07/01/2013 Newsnight


07/01/2013

Is the governing coalition a happy marriage or a civil partnership? Anti-censorship protests in China. How did Iceland rebuild its economy? With Gavin Esler.


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Tonight, for two-and-a-half years, it has been called everything from

:00:12.:00:20.

a marriage of convience, to a bro- mance. Today it was rebranded as a

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civil, a very civil partnership. Let me put it like this, we are

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married, not to each other, this is a Government, not a relationship.

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With no new major policy details and a row over benefit payments,

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and the Government and the opposition offer different

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scorecards on the coalition. The panel will double as agony auoints

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on the real state of the Conservative-Lib Dem relationship.

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What Iceland can teach Britain from going from near economic collapse,

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to businesses bursting back into light. Don't depend on a formal

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economy, we realised it was not real, a bubble. Protests in China

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over newspaper censorship, -- censorship, with the state loosen

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the grip on what the Chinese people hear, read and see.

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Good evening, at a time of real difficulty for his Government, some

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40 years a the then Prime Minister, Harold Wilson, told the people that

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he knew what was going on, he was going on and the Labour Government

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was going on. Today the single Wilson eye became the plural "we"

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of David Cameron and Nick Clegg telling us the coalition is going

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on until 2015. To what effect? Today is one of those crunch days

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with the Government pushing through plans to restrict rises in benefits

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to 1%, that is lower than inflation. Unformer Lib Dem minister said she

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will not be -- one former Lib Dem minister she wouldn't be able to

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vote for the move. We explore the rhetoric of the coalition

:02:03.:02:07.

Government. Today was a pretty gloomy day. Not

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so much for the weather, although that didn't help, but for the whole

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holidays-are-over, let-down-feeling. For some it was back to work or

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school, for others, even more gloomy today, today is the day we

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are told that divorce lawyers expect the most new business. No

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divorce news in Downing Street, the coalition still very much together.

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What better way then to cheer us all up, than a mid-term review by

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the coalition. A list of achievements made since 2010, and

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crucially, a list of new policy ideas for the second half of the

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parliament. This was all contained in a big

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chunky document, a big souvenir programme for the press conference.

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It was big on symbolism and occasion, what about new policy.

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Since you are very busy and haven't got time, we have been through the

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entire document to extract only the new policy details. So, if you are

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sitting comfortably, Mr Cameron and Mr Clegg will now read them out.

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(sound of the wind whistling) This lack of anything new didn't exactly

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cheer up the post-festive journalists, who then had to ask,

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instead, questions about the state of the coalition's political

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marriage, which, in turn, didn't exactly cheer up the PM. I hate to

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spoil the party, but, let me put it like this, we are married, not to

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each other. We are both happily married, this is a Government not a

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relationship. It is a Government about delivering for people,

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because of the mess that we were left in by the previous Government,

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because of the huge challenges that we face. And what we said to people

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two-and-a-half years ago, was that we would come together for a five-

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year parliament. We would tackle these problems. So, to me, it is

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not a marriage, it is, if you like, it is a "Ronseal deal", it does

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what it says on the tin. Today's performance was not only about

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demonstrating a unity of purpose within the coalition, they haven't

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run out of ideas, they tell us, but it is also to set up some useful

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political dividing lines between the coalition, on the one hand, and

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Labour on the other. We can see one of those coming into view tomorrow,

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when the Commons will vote on the up-rating of benefits.

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In the Autumn Statement, the Government announced that certain

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benefits, claimed by working age people, would rise by only 1% a

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year for three consecutive years, rather than in line with inflation.

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The benefits affected include, jobseeker's allowance, Employment

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and Support Allowance, income support, including some aspects of

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housing benefit, maternity allowance, Statutory Sick Pay,

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paternity, and maternity and adoption pay, it covers some part

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of the Working Tax Credit and Child Tax Credit. Child benefit, frozen

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for three years since 2011, will also be up-rated by only 1% for two

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years, until 2015-2016. Labour are voting against this. Which the

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Government is absolutely delighted with. Expect to see much

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Conservative campaigning suggesting Labour are on the side of claimants

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and against working people. Labour, of course, aren't having any of

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this. More than 60% of those affected by the changes that they

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are voting on tomorrow will be working families, that is going to

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be handicaping and stopping working families who want to get into work

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and do the right thing. I don't think this is a Government on the

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side of the strivers, people doing the right thing. I think this is a

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Government on the side of a few people in the country, the richest

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and most powerful. So, how many people are affected? Well the

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changes in the bill will affect four million families who claim in-

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work benefits, with a further three million being affected by the

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changes to the 1% child benefit up- rating. Of 2.8 million workless

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households, 2.5 million will see their entitlements reduced. The

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Government estimate that is it will save �1.9 billion in 2015-2016.

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Let's not forget this is only one important, but not the most

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important part of a much bigger package of tax changes and benefit

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changes, which, across the period of the console daigs, is hitting

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the very richest very hard -- consolidation, which is hitting the

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very richest very hard, and those at the bottom of benefits. Those on

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middle earnings, they are doing least badly out of all of this.

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row between Labour and the Conservatives about who supports

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the strivers, and who is on the side of the skivers, is pretty

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uncomfortable for Nick Clegg and the Liberal Democrats, some Lib

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Dems are supposedly minded to support Labour in tomorrow's vote.

