure, and housing, which
:28:23. > :28:28.I think it can actually do. Construction is a key to a lot of
:28:28. > :28:33.this? A lot of people watching would say we have had one of the
:28:33. > :28:39.biggest infrom structure of a lifetime, building the lipblic park,
:28:39. > :28:43.costing billions. Surely -- build building the Olympic Park costing
:28:43. > :28:48.billions. It is pretty much done. But I absolutely agree with Vicky,
:28:48. > :28:52.that we ought to be thinking of spending more on housing and
:28:52. > :28:55.infrastructure. Some of the big infrastructure projects take time
:28:55. > :28:59.to come through. We have seen good policies from the Government and
:28:59. > :29:05.the bank recently, to improve the supply of lending. That is one
:29:05. > :29:09.thing, but the demand for lending is another. We probably need the
:29:09. > :29:14.Government to do more on demand. If they do it t and spend it in ways
:29:14. > :29:17.that help us to build in the long- term, help us get young people back
:29:17. > :29:24.to work or build social housing, I don't think the markets would have
:29:24. > :29:30.a problem. It sounds like a Plan B? When you have as many shocks as
:29:30. > :29:33.knocked you of course, you think again. The biggest factors are
:29:33. > :29:38.outside the control of the Government. You are not necessarily
:29:38. > :29:43.worried about Spain going down, you are worried about the dominos that
:29:43. > :29:47.will claps if Spain was going down, and the contagion spreading across
:29:47. > :29:51.Europe. It is the biggest trading partner, a conference tomorrow to
:29:51. > :29:54.stimulate British business to export and trade more. Trying to
:29:54. > :29:59.run a business, when I look at western continental Europe, not so
:29:59. > :30:02.much the UK, actually, our business in the UK lasts two or three years,
:30:02. > :30:06.that should be strong, we have added jobs, at the same time our
:30:06. > :30:12.revenues have grown. Our revenues have grown faster than GMP. They
:30:12. > :30:18.would do better. The key issue is dealing with the eurozone crisi.
:30:18. > :30:25.You agree broadly with that? eurozone matters very much, we will
:30:25. > :30:30.see more crisis in the foreseeable future, it will not end. The IMF
:30:30. > :30:34.has revised figures downwards. They have a problem, Spain can't borrow,
:30:34. > :30:40.with great difficulty, neither can Italy or many other countries,
:30:40. > :30:46.yields are going up everywhere. We can, we have our own monitoring and
:30:46. > :30:55.economic policy. The fact we have extended the period of fiscal
:30:55. > :31:00.consolidation and by a few years, and it has not rattled the markets.
:31:00. > :31:03.We can do only certain things in our control? The US has already
:31:03. > :31:08.been downgraded and it hardly made a difference.
:31:08. > :31:12.We see in our surveys business are doing for more exports. We have
:31:12. > :31:17.seen a growth of exports of manufacturers and service in the
:31:17. > :31:23.last quarters. The last time it happened it was choked off by a
:31:23. > :31:25.lack of investment and finance. It is an important thing forea lot of
:31:25. > :31:28.growth businesses, able to get access to finance. Our members
:31:28. > :31:34.think the Government should do something bold and imaginative now
:31:34. > :31:38.to stimulate confidence. The thing they should do is massive instra
:31:38. > :31:43.structure projects in the medium -- infrastructure projects in the
:31:43. > :31:47.medium and long term. They have to seek private financing for it.
:31:47. > :31:54.Pension funds, sovereign wealth funds. You have to rerisk the
:31:54. > :32:00.political risk so the funds are prepared to invest. Our view is you
:32:00. > :32:03.can particular to Plan A deficit reduction and get growth as well.
:32:03. > :32:07.Get Mario Draghi in a room with Angela Merkel and get them to sort
:32:07. > :32:11.it out. When the Germans actually come to the rescue then it will
:32:11. > :32:15.sort itself out. It is kind of humiliating for a Chancellor to say
:32:15. > :32:18.it is nothing to do with me, get Angela Merkel to sort it out?
:32:18. > :32:21.not nothing, but the key factor, that is the key difference we have
:32:21. > :32:25.seen over the last three months. you think it matters n that sense,
:32:25. > :32:29.who the British Chancellor is, Mr Osborne has been having a lot of
:32:29. > :32:33.bad publicity today, whoever the Chancellor is would be having it in
:32:33. > :32:37.the neck any way. Does it matter? Yes, of course it matters what
:32:37. > :32:41.positions we take. Therefore it matters who the Chancellor is. I
:32:41. > :32:46.would absolutely agree, while the eurozone is not sorted out we won't
:32:46. > :32:48.get back to healthy growth. At the very least we need to avoid a
:32:48. > :32:53.downward spiral. What the Chancellor can do in terms of
:32:53. > :32:58.spending a bit more, in terms of helping us move towards these
:32:58. > :33:03.infrastructure projects people have talked about. I'm not sure it is --
:33:03. > :33:08.talking about. I'm not sure what is as much as is said can be done.
