:00:12. > :00:20.Tonight, for two-and-a-half years, it has been called everything from
:00:20. > :00:24.a marriage of convience, to a bro- mance. Today it was rebranded as a
:00:24. > :00:28.civil, a very civil partnership. Let me put it like this, we are
:00:28. > :00:32.married, not to each other, this is a Government, not a relationship.
:00:32. > :00:35.With no new major policy details and a row over benefit payments,
:00:35. > :00:40.and the Government and the opposition offer different
:00:40. > :00:43.scorecards on the coalition. The panel will double as agony auoints
:00:43. > :00:49.on the real state of the Conservative-Lib Dem relationship.
:00:49. > :00:57.What Iceland can teach Britain from going from near economic collapse,
:00:57. > :01:02.to businesses bursting back into light. Don't depend on a formal
:01:02. > :01:07.economy, we realised it was not real, a bubble. Protests in China
:01:07. > :01:17.over newspaper censorship, -- censorship, with the state loosen
:01:17. > :01:20.the grip on what the Chinese people hear, read and see.
:01:20. > :01:27.Good evening, at a time of real difficulty for his Government, some
:01:28. > :01:31.40 years a the then Prime Minister, Harold Wilson, told the people that
:01:31. > :01:37.he knew what was going on, he was going on and the Labour Government
:01:38. > :01:41.was going on. Today the single Wilson eye became the plural "we"
:01:41. > :01:45.of David Cameron and Nick Clegg telling us the coalition is going
:01:45. > :01:49.on until 2015. To what effect? Today is one of those crunch days
:01:49. > :01:56.with the Government pushing through plans to restrict rises in benefits
:01:56. > :01:59.to 1%, that is lower than inflation. Unformer Lib Dem minister said she
:01:59. > :02:03.will not be -- one former Lib Dem minister she wouldn't be able to
:02:03. > :02:07.vote for the move. We explore the rhetoric of the coalition
:02:07. > :02:15.Government. Today was a pretty gloomy day. Not
:02:15. > :02:19.so much for the weather, although that didn't help, but for the whole
:02:19. > :02:24.holidays-are-over, let-down-feeling. For some it was back to work or
:02:25. > :02:29.school, for others, even more gloomy today, today is the day we
:02:29. > :02:32.are told that divorce lawyers expect the most new business. No
:02:32. > :02:37.divorce news in Downing Street, the coalition still very much together.
:02:37. > :02:40.What better way then to cheer us all up, than a mid-term review by
:02:40. > :02:44.the coalition. A list of achievements made since 2010, and
:02:44. > :02:52.crucially, a list of new policy ideas for the second half of the
:02:52. > :02:55.parliament. This was all contained in a big
:02:55. > :02:58.chunky document, a big souvenir programme for the press conference.
:02:58. > :03:03.It was big on symbolism and occasion, what about new policy.
:03:03. > :03:08.Since you are very busy and haven't got time, we have been through the
:03:08. > :03:14.entire document to extract only the new policy details. So, if you are
:03:14. > :03:19.sitting comfortably, Mr Cameron and Mr Clegg will now read them out.
:03:19. > :03:23.(sound of the wind whistling) This lack of anything new didn't exactly
:03:23. > :03:26.cheer up the post-festive journalists, who then had to ask,
:03:26. > :03:32.instead, questions about the state of the coalition's political
:03:32. > :03:38.marriage, which, in turn, didn't exactly cheer up the PM. I hate to
:03:38. > :03:42.spoil the party, but, let me put it like this, we are married, not to
:03:42. > :03:44.each other. We are both happily married, this is a Government not a
:03:44. > :03:47.relationship. It is a Government about delivering for people,
:03:47. > :03:51.because of the mess that we were left in by the previous Government,
:03:51. > :03:55.because of the huge challenges that we face. And what we said to people
:03:55. > :03:59.two-and-a-half years ago, was that we would come together for a five-
:03:59. > :04:03.year parliament. We would tackle these problems. So, to me, it is
:04:03. > :04:07.not a marriage, it is, if you like, it is a "Ronseal deal", it does
:04:07. > :04:10.what it says on the tin. Today's performance was not only about
:04:10. > :04:15.demonstrating a unity of purpose within the coalition, they haven't
:04:15. > :04:18.run out of ideas, they tell us, but it is also to set up some useful
:04:18. > :04:22.political dividing lines between the coalition, on the one hand, and
:04:23. > :04:28.Labour on the other. We can see one of those coming into view tomorrow,
:04:28. > :04:31.when the Commons will vote on the up-rating of benefits.
:04:31. > :04:35.In the Autumn Statement, the Government announced that certain
:04:35. > :04:39.benefits, claimed by working age people, would rise by only 1% a
:04:39. > :04:43.year for three consecutive years, rather than in line with inflation.
:04:43. > :04:48.The benefits affected include, jobseeker's allowance, Employment
:04:48. > :04:52.and Support Allowance, income support, including some aspects of
:04:52. > :04:55.housing benefit, maternity allowance, Statutory Sick Pay,
:04:55. > :04:59.paternity, and maternity and adoption pay, it covers some part
:04:59. > :05:04.of the Working Tax Credit and Child Tax Credit. Child benefit, frozen
:05:04. > :05:10.for three years since 2011, will also be up-rated by only 1% for two
:05:10. > :05:14.years, until 2015-2016. Labour are voting against this. Which the
:05:14. > :05:18.Government is absolutely delighted with. Expect to see much
:05:18. > :05:22.Conservative campaigning suggesting Labour are on the side of claimants
:05:22. > :05:27.and against working people. Labour, of course, aren't having any of
:05:27. > :05:29.this. More than 60% of those affected by the changes that they
:05:29. > :05:33.are voting on tomorrow will be working families, that is going to
:05:33. > :05:36.be handicaping and stopping working families who want to get into work
:05:37. > :05:40.and do the right thing. I don't think this is a Government on the
:05:40. > :05:43.side of the strivers, people doing the right thing. I think this is a
:05:43. > :05:47.Government on the side of a few people in the country, the richest
:05:47. > :05:52.and most powerful. So, how many people are affected? Well the
:05:52. > :05:54.changes in the bill will affect four million families who claim in-
:05:54. > :06:00.work benefits, with a further three million being affected by the
:06:00. > :06:04.changes to the 1% child benefit up- rating. Of 2.8 million workless
:06:04. > :06:11.households, 2.5 million will see their entitlements reduced. The
:06:11. > :06:14.Government estimate that is it will save �1.9 billion in 2015-2016.