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I will be very clear with you, I don't think it helps at all to try

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to portray that decision as one which divides one set of people off

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against another, the deserving or undeserving, poor people, people in

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or out of work. However Mr Clegg went on to challenge those opposed

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to the 1% cap to answer a simple question. Where would you find that

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�5 billion, what would you cut? Schools, health, defence, local

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Government? Social care? That's the question you have got to ask

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yourself. And Mr Clegg has, perhaps, the consolation of knowing, that

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for now, at least, the policy seems popular with voters. Consistently

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polls show that people in lower income groups are more likely to

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think that people are fiddling the system more than people in higher

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income groups. So, when you look at this from a political, from a

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demographic perspective, it does seem to be something that appeals

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to all different groups. But, the big caveat is what does it actually

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mean in practice, when people start seeing their benefit levels, their

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disposable income being whittled away over the coming years, will

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they still be as supportive, the answer to that has got to be

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probably no. The Commons vote is, of course, not

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until tomorrow, you could argue that really, today's big political

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news was, not the coalition mid- term report, but a cabinet minister

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resigning. Yes, Lord Strathclyde, leader of the Lords, says he now

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wants to do something else, which, of course, may be his real reason,

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but, nevertheless, it was still rather odd to do it on the day of

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the big show of coalition unity. Schapps Shas, the Conservative

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Party chairman is with us, along with the Labour Party Treasury

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shadow minister. The big thing that David Cameron, the coalition

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promised to do, is fix the economy. That is the big thing, and you

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haven't. To that extent, the past two-and-a-half years have not been

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a success? I certainly would like it to be fixed faster, and for us

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not to have a position in Europe, and America and the rest of the

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world where economies are in difficulty. That is the

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disappointment the last two years? We would like things to have moved

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faster. In reality, we have cleared a quarter of the deficit, we have a

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million people working in new jobs in the private sector, and we have

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got the highest employment in this country ever at 29.6 million,

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including more women in work than ever before. I think there is a

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series of things where we can say we are starting to heal the economy.

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I agree with you saying I would like it to be faster. Faith healing

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some would say. In that the many successes trotted out today, there

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was no room to mention, for instance, the botched 2012 budget,

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there was room to mention the fiscal targets missed, and the

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double-dip recession, the possibility of a triple-dip

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recession, or we might lose our credit rating? All these things

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have to be taken in the backdrop of what is going on in the world. Who

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could have predicted 2010 that we would still be talking about

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whether or not Greece will default or not in Europe. We have the same

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budget deficit as Greece as a percentage of our economy back in

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2010, now that budget deficit has reduced by a quarter. That means we

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do have the confidence of the markets. We are borrowing at rates

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that this country has barely ever seen. You fully expect, for

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instance, because we want to look ahead to 2013, you do not expect,

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given that, then, to lose the triple-A rating? I don't know what

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will happen in the future, I'm not trying to predict the future. What

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I do know is you cannot solve this kind of problem with your economy,

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a problem caused by debt, by more borrowing, more spending and more

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debt. So we cannot go down that route. So far the coalition, say

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what you want about it, has stopped us from going to the wall.

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thing that will interest families up and down this country, is the

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possibility that there will be some help on childcare, and also capping

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social care cost. It was short on detail today, people will

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understand that, but can you at least say this is fully costed, it

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will be revenue-neutral? What you will see in the next few weeks is a

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series of announcements. Today's document was called a review,

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looking back at the two-and-a-half years. What we have also signalled,

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in areas like child cautious people who want to go back to work,

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pensions, a fairer system there, infrastructure for transport and

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housing, and helping people on to the market. You have something that

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is revenue-neutral? We will see announcements that will be

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significant and important. can't tell us now this is fully

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costed, we are not going to have to raise the money? It will be, and

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you won't have to wait long, these will be announcements made in the

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weeks to come. I want to move on, one other point, there is huge

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things ahead this year, in terms of overall welfare reform, reallying

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the beginning the question of the NHS reform. Absolutely huge

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questions over reforming the structure of our bureaucracy, why

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should people have any faith that you are going to be competent in

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doing this, when you couldn't even introduce pasty tax? Well, look,

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the big issues like reforming welfare, frankly, that we have

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tackled, which have been left in generations, just in welfare system

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getting ever more expensive, so welfare and pensions together take

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up one pound in every three spent by this Government. We have tackled

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the big reforms. You haven't done it yet? The Universal Credit is

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coming in this year. I'm asking will it be competent? To answer the

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question, tomorrow, for example, we will be vote to go put a 1% cap on

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the rise in the welfare. Now, we need to see what the opposition is

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going to do, if they don't vote for, that they need to explain why the

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billions will come from, cuts from the NHS budget, perhaps. Just on

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the big picture. The one thing that guarantees that the markets look at

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a country and think it is going OK, is if they think it has stable

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Government, we have a stable Government and it will be here for

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the next couple of years? The coalition have made it clear they

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will continue to 2015. What we have heard really doesn't sit with what

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people out there in the real world, away from the political process,

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the day-to-day political process, will understand as what is going on

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in their lives. What we saw today was really David Cameron and Nick

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Clegg, patting one another on the back, at the point which order wry

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families are feeling their income squeezed. You have to find the

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money from somewhere, to take the issue of tomorrow, tomorrow's vote

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will be a big watershed for you, as a party you said it is OK for

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public servants to be limited to a 1% increase in their pay, lower

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than the rate of inflation, but you are now saying that it is not OK

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for benefits claimants to do it. That doesn't add up, does it?