:33:08. > :33:12.Unless we do housing, it take as long time to have an impact. They
:33:12. > :33:14.have a multilayer affect, a lot of money stays in the economy and
:33:14. > :33:20.doesn't disappear into foreign lands, because you are doing it
:33:20. > :33:24.here. You tont have to in put a lot -- don't have to input a lot to do
:33:24. > :33:27.T but what is going on now is also a discussion about whether we need
:33:27. > :33:32.to do something extra or on tax. Whether we need to do something for
:33:32. > :33:36.the poorer people, because they are the ones that spend more. Whether
:33:36. > :33:39.there has to be some targeting reduction in the cost to people, if
:33:39. > :33:43.you like, in terms of the way they live, to make a difference. We are
:33:43. > :33:47.getting back to the vicious part of the circle, which is it is a lot
:33:47. > :33:51.easier to spend money than pay off the deficit. That causes the
:33:51. > :33:54.problems you are worried about. Just to pick up that point you made
:33:54. > :33:58.about the United States, do you seriously think by the end of the
:33:58. > :34:02.year, looking back the past three or four years, people would say
:34:02. > :34:04.they have done a lot better than we have, you say people will be
:34:04. > :34:12.pointing the finger there? Unemployment, in front of an
:34:12. > :34:22.election, they usually see, in what we call the US presidential legs
:34:22. > :34:24.
:34:24. > :34:28.year it goes down. It is stubbornly on these charts, and based on a
:34:28. > :34:33.failure to improve the unemployment statistics. By the time we get to
:34:33. > :34:38.the election, we might see signals in the bond market, and with the US
:34:39. > :34:42.dollar, as disquiet, with a failure to do more with the deficit and
:34:42. > :34:47.failure to come up with more. Two things you can always predict
:34:47. > :34:50.about the Olympics, records will be broken, and some athletes will be
:34:50. > :34:55.caught cheating. Today nine athletes were banned from the games
:34:55. > :35:01.after drugs tests. Including the middle distance runner, Mariem
:35:01. > :35:06.Selsouli, who was tipped to win gold. There is a new test for human
:35:06. > :35:11.growth hormone, but one unofficial sport is a came of cat and mouse,
:35:11. > :35:14.the cheats, the suppliers and the authorities. We reveal how some
:35:14. > :35:24.athletes are finding new ways to cheat, and authorities are finding
:35:24. > :35:27.
:35:27. > :35:35.new ways to catch them. For many endurance athletes, it is
:35:35. > :35:41.their secret weapon. Training at altitude. 6,000 feet above sea
:35:41. > :35:44.level in the pier knee, athletes are preparing for -- Pyrenees,
:35:44. > :35:46.athletes are preparing for London 2012, others take a different route.
:35:46. > :35:55.The authorities are doing everything they can to stop the
:35:55. > :35:59.cheats. But is it a race they can ever win? You do dedicate your life
:35:59. > :36:04.to training hard, and geting the best out of yourselves -- getting
:36:04. > :36:08.the best out of yourself, and to hear one of your competitor might
:36:08. > :36:12.have taken an easy route and short cut is frustrating. Paula Radcliffe
:36:12. > :36:18.is doing naturally, what others turn to drugs for. Train this high
:36:18. > :36:23.and the human body produces more of the hormone, EPO, this stimulates
:36:23. > :36:29.the growth of red blood cell, which allows athletes to take on more
:36:29. > :36:34.oxygen, and muscles to perform better. Injecting EP does the same
:36:34. > :36:38.thing, and it is banned. -- EPO does the same thing, and it is
:36:38. > :36:42.banned. She disagrees because it puts in question everybody. I had
:36:42. > :36:46.my performances doubted. It is wanting to be able to prove, in
:36:46. > :36:53.some way, they were 100% clean. I know that inside and it means a
:36:53. > :36:58.hell of a lot to me. At the same time to be able to prove that would
:36:58. > :37:04.mean a lot to me. But the standard of drug testing isn't at the level
:37:04. > :37:09.where everyone can believe in the system.
