17/07/2013 Newsnight


17/07/2013

In-depth investigation and analysis of the stories behind the day's headlines. With Gavin Esler.


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Transcript


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Tonight is the most ambitious transport plan for decades to build

:00:15.:00:22.

a high speed rail link from London to the north of England running out

:00:22.:00:25.

of steam. HS2 will redraw the economy of a nation, according to

:00:25.:00:29.

the Department of Transport. Where are political and business figures

:00:29.:00:34.

and a former Rail Minister going cold on the idea. It is going to be

:00:34.:00:39.

with us for a very long time, do we really want to tell constituents

:00:39.:00:42.

and tax-payers that we are spending �50 billion of their money on a

:00:42.:00:47.

train line that really doesn't need to be built? His successor is here

:00:47.:00:52.

to tell us why it is worth �43 billion of your money. Also tonight,

:00:52.:00:57.

the promises we have made to an ageing society for mentions and

:00:57.:01:02.

healthcare, could propel us into a future of chronic economic problems.

:01:02.:01:05.

We will debate a gloomy forecast from the Office for Budget

:01:05.:01:09.

Responsibility. As the politicians pack their suntan cream and head

:01:09.:01:13.

for their no doubt well deserved holidays, Newsnight's political

:01:13.:01:21.

panel are here to give an end of term report.

:01:21.:01:27.

Summer in the city, Nile Rodgers on how to stay cool of five decades of

:01:27.:01:36.

getting dirty and down there. cheerful tunes were about the

:01:36.:01:41.

future we thought we would see, future we envisioned has never

:01:41.:01:51.
:01:51.:01:54.

happened. Plans for one of the biggest leaps forward in British

:01:54.:01:57.

transport history is in trouble today. Today the Government

:01:57.:02:02.

launched its second consultation into the posts of high-speed 2. The

:02:02.:02:08.

costs have risen to a whopping �43 billion. The likes of Alitair

:02:08.:02:12.

Darling and Nigel Lawson, former Chancellors, are oply opposed. The

:02:12.:02:18.

new consultation wants to know about what the CBI, enthusiastic

:02:18.:02:22.

about the project, and Tom Harris think. But we have a report on the

:02:22.:02:27.

growing chorus of people with business, transport expierence who

:02:27.:02:35.

want the Government to think bin on HS2. There is one thing that is

:02:35.:02:39.

already high-speed about HS2, that is the speed the Government is

:02:39.:02:43.

pressing ahead with the plans, despite warnings to slow down. Lord

:02:43.:02:48.

Mandelson, a one-time supporter now says it could prove an expensive

:02:48.:02:50.

mistake. Former Labour Chancellor and Transport Secretary, Alitair

:02:50.:02:53.

Darling, says it will suck money out of the budget that would be

:02:53.:02:57.

better spent on other projects. Moon while Conservative former

:02:57.:03:02.

Chancellor, Lord Lawson calls it "madness", Boris Johnson says the

:03:02.:03:07.

cost will spiral to over �70 billion. Newsnight can reveal now

:03:07.:03:13.

that the latest Doubting Thomas is called Tom, Tom Harris, Rail

:03:13.:03:16.

Minister under Tony Blair and Gordon Brown. My own party is

:03:16.:03:21.

strongly in favour of it, I was until relatively recently. More and

:03:21.:03:25.

more are listening to those who say it might not be have a great idea.

:03:25.:03:28.

Austerity will be with us for a very long time, do we really want

:03:28.:03:33.

to tell constituents and tax-payers that we are spending �50 billion of

:03:33.:03:37.

their money on a train line that really doesn't need to be built and

:03:37.:03:42.

that money could be spent in any number of areas far more

:03:42.:03:46.

effectively? Some politicians have started reassessing their support

:03:46.:03:50.

for HS2 since the Government announced it was increasing the

:03:50.:03:54.

budget. The Transport Secretary says the bill is rising from �33

:03:54.:03:59.

billion to over �42 billion. Sow how did the senior civil servant

:03:59.:04:02.

here at the Department for Transport explain these higher

:04:02.:04:07.

costs? Well he said what we should remember is that the original

:04:07.:04:11.

estimate wasn't really so much an estimate it was more a...what was

:04:11.:04:21.
:04:21.:04:22.

the phrase he used?:...a High level desk-based exercise. Yes, a high-

:04:22.:04:26.

level desk-based exercise. Which means what, perhaps Tom Harris

:04:26.:04:32.

could finish in? The plans for HS2 have been written on the back of a

:04:32.:04:37.

fag packet. The increase in costs, it came on top of a high-level

:04:37.:04:41.

desk-based mauling of the HS2 business plan by the National Audit

:04:41.:04:44.

Office. We will build a new network. The Government has been working on

:04:44.:04:48.

a new version of the business plan, incorporating some of the changes

:04:48.:04:51.

the National Audit Office wants to see. This won't be ready until the

:04:51.:04:55.

autumn, we will just have to wait. It is just I'm not very good at

:04:55.:05:00.

waiting, why can't we have a go, how hard can it be to update the

:05:00.:05:04.

benefit cost ratio for a �40 billion infrastructure project.

:05:04.:05:14.
:05:14.:05:22.

We have commissioned a high-level pack particular table-based

:05:22.:05:26.

exercise from two transport economists, David Parish and Chris

:05:26.:05:29.

Castles, together they wrote a peer-reviewed study of the HS2

:05:29.:05:34.

business case back in 2011. So we will leave Chris and David updating

:05:34.:05:38.

their numbers. But first I think we should look at the changes that the

:05:38.:05:40.

National Audit Office has asked the Government to make to see what sort

:05:40.:05:44.

of thing they are going to be doing here. They are looking at the first

:05:44.:05:48.

phase of the project and at three specific areas, updating the

:05:48.:05:52.

forecast for how many people are likely to use HS2, the business

:05:53.:05:57.

case at the moment uses an out of date higher demand forecast.

:05:57.:06:00.