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important to recognise that many of the people who actually are

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receiving these benefits are receiving in-work benefits. I will

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put that to Grant Schapps in a second. It is very unfortunate they

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have tried to portray this as some how it is only those out of work

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receiving benefits. On the specific question, why is it OK to limit

:13:51.:13:54.

public sector workers to a 1% increase and it is not OK to do it

:13:54.:13:58.

for people out of work? We also made it very clear we wanted to see

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that limit done in a fair way, with a tougher approach to people on the

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highest earnings, and more protections for those on lower

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incomes. That is why I find it astonishing that we are still

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hearing from the Government, that they some how believe it is fair to

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give millionaires a massive tax cut, at the point in which working

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families are struggling. The point is you are penalising the strivers,

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a lot of people who don't get a lot of money, they look forward to some

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kind of benefit to help them and their family. 60% was Ed Miliband's

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figure of those who will be hurt? That is skewed by those including

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Child Tax Credit, those not within the employment market. It is

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challengable on that. The strivers who you think are the good people

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in this country and you want to help them? Governing at the end of

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the day is all about making difficult choice, working out where

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the money will come from. In a world where we have not had any

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increases until this year, 1% increase in the higher threshold,

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in a world where the public sector workers are accepting 1% pay, and

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many people in the private sector the same, you have to make some

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decisions about what you will do with welfare. We have made our

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decision, we have said it is 1%, at the same time, though, for people

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in work, we have raised the personal threshold from �6,500, to

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�9,440 this April, this has taken two million people completely out

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of tax and helping 24 million people pay tax. Hard choices have

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to be made, and one, which in the balance, he's suggesting, is quite

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reasonable? I accept hard choices have to be made, we have to

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recognise this Government has not done what they said they would do.

:15:36.:15:39.

If they look again at what was outlined today in terms of

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reviewing, they haven't met their targets in deficit reduction, they

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are heading for more borrowing than they intended, at the same time

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there is still a lack of fairness. It is completely unfair that those

:15:52.:15:56.

on the highest incomes, the millionaires seem to be getting the

:15:56.:16:00.

benefit, when ordinary working people are being hit. Is it unfair

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that those who work, seeing no rise in living standards, pay more so

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people out of work can get a little bit over the rate of inflation?

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Many of the people hit by these changes are people who are already

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in work. And I find it again astonishing that the Government

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persists on penalising working families, particularly women, we

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have had a whole series, a whole raft of measures, where people who

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are in work have already seen cuts. Tax credits, Working Tax Credits

:16:28.:16:31.

are really important. They are really important for family budgets,

:16:31.:16:35.

this is hurting real people. Surely, a better way to run a tax system, a

:16:35.:16:39.

better way to run an economy, is rather than taxing money away and

:16:39.:16:43.

handing it back in tax credits s not to take the tax in the first

:16:43.:16:47.

place. That is what happens when you take two million people out of

:16:47.:16:50.

tax entirely. More people will lose because of the changes in tax

:16:50.:16:54.

credits, particularly some of those who were in part-time work.

:16:54.:16:59.

people you would care about here, let me give you one figure, it is a

:16:59.:17:03.

sim one, for somebody on a minimum wage, under this Government, since

:17:03.:17:07.

2010, their tax bill has halved. It is a significant picture it helps a

:17:07.:17:12.

lot of people. But the problem is, that the changes that you have made

:17:12.:17:17.

and are making to tax credits means many of those people are not any

:17:17.:17:22.

better off. We have seen charities, we have seen third sector

:17:22.:17:24.

organisations, respected think tanks, all coming out and saying

:17:24.:17:28.

that these changes are hurting the lowest income families. That really

:17:29.:17:33.

isn't fair. We will leave it there. It doesn't take a great predickive

:17:33.:17:37.

skill to know we will come back to it -- predictive skill to know we

:17:37.:17:42.

will come back to it. Let's have a look at what lies ahead in 2013

:17:43.:17:46.

with our political panel, Danny Finkelstein used to work for

:17:46.:17:49.

Conservative Central Office, now working for the Times, Baroness

:17:49.:17:53.

Blair worked in Downing Street, and Miranda Green used to advise Paddy

:17:53.:17:59.

Ashdown. I wonder on the theatre of today, when you watch that, the two

:17:59.:18:05.

of them together, do you not find it a bit yucky? These set piece

:18:05.:18:10.

events have a grim inevitability about them. So does the surrounding

:18:10.:18:16.

chat about the Bro-mance and the relationship, it is all wearying, I

:18:16.:18:19.

find. There is a danger in doing events like this h it is because

:18:19.:18:24.

the public will think why not get on with governing, why spend time

:18:24.:18:27.

communicating to us about how well you think you are doing, isn't it

:18:27.:18:32.

up to us decide. On the other hand there is a massive danger of not

:18:32.:18:37.

taking stock at a half time point in a political experiment, a

:18:37.:18:40.

coalition in peacetime. There is a big danger in not doing that, and

:18:40.:18:44.