:37:09. > :37:14.It is lock-down day at the official Olympics testing lab. Samples are
:37:14. > :37:18.in from the London Marathon in April. But the Olympics, the plan
:37:18. > :37:22.is to test one in every two competitors, including all
:37:22. > :37:27.medallists. And every day they will test 400 or so samples. More than
:37:27. > :37:33.at any previous games. The lab's been paid for by GlaxoSmithKline,
:37:33. > :37:39.but it is run by a special team -- specialist team from King's College
:37:39. > :37:45.London. What you see in the labs are method that is are superfast
:37:46. > :37:49.and super accurate. This should give a message to athlete that is
:37:49. > :37:55.if you take drugs you will get caught. Don't come to London and
:37:55. > :37:59.take drugs. We want drugs to be used safely, not misused. The sport
:37:59. > :38:07.is about integrity, health and honesty. We want only clean
:38:07. > :38:10.athletes taking part in the games. That might be the ambition, but
:38:10. > :38:15.however clever the science deployed to stop the cheats, doping remains
:38:15. > :38:19.a constant undercurrent. And what's new, is that attention is shifting
:38:19. > :38:26.beyond just the athlete to their entourage. The trainers and medics
:38:26. > :38:30.that support them. Dwain Chambers, the British
:38:30. > :38:38.sprinter, controversially allowed back into Olympic competition this
:38:38. > :38:45.year, tested positive in 2003 for a steroid called THG, or the Clear,
:38:45. > :38:49.behind Chambers was a Californian nutritionists, Victor Conti, and
:38:49. > :38:54.organic chemist, Patrick Arnold, credited with designing the steroid.
:38:54. > :38:58.And just this summer, US anti- doping authorities charged seven-
:38:58. > :39:02.times Tour de France winner, Lance Armstrong, with use of banned
:39:02. > :39:06.substances. Unusually, the team behind him, including his doctors,
:39:06. > :39:14.allegedly involved, were also charged. They all strongly deny the
:39:14. > :39:21.charges, and Armstrong notes that he has never failed a drug test. To
:39:21. > :39:26.take on that culture, the World Anti-Doping Agency, has turned to
:39:26. > :39:31.the big pharmaceutical companies for help, companies like Glaxo
:39:32. > :39:39.smilt Klein, scientists will warn them about any -- GlaxoSmithKline,
:39:39. > :39:42.scientists will warn them about any new drug and how to test for it.
:39:42. > :39:45.The test case involving Dwain Chambers would indicate there is a
:39:45. > :39:49.great motivation for an athlete who wants to cheat, or an organisation
:39:49. > :39:53.who wants them to cheat, to be able to have something they think we
:39:53. > :39:59.don't know about. It is easy to see the same circumstances could arise,
:39:59. > :40:03.if someone could get hold of a drug in a pharmaceutical company's
:40:03. > :40:06.pipeline t could be used with impunity, at least for several
:40:06. > :40:12.years, enough to win yourself a gold medal somewhere perhaps.
:40:12. > :40:16.However, with this arrangement, we will let WADA know right away,
:40:16. > :40:21.forewarned is forearmed. Bradley Wiggins has emphasised all the way
:40:21. > :40:24.through, to his triumphant finish of the Tour de France, that his win
:40:24. > :40:34.means so much, because he races clean. And because doping has
:40:34. > :40:38.dogged the tour since the late 1990s, most most recently rogue
:40:38. > :40:42.athletes are said to control the amount of drugs they take, so their
:40:42. > :40:47.levels never go over allowed limits. A journalist who followed the race
:40:47. > :40:52.through all the years of scandals, says an extended web of players
:40:52. > :40:57.made it possible. It is combination of using dodgy doctors and shadey
:40:57. > :41:01.scientists, and also athletes pursuing an edge themselves. The
:41:01. > :41:08.ability to do that has been enhanced by the Internet. There is,
:41:08. > :41:13.again, lots ofen he can dotal -- anecdotal evidence that athletes
:41:13. > :41:19.talk about which products are useful. There is quite a background
:41:19. > :41:26.of competition to see who can get to those products first. Who can
:41:26. > :41:30.avoid detection first. It is an arms race mentality. Scientists and
:41:30. > :41:34.athletes will tell you sport is much cleaner now than it was even a
:41:34. > :41:38.few decades ago. They will also concede that there are people out
:41:38. > :41:42.there who have found ways to work the system. And others who are
:41:42. > :41:51.looking for new ways to increase performance without being caught.
:41:51. > :41:56.The future of doping in sport could prove darker. By studying identical
:41:56. > :42:00.twins, Genette cyst Tim Spector is discovering the genes we are born
:42:00. > :42:04.with aren't set in stone. We can alter how each gene behaves and is
:42:04. > :42:09.expressed in our bowedies. It is the new science of epigenetic, and
:42:09. > :42:14.could have an impact on sport. He foresees a time when athletes
:42:14. > :42:17.simply take a tablet to turn up the volume of useful genes.
