21/10/2013 Newsnight


21/10/2013

With Jeremy Paxman. Why the French and Chinese build our nuclear plants, London house prices soar, the LulzSec hacker meets his tracker and Saatchi says capitalism isn't working.


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Transcript


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Chapters four and five of the most charged story in politics right now,

:00:09.:00:14.

the cost of keeping the lights ablaze. It is with pride that I now

:00:15.:00:23.

open Calder Hall, Britain's first atomic power station. The Queen

:00:24.:00:28.

moved a lever, releasing atom power producing electricity into the

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National Grid. Once upon time we built nuclear power plants for

:00:33.:00:35.

ourselves, now we ask competitors do it for us. It may be necessary, but

:00:36.:00:41.

is it wise? What happened when the hacker met the tracker who got him

:00:42.:00:45.

convicted. FRMTHS what was the most interesting thing you found on my

:00:46.:00:48.

hard drive. I found lots of interesting things on your hard

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drive! He was behind the Conservative Party's most famous

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election poster, why doss Morris Saatchi now think marks may have

:00:58.:01:04.

been right afterall. He's here to tell us. Glory be to China and

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France, out of the goodness of their hearts, and with the promise of

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massive guarantees from the British Government, and tax-payers, they are

:01:17.:01:21.

generously restarting Britain's nuclear energy programme. The Prime

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Minister said the Government was securing the country's energy

:01:25.:01:27.

future. Now there was a time when Britain led the world in this sort

:01:28.:01:32.

of technology. No longer. None the less, building the Hinkley C Power

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Station may create 25,000 jobs. To say that Britain has lost its

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lead in nuclear power doesn't adequately describe the decline in

:01:48.:01:52.

the UK civilian nuclear programme. Today announcing the building of a

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new Hinkley C power station, the Prime Minister talked about a

:01:58.:02:01.

rebirth. It is going to give another kick-start to our nuclear industry,

:02:02.:02:05.

I think many people will see it is going to provide good, long-term,

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well-paid, high-tech jobs for our future. It is also going to provide

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low-carbon, reliable, safe, secure energy supplies long into the

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future. All of us here know that we are present at the making of

:02:24.:02:27.

history. But some may regard this as more of a national humiliation.

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Britain once led the world in civilian nuclear power. Britain's

:02:31.:02:35.

first atomic power station. When Her Majesty opened the first one, in the

:02:36.:02:46.

world at Calder Hall, nobody would think that the new generation of

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nuclear power plants would be built and owned by the Chinese and French

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Governments. Here is the rise and decline in graph, the decent upturn

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is simply due to so unplanned shutdown stations coming on-line.

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The trend is down and down fast. There are three reasons for this

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decline, the first is technology. It is one of the country's first

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generation of Magnox nuclear power stations. Because we got to go

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first, we created our own generators, others went down the

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safer and more efficient water-cooled route. They didn't want

:03:24.:03:27.

our technology and we couldn't create the economies of scale that a

:03:28.:03:29.

big export market would have brought us. We ended up with handful of

:03:30.:03:34.

different types of reactors that no-one wanted to know about. The

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advantage of water-cooled technology, such as the plant

:03:38.:03:43.

planned for Hinkley Point C, is it is more efficiently, water carries

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the heat to make electricity better than carbon dioxide gas, which was

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the British approach. The fact that the rest of the world didn't follow

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gas-cooled technology left us in deadent. We couldn't export any of

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our reactors, our second generation stations. It took a long time to get

:04:03.:04:07.

them working well. The next problem our nuclear industry has faced is

:04:08.:04:11.

the market. When Conservative ministers hit the button on energy

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privatisation, the nuclear industry was packaged up into British Energy.

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Whilst other companies bought up domestic suppliers, ensuring they

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always had a market, British Energy didn't. When the energy market

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crashed, they had nothing to cushion the fall, they went bust. Sorting

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out the mess meant a decade was wasted. Plans to build an earlier

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version of Hinkley C was scrapped at this time, when it was deemed

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uneconomic. The other problem we had, in the UK, certainly didn't

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look like a problem at the time, plentiful North Sea oil and gas.

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Just when we needed to be replacing our nuclear power station, it looked

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like we didn't need to. FRMTHS in 1973 the French were dependant on

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imported oil for two thirds of their energy in their economy. They were

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massively hit by the oil price hike and problems of 1973 and OPEC. So

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they switched an awful lot of their electricity from oil to nuclear. In

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the UK we had oil Gas in the North Sea. Not directly used for

:05:13.:05:16.

electricity, but certainly great cushion in terms of our overall

:05:17.:05:21.

energy picture. We still had home mined coal. The case for nuclear

:05:22.:05:24.

looked weaker than it did in a number of other countries like

:05:25.:05:31.

France. Then there is the politics, building nuclear power stations are

:05:32.:05:35.

hugely expensive, huge upfront costs and a long life. So the politicians

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who commissioned them just get to take the flack and pay the bills

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they probably won't cut the ribbon. What has changed? Well George

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Osborne visiting a new nuclear plant being built in China last week has a

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sense of urgency that previous politicians just haven't had.

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Because after years of underinvestment, there is a real

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prospect now of Britain's lights going out within a few years. And

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politicians who are blamed for power cuts don't tend to do well. Needing

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nuclear power in a hurry, and cheaply, means foreign-owned and

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foreign-operated was the only option.