Updating the value of shorter journey times, at the moment the

:06:00.:06:04.

business case assumes that no-one works on a train and any time saved

:06:04.:06:07.

is used for productive work. And thirdly, including the recent

:06:07.:06:13.

budget increase. OK, so you have had time to put in those changes,

:06:13.:06:17.

what impact do you think the new numbers will make to the Government

:06:17.:06:21.

as business case? What will it do to the benefit cost ratio? If you

:06:21.:06:25.

take the reduced demand and the change of value of business time

:06:25.:06:29.

and the higher costs the impact is devastating. The benefit cost ratio

:06:29.:06:35.

comes down from 1.4 in the latest published Government report, in the

:06:35.:06:43.

range to 0.5-0.6. So for every pound we spend we get 60p of

:06:43.:06:48.

benefits back. Does it make it a good-value project? There are many

:06:48.:06:53.

projects that offer ratios of four or five, including alternatives to

:06:53.:06:57.

the HS2 that are proposed by the local authorities and also by the

:06:57.:07:02.

Government's own consultants. that would suggest that HS2 isn't

:07:02.:07:07.

value for money at all then? Not at all. You might think it is absurd

:07:07.:07:12.

to downgrade the business case for HS2 by that much, but, there is

:07:12.:07:16.

academic evidence to suggest this would only be par for the course. I

:07:16.:07:20.

have come here to the Siad Business Scohool in Oxford to meet one

:07:20.:07:28.

academic who has studied over 100 years of big infrastructure data.

:07:28.:07:34.

This professor says on average big infrastructure projects cost 50%

:07:34.:07:38.

more than planned and deliver half the cost benefits. The bad projects

:07:38.:07:43.

are much worse than that. The Channel Tunnel was 80% over on

:07:43.:07:46.

construction cost and 120% over on financing cost. They only made 20%

:07:47.:07:50.

of the passengers that they forecast in the first year, so much

:07:50.:07:55.

worse. Why is that, why do we get that double whammy of lower returns

:07:55.:07:59.

and higher costs? This is something we have studied in detail here at

:07:59.:08:03.

Oxford, we find two root causes. One is optimisim, people are

:08:04.:08:07.

generally optimistic, and that includes planners, the other is

:08:07.:08:11.

something we call strategic misrepresentation. We find actually

:08:11.:08:17.

in some instances decision-makers, politicians, policy makers, will

:08:17.:08:20.

deliberately underestimate the cost and overstatement the benefits and

:08:20.:08:24.

revenues in order to get their projects started. If a project

:08:24.:08:28.

looks good on paper it is easier to get approval for the project in

:08:28.:08:33.

parliament or whoever is aproving the project. And you know the old

:08:33.:08:37.

saying that it is easier to get forgiveness than permission. That

:08:37.:08:44.

seems to be sometimes the approach used in getting projects started.

:08:44.:08:47.

The final stop on the journey is to take some of the concerns to the

:08:47.:08:54.

people who are supposedly going to be building High-speed 2, that is

:08:54.:09:00.

HS2 Ltd, it sounds like a private sector company, there is a clue to

:09:00.:09:08.

who owns it in the building they are situated in. It is a Government

:09:08.:09:18.
:09:18.:09:19.

office, and HS2Ltd is a subsidey of a Government. I don't think you

:09:19.:09:22.

should necessarily assume that the business case, the quantified

:09:22.:09:26.

benefit cost ratio will go down. Beyond that, of course, it is not

:09:26.:09:33.

just about the benefit cost ratio. First and foremost high-speed 2 is

:09:33.:09:37.

about providing additional capacity. The existing railway is

:09:37.:09:43.

increasingly full, Network Rail forecasts by 2020 the eastern

:09:43.:09:47.

Network Rail will be full. There is an overriding argument for

:09:47.:09:51.

providing capacity. Any competitive economy needs strong infrastructure.

:09:51.:09:54.

Today we have one of the busiest networks in Europe.

:09:54.:10:00.

This point is made in the HS2 promotional video, but the ANO says

:10:00.:10:05.

the Government needs to do more work in explaining why HS2 is the

:10:05.:10:08.

best solution. Are there other cheaper projects that might deliver

:10:08.:10:10.

as much or more capacity. For those politicians and business leaders

:10:10.:10:15.

who say we should pause and reconsider? There is an imperative

:10:15.:10:18.

to keep driving this forward. I think the other thing I would say

:10:18.:10:22.

about people who say we should pause, even the people who oppose

:10:22.:10:26.

this route, it is much better we get on and do it. They don't want

:10:26.:10:29.

continuing uncertainty. So there is a strong case. Can they get it

:10:29.:10:33.

right rather than go on and do it? We have got it right. Plenty of

:10:33.:10:38.

people don't think you have got it right? We haven't yet put out all

:10:38.:10:43.

the further work, we will in the autumn. That will show it will

:10:43.:10:48.

update the cost benefit ratio and present the wider case, which as

:10:48.:10:52.

represented work over the past year or so, which will look at both the

:10:52.:10:57.

capacity arguments and also the wider benefits and how HS2 can

:10:57.:11:01.

support both the national economy and also importantly how it will

:11:01.:11:06.

support the cities we connect. the political signals changing for

:11:06.:11:09.

HS2, some don't believe that three- party consensus in favour of the

:11:10.:11:14.

project will last much longer. There is something of of the grand

:11:14.:11:17.

project about this, aing willcy for politicians. Politicians love a

:11:17.:11:20.

legacy, we love building huge capital structures, that is not

:11:20.:11:24.

good enough. There has to be a business case, it has to be worth

:11:24.:11:29.

it. The Government began its consultation on the second phase of

:11:29.:11:33.

HS2 today. The Transport Secretary was in Manchester making the case

:11:33.:11:37.

in terms of jobs and apprenticeships. It is clear there

:11:37.:11:43.

are still plenty of people he has yet to convince. The Rail Minister,

:11:43.:11:48.

Simon Burns, came into the studio a little earlier. Why it that so many

:11:48.:11:52.

people with transport or business or Government experience are now

:11:52.:11:56.

running away from the HS2 project? I don't think that a lot of people

:11:56.:12:00.

are. There is considerable support, particularly if you look in the

:12:00.:12:05.