not assessing where we are, these are our achievements and our agenda

:18:44.:18:48.

is still this. You allow your enemies, on the right and left to

:18:48.:18:51.

describe what is happening for you. I think they really wanted to avoid,

:18:51.:18:57.

that and set the tone themselves, for the -- to avoid that, and set

:18:57.:19:02.

the tone themselves. I heard one journalist complain that thanks for

:19:02.:19:07.

coming out to talk to us, we don't get many of these! Very few people

:19:07.:19:11.

would have watched it, it won't make a difference. It was about

:19:11.:19:14.

trying to create 24-hours of news coverage out of the policies they

:19:14.:19:19.

have already introduced. Otherwise you keep throwing more meat off the

:19:19.:19:24.

wagon to create the idea of momentum F that isn't too bad a

:19:24.:19:27.

mixed metaphor. They did this to dominate the news agenda for a

:19:28.:19:31.

period, showing they had a Government that was successful in

:19:31.:19:35.

so far as that makes a difference. In reality people's behaviour will

:19:35.:19:39.

be determined by how these policies impact on their lives. You might

:19:39.:19:45.

say, rather snidely, they do get on better than Blair and Brown?

:19:45.:19:50.

might say that! I thought it was a missed opportunity, I could see why

:19:50.:19:53.

it was quite a good exercise, the plan was good, which was to take

:19:54.:19:57.

stock, which they sort of did. To present a bit of a forward plan,

:19:57.:20:04.

which, when you look at it was very bad, it had everything from peace

:20:04.:20:10.

in Iran to midwives, 2,000 of them. It was a pretty bizarre list. The

:20:10.:20:15.

thing that didn't work, I thought the plan was they are doing this to

:20:15.:20:18.

show the interest of the country and we are running it in a

:20:19.:20:23.

business-like way. Then they got into the ghastly jokey stuff, that

:20:23.:20:27.

is the picture that will stick with people. It is pretty irritating.

:20:27.:20:31.

They would be really lucky if anything stayed with people. It is

:20:31.:20:36.

all that has been shown today, that clip. On the substance, David

:20:36.:20:40.

Cameron said it is not whether you have disagreements but how you

:20:40.:20:43.

handle them that matters, big disagreements ahead. What do you

:20:43.:20:49.

foresee as the really bumpy bits of the pol coalition? This whole

:20:49.:20:52.

subject subject of welfare reform. We will have a little bump tomorrow,

:20:52.:20:56.

because I think of some of the rhetoric that has been used about

:20:56.:21:02.

this freeze for benefits. Do you that Sarah Teather is not alone in

:21:02.:21:06.

the way she thinks, but she may be alone in how she votes, but there

:21:06.:21:10.

are others? She represents a certain strand of Lib Dem opinion,

:21:10.:21:12.

which would be happier with the fact of what Government are doing

:21:13.:21:18.

with the cap, rather than the rhetoric that surrounds it. The

:21:18.:21:21.

devisive rhetoric has been damaging for the coalition on this issue.

:21:21.:21:24.

The arguments over welfare reform will continue. Europe, David

:21:24.:21:28.

Cameron is about to, apparently, make this enormous speech, saying

:21:28.:21:31.

he wants to redefine Britain's entire relationship with Europe. It

:21:31.:21:35.

will be very unhappy for the Lib Dems to carry on in partnership

:21:35.:21:39.

with somebody who wants to, I don't know what he wants to do, take us

:21:39.:21:43.

off into the middle of the Atlantic, I don't know. What will impact on

:21:43.:21:46.

politics is people's living standards. What makes people

:21:46.:21:50.

uncomfortable about the benefit freeze, is not well off people

:21:50.:21:53.

feeling even more squeezed. On the other hand, Nick Clegg was very

:21:53.:21:56.

good on the point, where else will the money come from. Everybody is

:21:56.:21:59.

going to lose money, and of course this point about people working,

:21:59.:22:04.

those people are paying for this policy as well as losing, by having

:22:04.:22:09.

a 1% increase. It is really about saving money from some people, and

:22:09.:22:14.

those people are out of work. not strictly true, I think Miranda

:22:14.:22:16.

is right about the rhetoric around this. It isn't that everybody is

:22:17.:22:20.

paying for it. I understand the decision on some benefits being

:22:20.:22:23.

raised and some not, from the Government's point of view. But,

:22:24.:22:28.

for example, it is so clearly about trying to divide the acceptable

:22:28.:22:34.

poor from the non-acceptable poor. Pensioners, of whatever kind of

:22:34.:22:37.

background. It is not my way of expressing an argument. Do you

:22:37.:22:40.

think Labour have got this right, it is tricky, if you are seen to be

:22:40.:22:44.

getting people, who are not very well paid, to pay more, relatively,

:22:44.:22:48.

for people who are not in work or claiming benefits? I think it is a

:22:48.:22:54.

really difficult decision. But I think the way that they have

:22:54.:22:57.

explained the decision tomorrow is right, actually. Talking to Grant

:22:57.:23:01.