:06:14. > :06:18.Let's not forget this is only one important, but not the most
:06:18. > :06:22.important part of a much bigger package of tax changes and benefit
:06:22. > :06:27.changes, which, across the period of the console daigs, is hitting
:06:27. > :06:32.the very richest very hard -- consolidation, which is hitting the
:06:33. > :06:36.very richest very hard, and those at the bottom of benefits. Those on
:06:36. > :06:39.middle earnings, they are doing least badly out of all of this.
:06:39. > :06:44.row between Labour and the Conservatives about who supports
:06:44. > :06:47.the strivers, and who is on the side of the skivers, is pretty
:06:47. > :06:50.uncomfortable for Nick Clegg and the Liberal Democrats, some Lib
:06:50. > :06:54.Dems are supposedly minded to support Labour in tomorrow's vote.
:06:54. > :06:57.I will be very clear with you, I don't think it helps at all to try
:06:57. > :07:01.to portray that decision as one which divides one set of people off
:07:01. > :07:05.against another, the deserving or undeserving, poor people, people in
:07:05. > :07:10.or out of work. However Mr Clegg went on to challenge those opposed
:07:10. > :07:14.to the 1% cap to answer a simple question. Where would you find that
:07:14. > :07:19.�5 billion, what would you cut? Schools, health, defence, local
:07:19. > :07:23.Government? Social care? That's the question you have got to ask
:07:23. > :07:29.yourself. And Mr Clegg has, perhaps, the consolation of knowing, that
:07:29. > :07:32.for now, at least, the policy seems popular with voters. Consistently
:07:32. > :07:36.polls show that people in lower income groups are more likely to
:07:36. > :07:42.think that people are fiddling the system more than people in higher
:07:42. > :07:45.income groups. So, when you look at this from a political, from a
:07:45. > :07:50.demographic perspective, it does seem to be something that appeals
:07:50. > :07:54.to all different groups. But, the big caveat is what does it actually
:07:54. > :07:58.mean in practice, when people start seeing their benefit levels, their
:07:58. > :08:01.disposable income being whittled away over the coming years, will
:08:01. > :08:06.they still be as supportive, the answer to that has got to be
:08:06. > :08:09.probably no. The Commons vote is, of course, not
:08:09. > :08:15.until tomorrow, you could argue that really, today's big political
:08:15. > :08:18.news was, not the coalition mid- term report, but a cabinet minister
:08:18. > :08:23.resigning. Yes, Lord Strathclyde, leader of the Lords, says he now
:08:23. > :08:26.wants to do something else, which, of course, may be his real reason,
:08:26. > :08:31.but, nevertheless, it was still rather odd to do it on the day of
:08:31. > :08:37.the big show of coalition unity. Schapps Shas, the Conservative
:08:37. > :08:40.Party chairman is with us, along with the Labour Party Treasury
:08:40. > :08:45.shadow minister. The big thing that David Cameron, the coalition
:08:45. > :08:48.promised to do, is fix the economy. That is the big thing, and you
:08:48. > :08:53.haven't. To that extent, the past two-and-a-half years have not been
:08:53. > :08:56.a success? I certainly would like it to be fixed faster, and for us
:08:56. > :09:00.not to have a position in Europe, and America and the rest of the
:09:00. > :09:03.world where economies are in difficulty. That is the
:09:03. > :09:07.disappointment the last two years? We would like things to have moved
:09:07. > :09:10.faster. In reality, we have cleared a quarter of the deficit, we have a
:09:10. > :09:16.million people working in new jobs in the private sector, and we have
:09:16. > :09:19.got the highest employment in this country ever at 29.6 million,
:09:19. > :09:23.including more women in work than ever before. I think there is a
:09:23. > :09:27.series of things where we can say we are starting to heal the economy.
:09:27. > :09:30.I agree with you saying I would like it to be faster. Faith healing
:09:30. > :09:35.some would say. In that the many successes trotted out today, there
:09:35. > :09:40.was no room to mention, for instance, the botched 2012 budget,
:09:40. > :09:43.there was room to mention the fiscal targets missed, and the
:09:43. > :09:48.double-dip recession, the possibility of a triple-dip
:09:48. > :09:53.recession, or we might lose our credit rating? All these things
:09:53. > :09:58.have to be taken in the backdrop of what is going on in the world. Who
:09:58. > :10:02.could have predicted 2010 that we would still be talking about
:10:02. > :10:05.whether or not Greece will default or not in Europe. We have the same
:10:05. > :10:09.budget deficit as Greece as a percentage of our economy back in
:10:09. > :10:12.2010, now that budget deficit has reduced by a quarter. That means we
:10:12. > :10:15.do have the confidence of the markets. We are borrowing at rates
:10:15. > :10:19.that this country has barely ever seen. You fully expect, for
:10:19. > :10:22.instance, because we want to look ahead to 2013, you do not expect,
:10:22. > :10:26.given that, then, to lose the triple-A rating? I don't know what
:10:26. > :10:30.will happen in the future, I'm not trying to predict the future. What
:10:30. > :10:34.I do know is you cannot solve this kind of problem with your economy,
:10:35. > :10:37.a problem caused by debt, by more borrowing, more spending and more
:10:37. > :10:41.debt. So we cannot go down that route. So far the coalition, say
:10:41. > :10:44.what you want about it, has stopped us from going to the wall.