Midland, north of England amongst local authority leader, business

:12:05.:12:09.

groups, including the local CBIs and chambers of commerce.

:12:10.:12:16.

mentioned the CBI, the Director General of the CBI is one of them.

:12:16.:12:20.

He says questions need answering, �43 billion could be put to better

:12:20.:12:24.

use, and politicians have been dazzled by promises of speed. He

:12:24.:12:29.

makes it sound like another Concorde. He did qualify the

:12:29.:12:32.

comments and he said he was still enthusiastic about the project but

:12:32.:12:36.

he wanted to ensure the costs of building the railway did not run

:12:36.:12:40.

out of control. I have considerable sympathy and agreement with him on

:12:40.:12:44.

that. When you have lot Lord Mandelson, Tom Harris and Boris

:12:44.:12:47.

Johnson all agreeing that something is up here, Lord Lawson is another

:12:47.:12:53.

one, maybe, maybe they are right? don't think they are, for a reason,

:12:53.:12:56.

the critical thing is on the conventional railways we are

:12:57.:13:01.

running out of capacity. Between 2020 and 2024 on the West Coast

:13:01.:13:05.

Main Line, the major spine up the country towards Scotland we are

:13:05.:13:10.

expecting the capacity to become full. We have got to provide extra

:13:10.:13:12.

capacity. There could be cheaper ways of doing it? We have looked at

:13:12.:13:17.

it and some people have said, thinking it was a cheaper way, that

:13:17.:13:20.

we should just build another conventional line. The costs are

:13:20.:13:26.

slightly less, but not that less, you lose all the benefits that

:13:26.:13:29.

high-speed rail brings to this country. It is a project can he

:13:29.:13:33.

can't afford not to do. Our major competitors are all engaging in

:13:33.:13:37.

building or have high-speed railways. In that case does it not

:13:37.:13:40.

matter about the cost, it is so important we have to do it any way?

:13:40.:13:44.

I think it is important. But it has to be done within cost disciplines,

:13:45.:13:52.

and that is why we have been so determined with robust governance,

:13:52.:13:56.

robust economic plans to ensure that we keep to a very controlled

:13:56.:14:00.

budget. You say that, but how much is too much, the budget has just

:14:00.:14:05.

gone up another �8 billion to �43 billion, Boris Johnson saying it

:14:05.:14:11.

could cost �70 billion. The people on your own side say it could be

:14:11.:14:16.

�100 billion. Boris is Boris, you would expect people who are opposed

:14:16.:14:19.

to the project to exaggerate the costs because they are making a

:14:19.:14:23.

case and they are entitled to. much is too much? The fact is it is

:14:23.:14:30.

what we are going to spend which is to quote the figure you quote,

:14:30.:14:36.

�42.6 billion. Of that �14.4 billion is contingency, we are

:14:36.:14:40.

aiming to stick to those rigid budgets. You know the history of

:14:40.:14:42.

capital projects in this country has been exactly the opposite, that

:14:42.:14:45.

Governments of all stripes have said we will stick to it and it

:14:45.:14:51.

goes up and up and up? If you have discipline and you vigorously check

:14:51.:14:55.

on the effectiveness and the efficiencies of the building

:14:55.:15:00.

process you can cheap within budget and I will give you an example.

:15:00.:15:06.

billion, that too much? I will give you the example, the Olympics,

:15:06.:15:10.

everybody said that couldn't be built within the budget. They were

:15:10.:15:12.

because there was rigorous discipline to ensure the cost

:15:12.:15:16.

didn't go spiralling out of control. It did go up from the original

:15:16.:15:20.

budget. Let as move on to part of the business case, this is also

:15:20.:15:23.

questioned, the benefit cost ratio. We were told to put it in simple

:15:23.:15:30.

terms that we get �2.60 back for every �1 we put into it. Now it is

:15:30.:15:36.

revised down to �1.40, and it may be lower than that. We have people

:15:36.:15:39.

saying 0.5, in other words we would lose half the money we put in. The

:15:39.:15:42.

business case is very shaky? business case is now outdated

:15:42.:15:47.

because of the time it was done. At that point if you take the whole

:15:47.:15:55.

route, both phases, the BCR was between 1.4 and 2.5. This is the

:15:55.:16:00.

benefit cost ratio, the amount of money we would expect to get back?

:16:00.:16:04.

We are preparing at the moment an updated business case, available

:16:04.:16:10.

later in the year. Philip Hammond said if the BCR went less than 1.5

:16:10.:16:14.

he would put it under close scrutiny. Some people say it is

:16:14.:16:17.

certain to go less than 1.5. Where would you draw the line. Where

:16:17.:16:20.

would you say we have to have more benefits otherwise we are not going

:16:20.:16:26.

to proceed? What I would say is that with the extension of the

:16:26.:16:31.

Jubilee Line, which everyone recognises has been a tremendous

:16:31.:16:37.

benefit to travel in London. That BCR, I think, from memory was about

:16:37.:16:41.

0.4%. To use that parallel of the Jubilee Line, would you be content

:16:41.:16:45.

if the benefit cost ratio was 0.4 as it was with the Jubilee Line. In

:16:45.:16:49.

other words we got 40p back for every pound we put in. Although

:16:49.:16:53.

people would not be content, including Philip Hammond? I don't

:16:53.:16:57.

accept that is what the BCR will be, it is certainly not at the moment

:16:57.:17:05.

with HS2. We will wait until the publication of the next business

:17:05.:17:09.

impact studio later this year. I don't accept it will be 0.4%.

:17:09.:17:13.

there any figure on this that would make you give up this project?

:17:13.:17:19.

is the overriding importance, as I said before, it is capacity,

:17:19.:17:22.

helping solve the capacity problems on the conventional railway. The

:17:22.:17:26.

job creation and the regeneration that will flow from it,

:17:26.:17:29.

particularly in Birmingham and the Great Northern cities. Minister,

:17:30.:17:39.
:17:40.:17:40.

thank you very much. In a moment. Hey, I'm Nile Rodgers and you are

:17:40.:17:45.

watching Newsnight, your late night funk jam! We talk to the man behind

:17:45.:17:55.
:17:55.:17:56.