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With us now is Dr Sue Ian of the Royal Academy of Engineering, and a

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former technology director she is at British Nuclear Fuels Ltd. David

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Norris is chairman of Conservative Friends of Nuclear Energy.

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Is this a humiliation? No, I see it as good news for the engineering

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sector in the UK. Although the current designs about to be built

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are overseas-designed, our engineers in the UK have been involved in some

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of these designs on the international stage for some years.

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It is UK engineers that will help to build the plant and operate it

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ultimately. It may be overseas-owned, but there are plenty

:07:00.:07:03.

of British engineers involved now and in the future. How do you feel

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about it? I'm elated we are getting the nuclear power stations finally

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built. Doesn't it matter who builds them? Not to me, as the good doctor

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was saying before, we have the home-grown effect in my

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constituency. Explain your constituency and what the

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Aberdeen-effect is? It is lots of expertise going overseas to work in

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an industry that you have been brought up, in Aberdeen it is the

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oil industry. In my area it is the nuclear power industry. We have lots

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of youngsters with good jobs at the moment, with go skills they can

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export. The North West dose is st coast is a good breeding ground for

:07:52.:07:55.

that to happen. We are always told that the future of the economy is in

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knowledge, if the key parts of this project is foreign-innovated,

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doesn't it make you worry about future of this country? One of the

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good things done is to invest in the nuclear manufacturing advance

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research centre. A joint venture between the University of Manchester

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and Sheffield. This is designed to bring 21st century techniques to the

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designs to be built. Although the designs are overseas, the

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manufacturing and tools and techniques may well have UK IP

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associated with them, as we go through the decades. When you hear

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somebody prominent in the project talking about it being muck-shifting

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what do you think? They might one day regret their choice of words in

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that. Even the British construction industry is a world-class

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construction industry with a world-class safety record, as

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evidenced by the Olympic Games and the Channel Tunnel. British

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engineers are involved in the nuke clear power -- nuclear power

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programme, and with the new investment that is about to be made

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that will grow. The other thing is we have fantastic university base

:09:07.:09:10.

here in the UK. Our nuclear courses in our universities like ones here

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in Manchester and at Imperial College in London, they are

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fantastic international low- renowned courses attracting a lot of

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students. There is another element which is Government industrial

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policy, doesn't it look at an occasion like this as if the French

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got it right and the British got it wrong. I have always advocated that

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we should have gone straight into nuclear instead of going into wind

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farms. I'm bound to that say, that' the chairman of the Conservative

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Friends of Nuclear Energy. I do believe the way ahead is nuclear.

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But ?90 as a strike price seems high at the moment. It is ?150 for on

:09:50.:09:56.

shore wind farms as strike price. EDF is what 80% or so owned by the

:09:57.:10:03.

French taxpayer. Right? We just flog all these things off? We have not

:10:04.:10:08.

got at the moment with austerity measures the actual finance to build

:10:09.:10:12.

these things outright. It is good to have foreign investment coming into

:10:13.:10:15.

our country to do this. At the end of the day we will be keeping the

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lights on and that is really what we are in it to do. You don't wore, you

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don't worry? I do worry, I joke in parliament all the time that I could

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be the man that signs off the next generation of nuclear power

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stations. I really want public subsidy into nuclear power stations

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because we are going to have a shortage of energy. We can't be

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reliant on gas forever and a day. 2013 looks like we are going to be

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80% reliant on gas. We can't have, that we must have nuclear power

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built sooner rather than later. We all know what we expect a soldier

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to look like right? Pale, spotty, rarely seen outside a darkened room,

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tracksuit bottoms and lots of pizza cartoons lying around. That is an

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artist's impression of what the defence of this country may hang.

:11:06.:11:09.

The defence committee is not just committed to cyberprotection, but

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cybercounter-attack. The people who can mastermind that campaign won't

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be found on the playgrounds of Eton. We're barely ware of it any more,

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but our lives are dependant on a digital world that operates unseen.

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In parallel to the one all around us. Being wired has changed the way

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we do everything, but also means new VUNabilities. So what kind of people

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seek to disrupt it? And what motivates those who try to protect

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it. There is often little difference between the hackers and those who

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track them. Is it time to include hackers in our plans to protect the

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nation from emerging cyber-threats? The same people who make very good

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malicious hackers can also be very good at non-malicious hacking. I

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prefer to look at the skills these people may be bringing rather than

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putting labels on the skills. It will be highly beneficial to recruit

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hackers, especially at a corporate level. They are scared to do it.

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There is wealth of talent underground. Not the place that

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industry and the military would orderly look for new recruit, but

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they may just have the skills we are going to need. Perhaps the most

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notorious of recent hacking groups sprang out of the Anonymous

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Movement. A jokey offshoot called Lulsec, that came to worldwide

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attention, at first they targeted for laughs. Jake Davies went by the

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name of Topiary, he was their quirky spokesman and shaped the on-line

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Presence. The youngest was 16. When they turned their hacking skills

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against law enforcement, most of the members were eventually tracked down

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and sent to prison. Some are now free and thinking about what to do

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next with their lives. Those who have been immersed in the world of

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hacking talk about it being exciting, even thrilling, about an

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intellectual stimulus that's hard to beat. So is it ever possible for a

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malicious hacker to turn their skills for good. Is there such a

:13:35.:13:48.

thing as hacker reHAB! This hacker MustaffaAl-Bassam was convicted with

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a sended sentence earlier this year, and is studying computer science.