Schapps before the programme, he was saying Tory posters going up

:23:01.:23:03.

tomorrow saying Labour have it completely wrong, and spelling out

:23:03.:23:10.

why they think so, the Tories think this is a win for them? I think the

:23:10.:23:14.

politics are with the Government. People are suspicious of people

:23:14.:23:18.

receiving welfare benefits. They do see the fairness of public sector

:23:18.:23:24.

wages going up the same as benefits. I never like revelling in anybody's

:23:24.:23:27.

misfortune of any kind, so I think that they have to be careful of the

:23:27.:23:31.

tone. Although, that is for me, other people maybe don't feel the

:23:31.:23:35.

same way. The tone has been deliberate. This is a political

:23:35.:23:39.

move. We have all seen them before, this is a clear political decision

:23:39.:23:44.

to have a clear dividing line and to have a political split. That's,

:23:44.:23:48.

it's been done well, it has been not accidental. I'm resolute about

:23:48.:23:52.

the choice, I think you need to explain the choice, everyone has

:23:52.:23:57.

their own way of earnings pressing an argument. -- Expressing an

:23:57.:24:00.

argument. How can the two leaders keep a lid on the backbenchers over

:24:00.:24:05.

the next two years. Very tricky on welfare reform and the NHS reforms,

:24:05.:24:09.

bumps on that, that will be very difficult? I think it will be.

:24:09.:24:13.

Absolutely. Actually, it has been surprising to everyone, I think,

:24:13.:24:17.

how well the Lib Dems have actually hung together during the coalition

:24:17.:24:21.

so far. I think they will continue to do so. Frankly, I don't think

:24:21.:24:25.

there is much ofpgs for the Lib Dems, they have just got to carry

:24:25.:24:29.

on marching through the mud, with all the in coming shrapnel. What

:24:29.:24:34.

else can they do. The only thing they can hope for is to get credit

:24:34.:24:38.

for providing stability at a very important moment, where otherwise

:24:38.:24:41.

the country wouldn't have been able to borrow money at an affordable

:24:41.:24:46.

rate. You have to hang on to that, you are doing a job in an

:24:46.:24:51.

uncomfortable way at an uncomfortable time. Something else,

:24:51.:24:55.

the prospect of David Miliband coming back into cabinet? I don't

:24:55.:24:58.

know where the story is. My personal view was David was right

:24:58.:25:02.

not to come in when Ed had won, it would have been pretty impossible.

:25:02.:25:05.

David is a great talent, so I hope at some point he does come back.

:25:05.:25:09.

You would like him back, even though it might give newspapers and

:25:09.:25:14.

television programmes another thing to talk about other than a

:25:14.:25:18.

bromance? It would be another soap opera, that is the dilemma.

:25:18.:25:22.

Lord Strathclyde doing? It was odd to do it today. I do politically

:25:22.:25:26.

that was very odd, why they didn't wait 24-hours. I understand the

:25:26.:25:30.

reasons of what he said, that is what everyone thinks, that he has

:25:30.:25:35.

decided to move into the private sector, he's in his mid-50s, and if

:25:35.:25:40.

he doesn't do it now. It is not because he doesn't like working

:25:40.:25:44.

with the Lib Dems in the Lords? That is not what he has told people

:25:44.:25:51.

or what they are led to believe. Just over four years ago the tiny

:25:51.:25:56.

island Republic of Iceland experienced the worst economic

:25:56.:26:03.

brown yaek of any group. House prices slumped and banks folded and

:26:03.:26:07.

the banks had to be nationalised. They let the banks died and growth

:26:07.:26:13.

has been averaging 2%, more than the UK. The macro-economics masks

:26:13.:26:16.

the pain being felt by many ordinary people. We have been to

:26:17.:26:22.

learn what we can learn from their experience.

:26:22.:26:30.

Iceland stuns in so many ways. Its geezers, glaciers and thermal

:26:30.:26:34.

springs reward even the pickiest tourist. But beyond the beautiful

:26:34.:26:39.

world heritage sites, Iceland is a bleak place for any humanity to

:26:39.:26:44.

survive. Winters are cold and daylight is a precious commodity.

:26:44.:26:54.
:26:54.:26:56.

In summer 13 degrees is a warm day. It means Icelandic people had to

:26:56.:27:00.

develop tenacity, resilience and propenceity for hard work, which

:27:00.:27:06.

they have had to draw upon to survive this very man made crisis.

:27:06.:27:10.

I wanted to know whether those characteristics that helped create

:27:10.:27:16.

the economic bubble, might now lift the economy? The President has been

:27:16.:27:21.

in office for 16 years, he has seen boom and bust. We have a very

:27:21.:27:31.
:27:31.:27:32.

strong sense of history of our culture. Mingled with that,

:27:32.:27:37.

solidarity and history, there is also an entrepeneural sense that,

:27:37.:27:42.

perhaps, led us astray in the years before the collapse. It has also

:27:42.:27:46.

enabled a nation of farmers and fishermen to transform themselves

:27:46.:27:53.

from being up to the 1960s and 1970s, among the poorest countries

:27:53.:27:56.

in Europe, to having achieved now one of the highest standards of

:27:56.:28:01.

living that you can find in the world, despite the difficulties

:28:01.:28:05.

that follow the crisis. Fundamentally we are still a nation

:28:05.:28:14.

of farmers and fishermen. But fishermen turned into fanciers

:28:14.:28:19.

between 2001 and 2008, and the economy grew up 230%, as the banks

:28:19.:28:23.

loaned money to everyone and anyone who wanted it, until the global

:28:23.:28:27.

money markets froze. Destroying the Icelandic economy over a summer,

:28:27.:28:31.

and creating the country's first- ever civil unrest. We stand

:28:31.:28:34.

together and demand the Government do a better job. When the then

:28:34.:28:39.