:10:44. > :10:49.thing that will interest families up and down this country, is the
:10:49. > :10:52.possibility that there will be some help on childcare, and also capping
:10:52. > :10:55.social care cost. It was short on detail today, people will
:10:56. > :11:00.understand that, but can you at least say this is fully costed, it
:11:00. > :11:03.will be revenue-neutral? What you will see in the next few weeks is a
:11:03. > :11:07.series of announcements. Today's document was called a review,
:11:07. > :11:11.looking back at the two-and-a-half years. What we have also signalled,
:11:11. > :11:14.in areas like child cautious people who want to go back to work,
:11:14. > :11:19.pensions, a fairer system there, infrastructure for transport and
:11:19. > :11:21.housing, and helping people on to the market. You have something that
:11:21. > :11:24.is revenue-neutral? We will see announcements that will be
:11:24. > :11:27.significant and important. can't tell us now this is fully
:11:28. > :11:31.costed, we are not going to have to raise the money? It will be, and
:11:31. > :11:34.you won't have to wait long, these will be announcements made in the
:11:34. > :11:38.weeks to come. I want to move on, one other point, there is huge
:11:38. > :11:43.things ahead this year, in terms of overall welfare reform, reallying
:11:43. > :11:46.the beginning the question of the NHS reform. Absolutely huge
:11:46. > :11:49.questions over reforming the structure of our bureaucracy, why
:11:49. > :11:54.should people have any faith that you are going to be competent in
:11:54. > :11:57.doing this, when you couldn't even introduce pasty tax? Well, look,
:11:57. > :12:01.the big issues like reforming welfare, frankly, that we have
:12:01. > :12:05.tackled, which have been left in generations, just in welfare system
:12:05. > :12:10.getting ever more expensive, so welfare and pensions together take
:12:10. > :12:14.up one pound in every three spent by this Government. We have tackled
:12:15. > :12:18.the big reforms. You haven't done it yet? The Universal Credit is
:12:18. > :12:22.coming in this year. I'm asking will it be competent? To answer the
:12:22. > :12:26.question, tomorrow, for example, we will be vote to go put a 1% cap on
:12:26. > :12:30.the rise in the welfare. Now, we need to see what the opposition is
:12:30. > :12:34.going to do, if they don't vote for, that they need to explain why the
:12:34. > :12:37.billions will come from, cuts from the NHS budget, perhaps. Just on
:12:37. > :12:41.the big picture. The one thing that guarantees that the markets look at
:12:41. > :12:44.a country and think it is going OK, is if they think it has stable
:12:44. > :12:48.Government, we have a stable Government and it will be here for
:12:48. > :12:52.the next couple of years? The coalition have made it clear they
:12:52. > :12:56.will continue to 2015. What we have heard really doesn't sit with what
:12:56. > :12:59.people out there in the real world, away from the political process,
:12:59. > :13:03.the day-to-day political process, will understand as what is going on
:13:03. > :13:08.in their lives. What we saw today was really David Cameron and Nick
:13:08. > :13:11.Clegg, patting one another on the back, at the point which order wry
:13:11. > :13:14.families are feeling their income squeezed. You have to find the
:13:14. > :13:19.money from somewhere, to take the issue of tomorrow, tomorrow's vote
:13:19. > :13:23.will be a big watershed for you, as a party you said it is OK for
:13:23. > :13:28.public servants to be limited to a 1% increase in their pay, lower
:13:28. > :13:32.than the rate of inflation, but you are now saying that it is not OK
:13:32. > :13:35.for benefits claimants to do it. That doesn't add up, does it?
:13:35. > :13:39.important to recognise that many of the people who actually are
:13:39. > :13:43.receiving these benefits are receiving in-work benefits. I will
:13:43. > :13:47.put that to Grant Schapps in a second. It is very unfortunate they
:13:47. > :13:51.have tried to portray this as some how it is only those out of work
:13:51. > :13:54.receiving benefits. On the specific question, why is it OK to limit
:13:54. > :13:58.public sector workers to a 1% increase and it is not OK to do it
:13:58. > :14:02.for people out of work? We also made it very clear we wanted to see
:14:02. > :14:05.that limit done in a fair way, with a tougher approach to people on the
:14:05. > :14:08.highest earnings, and more protections for those on lower
:14:08. > :14:12.incomes. That is why I find it astonishing that we are still
:14:12. > :14:18.hearing from the Government, that they some how believe it is fair to
:14:18. > :14:22.give millionaires a massive tax cut, at the point in which working
:14:22. > :14:26.families are struggling. The point is you are penalising the strivers,
:14:26. > :14:32.a lot of people who don't get a lot of money, they look forward to some
:14:32. > :14:36.kind of benefit to help them and their family. 60% was Ed Miliband's
:14:36. > :14:39.figure of those who will be hurt? That is skewed by those including
:14:39. > :14:42.Child Tax Credit, those not within the employment market. It is
:14:42. > :14:46.challengable on that. The strivers who you think are the good people
:14:46. > :14:48.in this country and you want to help them? Governing at the end of
:14:48. > :14:52.the day is all about making difficult choice, working out where
:14:52. > :14:56.the money will come from. In a world where we have not had any
:14:56. > :14:59.increases until this year, 1% increase in the higher threshold,
:14:59. > :15:02.in a world where the public sector workers are accepting 1% pay, and
:15:02. > :15:05.many people in the private sector the same, you have to make some
:15:06. > :15:09.decisions about what you will do with welfare. We have made our
:15:09. > :15:16.decision, we have said it is 1%, at the same time, though, for people
:15:16. > :15:21.in work, we have raised the personal threshold from �6,500, to
:15:21. > :15:26.�9,440 this April, this has taken two million people completely out
:15:26. > :15:30.of tax and helping 24 million people pay tax. Hard choices have
:15:30. > :15:33.to be made, and one, which in the balance, he's suggesting, is quite
:15:33. > :15:36.reasonable? I accept hard choices have to be made, we have to
:15:36. > :15:39.recognise this Government has not done what they said they would do.