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The computer forensic expert whose evidence helped convict him was

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David Day. We brought hacker and tracker together. This is the first

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time they have met. What was the most interesting thing you found on

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my hard drive! I found lots of interesting things on your hard

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drive, maybe some of the more interesting things I'm not sure I

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want to talk about now. But I found pretty much every website you looked

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at. I found loads and loads of files which you probably thought had been

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deleted. I found them in system information folders in place they

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were hidden away. Was it thrilling for you to look at someone's almost

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life? Honestly? A little bit. He was looking for evidence that he and the

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Anonymous hacker T-Flow were one in the same. He doesn't condone

:14:56.:15:01.

anything he did but can't admire his programming -- ANT help but admire

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his programming skills. I don't know if you are aware that you are more

:15:06.:15:11.

skilled at doing shows things than other people. What is the motivation

:15:12.:15:15.

DPOR doing it? Being a teenager at the time, the motivation was the

:15:16.:15:20.

ability to use basic technology to embarrass major corporations and

:15:21.:15:25.

people in authority. That was a thrill as a teenager. In simple

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terms it was just for fun, for kicks? Pretty much. It is like

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solving a puzzle or problem solving. If when you complete the problem at

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the end you do get quite a sense of achievement. Do you know that's

:15:41.:15:43.

exactly the same feeling that you get when you are doing forensic work

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as well. I think what was more important for the group was showing

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the world how these major corporations weren't following basic

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security. One of the codefendants in the case was the PR man Jake Davies.

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We last spoke to him before the case came to court. I don't feel like a

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criminal, I feel like a kid that put the creativity in the wrong place at

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the wrong time. Jake sent 37 days in a youth offenders institution in

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Feltham, now he said the time he spent off line had a bigger impact.

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What changed me was the two years being banned from the Internet,

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electronically tagged to my house. The 37 days in Feltham was

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interesting. It gave me some good perspective on where our youth end

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up when they have done what the state perceives as wrong. Has turned

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away from -- he has turned away from hacking and leads a different life,

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working in film distribution. The same parts are being stimulated in

:16:50.:16:54.

the same way but they won't, you get paid at the end of the month rather

:16:55.:16:57.

than being sent to Feltham. We are often told there is a short-terming

:16:58.:17:05.

of people with skills in the industry, to protect the Government

:17:06.:17:10.

systems from attack. The MoD is calling for cyber-reservist, a GEEK

:17:11.:17:14.

version of the Territorial Army. Is anyone likely to sign up, should

:17:15.:17:28.

former hackers bother to apply. At the Ministry of Defence's

:17:29.:17:34.

multimillion pound communication centre, specialists from all three

:17:35.:17:38.

force, army, Navy and air force, work together to keep the country's

:17:39.:17:41.

military communications systems secure. Cameras are rarely allowed

:17:42.:17:46.

in. Each screen we filmed had to be individually vetted. This is the key

:17:47.:17:50.

centre that operates and defends the UK's military networks worldwide. It

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is also where some of the new joint reserve unit will be based and

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trained. And the hope is to employ people who are not only from

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elsewhere in the military and defence, but also from industry and

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people who are not necessarily traditional military material.

:18:07.:18:10.

Lieutenant Colonel Michael White is the commanding officer of the new

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reserve unit. He said the kind of people they are looking for are in

:18:15.:18:18.

short supply, so they would have to be open-minded when recruiting. If

:18:19.:18:23.

somebody had a quirky personality but very good at computing, you

:18:24.:18:27.

might consider them? We will look the individuals in the round as they

:18:28.:18:31.

apply, we are looking at the capability development rather than

:18:32.:18:35.

setting hard and fast rules about individual personal traits. If

:18:36.:18:39.

somebody came to you and they had a criminal record for hacking but all

:18:40.:18:44.

the skills you were looking for, you wouldn't necessarily rule them out?

:18:45.:18:48.

If they could get through that security process, then if they have

:18:49.:18:52.

that capability that we would like, then if the vetting authority was

:18:53.:18:58.

happy with that, then why not. Simply building cyber s is not

:18:59.:19:04.

enough. We also have to decertificate. Britain will build a

:19:05.:19:08.

dedicated capability to counter-attack, and if necessary to

:19:09.:19:12.

strike in cyber-space. This was the first time that Britain's approach

:19:13.:19:17.

to cyber s had been spelt out so clearly. That we will not only

:19:18.:19:22.

defend against attacks but potentionally launch our own. But

:19:23.:19:26.

the Government may find it hard to attract the talented individuals the

:19:27.:19:33.

needs, if former hacker Mustafa is typical. If you had the opportunity

:19:34.:19:37.

to take up a role or assist in trying to prevent threats to the

:19:38.:19:40.

nation's security, would that be something you would be interested in

:19:41.:19:45.

using your skills for? For me that would be important, I can understand

:19:46.:19:48.

the need for a Government to protect itself, but when you go ahead and

:19:49.:19:52.

stamp on everybody's civil liberties, which we have seen on the

:19:53.:19:57.

massive surveillance stories broken this year, you will repel talented

:19:58.:20:06.

people. A stereotypical hacker mentality, often anti-establishment,

:20:07.:20:10.

may not fit neatly into Government institutions. There is heightened

:20:11.:20:14.

sensitivity after high-profile leak, such as those by insider Edward

:20:15.:20:21.