Prime Minister addressed a shocked nation in October 2008, he envoked

:28:39.:28:49.
:28:49.:28:57.

the help of a higher deity. really makes me feel angry and sad.

:28:57.:29:03.

Because, you know, the country is made of people, the nation is made

:29:03.:29:10.

of people, and it is made for people and by people. Now it seems

:29:10.:29:16.

like banks are running societies and that is horribly wrong. Theodor

:29:16.:29:22.

Magnusson works in IT, he also hunds reindeer for a living. He,

:29:22.:29:27.

like -- hunts reindeer for a living. He like most people took out a

:29:27.:29:32.

mortgage 12 years Agatha ties inflation to the principal. It

:29:32.:29:38.

means he now owes 1.5-times the original mortgage, because of the

:29:38.:29:44.

spikes in the economy. I have been paying 150 months of this loan, I

:29:44.:29:52.

owe much more than I borrowed. I borrowed six million krona, I owe

:29:52.:29:59.

9.7 million. I have been paying around five million in these 150

:29:59.:30:09.
:30:09.:30:12.

months. As is often the case in politics, the party which inherits

:30:12.:30:16.

the mess, doesn't always get much credit for cleaning it up.

:30:16.:30:21.

Iceland's ruling coalition, in power since 2009, has turned things

:30:21.:30:26.

around. The deficit is down from 14% of GDP, to around 1% today.

:30:26.:30:30.

Unemployment has halved, and exports are up. But this has been

:30:30.:30:36.

achieved, in part, by almost 100 new taxes, including a tax on

:30:36.:30:41.

sugary drinks. We have closed this dramatic gap in the budget, which

:30:42.:30:47.

has been very important for our economy, and so I think that we

:30:47.:30:54.

have made difficult decision, but I think some were good, some were not

:30:54.:31:00.

less good, but overall, I think we are well on the way in becoming a

:31:00.:31:05.

very strong economy again. What the Government and Icelanders in

:31:05.:31:09.

general won't do is compromise on the welfare state. Education and

:31:09.:31:13.

healthcare are free for all, and many who lost their jobs simply got

:31:13.:31:17.

another degree to make themselves more employable. There is also no

:31:17.:31:21.

glass ceiling in this country. Participation rates by women are

:31:21.:31:24.

amongst the highest in the world. From the Prime Minister to the

:31:24.:31:29.

Finance Minister and to business leaders at all levels, women are

:31:29.:31:39.
:31:39.:31:42.

vital to this economy. People always say that if you can see Esja

:31:42.:31:48.

from any parliament the price is a million pounds higher. This woman

:31:48.:31:52.

used to be the Mayor of One of Reykjavik's wealthiest suburbs, now

:31:52.:31:56.

she runs a privately-owned care home service, her biggest customers

:31:56.:32:00.

are local authorities. When you start a new business, and the

:32:00.:32:08.

economy just like, overnight collapses, it is like wow, can we

:32:08.:32:16.

really, really survive. But at the same time, I always had in mind a

:32:16.:32:22.

sentence from one of my professor, when I was doing my MBA studies.

:32:22.:32:27.

One I was doing my studies, he said "and then when you go out there to

:32:27.:32:32.

run companies, keep in mind it is not like an exciting movie, it is

:32:32.:32:37.

more like a soap opera, you do the same things over and over and over

:32:37.:32:40.

again". With that in mind, we are doing a soap opera.

:32:40.:32:45.

When the crisis struck in the autumn of 2008, Iceland's economy

:32:45.:32:48.

entered an apparent death spiral, spluinging for ten straight

:32:48.:32:52.

quarters, but by letting its currency collapse and its bloated

:32:52.:32:57.

banks simply die, things turned around rapidly, so since 2011,

:32:58.:33:01.

Iceland has seen seven straight quarters of growth, averaging at

:33:01.:33:07.

around 2.5% per an number. But the macro-economic picture

:33:07.:33:11.

hides the reality for many ordinary Icelandic people. Thousands have

:33:11.:33:15.

had to emigrate in search of work, that has artificially kept the

:33:15.:33:18.

unemployment rate down. For those who have stayed, many of them have

:33:18.:33:23.

taken on second or third jobs, in order to maintain living standards.

:33:23.:33:26.

They are still amongst the highest in the world.

:33:27.:33:36.
:33:37.:33:40.

The question is, how long can Iceland maintain this facade.

:33:40.:33:44.

Neil McMahon has been living here 38 years, he's a full-time teacher,

:33:45.:33:49.

but also translator and tour guide. He and his daughter met me in a

:33:49.:33:56.

restaurant in the reinvigorated area Marina area. For an outsider

:33:56.:34:01.

reading articles in the newspaper, or following a brief TV coverage of

:34:01.:34:06.

Iceland, they might be fooled into believing that Icelanders have

:34:06.:34:11.

managed to extricate themselves very effectively from this crisis.

:34:11.:34:16.

However, there is still a lot of problems, people have lost their

:34:16.:34:24.

homes, particularly perhaps the younger generation, people who had

:34:24.:34:30.

huge mortgages and are now having to try and deal with this situation.