:15:39. > :15:43.If they look again at what was outlined today in terms of
:15:43. > :15:49.reviewing, they haven't met their targets in deficit reduction, they
:15:49. > :15:52.are heading for more borrowing than they intended, at the same time
:15:52. > :15:56.there is still a lack of fairness. It is completely unfair that those
:15:56. > :16:00.on the highest incomes, the millionaires seem to be getting the
:16:00. > :16:03.benefit, when ordinary working people are being hit. Is it unfair
:16:04. > :16:08.that those who work, seeing no rise in living standards, pay more so
:16:08. > :16:12.people out of work can get a little bit over the rate of inflation?
:16:12. > :16:16.Many of the people hit by these changes are people who are already
:16:16. > :16:20.in work. And I find it again astonishing that the Government
:16:20. > :16:23.persists on penalising working families, particularly women, we
:16:23. > :16:28.have had a whole series, a whole raft of measures, where people who
:16:28. > :16:31.are in work have already seen cuts. Tax credits, Working Tax Credits
:16:31. > :16:35.are really important. They are really important for family budgets,
:16:35. > :16:39.this is hurting real people. Surely, a better way to run a tax system, a
:16:39. > :16:43.better way to run an economy, is rather than taxing money away and
:16:43. > :16:47.handing it back in tax credits s not to take the tax in the first
:16:47. > :16:50.place. That is what happens when you take two million people out of
:16:50. > :16:54.tax entirely. More people will lose because of the changes in tax
:16:54. > :16:59.credits, particularly some of those who were in part-time work.
:16:59. > :17:03.people you would care about here, let me give you one figure, it is a
:17:03. > :17:07.sim one, for somebody on a minimum wage, under this Government, since
:17:07. > :17:12.2010, their tax bill has halved. It is a significant picture it helps a
:17:12. > :17:17.lot of people. But the problem is, that the changes that you have made
:17:17. > :17:22.and are making to tax credits means many of those people are not any
:17:22. > :17:24.better off. We have seen charities, we have seen third sector
:17:24. > :17:28.organisations, respected think tanks, all coming out and saying
:17:29. > :17:33.that these changes are hurting the lowest income families. That really
:17:33. > :17:37.isn't fair. We will leave it there. It doesn't take a great predickive
:17:37. > :17:42.skill to know we will come back to it -- predictive skill to know we
:17:43. > :17:46.will come back to it. Let's have a look at what lies ahead in 2013
:17:46. > :17:49.with our political panel, Danny Finkelstein used to work for
:17:49. > :17:53.Conservative Central Office, now working for the Times, Baroness
:17:53. > :17:59.Blair worked in Downing Street, and Miranda Green used to advise Paddy
:17:59. > :18:05.Ashdown. I wonder on the theatre of today, when you watch that, the two
:18:05. > :18:10.of them together, do you not find it a bit yucky? These set piece
:18:10. > :18:16.events have a grim inevitability about them. So does the surrounding
:18:16. > :18:19.chat about the Bro-mance and the relationship, it is all wearying, I
:18:19. > :18:24.find. There is a danger in doing events like this h it is because
:18:24. > :18:27.the public will think why not get on with governing, why spend time
:18:27. > :18:32.communicating to us about how well you think you are doing, isn't it
:18:32. > :18:37.up to us decide. On the other hand there is a massive danger of not
:18:37. > :18:40.taking stock at a half time point in a political experiment, a
:18:40. > :18:44.coalition in peacetime. There is a big danger in not doing that, and
:18:44. > :18:48.not assessing where we are, these are our achievements and our agenda
:18:48. > :18:51.is still this. You allow your enemies, on the right and left to
:18:51. > :18:57.describe what is happening for you. I think they really wanted to avoid,
:18:57. > :19:02.that and set the tone themselves, for the -- to avoid that, and set
:19:02. > :19:07.the tone themselves. I heard one journalist complain that thanks for
:19:07. > :19:11.coming out to talk to us, we don't get many of these! Very few people
:19:11. > :19:14.would have watched it, it won't make a difference. It was about
:19:14. > :19:19.trying to create 24-hours of news coverage out of the policies they
:19:19. > :19:24.have already introduced. Otherwise you keep throwing more meat off the
:19:24. > :19:27.wagon to create the idea of momentum F that isn't too bad a
:19:28. > :19:31.mixed metaphor. They did this to dominate the news agenda for a
:19:31. > :19:35.period, showing they had a Government that was successful in
:19:35. > :19:39.so far as that makes a difference. In reality people's behaviour will
:19:39. > :19:45.be determined by how these policies impact on their lives. You might
:19:45. > :19:50.say, rather snidely, they do get on better than Blair and Brown?
:19:50. > :19:53.might say that! I thought it was a missed opportunity, I could see why
:19:54. > :19:57.it was quite a good exercise, the plan was good, which was to take
:19:57. > :20:04.stock, which they sort of did. To present a bit of a forward plan,
:20:04. > :20:10.which, when you look at it was very bad, it had everything from peace
:20:10. > :20:15.in Iran to midwives, 2,000 of them. It was a pretty bizarre list. The
:20:15. > :20:18.thing that didn't work, I thought the plan was they are doing this to
:20:19. > :20:23.show the interest of the country and we are running it in a
:20:23. > :20:27.business-like way. Then they got into the ghastly jokey stuff, that
:20:27. > :20:31.is the picture that will stick with people. It is pretty irritating.
:20:31. > :20:36.They would be really lucky if anything stayed with people. It is
:20:36. > :20:40.all that has been shown today, that clip. On the substance, David
:20:40. > :20:43.Cameron said it is not whether you have disagreements but how you
:20:43. > :20:49.handle them that matters, big disagreements ahead. What do you
:20:49. > :20:52.foresee as the really bumpy bits of the pol coalition? This whole
:20:52. > :20:56.subject subject of welfare reform. We will have a little bump tomorrow,
:20:56. > :21:02.because I think of some of the rhetoric that has been used about
:21:02. > :21:06.this freeze for benefits. Do you that Sarah Teather is not alone in
:21:06. > :21:10.the way she thinks, but she may be alone in how she votes, but there
:21:10. > :21:12.are others? She represents a certain strand of Lib Dem opinion,
:21:13. > :21:18.which would be happier with the fact of what Government are doing
:21:18. > :21:21.with the cap, rather than the rhetoric that surrounds it. The
:21:21. > :21:24.devisive rhetoric has been damaging for the coalition on this issue.