Snowdon, who revealed details of secret masseur veilence by UK and US

:20:22.:20:32.

groups. So -- mass Surveillance by UK and US Government groups. As a

:20:33.:20:40.

hacker you have an inset belief, the people who would hire that are

:20:41.:20:44.

afraid, there could be another Snowdon situation, they don't want

:20:45.:20:48.

discrepancies in anything. It would be highly beneficial to recruit

:20:49.:20:52.

hackers, especially at a corporate level, but they are scared to do it.

:20:53.:20:57.

Are they right to do it? It depends on the hacker. It can be

:20:58.:21:01.

particularly difficult to get a job in industry after you have been

:21:02.:21:05.

convicted of malicious hacking. Which in certain situations for

:21:06.:21:10.

certain individuals is a terrible shame, if they have those abilities

:21:11.:21:14.

and those skills, some of the best talent and we can't use it. Would

:21:15.:21:21.

you employ a former hacker? That is tricky. That is very tricky. I think

:21:22.:21:25.

it would have to be every case on its merits. You have met Mustafa

:21:26.:21:32.

today, would you employ him? He seems like a really nice lad, and

:21:33.:21:37.

obviously clearly very talented. I might. A surprise, perhaps, that

:21:38.:21:45.

there is a growing appetite for hiring ex-hackers, even within the

:21:46.:21:48.

military, but those prepared to take the risk may find it harder than

:21:49.:21:53.

they think to win over the GEEKs as defenders of our on-line security,

:21:54.:22:02.

or as part of a cyberarmy. I spokes to the Defence Secretary Neil

:22:03.:22:07.

Hamilton and I asked him whether the armed services would employ someone

:22:08.:22:14.

with a criminal conviction for hacking? The Armed Forces don't

:22:15.:22:17.

necessarily exclude people with criminal convictions. Each

:22:18.:22:20.

individual case would be looked at on its MER sits. The conviction

:22:21.:22:24.

would be examined in terms of how long ago it was, how serious it was,

:22:25.:22:31.

what sort -- its merit, the convictions and how serious it was,

:22:32.:22:39.

I couldn't rule it out. In the cyber-world, is there any way to

:22:40.:22:44.

know how someone has gone from a black hat hacker to white hat

:22:45.:22:47.

hacker? There are many professional people out there with the skills you

:22:48.:22:52.

might traditionally associate with the hacker's skills set, who have

:22:53.:22:57.

never done anything illegal and who scruplously maintain their

:22:58.:23:00.

activities on the right side of the law. This will be a matter of

:23:01.:23:05.

judgment in individual cases. But the Armed Forces overall do not have

:23:06.:23:09.

an absolute bar on people with criminal convictions becoming

:23:10.:23:13.

members of them. Would a hacker recruited to your cybersecurity

:23:14.:23:18.

force have to wear a uniform and pass standards of physical fitness?

:23:19.:23:25.

Well the cyberreserve that we are recruiting will have considerable

:23:26.:23:30.

flexibility in terms of recruitment criteria around areas like fitness.

:23:31.:23:34.

Clearly it is not necessarily for somebody who is going to spend their

:23:35.:23:43.

serving time doing cyber-work, not necessarily necessary for them to

:23:44.:23:45.

have the same level of fitness as someone who was joining a royal

:23:46.:23:53.

marine or an infantry reserve unit to do. Will they wear a uniform? The

:23:54.:23:58.

routine would be that they would wear uniform, but again service

:23:59.:24:03.

personnel when they are doing and performing roles that are not in

:24:04.:24:07.

public, don't necessarily need the wearing of uniform, they may not

:24:08.:24:10.

always need do so. Would they have to have a haircut? The regulations

:24:11.:24:15.

around The Verves will still apply, but there will be some flexibility

:24:16.:24:21.

where we're talking about members of the cyber-reservists. What we are

:24:22.:24:25.

trying to do is recruit the very brightest and the best from across

:24:26.:24:29.

the IT industry. And use the skills sets that they have got in the

:24:30.:24:34.

national interest to enhance our cyberdefences, and to help us build

:24:35.:24:40.

an offensive cybercapability. Can you tell us what a cyber-attack is

:24:41.:24:47.

please? There are two types, there are cyber-attacks seeking to take

:24:48.:24:53.

information from the victims' systems and there are cyber-attacks

:24:54.:24:58.

seeking to deny service to the victims' system, shut them down. The

:24:59.:25:03.

United States has identified China as the source of the greatest threat

:25:04.:25:08.

at a Government level. Who is our enemy? We don't, it is not about a

:25:09.:25:13.

specific enemy, it is about being aware that both our traditional

:25:14.:25:19.

perceived potential adversaries and also some non-traditional smaller

:25:20.:25:23.

states do have this capability. There are a number of countries

:25:24.:25:27.

around the world who have recognised that this is an asymmetric

:25:28.:25:32.

capability. It is an area whereby building a niche capability, a

:25:33.:25:38.

relatively small country could have a disproportionate effect. That they

:25:39.:25:42.

could never hope to do by building up traditional conventional military

:25:43.:25:46.

forces. Can you tell us what these countries are? I'm not going to name

:25:47.:25:51.

individual countries. How many are there? There are a number of major

:25:52.:25:54.

players around the world who are already known to have

:25:55.:25:59.

cyber-capabilities. There are other smaller countries who are known to

:26:00.:26:02.

be seeking to develop them. What would a British cyber-attack be

:26:03.:26:09.

like? I should start by emphasising that this is very naisent

:26:10.:26:17.

early-emerging technology. But it is possible in time there will be

:26:18.:26:22.

capabilities to interfere with an enemy's ability to control its

:26:23.:26:26.

weapons systems. You might be able to deny an enemy the use of certain

:26:27.:26:31.

weapons systems. You might be able to interfere with the way they

:26:32.:26:37.

worked. You might be able to do by cyber-intervention, something that

:26:38.:26:41.

today would be done by a kinetic strike. By bombing or missile

:26:42.:26:46.

attacks. Would such an take have to be authorised by the Prime Minister?