:34:30.:34:36.

I work as a teacher, and after 35 years in the profession as a

:34:36.:34:43.

secondary teacher I come out with �24,000 annually. It would be

:34:43.:34:48.

rather difficult to make ends meet on that. Icelanders know many

:34:48.:34:52.

countries, including Britain, are watching their economic recovery

:34:53.:34:56.

very closely. Certainly, when this crisis broke,

:34:56.:35:02.

Reykjavik didn't abide by the usual rules. Apart from letting the

:35:02.:35:06.

bloated banks collapse, Iceland also imposed strict capital

:35:06.:35:09.

controls. Even today companies and individuals need permission to take

:35:09.:35:14.

money out of the country. So what can the UK, with its still dominant

:35:14.:35:22.

banking sector learn from Iceland's experience? Don't defend on a

:35:22.:35:26.

formal economy. It was not real, -- on a phoney economy. It was not

:35:26.:35:30.

real. We understand in Iceland if we look back, we see very clearly

:35:30.:35:36.

this was not real. This was completely a bubble. The financial

:35:36.:35:42.

business is very necessary, don't get me wrong, but it is very, it is

:35:42.:35:46.

very dangerous as a business, because it sucks the best, it is

:35:46.:35:54.

not real. This business is very real, they make the bionic legs,

:35:54.:35:58.

which the called Blade Runner, Oscar Pistorious, has made so

:35:58.:36:01.

famous. They help many people, including soldiers who have lost

:36:01.:36:05.

limbs in Afghanistan, to abandon their wheelchairs, and vastly

:36:05.:36:12.

improve their quality of life. They struggled to find engineers during

:36:12.:36:15.

the regin of the banks, because they couldn't match the salaries,

:36:15.:36:22.

not any more. Like so many Icelandic firms, engineers work in

:36:22.:36:30.

engineering since the crash. Of course, they are the lucky ones,

:36:30.:36:34.

well-paid specialists rarely have their homes repossessed. But it is

:36:34.:36:38.

a reality facing thousands of Icelanders tethered to thousands of

:36:38.:36:42.

mortgages that never get paid off. It is an intergenerational conflict

:36:42.:36:46.

as grandparents have to pass their debts on. What is so serious is

:36:46.:36:51.

those who had their houses with no debts, like elderly people, they

:36:51.:36:56.

gave the mortgage to their children or grandchildren. It is like their

:36:56.:37:01.

eating up our homes. It is very important for us now to just take

:37:01.:37:05.

the status on where are we, and where do we want to go, what kind

:37:05.:37:10.

of society do we want, into the long-term future. That is the big

:37:10.:37:15.

question we should be asking at the moment. And one part of this

:37:15.:37:18.

question is whether we should be a member of the European Union,

:37:18.:37:25.

whether we should be a member of the eurozone. I have answered this

:37:25.:37:35.

question on, for me personal, and my answer is yes.

:37:35.:37:40.

Over all, I think, that we are just typical islanders, with hopes and

:37:40.:37:49.

dreams. You could also saying, maybe we have been a little bit

:37:49.:37:58.

arrogant in the past. Hopefully we are evolving into a more humble

:37:58.:38:05.

nation after what we have been through. Now, Google today admitted

:38:05.:38:10.

that users in China were no longer being warned when their internet

:38:10.:38:13.

searches were being censored, the news appeared a victory for the

:38:13.:38:17.

authorities in Beijing who had frequently sabotaged Google's

:38:17.:38:22.

attempts to warn of censorship. But 2,000kms south of the capital, the

:38:22.:38:27.

city of Guangzhou was experiencing rare genes of public defiance

:38:27.:38:31.

against censorship, as people rallied behind journalists of the

:38:31.:38:36.

Southern Weekend newspaper, after it was forced to change an

:38:36.:38:43.

editorial calling for reform, into a tribute in praise of the

:38:43.:38:48.

Communist Party. TRANSLATION: You can speak, he can

:38:48.:38:55.

speak, I can speak, let us discuss. Protestors want the local censor

:38:55.:39:02.

dismissed and more political freedoms. On the Twitter-style

:39:02.:39:05.

blogging site, one Chinese activists with 30,000 followers,

:39:05.:39:09.

appeared to intimate her support for the protests. Ever since the

:39:09.:39:13.

violent crackdown on protestors in Tiananmen Square in 1989, China has

:39:13.:39:18.

bought off some political protests, through the Communist Party's

:39:18.:39:22.

greatest achievement, increased prosperity. The new leadership

:39:22.:39:25.

promises reforms. But retains a strong grip on what Chinese

:39:25.:39:30.

citizens can see, read and hear in the media. The official Global

:39:30.:39:37.

Times said in an editoria that, "in China's current social reality,

:39:37.:39:41.

there cannot be the free media these people hope in their hearts

:39:41.:39:45.

for". Perhaps not, so far the protests have remained very small.

:39:45.:39:49.

But Beijing knows the great political movement of the Arab

:39:49.:39:53.