Chic. Now in ancient Greece poor old Sisyphus was punished by the

:17:56.:18:00.

gods, condemned to roll a massive rock to the top of the hill only to

:18:00.:18:06.

watch it roll down again, to repeat that for all of history. The Office

:18:06.:18:08.

of Budget Responsibility can't compete with the Gods, but if they

:18:08.:18:11.

are right about the unsustainable public finances we are all

:18:11.:18:14.

condemned like Sisyphus. In our case it could be years of austerity,

:18:14.:18:18.

because of the ageing population and strained healthcare system will

:18:18.:18:21.

still leave a massive hole in our finances, and more austerity to

:18:21.:18:25.

come as we try once more to roll the rock to the top of the mountain.

:18:25.:18:30.

Or is there a better way? Our political editor, Allegra Stratton

:18:30.:18:32.

has spent the day with the bar charts.

:18:32.:18:37.

We already know this clock of public debt races faster than some

:18:37.:18:40.

would like, we have been old it add naus yum. This Government's pitch

:18:40.:18:44.

is they are the ones trying to stop this clock, trying. In the next

:18:44.:18:48.

five years the aim is to reduce Britain's debt. What about the

:18:48.:18:52.

long-term? From an array of scary graphs, this is today's key one

:18:52.:18:57.

from the Government's Office for Budget Responsibility. Towed is

:18:57.:19:01.

their annual attempt at physical futurology. The recent debate has

:19:01.:19:04.

been about these bars, the Government has successfully, you

:19:04.:19:09.

can see, brought down the debt and the deficit, but after about 2020

:19:09.:19:12.

and that low point there things start to climb, that is because of

:19:12.:19:16.

two new pressures. Firstly the traditional sources of revenue

:19:16.:19:21.

begin to dry up, things like duties from tobacco and fuel. Also North

:19:21.:19:25.

Sea oil is going down. But then there are fresh demands of the

:19:25.:19:32.

state. We will be having more demands of the NHS, social care and

:19:32.:19:35.

pensions. That is why that line climbs rather alarmingly. As soon

:19:35.:19:39.

as we hit the 2020s we hit the cost of an ageing society, more money

:19:39.:19:42.

needs to be found for the NHS, social care and pensions. What we

:19:42.:19:45.

need to do then is have a big debate as a country about how we

:19:45.:19:49.

pay for that. You can either do it by cutting services, charging

:19:49.:19:53.

people for the services they use, or by putting up taxes. I actually

:19:53.:19:57.

think that the fairest way of doing it is to raise taxes. But of course

:19:57.:20:00.

we see from the political debate we are having about the NHS at the

:20:00.:20:03.

moment it is very difficult to have a grown-up sensible conversation

:20:03.:20:08.

about how we pay for these things. These two bars show how old our

:20:08.:20:12.

society is right now. And then it is broken down by age in 2062. In

:20:12.:20:17.

the future there are fewer people aged between 16-54, the big purple

:20:17.:20:23.

band. But there are many more 65- year-olds, and even more aged over

:20:23.:20:29.

85. Just with fewer working age people to support them. A toddler

:20:30.:20:35.

uses a lot of healthcare, a lot of education, but clearly pays in

:20:35.:20:38.

barely no income tax. When they graduate to working age of course

:20:39.:20:42.

the amount of income tax they pay in will go up massively, but they

:20:42.:20:46.

will actually be using relatively few public services in that time.

:20:46.:20:51.

Then when they retire they will be using the NHS, social care and an

:20:51.:20:56.

awful lot. But again it will be paying in not very much income tax.

:20:56.:20:59.

The OBR is saying that an older population will be a financially

:20:59.:21:04.

poorer one. And, decisions taken by this Government may have made it

:21:04.:21:08.

even more so. The called pension triple look means pensions will go

:21:08.:21:14.

up in line with the highest of inflation or earnings. That's more

:21:14.:21:20.

expensive. The OBR also suggests trouble ahead if the Government is

:21:20.:21:24.

successful in bringing down immigration. The yellow bar shows

:21:24.:21:28.

if it does bring it down to almost nothing, the working age population

:21:28.:21:32.

is much lower. The red bar shows with high immigration you end up

:21:32.:21:37.

with a greater working population to support the elderly. The Office

:21:37.:21:40.

for Budget Responsibility gives today's politicians a stark choice,

:21:41.:21:46.

they either have to cut an extra �19 billion from public services on

:21:46.:21:51.

top of everything we have already heard that will be cut, or they do

:21:51.:21:55.

it more slowly and over many more decades, but they do have to make

:21:55.:21:58.

that choice. The OBR says unless they do everything we have been

:21:58.:22:04.

through in this decade from 2010- 2020 will have been for nothing.

:22:04.:22:10.

The lesson is that George Osborne has got a long-term challenge. He

:22:10.:22:14.

stands for higher pensions spending, protection for health spending, now

:22:14.:22:22.

we hear no tax rises. The OBR tell us today that pensions, health are

:22:22.:22:26.

going to drive the public finances and make them unsustainable for

:22:26.:22:29.

decades to come and taxes will have to go up to record levels. He

:22:29.:22:32.

commissioned this report but the report is a big challenge to him.

:22:32.:22:36.

big challenge to the Chancellor but also to his successor, unless one

:22:36.:22:40.

of them gets lucky in a piece of megatechnology invented on their

:22:40.:22:47.

watch, bringing in fresh revenue for Britain. 50 years a very long

:22:47.:22:52.

time in politics, even longer if you don't like bar charts.

:22:52.:23:02.

We have an economic correspondent and Ann Pettifor. Long range

:23:02.:23:05.

economic forecast is like long range weather forecast, do you

:23:05.:23:13.

broadly accept the OBR is right on this? The man who runs the OBR is

:23:13.:23:17.

an honourable and brilliant man, when you are making forecasts for

:23:17.:23:20.