:26:47.:26:50.

Well any, we're very clear that the law of armed conflict applies to the

:26:51.:26:55.

cyber-domain, there is an interesting debate going on

:26:56.:26:59.

internationally at the moment and quite openly about how the law of

:27:00.:27:03.

armed conflict should properly be applied in the cyber-domain. We are

:27:04.:27:10.

very clear that any cyber-activities will have to be lawful and have to

:27:11.:27:14.

meet the same standards as we require for conventional attacks.

:27:15.:27:19.

That is to say they will have to be proportionate to the threat that we

:27:20.:27:27.

were dealing with or the attack that we had suffered.

:27:28.:27:30.

Another energy company waded into politic today, NPower is going, wait

:27:31.:27:35.

for it, to put up its prices by an average 10%, just like the other two

:27:36.:27:38.

that have already announced their hikes. The Government advice to all

:27:39.:27:44.

those squirming with anxiety or boiling with anger is we should shop

:27:45.:27:49.

around. Labour, by contrast, promises to cap energy prices for a

:27:50.:27:52.

while at least. The voters like that idea, which has given the Tories a

:27:53.:27:56.

bit of a problem. In the Mail on Sunday, the former Conservative

:27:57.:28:00.

Party chairman, Lord Saatchi pointed out, it is now 21 years since the

:28:01.:28:05.

Conservatives won an election. The corrosive question for people

:28:06.:28:08.

like him is whether they can ever do so again. I will be talking to him

:28:09.:28:16.

in a moment or two. First we report. With his conference speech, Ed Mill

:28:17.:28:22.

band set the political weather, and is a said this autumn energy prices

:28:23.:28:25.

would go up and so they have. The number of Labour voters

:28:26.:28:51.

satisfied with their leader is up by 22 points since the Labour Party

:28:52.:28:55.

Conference. The party's overall lead on the Tories hasn't extended. Some

:28:56.:29:02.

Tories are delayeded with the energy price freeze. They believe that he

:29:03.:29:10.

resusitated Markism, and it is no longer a plaque on the wall. There

:29:11.:29:14.

are two camps with how to deal with the energy freeze from Ed Miliband.

:29:15.:29:21.

Some believe they don't have to do anything and figures say that it

:29:22.:29:25.

shows the purring purring along. Then there is the tax camp,

:29:26.:29:29.

believing to give people more money back. The third camp is competition.

:29:30.:29:38.

That Ed Miliband is right the energy companies need to be cracked down

:29:39.:29:41.

on, but the Tory answer is competition.

:29:42.:29:44.

Vast sections of the country favour action on the utilities companies.

:29:45.:29:48.

In one recent poll only 12% trust gene companies to treat their --

:29:49.:29:53.

energy companies to treat their customers fairly. 3% don't. 3%

:29:54.:30:01.

support plan to freeze energy prices for 20 months. But the Labour

:30:02.:30:05.

leader, pollsters say, has to convince voters a little more if

:30:06.:30:09.

he's to capitalise on this. David Cameron is a veteran of

:30:10.:30:13.

election campaign, but one colleague of his from this, a 1992 campaign,

:30:14.:30:19.

none the less urging him to realise the new threat posed by Ed Miliband,

:30:20.:30:30.

one-time Tory chairman, Lord Saatchi said unfettered capitalism will help

:30:31.:30:37.

Labour into power, Ed Miliband has set the weather and the Tories need

:30:38.:30:40.

to dress for it. Lord Saatchi is here. You think that

:30:41.:30:46.

Marx might have been right? I really would like it, I would like him not

:30:47.:30:52.

to be proved right. The particular aspect of his prophesis, which

:30:53.:30:57.

worries me, which is why I wrote the article in the Mail on Sunday is he

:30:58.:31:06.

forecast that after years of warfare amongst capitalists, there would be

:31:07.:31:10.

fewer and fewer capitalists controlling vaster and vaster

:31:11.:31:13.

empires, that seems an accurate prediction. I would be alarmed if

:31:14.:31:18.

that was allowed to take hold and what it says behind me, "capitalism

:31:19.:31:25.

isn't working "became what people believe. Then they might turn to

:31:26.:31:30.

state socialism, and state control as a free market system that they

:31:31.:31:36.

don't regard as being effective. The energy, as you have been dealing

:31:37.:31:39.

with in the programme, this is a key test for public opinion. Absolutely,

:31:40.:31:43.

it is clear where public opinion resides in this, it is also quite

:31:44.:31:47.

clear that when David Cameron says that people should shop around, he's

:31:48.:31:52.

talking nonsense really isn't he? He's expressing what is the true

:31:53.:31:59.

faith of Conservatism. That is at the root of Conservatism is free

:32:00.:32:05.

market competition. This is what we believe in. It strikes at the heart

:32:06.:32:09.

of Conservative belief to find a situation in which there isn't real

:32:10.:32:13.

competition. I think the Prime Minister is expressing the view

:32:14.:32:17.

that's what he wants. That's what Conservatives want. But it isn't

:32:18.:32:20.

what we have got, we have cartel? That is true. So now here you have a

:32:21.:32:26.

serious problem. That's why I wrote what I wrote. How did the

:32:27.:32:29.