Spring began with one tiny protest by a single fruit seller in Tunisia,

:39:53.:39:59.

fed up with police harassment. What is certain is educated outward

:39:59.:40:03.

looking ambitious young Chinese, are far less prepared than a

:40:03.:40:08.

generation ago, to accept the bargain of prosperity at the

:40:08.:40:14.

expense of freedom. We have the Editor in Chief of the

:40:14.:40:20.

paper that tries to bring stories about the real China. What are your

:40:20.:40:24.

thoughts on the significance of the protests, given they are quite

:40:24.:40:30.

small? It started big, and now it is getting even bigger. When I said

:40:30.:40:37.

big, it is because Southern Weekend is not just a newspaper, or any

:40:37.:40:44.

provincial newspaper. It is a most reputable newspaper, nationwide

:40:44.:40:51.

newspaper, for over a decade. It has millions and millions of loyal

:40:51.:40:58.

readers across the country. It is a party newspaper, but it is a very

:40:58.:41:02.

reformed-minded newspaper. It often pushes the envelope. Particularly

:41:02.:41:10.

on this event, the Southern Weekend had the tradition which put a very

:41:10.:41:18.

elaborate new year's letter, an editorial with a fancy rhetoric

:41:18.:41:25.

full of hope and inspiration that every year it tried to inspire the

:41:25.:41:32.

people to move forward to progress. At the back of that value is always

:41:32.:41:36.

justice and freedom. This year, it is on that very important message

:41:36.:41:40.

of the nationally respected newspaper, something went badly

:41:40.:41:46.

wrong. In that sense, then, how big a challenge is this for the new

:41:46.:41:49.

leadership, for Xi Jinping and the others, how difficult will it be

:41:49.:41:55.

for them to handle? This is something we have yet to see. I

:41:55.:42:04.

think it is a real test. First of all, since Mr Xi Jinping took his

:42:04.:42:09.

party secretary position, and the chairman of the military

:42:09.:42:14.

commitmenty, that he is officially head of the country, but not

:42:14.:42:17.

President of the People's Republic of China, that won't be until the

:42:18.:42:25.

spring. He has already given a very strong speech about China's dream.

:42:25.:42:28.

He's trying to build some kind of consensus and public support, both

:42:28.:42:34.

inside the country and outside, and in the general population, under a

:42:34.:42:38.

slogan of "China's dream", and he will be the leader to lead the

:42:38.:42:42.

country towards it. But what is exactly the Chinese dream? He gave

:42:42.:42:47.

some kind of definition in his speech, and the Southern Weekend,

:42:47.:42:53.

the new year's editorial, had a title, which was censored later,

:42:54.:43:01.

had a title called "China's dream, dream of constitutional rule", that

:43:01.:43:04.

precise message was censored by the propaganda department. That is

:43:04.:43:11.

where the conflict starts. Do you see this as some kind of watershed

:43:11.:43:15.

moment. I said the Arab Spring began with one fruit seller and one

:43:15.:43:21.

protest and it got very big. Is it something like that, because the

:43:21.:43:26.

bargain of we will make you more prosperous if you keep quiet about

:43:26.:43:32.

human rights s that bargain changing? It is changing. There is

:43:32.:43:37.

a small level of street protest in Guangzhou right now, but I don't

:43:37.:43:44.

know how that will spread. An entire society, on the street

:43:44.:43:46.

movement, requires many other conditions, and I cannot see that

:43:46.:43:50.

in China at the moment. In terms it of a message, there is a similarity,

:43:50.:43:57.

because the event, at this point, is no more just about one newspaper,

:43:57.:44:04.

with its party propaganda chief, it is a nationwide, participated,

:44:04.:44:08.

public protest, through the Internet, not anywhere else. It is

:44:08.:44:16.

nationwide. Let me give you another very concrete example on this,

:44:16.:44:23.

talking about China's dream, the Mr Xi Jinping's dream, when he was

:44:23.:44:28.

giving the speech, he touched upon material, the food, the safety,

:44:28.:44:32.

retirement, medical assurances, healthcare and those things people

:44:32.:44:36.

care about, then he jumped from materialism to collective national

:44:36.:44:42.

pride, which the rejufisation of Chinese society in the world. There

:44:42.:44:46.

is something badly missing in the definition of the dream, is

:44:46.:44:52.

individual dignity, that is exactly where the Southern Weekend news

:44:52.:44:58.

editorial, which was later censureed, touched upon. On that

:44:58.:45:08.
:45:08.:45:42.

note thank you for joining us. A That's it for us from tonight. We

:45:42.:45:52.
:45:52.:46:17.

will have more tomorrow. Until then, Hello, we have had the cloud over

:46:17.:46:21.

Hello, we have had the cloud over the last couple of days. More to

:46:21.:46:25.

come on Tuesday. Much of the country with grey skies, still rain,

:46:25.:46:28.

tomorrow it begins to move further south and east, allowing brighter

:46:28.:46:34.

skies as part of Scotland and Northern Ireland. 3.3030am, we have

:46:34.:46:44.
:46:44.:46:51.

patchy rain in northern England and Clearing away through the afternoon.

:46:51.:46:54.

Up towards Anglesey, we are looking at brighter weather to finish off

:46:54.:46:58.

the day. Much brighter, for Northern Ireland, but it will turn

:46:58.:47:03.

colder, temperatures at 3.3030pm, 9 degrees, a similar story for

:47:03.:47:07.

Scotland, a dryer, brighter afternoon, but a colder feel to

:47:07.:47:11.

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