:42:17. > :42:22.switching certain genes on and off, you can change the proteins they
:42:22. > :42:26.use, and depending on which genes you are targeting, they have
:42:26. > :42:30.different affects. We know certain endurance genes are associated with
:42:30. > :42:35.being a top athlete, these endurance, long distance genes,
:42:35. > :42:38.give you a greater lung power, it could be turned on. In someone who
:42:38. > :42:44.is already a pretty good athlete, would it be worth doing that,
:42:44. > :42:49.tweaking in that way? I think the level of top athletes, a few per
:42:49. > :42:52.cent here and there, can have enormous differences on their world
:42:52. > :42:56.rankings. Certainly, if I was a top athlete, in the sports business, I
:42:56. > :43:04.would be thinking of any ways that are legal to change my genes to
:43:04. > :43:08.improve things. Anti-doping authorities have banned
:43:08. > :43:14.Genetteic manipulation, and the scientist os -- genetic
:43:14. > :43:18.manipulation, and the scientists on the trail say they have made it
:43:18. > :43:23.harder to cheat. Samples are stored for eight years, if any new tests
:43:23. > :43:27.come up they can look back and see if anyone was cheating. There is
:43:27. > :43:32.the biological passport, a snapshot of the athlete's physiology, and
:43:32. > :43:36.should stay constant over time if it changes, that is a sign they
:43:36. > :43:39.could have cheated. The authorities think they are doing quite well and
:43:39. > :43:43.they have made significant grounds. In some areas they have, I worry
:43:43. > :43:49.that we are being presented a makover. And that, actually,
:43:49. > :43:54.underground, there is still loot of doping activity going on. You
:43:54. > :43:58.wonder how winnable the fight is. If you talk about athletes who have
:43:58. > :44:03.been through the experience and been banned, they will say it is a
:44:03. > :44:09.constant battle because there will always be somebody looking for an
:44:09. > :44:12.edge, and always people who are interested. Back in 2001, Paula
:44:12. > :44:17.Radcliffe took a difficult decision to protest. Russian athlete, Olga
:44:17. > :44:23.Yegorova, had failed a drugs test before the World Athletics
:44:23. > :44:28.Championship, but was allowed to race. And ten years later, she says
:44:28. > :44:34.her strong anti-doping stance is about sticking to the values that
:44:34. > :44:37.keep her competing. My biggest goal and biggest aim is when I finish my
:44:38. > :44:42.career I walk away and say that was the best I could do. I know that
:44:42. > :44:47.was everything that I could give. That was all I could do. I want to
:44:47. > :44:52.be able to look back with pride, I want my children to look at the
:44:53. > :44:57.performances and say mummy did that and she worked hard for that. Being
:44:57. > :45:06.able to stand on the top and look at the people you have beaten in
:45:06. > :45:11.the eye and know you have done it fairly, that means a lot to me.
:45:11. > :45:16.With the science of doping becoming more sophisticated, and the teams
:45:16. > :45:20.behind the cheats scouring science journals for clues to the next drug.
:45:20. > :45:25.Those trying to catch the cheats are struggling to keep up. For many,
:45:25. > :45:33.the cheats have already done enough to place an element of doubt over
:45:33. > :45:37.every sporting performance. Tomorrow Susan will reveal how Team
:45:37. > :45:47.GB is harnessing perfectly legal advances in science and technology
:45:47. > :45:47.
:45:47. > :46:35.Apology for the loss of subtitles for 48 seconds
:46:36. > :46:40.to improve athletes' performance. That's all from nice night tonight.
:46:40. > :46:43.We wanted to leave you with news that South Korea is not the same
:46:43. > :46:46.country as northyia. Perhaps, like most people you knew that already,
:46:46. > :46:51.but at the Olympics, when the north Korean women's football team
:46:51. > :47:01.prepared for their game today, they walked out when the South Korean
:47:01. > :47:34.
:47:34. > :47:37.flag was shown. Here is what Good evening, another hot day in
:47:38. > :47:42.the south. We have more of that hot weather to come for a couple more
:47:42. > :47:46.days. As we look to Thursday's forecast, more cloud in the north,
:47:46. > :47:50.where it is cooler. We are looking at a bit of rain come the afternoon
:47:50. > :47:54.across parts of southern Scotland. Some bright weather through
:47:54. > :47:58.northern England, temperatures in Manchester at 25 degrees. Clearer
:47:58. > :48:03.skies further south, yet again we could see 30 for south-east England.
:48:03. > :48:07.Through the afternoon some sea breezes developing, sunny skies
:48:07. > :48:11.across part of Devon and Cornwall. With that heat, the small risk of
:48:11. > :48:14.afternoon showers across part of Wales. Most places should miss them.
:48:14. > :48:18.If they are triggered, they are likely to be heavy and thundery.
:48:18. > :48:22.For Northern Ireland a change come the afternoon. With more cloud and
:48:22. > :48:27.the risk of rain further south. The best of any brightness along the
:48:27. > :48:37.north coast. The North West Highlands of Scotland holding on to
:48:37. > :48:48.