50 years the slight tiller assumption has massive effects. I

:23:20.:23:24.

would like the OBR to focus on what is happening in the last five years

:23:24.:23:28.

and what will happen in the next five years. Back in 2008 this

:23:28.:23:33.

country's national debt was about �580 billion, we are now above a

:23:33.:23:37.

trillion pound, by 2015 we are going to be at �1.6 trillion in our

:23:37.:23:41.

national debt. So, yes there are parts of the public sector that are

:23:41.:23:46.

suffering, nobody is denying that, but the macro picture is not one of

:23:46.:23:50.

austerity. The macro picture is a situation where over five years our

:23:50.:23:54.

national debt almost triples. This is the reality of the situation we

:23:54.:23:58.

face. With what does that mean for interest rates? What does that mean

:23:58.:24:02.

for tagsyaix going forward? There is not enough -- taxation going

:24:02.:24:06.

forward? There is not enough discussion among the political

:24:06.:24:08.

classes about the debt we are accumulating and have to service

:24:08.:24:12.

day in day out. The core of the argument appears to be ageing

:24:12.:24:15.

population with health problems we are all going to face in the future

:24:15.:24:19.

and the pension rises that it is unsustainable because we are not

:24:19.:24:23.

creating wealth fast enough to pay for it? This report is more about

:24:23.:24:29.

policies that are operating now, mainly austerity. Than it is about

:24:29.:24:33.

the future. It is using assumption based on austerity policies to talk

:24:33.:24:38.

about the future. And one of your contributors said the choices are

:24:38.:24:42.

to increase taxes or cut spending. There is a third choice, which is

:24:42.:24:49.

to increase income. This report doesn't really deal with that. The

:24:49.:24:53.

only way to increase income is to increase employment. The report

:24:53.:24:57.

doesn't include in assumptions what will happen to employment over this

:24:57.:25:01.

period. The fact is population will go up and baby-boomers like us will

:25:01.:25:05.

rot and die and then the next generation will come up. This is

:25:05.:25:09.

life. I don't know about the rotting and dying. Jo Hammer House

:25:09.:25:12.

of Horror. One of the interesting things about this report is the

:25:12.:25:16.

reflection on immigration. It says immigrants will make a more

:25:16.:25:19.

positive contribution to the UK public finances than natives, and I

:25:19.:25:22.

wonder if this raises the whole question of whether we should

:25:22.:25:25.

change our immigration policy, because it would be of economic

:25:25.:25:28.

benefit, which appears to be part of this report? Sure, I think the

:25:28.:25:34.

OBR would have been braver than it has been, had it focused more on

:25:34.:25:37.

the fiscal trajectory over the next three-to-four years. It has been

:25:37.:25:41.

brave in grasping the nettle of immigration. I personally think and

:25:41.:25:45.

the weight of economic evidence is behind me, that if you have more

:25:46.:25:50.

immigration you bring in immigrants from the shadow world of the

:25:50.:25:56.

untaxed economy, you bring them on to the books. If you celebrate

:25:56.:25:58.

economic migrants rather than ostracising economic migrants, that

:25:58.:26:02.

will do a lot to help this country grow its way out of the massive

:26:02.:26:06.

fiscal hole that it is in. Of course that means you need better

:26:06.:26:09.

infrastructure, it also means that politicians have to explain this to

:26:09.:26:15.

the body of voters. None of that will happen if we persevere in the

:26:15.:26:18.

current policies basically. Do you accept the point that immigrants,

:26:18.:26:22.

in the words of the report, would be "good for the long-term economic

:26:22.:26:26.

health of the country", because people coming in paying taxes

:26:26.:26:29.

wooing dob the services other people won't do? We are very lucky,

:26:29.:26:33.

in Italy the population is falling, here it is rising, we have a

:26:33.:26:37.

population rising which will be able to work and create income to

:26:38.:26:44.

finance the pensions of the future. Let's not beat about the bush here.

:26:44.:26:50.

This is about laying the ground for cutting universal provision and in

:26:50.:26:54.

particular attacking pension Do you think that is politically possible?

:26:54.:26:58.

Of course I think what, creating jobs and generating income to pay

:26:58.:27:02.

for pensions? It is entirely possible. It would make it immense

:27:02.:27:05.

low important. Cutting pensions?I don't think it is politically

:27:05.:27:09.

popular, but the logic of austerity is that you should go that way.

:27:09.:27:13.

of the things that this does is talk about some of the things we

:27:13.:27:16.

don't talk about in public debate, cutting pensions is one of them?

:27:16.:27:19.

Ann is right, of course, the population is growing, it will need

:27:19.:27:24.

to grow a lot faster if we are going to even hope to tackle our

:27:24.:27:28.

fiscal problems. But of course while the population is rising, the

:27:28.:27:32.

dependency ratio is really changing in a crushing way. At the moment

:27:32.:27:38.

about four people are in work for every pensioner, by 2030, 2030, not

:27:38.:27:43.

very long, it will be only two people in work for each pensioner.

:27:43.:27:47.

Right now we have 2.5 million people unemployed, we have 1.5

:27:47.:27:51.

million people who have been unemployed for a short time, young,

:27:51.:27:55.

educated, skilled who are hungry to work and we have policies which are

:27:55.:28:00.

denying them work which would generate income tax revenues to pay

:28:00.:28:05.

for these things. Not just now but into the future. The bank of

:28:05.:28:11.

international settlements the Central Bankers' think-tank if you

:28:11.:28:17.

like. Extremely robust organisation, they say by 2030 the UK's national

:28:17.:28:21.

debt on current projections. And on current policy. Maybe you can let

:28:21.:28:26.

me talk, you didn't let me last time I was on the show. Go on.The

:28:26.:28:30.

bank of international assessment says by 2030, a short long-term

:28:30.:28:36.

forecast will be our national debt will be about 300% of GDP, that's a

:28:36.:28:39.

massive number unless we take drastic action. We have now got a

:28:39.:28:42.

situation where politicians are just beginning to nibble at the

:28:42.:28:47.

edges of pension reforms. But their pension reforms are saving by

:28:47.:28:50.

nudging up the retirement age. These are scare stories. Hundreds

:28:50.:28:55.

of millions over 30 years. When the problem is one of hundreds of

:28:55.:28:57.

billions. They are economic scare stories in order to attack pensions

:28:57.:29:01.

and in order to attack a whole generation that have paid for their

:29:01.:29:05.

pensions. And in order to deprive an upcoming generation of work.