:21:24. > :21:28.The arguments over welfare reform will continue. Europe, David
:21:28. > :21:31.Cameron is about to, apparently, make this enormous speech, saying
:21:31. > :21:35.he wants to redefine Britain's entire relationship with Europe. It
:21:35. > :21:39.will be very unhappy for the Lib Dems to carry on in partnership
:21:39. > :21:43.with somebody who wants to, I don't know what he wants to do, take us
:21:43. > :21:46.off into the middle of the Atlantic, I don't know. What will impact on
:21:46. > :21:50.politics is people's living standards. What makes people
:21:50. > :21:53.uncomfortable about the benefit freeze, is not well off people
:21:53. > :21:56.feeling even more squeezed. On the other hand, Nick Clegg was very
:21:56. > :21:59.good on the point, where else will the money come from. Everybody is
:21:59. > :22:04.going to lose money, and of course this point about people working,
:22:04. > :22:09.those people are paying for this policy as well as losing, by having
:22:09. > :22:14.a 1% increase. It is really about saving money from some people, and
:22:14. > :22:16.those people are out of work. not strictly true, I think Miranda
:22:17. > :22:20.is right about the rhetoric around this. It isn't that everybody is
:22:20. > :22:23.paying for it. I understand the decision on some benefits being
:22:24. > :22:28.raised and some not, from the Government's point of view. But,
:22:28. > :22:34.for example, it is so clearly about trying to divide the acceptable
:22:34. > :22:37.poor from the non-acceptable poor. Pensioners, of whatever kind of
:22:37. > :22:40.background. It is not my way of expressing an argument. Do you
:22:40. > :22:44.think Labour have got this right, it is tricky, if you are seen to be
:22:44. > :22:48.getting people, who are not very well paid, to pay more, relatively,
:22:48. > :22:54.for people who are not in work or claiming benefits? I think it is a
:22:54. > :22:57.really difficult decision. But I think the way that they have
:22:57. > :23:01.explained the decision tomorrow is right, actually. Talking to Grant
:23:01. > :23:03.Schapps before the programme, he was saying Tory posters going up
:23:03. > :23:10.tomorrow saying Labour have it completely wrong, and spelling out
:23:10. > :23:14.why they think so, the Tories think this is a win for them? I think the
:23:14. > :23:18.politics are with the Government. People are suspicious of people
:23:18. > :23:24.receiving welfare benefits. They do see the fairness of public sector
:23:24. > :23:27.wages going up the same as benefits. I never like revelling in anybody's
:23:27. > :23:31.misfortune of any kind, so I think that they have to be careful of the
:23:31. > :23:35.tone. Although, that is for me, other people maybe don't feel the
:23:35. > :23:39.same way. The tone has been deliberate. This is a political
:23:39. > :23:44.move. We have all seen them before, this is a clear political decision
:23:44. > :23:48.to have a clear dividing line and to have a political split. That's,
:23:48. > :23:52.it's been done well, it has been not accidental. I'm resolute about
:23:52. > :23:57.the choice, I think you need to explain the choice, everyone has
:23:57. > :24:00.their own way of earnings pressing an argument. -- Expressing an
:24:00. > :24:05.argument. How can the two leaders keep a lid on the backbenchers over
:24:05. > :24:09.the next two years. Very tricky on welfare reform and the NHS reforms,
:24:09. > :24:13.bumps on that, that will be very difficult? I think it will be.
:24:13. > :24:17.Absolutely. Actually, it has been surprising to everyone, I think,
:24:17. > :24:21.how well the Lib Dems have actually hung together during the coalition
:24:21. > :24:25.so far. I think they will continue to do so. Frankly, I don't think
:24:25. > :24:29.there is much ofpgs for the Lib Dems, they have just got to carry
:24:29. > :24:34.on marching through the mud, with all the in coming shrapnel. What
:24:34. > :24:38.else can they do. The only thing they can hope for is to get credit
:24:38. > :24:41.for providing stability at a very important moment, where otherwise
:24:41. > :24:46.the country wouldn't have been able to borrow money at an affordable
:24:46. > :24:51.rate. You have to hang on to that, you are doing a job in an
:24:51. > :24:55.uncomfortable way at an uncomfortable time. Something else,
:24:55. > :24:58.the prospect of David Miliband coming back into cabinet? I don't
:24:58. > :25:02.know where the story is. My personal view was David was right
:25:02. > :25:05.not to come in when Ed had won, it would have been pretty impossible.
:25:05. > :25:09.David is a great talent, so I hope at some point he does come back.
:25:09. > :25:14.You would like him back, even though it might give newspapers and
:25:14. > :25:18.television programmes another thing to talk about other than a
:25:18. > :25:22.bromance? It would be another soap opera, that is the dilemma.
:25:22. > :25:26.Lord Strathclyde doing? It was odd to do it today. I do politically
:25:26. > :25:30.that was very odd, why they didn't wait 24-hours. I understand the
:25:30. > :25:35.reasons of what he said, that is what everyone thinks, that he has
:25:35. > :25:40.decided to move into the private sector, he's in his mid-50s, and if
:25:40. > :25:44.he doesn't do it now. It is not because he doesn't like working
:25:44. > :25:51.with the Lib Dems in the Lords? That is not what he has told people
:25:51. > :25:56.or what they are led to believe. Just over four years ago the tiny
:25:56. > :26:03.island Republic of Iceland experienced the worst economic
:26:03. > :26:07.brown yaek of any group. House prices slumped and banks folded and
:26:07. > :26:13.the banks had to be nationalised. They let the banks died and growth
:26:13. > :26:16.has been averaging 2%, more than the UK. The macro-economics masks
:26:17. > :26:22.the pain being felt by many ordinary people. We have been to
:26:22. > :26:30.learn what we can learn from their experience.