Conservatives find themselves on the wrong side of the fence on this? I

:32:30.:32:35.

think the solution that Labour proposes is a solution that we don't

:32:36.:32:41.

want. Because what is the solution? The solution would be some kind of

:32:42.:32:45.

state control. Our solution more in keeping with free market views would

:32:46.:32:50.

be that the market should operate. That is what the Prime Minister is

:32:51.:32:52.

saying. But the market isn't operating? People should be able to

:32:53.:33:00.

shop around. This the market isn't working? If globalisation has, as an

:33:01.:33:06.

unintended consequence of globalisation is the creation of

:33:07.:33:10.

global cartels, that is a major problem. As you are seeing with

:33:11.:33:14.

energy will come to many other categories, people will come to the

:33:15.:33:16.

conclusion that the free market competition is not working, because

:33:17.:33:19.

there is not enough competition. That is what I'm trying to suggest,

:33:20.:33:23.

this is something we must watch out for very carefully, which Labour

:33:24.:33:27.

could exploit if we don't. We must make sure they can't. If the

:33:28.:33:30.

consequence, you believe in the market because you believe it makes

:33:31.:33:36.

people free isn't that right? If you asked me what is the actual

:33:37.:33:41.

fundamental belief of Conservatism, I would say in one word it is

:33:42.:33:48.

freedom, independent, individuality, self-determination. It hasn't led to

:33:49.:33:53.

freedom has it? Energy is a classic case, it hasn't led to freedom, if

:33:54.:33:59.

you can't afford to pay the bill it is an interesting and philosophical

:34:00.:34:04.

idea but that is all? Let me go on with basic Conservative belief, will

:34:05.:34:09.

that help? Yeah. Let's say the fundamental Conservative belief is

:34:10.:34:12.

freedom. Now let me ask you this, is there a connection between freedom

:34:13.:34:16.

and money? I would say that there is. To deny that would be

:34:17.:34:23.

hypocritical. I take as my case Professor JK Galbraith, he said, I

:34:24.:34:28.

think it is very memorable, he said "the greatest restriction on the

:34:29.:34:32.

liberty of the citizen is a complete absence of money". Therefore what

:34:33.:34:37.

Conservatism should aim at is that people will have more money. How

:34:38.:34:43.

will that, in order that they can be more free, you take my point. In

:34:44.:34:46.

other words there is a moral purpose to Conservatism which it is very

:34:47.:34:52.

important important to express, it could lead people to the view that

:34:53.:34:55.

Conservatism is only interested in money. We are interested in money,

:34:56.:35:00.

but the root is to the highest thing of all, freedom. What do you think

:35:01.:35:07.

the Tories should do? I am the chairman of a fine body called the

:35:08.:35:13.

Centre for Policy Study, created by Margaret Thatcher some years ago. It

:35:14.:35:16.

was responsible for iconic policies that allowed the Conservative Party

:35:17.:35:20.

to win many elections, including of course you can own your own home,

:35:21.:35:23.

the sale of council houses. We are going to have to develop and we

:35:24.:35:31.

will. A policy, just one, more than one is already too complicated,

:35:32.:35:34.

before the next election that has the iconic status in terms of appeal

:35:35.:35:43.

and simplicity of "you can own your own home". That is our aim in the

:35:44.:35:47.

Centre for Policy Studies. And we will do it, this will have a big

:35:48.:35:50.

impact. Do you know what that policy will be about? Yes. Go on? It is

:35:51.:35:55.

going to be about freedom. It is going to be about freedom and the

:35:56.:35:58.

connection between freedom and money. We are not going to shy away

:35:59.:36:05.

away from the fact that to speak about freedom and money is

:36:06.:36:08.

hypocrisy. The Conservative Party is often accused, are we not, condemned

:36:09.:36:14.

for being money obsessed. Therefore having a heart of stone. But at the

:36:15.:36:19.

root of Conservatism is a very high moral purpose. Which is the pursuit

:36:20.:36:25.

of freedom and independent. When the Centre for Policy Studies produces

:36:26.:36:29.

this policy, you will see that it connects the aim of freedom with the

:36:30.:36:36.

need for money. And it will be DRAM Maastricht Treaty, will be dramatic,

:36:37.:36:46.

culture changing. As someone who has been finding somewhere to live will

:36:47.:36:52.

be know, the cost of property in the capital has conbeserk. Asking prices

:36:53.:36:56.

have gone up 10% between September and October. The British obsession

:36:57.:37:01.

with homeownership is part of the reason. So too perhaps is the

:37:02.:37:04.

Government's help to buy scheme. But it is also quite clear that many

:37:05.:37:08.

foreigners are frantic to buy property in London, and in so doing

:37:09.:37:13.

the city is being made unaffordable to many. Before we talk about it we

:37:14.:37:24.

have this report. Whose housing boom is it? For four years the rest of

:37:25.:37:30.

the UK has watched as prime property in central London behaved like it

:37:31.:37:34.

was part of a different country. Price booms started in London in the

:37:35.:37:39.

past and went out to the UK. In the capital they have risen 60% since

:37:40.:37:43.