:29:05.:29:10.

will have to leave it there. Thank you both very much. Now what to put

:29:10.:29:13.

on cigarette packets? How much to charge for a can of beer, who is

:29:13.:29:17.

responsible for shocking failures in the health service and the role

:29:18.:29:23.

of lobyists and trade unions -- lobbyists and trade unions in

:29:23.:29:29.

politics. Particularly Lynton Crosby, the's adviser. This is only

:29:29.:29:33.

Wednesday. The politicians are off on hole day, although today's Prime

:29:33.:29:37.

Minister's Questions suggests the mood is not exactly mellow.

:29:37.:29:42.

reality that he cannot admit is against the advice of every major

:29:42.:29:48.

public health organisation he has caved in to big tobacco, that is

:29:48.:29:54.

the reality about this Prime Minister. And he knows it, it is

:29:54.:29:57.

Andy Coulson all over again. He's a Prime Minister that doesn't think

:29:57.:30:03.

the rules apply to him, dinners for donor, Andy Coulson and now big

:30:03.:30:06.

tobacco in Downing Street, he always stands up for the wrong

:30:06.:30:10.

people. The reason his leadership is in crisis is he can't talk about

:30:10.:30:14.

the big issues. We are getting to the end of a political session,

:30:14.:30:19.

when the deficit is down, unemployment is falling, crime is

:30:19.:30:23.

down, welfare is capped, Abu Qatada is back in Jordan, every day this

:30:23.:30:29.

country is getting stronger and every day he's getting weaker.

:30:29.:30:34.

now all this comes in a week in which one poll suggested that the

:30:34.:30:38.

Conservatives are now neck and neck with Labour, thanks to a

:30:38.:30:44.

significant drop in supporting UKIP. Here to talk about the flavour of

:30:44.:30:48.

politics to come is Newsnight's panel. Danny Finkelstein former

:30:48.:30:51.

Conservative adviser and columnist. Sally Morgan who worked for Tony

:30:51.:30:56.

Blair, and the Lib Dem peer, Lord Razzall was the past chair of the

:30:56.:30:59.

party campaigns and communication committee. First of all on the NHS,

:30:59.:31:04.

did anybody win that row? I think that when the salience of the NHS

:31:04.:31:08.

rises the Conservative Party loses out until it changes the long-term

:31:08.:31:12.

terms of trade on the NHS and it is a long way away from doing that.

:31:12.:31:18.

You can't avoid talking about the NHS, but this kind of row in the

:31:18.:31:20.

House of Commons will it change people's view of the Conservative

:31:20.:31:26.

Party in the NHS? No. It is a bit like Ed Miliband raises the unions,

:31:26.:31:29.

you raise the salience of something you lose. I'm not sure tactically

:31:29.:31:33.

it is good, but strategically in the long run you have to try to win

:31:33.:31:38.

the argument. The Conservatives are at least equal with Labour on the

:31:38.:31:41.

NHS. Where do you stand on this, the Prime Minister had a bit of

:31:41.:31:44.

wind in his sales he didn't have three months ago? People out there

:31:44.:31:49.

will hate it. It will just sound like people playing politics and

:31:49.:31:52.

scoring points around the NHS. I think it is really simple for

:31:52.:31:54.

politicians, they have got to remember that ultimately they have

:31:55.:31:59.

to deliver for patient and they have to keep completely focused on

:31:59.:32:02.

quality. They have to be completely focused on greater transparency,

:32:02.:32:06.

that allows patients to have power within the health service. And as

:32:06.:32:09.

soon as they seem like they are moving away from that focus and

:32:09.:32:12.

just getting into yaboo politics it is a failure. I think that the

:32:12.:32:17.

Tories have put it on the agenda and behaving like that is a real

:32:17.:32:21.

mistake. I thought the Prime Minister handled Staffs really well,

:32:21.:32:24.

it is such a dramatic shift from that approach. I think it is a

:32:24.:32:30.

little unsafe for them. Yaboo politics? The three of us are in

:32:30.:32:36.

danger of agreeing on this. I'm very much reminded of political

:32:36.:32:41.

history, go back to 1992, the war of Jennifer's ear, Labour tried to

:32:41.:32:47.

race that and it didn't resonate. Even Duncan Smith trying to talk

:32:47.:32:51.

about Rose Addis lying on a hospital bed. When politicians try

:32:52.:32:56.

to score points off the NHS they lose. Let's move to lobbying,

:32:57.:33:03.

Lynton Crosby and Unite. Did anyone make anything of that, or does it

:33:03.:33:07.

raise suspicions in voters' minds, politics is for other people, they

:33:07.:33:10.

are insiders? There has been a major player in the last few weeks

:33:10.:33:14.

and that is Ed Miliband's move on the unions. It creates a strategic

:33:14.:33:17.

opportunity for him and massive danger. The strategic opportunity

:33:17.:33:21.

is obvious you can show as a strong leader and distance Labour from

:33:21.:33:24.

unpopular vested interests. The danger is he gets half way into it

:33:24.:33:28.

and can't finish the job. Then he gets tangled up in something that

:33:28.:33:33.

he doesn't think is a U-turn but people watching think is a U-turn

:33:33.:33:37.

and then he looks weak. It is a strategic opening for him but also

:33:37.:33:44.

a big risk. I think that was a much bigger play than other issues about

:33:44.:33:47.

lobbying. Len McCluskey saying in tomorrow's Guardian this is a

:33:47.:33:52.

gamble that could bankrupt the party. That is what's at stake?

:33:52.:33:56.

Bizarrely I think the money is less of an issue than in the end whether

:33:57.:34:04.

or not Ed see it is through and wins. I'm afraid I agree with Danny.

:34:04.:34:09.