:26:30. > :26:34.Iceland stuns in so many ways. Its geezers, glaciers and thermal
:26:34. > :26:39.springs reward even the pickiest tourist. But beyond the beautiful
:26:39. > :26:44.world heritage sites, Iceland is a bleak place for any humanity to
:26:44. > :26:54.survive. Winters are cold and daylight is a precious commodity.
:26:54. > :26:56.
:26:56. > :27:00.In summer 13 degrees is a warm day. It means Icelandic people had to
:27:00. > :27:06.develop tenacity, resilience and propenceity for hard work, which
:27:06. > :27:10.they have had to draw upon to survive this very man made crisis.
:27:10. > :27:16.I wanted to know whether those characteristics that helped create
:27:16. > :27:21.the economic bubble, might now lift the economy? The President has been
:27:21. > :27:31.in office for 16 years, he has seen boom and bust. We have a very
:27:31. > :27:32.
:27:32. > :27:37.strong sense of history of our culture. Mingled with that,
:27:37. > :27:42.solidarity and history, there is also an entrepeneural sense that,
:27:42. > :27:46.perhaps, led us astray in the years before the collapse. It has also
:27:46. > :27:53.enabled a nation of farmers and fishermen to transform themselves
:27:53. > :27:56.from being up to the 1960s and 1970s, among the poorest countries
:27:56. > :28:01.in Europe, to having achieved now one of the highest standards of
:28:01. > :28:05.living that you can find in the world, despite the difficulties
:28:05. > :28:14.that follow the crisis. Fundamentally we are still a nation
:28:14. > :28:19.of farmers and fishermen. But fishermen turned into fanciers
:28:19. > :28:23.between 2001 and 2008, and the economy grew up 230%, as the banks
:28:23. > :28:27.loaned money to everyone and anyone who wanted it, until the global
:28:27. > :28:31.money markets froze. Destroying the Icelandic economy over a summer,
:28:31. > :28:34.and creating the country's first- ever civil unrest. We stand
:28:34. > :28:39.together and demand the Government do a better job. When the then
:28:39. > :28:49.Prime Minister addressed a shocked nation in October 2008, he envoked
:28:49. > :28:57.
:28:57. > :29:03.the help of a higher deity. really makes me feel angry and sad.
:29:03. > :29:10.Because, you know, the country is made of people, the nation is made
:29:10. > :29:16.of people, and it is made for people and by people. Now it seems
:29:16. > :29:22.like banks are running societies and that is horribly wrong. Theodor
:29:22. > :29:27.Magnusson works in IT, he also hunds reindeer for a living. He,
:29:27. > :29:32.like -- hunts reindeer for a living. He like most people took out a
:29:32. > :29:38.mortgage 12 years Agatha ties inflation to the principal. It
:29:38. > :29:44.means he now owes 1.5-times the original mortgage, because of the
:29:44. > :29:52.spikes in the economy. I have been paying 150 months of this loan, I
:29:52. > :29:59.owe much more than I borrowed. I borrowed six million krona, I owe
:29:59. > :30:09.9.7 million. I have been paying around five million in these 150
:30:09. > :30:12.
:30:12. > :30:16.months. As is often the case in politics, the party which inherits
:30:16. > :30:21.the mess, doesn't always get much credit for cleaning it up.
:30:21. > :30:26.Iceland's ruling coalition, in power since 2009, has turned things
:30:26. > :30:30.around. The deficit is down from 14% of GDP, to around 1% today.
:30:30. > :30:36.Unemployment has halved, and exports are up. But this has been
:30:36. > :30:41.achieved, in part, by almost 100 new taxes, including a tax on
:30:42. > :30:47.sugary drinks. We have closed this dramatic gap in the budget, which
:30:47. > :30:54.has been very important for our economy, and so I think that we
:30:54. > :31:00.have made difficult decision, but I think some were good, some were not
:31:00. > :31:05.less good, but overall, I think we are well on the way in becoming a
:31:05. > :31:09.very strong economy again. What the Government and Icelanders in
:31:09. > :31:13.general won't do is compromise on the welfare state. Education and
:31:13. > :31:17.healthcare are free for all, and many who lost their jobs simply got
:31:17. > :31:21.another degree to make themselves more employable. There is also no
:31:21. > :31:24.glass ceiling in this country. Participation rates by women are
:31:24. > :31:29.amongst the highest in the world. From the Prime Minister to the
:31:29. > :31:39.Finance Minister and to business leaders at all levels, women are
:31:39. > :31:42.
:31:42. > :31:48.vital to this economy. People always say that if you can see Esja
:31:48. > :31:52.from any parliament the price is a million pounds higher. This woman
:31:52. > :31:56.used to be the Mayor of One of Reykjavik's wealthiest suburbs, now
:31:56. > :32:00.she runs a privately-owned care home service, her biggest customers
:32:00. > :32:08.are local authorities. When you start a new business, and the
:32:08. > :32:16.economy just like, overnight collapses, it is like wow, can we
:32:16. > :32:22.really, really survive. But at the same time, I always had in mind a
:32:22. > :32:27.sentence from one of my professor, when I was doing my MBA studies.
:32:27. > :32:32.One I was doing my studies, he said "and then when you go out there to
:32:32. > :32:37.run companies, keep in mind it is not like an exciting movie, it is
:32:37. > :32:40.more like a soap opera, you do the same things over and over and over
:32:40. > :32:45.again". With that in mind, we are doing a soap opera.