2009, the rest of the country has some catching up to do. If you look

:37:44.:37:50.

at the stamp duty take from the two central London borough, Kensington

:37:51.:37:52.

and Chelsea and City and Westminster, in 2012/13 it was ?7208

:37:53.:37:59.

million, that is ?78 million more than Northern Ireland, Scotland,

:38:00.:38:02.

Wales and the north-east and the North West and Yorkshire and Humber

:38:03.:38:09.

put together. Who are the buyers who can afford prime central London

:38:10.:38:13.

property? The latest research shows 49% of them aren't British

:38:14.:38:17.

nationals. The biggest chunk are from other European countries,

:38:18.:38:20.

followed by buyers from Russia in the former Soviet Union countries,

:38:21.:38:23.

close behind are buyers from the Middle East, followed by Americans,

:38:24.:38:28.

Asians, and the rest of the world. To rich international investors,

:38:29.:38:32.

London property means financial safety. Initially it was an exchange

:38:33.:38:38.

rate thing, people cashing in at the bottom of the market and weak

:38:39.:38:41.

sterling. A lot is driven by safe haven places, uncertainty in the

:38:42.:38:45.

eurozone looking for alternative investments driving wealth into

:38:46.:38:48.

London. We have also a lot of wealth being generated in immature markets,

:38:49.:38:52.

they are keen to put their money into a safe, secure and well known

:38:53.:38:58.

asset. And prime central London ticks those boxing. Buyers are going

:38:59.:39:02.

off central London, prices rose 8% last year. Central London is so

:39:03.:39:06.

awash with money looking for a home that it has pushed prices up to the

:39:07.:39:09.

point where you can't really make money. If you bought one of these

:39:10.:39:15.

modest sized flats for probably ?1 million, you might get a rent of

:39:16.:39:20.

?30,000 a year, a 3% return, not much better than savings. Don't

:39:21.:39:24.

forget you are taking a risk with money. Now those international

:39:25.:39:30.

buyers are copying an old British habit, they are searching for better

:39:31.:39:35.

value for money. Welcome to London's latest house price hot spot. A

:39:36.:39:43.

stone's throw from West Ham's football ground, it may not always

:39:44.:39:46.

have been a magnet for buyers, foreign or domestic, but it is one

:39:47.:39:49.

of the few places in London where you might get a house for less than

:39:50.:39:52.

a quarter of a million pounds. To use a local expression, I'm not

:39:53.:39:58.

taking the mickey, if you judge an economy by house price, Plaistow is

:39:59.:40:04.

booming, prices up 15% by January, agents say they are accelerating. On

:40:05.:40:08.

the weekend more than 30 people were booked into see this three-bed

:40:09.:40:15.

terrace, on offer at ?240,000. In a sellers' market like this, there is

:40:16.:40:18.

no need to tidy up. Buyers are looking for what is known as

:40:19.:40:23.

"potential. This couple are among those hoping to take advantage of

:40:24.:40:28.

cheap Help To Buy mortgages before prices take off. This isn't for

:40:29.:40:33.

them. The rooms are really small, for us wanting to start family as

:40:34.:40:36.

well. They are too small for us. Is that your plan at the moment? In the

:40:37.:40:41.

next few months, yeah. Is it your plan too Chris? In the next few

:40:42.:40:46.

years! Ten years ago, if you worked in Dubai and got an ?80,000 job in

:40:47.:40:53.

Canary Wharf, you would look in the City, for this City high flyer

:40:54.:41:00.

Plaistow is the best he can get. You are in corporate finance, should be

:41:01.:41:05.

able to afford stuff? It still means having, if you are buying a ?1

:41:06.:41:13.

million property you need ?200,000 in the bank. What is the answer?

:41:14.:41:17.

Bank of mum and dad. Not all buyers are well-healed, born in Vietnam and

:41:18.:41:21.

brought up in Australia, this man has come to Plaistow because Help To

:41:22.:41:26.

Buy has priced him out of Leytonstone? It is too hot. I think

:41:27.:41:30.

it might get worse because they were tightening the lending, now they are

:41:31.:41:33.

starting releasing it, so everybody can get the loan. It pushed the

:41:34.:41:44.

price up. So even as an of a -- earner ?40,000, I don't think you

:41:45.:41:47.

can afford that sort of property in London. Behind London's boom is a

:41:48.:41:50.

chronic shortage of property for sale and some of the cheapest

:41:51.:41:53.

mortgages ever offered. If the market is this heated here, buyers

:41:54.:41:56.

looking for better value for money are going to have to travel even

:41:57.:42:02.

further out of town. With us now is Michael Goldfrab an American

:42:03.:42:06.

journalist observing London since 1985 and Isabel Harding, editor of

:42:07.:42:11.

the Spectator's Coffee House blog. What has gone wrong in your view?

:42:12.:42:14.

Trends have been going on for quite a long time. The accel RANT in all

:42:15.:42:20.

of this has been Help To Buy in the last month. What has happened in

:42:21.:42:26.

2008 we had the crash, it didn't reform the financial services

:42:27.:42:32.

industry. Money has been thrown at the financial services industry.

:42:33.:42:34.

Rather than in investing in things that create jobs and business, if

:42:35.:42:38.

you want a quick return get into bricks and mortar and in London. And

:42:39.:42:42.

so what's happened is London property is no longer, it is no

:42:43.:42:46.

longer an investment and shelter for a family to make over a 25-year

:42:47.:42:49.

mortgage term, it is something for people who want to turn a quick

:42:50.:42:53.

buck. Just this weekend Jeremy in Hong Kong they launched, there is a

:42:54.:43:00.

little three storey block of flats in E 15, they are launching it in

:43:01.:43:04.