It must be the warm weather? think the position is this is

:34:09.:34:12.

potential lot biggest breakthrough for Ed, if he gets it right and

:34:12.:34:17.

sees it through. If he doesn't it will be a really significant thing

:34:17.:34:23.

for him. He might think he's seeing it through. Dam on grammar schools

:34:23.:34:29.

got into a row, and then about technical differences about

:34:29.:34:33.

Dominique Grieve was having grammar schools in Kent, and then there was

:34:33.:34:36.

the U-turn and it collapsed. Ed Miliband has to be careful

:34:36.:34:41.

technically or he will look like he U-turned. The Lynton Crosby thing,

:34:41.:34:44.

does it raise the question that Liberal Democrats have been banging

:34:44.:34:49.

on about years, public funding? This must get back on the agenda

:34:49.:34:53.

the issue of how political parties are funded. I mean we have banged

:34:53.:34:58.

on for ages and you might well say we would, wouldn't we, as a party.

:34:58.:35:02.

But how Labour is in the pocket of the trade unions because they are

:35:03.:35:07.

the paymasters, Tories are in the pockets of originally big business,

:35:07.:35:14.

now the City. The issue now is, is it really now the opportunity to

:35:14.:35:17.

reactivate the proposals for proper finance. It was the Tories who

:35:17.:35:20.

pulled out, everybody thinks it was Labour that pulled out, it was the

:35:20.:35:23.

Tories. These proposals are fine but they will bankrupt political

:35:23.:35:29.

parties. If they have a �5,000 or �10,000 limit on donation, everyone

:35:29.:35:34.

says we will have small donation, we all know really it is all about

:35:34.:35:37.

bankrupting, the Liberal Democrats are bankrupt already, they are

:35:37.:35:40.

perfectly happy with that. understand we are doing rather well,

:35:40.:35:44.

I'm no longer treasurer, but we are doing well. Lynton Crosby, was it

:35:44.:35:51.

unwise for him not to be forced to devest from business links. He

:35:51.:35:55.

shook the party up? You couldn't have Lynton Crosby and have him do

:35:55.:35:59.

that, he wouldn't do it on the terms. You had to choose to have

:35:59.:36:02.

Lynton Crosby and background noise or no Lynton Crosby. They have

:36:02.:36:05.

experienced Lynton Crosby before and they think he has integrity and

:36:06.:36:10.

he certainly has ability. They have decided to take the risk. He will

:36:10.:36:13.

get himself tangled up in stuff but it is below the radar. I don't

:36:13.:36:16.

agree with that, I think the problem with Lynton Crosby and the

:36:16.:36:19.

way it is positioned at the moment, it has a smell about it. That is

:36:19.:36:24.

not to say he has been in lobbying David Cameron, but if you take a

:36:24.:36:32.

position where we know Lynton Crosby says let's wipe away sue

:36:32.:36:42.

perv Louis issues, and one of those being public health, -- superfluous,

:36:42.:36:45.

and one being public health, I think that is somewhere the

:36:45.:36:48.

Conservatives don't need to be. is a cut-through issue, I would

:36:49.:36:53.

take a lot of persuading that people knew Lynton Crosby really

:36:53.:36:56.

was very widely or they were paying a lot of attention to these

:36:56.:36:58.

parliamentary debates. You are netting this off against the impact

:36:58.:37:04.

that he can make for you. You couldn't get him any other way.

:37:04.:37:06.

don't think Lynton Crosby will have significantly influenced the

:37:06.:37:09.

decision that was taken, and there is far too many people involved in

:37:09.:37:13.

it. What worries me about this is it brings the whole political

:37:13.:37:19.

process into disrepute, it is just yet another peg to people adding to

:37:19.:37:24.

all the other pegs that people have, that politics is corrupt, and

:37:24.:37:27.

politics isn't corrupt in this country but people are beginning to

:37:27.:37:30.

think they are. It is another thing. I don't think it will damage the

:37:30.:37:34.

Tory Party, it will damage all of us. It creates a smell. Just in the

:37:34.:37:40.

couple of minutes we have left, it is lovely weather, a great sporting

:37:40.:37:44.

summer are people going in a cheery mood or is it the next two years

:37:44.:37:49.

will be this, austerity election, the battlelines are obvious and

:37:49.:37:53.

pretty miserable? I think it will be a very tough political period. I

:37:53.:37:55.

think it is clear that the Conservatives are in a better

:37:56.:38:00.

position than they were a month ago. It would be foolish not to accept

:38:00.:38:03.

that. I think we are in a position where the general election is wide

:38:03.:38:09.

open. I think you could end up with either major party having a

:38:09.:38:12.

majority or hung parliament. Nobody could call that at the moment. I

:38:12.:38:18.

think we are going to have a lot of hand-to-hand combat. The real issue

:38:18.:38:21.

is whether the economy is showing green shoots and beginning to

:38:21.:38:24.

recover. If it is both of the coalition parties will start to

:38:24.:38:27.

improve their position in the opinion polls. If they are not we

:38:27.:38:31.

have a problem. And the other very big issue is whether Ed Miliband

:38:31.:38:34.

sees through the strategic opening he has made for himself or it

:38:34.:38:39.

become as big trap for him. Not just in terms of bankrupting the

:38:39.:38:41.

Labour Party, that is secondary, it is much more about weakness and

:38:41.:38:46.

strength for his leadership. It is perfect Barbie weather, but

:38:46.:38:52.

what is on the Newsnight summer playlist, drifting from our iPod

:38:52.:38:58.

dock, one artist has been on heavy rotation for decades, five of them,

:38:58.:39:04.

Nile Rodgers, hit maker to the stars, Bowie, Madonna and Daft Punk.

:39:04.:39:09.

Nile Rodgers has let his music do his talking but in a by star store

:39:09.:39:16.

in London he gave us tips on how to make hit records. He even had a go

:39:16.:39:22.

at the notoriously tricky Newsnight song book. In a guitar store down

:39:23.:39:26.

Tin Pan Alley in London's West End we are hanging with Nile Rodgers

:39:26.:39:33.

and bringing our own joint toe the jam. (Newsnight theme tune played)

:39:33.:39:38.