:32:45. > :32:48.When the crisis struck in the autumn of 2008, Iceland's economy
:32:48. > :32:52.entered an apparent death spiral, spluinging for ten straight
:32:52. > :32:57.quarters, but by letting its currency collapse and its bloated
:32:58. > :33:01.banks simply die, things turned around rapidly, so since 2011,
:33:01. > :33:07.Iceland has seen seven straight quarters of growth, averaging at
:33:07. > :33:11.around 2.5% per an number. But the macro-economic picture
:33:11. > :33:15.hides the reality for many ordinary Icelandic people. Thousands have
:33:15. > :33:18.had to emigrate in search of work, that has artificially kept the
:33:18. > :33:23.unemployment rate down. For those who have stayed, many of them have
:33:23. > :33:26.taken on second or third jobs, in order to maintain living standards.
:33:27. > :33:36.They are still amongst the highest in the world.
:33:37. > :33:40.
:33:40. > :33:44.The question is, how long can Iceland maintain this facade.
:33:45. > :33:49.Neil McMahon has been living here 38 years, he's a full-time teacher,
:33:49. > :33:56.but also translator and tour guide. He and his daughter met me in a
:33:56. > :34:01.restaurant in the reinvigorated area Marina area. For an outsider
:34:01. > :34:06.reading articles in the newspaper, or following a brief TV coverage of
:34:06. > :34:11.Iceland, they might be fooled into believing that Icelanders have
:34:11. > :34:16.managed to extricate themselves very effectively from this crisis.
:34:16. > :34:24.However, there is still a lot of problems, people have lost their
:34:24. > :34:30.homes, particularly perhaps the younger generation, people who had
:34:30. > :34:36.huge mortgages and are now having to try and deal with this situation.
:34:36. > :34:43.I work as a teacher, and after 35 years in the profession as a
:34:43. > :34:48.secondary teacher I come out with �24,000 annually. It would be
:34:48. > :34:52.rather difficult to make ends meet on that. Icelanders know many
:34:53. > :34:56.countries, including Britain, are watching their economic recovery
:34:56. > :35:02.very closely. Certainly, when this crisis broke,
:35:02. > :35:06.Reykjavik didn't abide by the usual rules. Apart from letting the
:35:06. > :35:09.bloated banks collapse, Iceland also imposed strict capital
:35:09. > :35:14.controls. Even today companies and individuals need permission to take
:35:14. > :35:22.money out of the country. So what can the UK, with its still dominant
:35:22. > :35:26.banking sector learn from Iceland's experience? Don't defend on a
:35:26. > :35:30.formal economy. It was not real, -- on a phoney economy. It was not
:35:30. > :35:36.real. We understand in Iceland if we look back, we see very clearly
:35:36. > :35:42.this was not real. This was completely a bubble. The financial
:35:42. > :35:46.business is very necessary, don't get me wrong, but it is very, it is
:35:46. > :35:54.very dangerous as a business, because it sucks the best, it is
:35:54. > :35:58.not real. This business is very real, they make the bionic legs,
:35:58. > :36:01.which the called Blade Runner, Oscar Pistorious, has made so
:36:01. > :36:05.famous. They help many people, including soldiers who have lost
:36:05. > :36:12.limbs in Afghanistan, to abandon their wheelchairs, and vastly
:36:12. > :36:15.improve their quality of life. They struggled to find engineers during
:36:15. > :36:22.the regin of the banks, because they couldn't match the salaries,
:36:22. > :36:30.not any more. Like so many Icelandic firms, engineers work in
:36:30. > :36:34.engineering since the crash. Of course, they are the lucky ones,
:36:34. > :36:38.well-paid specialists rarely have their homes repossessed. But it is
:36:38. > :36:42.a reality facing thousands of Icelanders tethered to thousands of
:36:42. > :36:46.mortgages that never get paid off. It is an intergenerational conflict
:36:46. > :36:51.as grandparents have to pass their debts on. What is so serious is
:36:51. > :36:56.those who had their houses with no debts, like elderly people, they
:36:56. > :37:01.gave the mortgage to their children or grandchildren. It is like their
:37:01. > :37:05.eating up our homes. It is very important for us now to just take
:37:05. > :37:10.the status on where are we, and where do we want to go, what kind
:37:10. > :37:15.of society do we want, into the long-term future. That is the big
:37:15. > :37:18.question we should be asking at the moment. And one part of this
:37:18. > :37:25.question is whether we should be a member of the European Union,
:37:25. > :37:35.whether we should be a member of the eurozone. I have answered this
:37:35. > :37:40.question on, for me personal, and my answer is yes.
:37:40. > :37:49.Over all, I think, that we are just typical islanders, with hopes and
:37:49. > :37:58.dreams. You could also saying, maybe we have been a little bit
:37:58. > :38:05.arrogant in the past. Hopefully we are evolving into a more humble
:38:05. > :38:10.nation after what we have been through. Now, Google today admitted
:38:10. > :38:13.that users in China were no longer being warned when their internet
:38:13. > :38:17.searches were being censored, the news appeared a victory for the
:38:17. > :38:22.authorities in Beijing who had frequently sabotaged Google's
:38:22. > :38:27.attempts to warn of censorship. But 2,000kms south of the capital, the
:38:27. > :38:31.city of Guangzhou was experiencing rare genes of public defiance
:38:31. > :38:36.against censorship, as people rallied behind journalists of the
:38:36. > :38:43.Southern Weekend newspaper, after it was forced to change an
:38:43. > :38:48.editorial calling for reform, into a tribute in praise of the
:38:48. > :38:55.Communist Party. TRANSLATION: You can speak, he can
:38:55. > :39:02.speak, I can speak, let us discuss. Protestors want the local censor
:39:02. > :39:05.dismissed and more political freedoms. On the Twitter-style
:39:05. > :39:09.blogging site, one Chinese activists with 30,000 followers,
:39:09. > :39:13.appeared to intimate her support for the protests. Ever since the
:39:13. > :39:18.violent crackdown on protestors in Tiananmen Square in 1989, China has
:39:18. > :39:22.bought off some political protests, through the Communist Party's
:39:22. > :39:25.greatest achievement, increased prosperity. The new leadership
:39:25. > :39:30.promises reforms. But retains a strong grip on what Chinese
:39:30. > :39:37.citizens can see, read and hear in the media. The official Global
:39:37. > :39:41.Times said in an editoria that, "in China's current social reality,
:39:41. > :39:45.there cannot be the free media these people hope in their hearts
:39:45. > :39:49.for". Perhaps not, so far the protests have remained very small.