Hong Kong to buy it off plan. The people who buy it will never see the

:43:05.:43:09.

building. That is not healthy is it? It is not very helpful, I think it

:43:10.:43:13.

is only 28% of foreign investors who are nonresident in the UK. But the

:43:14.:43:17.

fact is that they are distorting the UK housing market and distorting the

:43:18.:43:22.

London housing market. And their activity has been increasing since

:43:23.:43:29.

200 #. In -- 2007. In 2011 the investment in the housing market

:43:30.:43:33.

alone was more than the Government investment in affordable housing in

:43:34.:43:37.

the whole of the UK. A good or a bad thing? Not a good thing for people

:43:38.:43:40.

in London not PRATH at that level. There is another problem which is

:43:41.:43:46.

supply. The number of households will far outstrip supply in London.

:43:47.:43:50.

The communities and local Government department estimates I think it is

:43:51.:43:54.

525,000 new households in the next decade. There is nowhere near enough

:43:55.:43:59.

homes being built to match that. You are absolutely right, when I was

:44:00.:44:03.

talking long-term, supply and demand, there has never been enough

:44:04.:44:05.

supply. One of the interesting things is you hear people, I mean

:44:06.:44:09.

Conservative politicians saying the Government needs to build house, the

:44:10.:44:14.

Government doesn't build house, Barrett builds house, what hasn't

:44:15.:44:19.

been done... The Government has build houses. I know I live very

:44:20.:44:27.

near some greater London council 190 -- 1900 thousands and they survived

:44:28.:44:32.

and lovely. It is true that the planning laws are old and should be

:44:33.:44:36.

revived, what Governments successively have not done is create

:44:37.:44:41.

an infrastructure that allows the free market to work. I don't want to

:44:42.:44:47.

sound like Lord Saatchi here. The free market is working, people are

:44:48.:44:50.

buying property. The market is not working, the market should be about

:44:51.:44:55.

shelter for people who live in Britain. Why should it be. That is

:44:56.:44:59.

not the market. There is a limited supply of this commodity and

:45:00.:45:03.

increasing demand,ering geothe price goes up? Is it a demand for shelter

:45:04.:45:09.

or a demand for the equivalent of that. One of the really important

:45:10.:45:12.

things that politicians can do, rather than penalising those at the

:45:13.:45:16.

top who can afford to move into the high-value properties is protect

:45:17.:45:22.

those at the bottom. I'm not so worry -- worried that I can't afford

:45:23.:45:27.

a nice property in London, it is those cleaning offices in London who

:45:28.:45:31.

can't afford the train fares or the housing. Does that matter? It does,

:45:32.:45:36.

London has a mixed capital heritage, unlike Paris, you can walk past a

:45:37.:45:40.

council estate in the middle of Westminster. We have a heritage

:45:41.:45:44.

where the founder of the olders and largest housing association was an

:45:45.:45:49.

American bank e Joseph Peabody, that has to be safeguarded by politicians

:45:50.:45:55.

like Boris Johnson who can create that sort of protection for the

:45:56.:45:58.

people who keep the city moving and feed the city as well. One of the

:45:59.:46:03.

things that could be done is for Boris to use his bully pulpit. We

:46:04.:46:07.

know he doesn't have that much power, but he's good on the bully

:46:08.:46:12.

pulpit. He says he doesn't care? He was writing today about stop beating

:46:13.:46:16.

up on foreigners. I'm not, I'm saying let's make the housing market

:46:17.:46:20.

be about housing and not about some new form of global reserve currency.

:46:21.:46:24.

There is another thing in London and let's be clear about it, councils

:46:25.:46:28.

are sitting on a lot of properties, many of them are rotting away. I

:46:29.:46:32.

come from New York, and in New York in the 80s when I left, the city was

:46:33.:46:37.

in very bad shape. There were a lot of houses that had been repossessed

:46:38.:46:41.

by the city. What they did is they started selling them back to people

:46:42.:46:45.

who couldn't possibly raise a mortgage, like a dollar down, and

:46:46.:46:49.

you put sweat equity in it, they took these houses that were off the

:46:50.:46:53.

market and turned them into SDWELings, it would be useful if

:46:54.:46:57.

councils like Hackney and tower hamlets started putting their houses

:46:58.:47:06.

back on the market. Southwark Council has been looking out to

:47:07.:47:10.

Limehouse and Popular, they are thinking about how to increase the

:47:11.:47:14.

overall housing supply. Boris says don't beat up foreigners but he has

:47:15.:47:18.

ambitious targets on affordable housing, we can have an argument

:47:19.:47:23.

about how affordable it is, it is still 80% of market rent. He has the

:47:24.:47:27.

aim to protect those who can't afford the sky high prices.

:47:28.:47:33.

Tesco revealed today massive quantities of food and fresh fruit

:47:34.:47:37.

and vegtables simply thrown away by the supermarket and its customer,

:47:38.:47:42.

four out of ten apples they sell end up in the tip. Most of those nice

:47:43.:47:49.

bags of salad decompose, as we say good night, we have been reminded in

:47:50.:47:54.

2001 decomposition can be quite beautiful.

:47:55.:47:57.

With Jeremy Paxman. Why the French and Chinese build our nuclear plants, London house prices soar, the LulzSec hacker meets his tracker and Saatchi says capitalism isn't working.


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