Hello, the Queen has entered the building! That is actually our

:39:38.:39:44.

theme music, it sound regular gall. What happens when a world famous

:39:44.:39:49.

hero meets the theme tune of an acclaimed late night...well show,

:39:49.:39:59.
:39:59.:40:00.

basically. Let's go with that. The horn is it. It has been the summer

:40:00.:40:06.

of bling. Liberace is big at the box-office again. It was a shiny

:40:06.:40:11.

gold pot for Andy Murray, and at the festivals a storming turn by

:40:11.:40:15.

Chic and Nile Rodgers. # We're lost in music

:40:15.:40:18.

# Caught in a trap His career was born under a

:40:18.:40:25.

glitterball. # We're lost in music

:40:25.:40:30.

How does he come up with those tight, funky groofs, how tight are

:40:30.:40:39.

they? They are tighter than Mickey Rourke's forehead. The process of

:40:39.:40:43.

writing a song and a groove and hook is so much trial and error.

:40:43.:40:46.

All of the composers I know and respect we never get it right the

:40:46.:40:50.

first time around, it is only after you rewrite it and rewrite it and

:40:50.:40:55.

then there is that moment usually that a-ha moment when you go, I got

:40:56.:41:05.
:41:06.:41:09.

# Let's dance # Put on your red shoes

:41:09.:41:15.

# And dance the blues Not bad, but how is Nile Rodgers's

:41:15.:41:23.

audition going for the Newsnight house band. (Newsnight theme plays

:41:23.:41:29.

) Is it in six-eight?It is mainly a piece for banjo! Anybody in the

:41:29.:41:35.

store know what this tune is. his long career Nile Rodgers has

:41:35.:41:40.

collaborateed with all sorts. Including the droids of Daft Punk

:41:40.:41:44.

on this year's monster hit. But how are people getting along in America

:41:44.:41:51.

today. In the aftermath of the fatal shooting of Trevyon Martin, a

:41:51.:41:55.

black youngster in Florida, are things better or others than when

:41:55.:42:00.

Rodgers was starting out? I think things are worse, I tell you why,

:42:00.:42:05.

because gone is the sense of optimisim. A Trevyon Martin type of

:42:05.:42:08.

case could have happened when I was a kid and the outcome would have

:42:08.:42:13.

been the same. The difference is when I was younger we believed that

:42:13.:42:17.

in 2013 things would be different. We were loaded with this optimisim

:42:17.:42:21.

which is what fuelled, that was the turbo charger in our music, that is

:42:21.:42:25.

what made us write these optimistic songs, we were writing about a

:42:25.:42:31.

future that we thought we would see. In fact, the future that we

:42:31.:42:36.

envisioned has never happened. It is pretty much the same. Despite a

:42:36.:42:39.

black man in the White House? That is something you might not have

:42:39.:42:42.

anticipated or maybe you did? certainly never anticipated that in

:42:42.:42:48.

a million years. I think that is probably worse, in a strange way,

:42:48.:42:52.

because of someone like that. Because I have never seen any

:42:53.:42:59.

President as disrespected as I see President Obama being disrespected.

:42:59.:43:03.

# I'm coming up # I want the world to know fl # Got

:43:03.:43:08.

to let it show When Nile Rodgers wrote this song

:43:09.:43:12.

for Diana Ross he was smuggling a gay anthem into the charts, a

:43:12.:43:18.

harder thing to do 30 years ago than today perhaps. What's his view

:43:18.:43:21.

of the gay marriage debate? almost don't understand how a

:43:21.:43:26.

person could be against gay marriage. Why would what someone

:43:26.:43:33.

else does bother you? You wouldn't even know. America is quite divided

:43:34.:43:39.

because things that don't really affect their lives they believe has

:43:39.:43:44.

some sort of moral effect or some sort of residual effect when it

:43:44.:43:49.

doesn't really. 1-2ahhh

:43:49.:43:55.

# Freak out # Le freak

:43:55.:44:00.

Much admired by rappers and artists, he has been sampled more than John

:44:00.:44:03.

Lewis curtains, he has come to terms with it, especially now they

:44:03.:44:07.

are paying him. That is just a big part of the music business. I will

:44:07.:44:11.

go work with producers and I will sit down with them and they will

:44:11.:44:14.

play tonnes of my samples right there in front of me. They don't

:44:14.:44:19.

think about it. I can't tell you. There is no self-respecting DJ that

:44:19.:44:26.

doesn't have the beginning of Le Freak as part of their samples

:44:26.:44:35.

library, every as an "ahhh". Newsnight theme) big finish? I'm in

:44:35.:44:42.

the ball park but not there. If you had this cold in Hyde part, you

:44:42.:44:49.

would have blown them away. You got to be kidding me. (plays the

:44:49.:44:54.

Newsnight theme) that can't be it. You got it. Wonderful Nile Rodgers,

:44:54.:45:04.
:45:04.:45:04.

Apology for the loss of subtitles for 60 seconds

:45:04.:46:05.

let's have a look at tomorrow That's it for tonight, we are back

:46:05.:46:15.
:46:15.:46:44.

Today more sunshine for Scotland and Northern Ireland and more heat.

:46:44.:46:49.

Further south perhaps our hot spots just a bit further west. For

:46:49.:46:54.

Northern Ireland some decent sunny spells, temperatures up into the

:46:54.:46:58.

mid-20s, similar figures are forecast across southern and

:46:58.:47:02.

eastern Scotland. Persistent low cloud and muark further north, the

:47:02.:47:05.

isolated chance of a shower through eastern Scotland through the

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afternoon into the evening. Sunny spells for northern England,

:47:09.:47:12.

sunshine across the Midlands into East Anglia and the south-east of

:47:12.:47:17.

England. Some of the temperatures, a couple of degrees down on the

:47:17.:47:21.

last few days, an Eastleigh breeze, we can see the highs more intense

:47:21.:47:25.

further west. A hotter day for Devon and Cornwall in South Wales,

:47:25.:47:29.

In-depth investigation and analysis of the stories behind the day's headlines. With Gavin Esler.


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