:39:49. > :39:53.But Beijing knows the great political movement of the Arab
:39:53. > :39:59.Spring began with one tiny protest by a single fruit seller in Tunisia,
:39:59. > :40:03.fed up with police harassment. What is certain is educated outward
:40:03. > :40:08.looking ambitious young Chinese, are far less prepared than a
:40:08. > :40:14.generation ago, to accept the bargain of prosperity at the
:40:14. > :40:20.expense of freedom. We have the Editor in Chief of the
:40:20. > :40:24.paper that tries to bring stories about the real China. What are your
:40:24. > :40:30.thoughts on the significance of the protests, given they are quite
:40:30. > :40:37.small? It started big, and now it is getting even bigger. When I said
:40:37. > :40:44.big, it is because Southern Weekend is not just a newspaper, or any
:40:44. > :40:51.provincial newspaper. It is a most reputable newspaper, nationwide
:40:51. > :40:58.newspaper, for over a decade. It has millions and millions of loyal
:40:58. > :41:02.readers across the country. It is a party newspaper, but it is a very
:41:02. > :41:10.reformed-minded newspaper. It often pushes the envelope. Particularly
:41:10. > :41:18.on this event, the Southern Weekend had the tradition which put a very
:41:18. > :41:25.elaborate new year's letter, an editorial with a fancy rhetoric
:41:25. > :41:32.full of hope and inspiration that every year it tried to inspire the
:41:32. > :41:36.people to move forward to progress. At the back of that value is always
:41:36. > :41:40.justice and freedom. This year, it is on that very important message
:41:40. > :41:46.of the nationally respected newspaper, something went badly
:41:46. > :41:49.wrong. In that sense, then, how big a challenge is this for the new
:41:49. > :41:55.leadership, for Xi Jinping and the others, how difficult will it be
:41:55. > :42:04.for them to handle? This is something we have yet to see. I
:42:04. > :42:09.think it is a real test. First of all, since Mr Xi Jinping took his
:42:09. > :42:14.party secretary position, and the chairman of the military
:42:14. > :42:17.commitmenty, that he is officially head of the country, but not
:42:18. > :42:25.President of the People's Republic of China, that won't be until the
:42:25. > :42:28.spring. He has already given a very strong speech about China's dream.
:42:28. > :42:34.He's trying to build some kind of consensus and public support, both
:42:34. > :42:38.inside the country and outside, and in the general population, under a
:42:38. > :42:42.slogan of "China's dream", and he will be the leader to lead the
:42:42. > :42:47.country towards it. But what is exactly the Chinese dream? He gave
:42:47. > :42:53.some kind of definition in his speech, and the Southern Weekend,
:42:54. > :43:01.the new year's editorial, had a title, which was censored later,
:43:01. > :43:04.had a title called "China's dream, dream of constitutional rule", that
:43:04. > :43:11.precise message was censored by the propaganda department. That is
:43:11. > :43:15.where the conflict starts. Do you see this as some kind of watershed
:43:15. > :43:21.moment. I said the Arab Spring began with one fruit seller and one
:43:21. > :43:26.protest and it got very big. Is it something like that, because the
:43:26. > :43:32.bargain of we will make you more prosperous if you keep quiet about
:43:32. > :43:37.human rights s that bargain changing? It is changing. There is
:43:37. > :43:44.a small level of street protest in Guangzhou right now, but I don't
:43:44. > :43:46.know how that will spread. An entire society, on the street
:43:46. > :43:50.movement, requires many other conditions, and I cannot see that
:43:50. > :43:57.in China at the moment. In terms it of a message, there is a similarity,
:43:57. > :44:04.because the event, at this point, is no more just about one newspaper,
:44:04. > :44:08.with its party propaganda chief, it is a nationwide, participated,
:44:08. > :44:16.public protest, through the Internet, not anywhere else. It is
:44:16. > :44:23.nationwide. Let me give you another very concrete example on this,
:44:23. > :44:28.talking about China's dream, the Mr Xi Jinping's dream, when he was
:44:28. > :44:32.giving the speech, he touched upon material, the food, the safety,
:44:32. > :44:36.retirement, medical assurances, healthcare and those things people
:44:36. > :44:42.care about, then he jumped from materialism to collective national
:44:42. > :44:46.pride, which the rejufisation of Chinese society in the world. There
:44:46. > :44:52.is something badly missing in the definition of the dream, is
:44:52. > :44:58.individual dignity, that is exactly where the Southern Weekend news
:44:58. > :45:08.editorial, which was later censureed, touched upon. On that
:45:08. > :45:42.
:45:42. > :45:52.note thank you for joining us. A That's it for us from tonight. We
:45:52. > :46:17.
:46:17. > :46:21.will have more tomorrow. Until then, Hello, we have had the cloud over
:46:21. > :46:25.Hello, we have had the cloud over the last couple of days. More to
:46:25. > :46:28.come on Tuesday. Much of the country with grey skies, still rain,
:46:28. > :46:34.tomorrow it begins to move further south and east, allowing brighter
:46:34. > :46:44.skies as part of Scotland and Northern Ireland. 3.3030am, we have
:46:44. > :46:51.
:46:51. > :46:54.patchy rain in northern England and Clearing away through the afternoon.
:46:54. > :46:58.Up towards Anglesey, we are looking at brighter weather to finish off
:46:58. > :47:03.the day. Much brighter, for Northern Ireland, but it will turn
:47:03. > :47:07.colder, temperatures at 3.3030pm, 9 degrees, a similar story for
:47:07. > :47:11.Scotland, a dryer, brighter afternoon, but a colder feel to