:00:00. > :00:24.Could an interest rate rise Pierce Scotland's recovery?
:00:25. > :00:26.Good evening. Welcome to Scotland 2014.
:00:27. > :00:35.Where you live could matter more than ever if moves to tackle
:00:36. > :00:38.a growing housing bubble in London put Scotland's economy at risk.
:00:39. > :00:42.But would it make any difference if we were independent?
:00:43. > :00:45.We've been to Spain to meet the Catalans who say our referendum
:00:46. > :00:50.And the politicians who say they'll try to keep an independent Scotland
:00:51. > :01:03.And get those three lions off his shirt.
:01:04. > :01:05.Why a supermarket chain has banned English World Cup songs
:01:06. > :01:15.What is the biggest risk to the Scottish economy?
:01:16. > :01:18.Could it be the booming housing market in London?
:01:19. > :01:20.The warnings from the Bank of England are clear.
:01:21. > :01:23.They think they will soon have to raise interest rates to tackle
:01:24. > :01:26.soaring house prices in the South East.
:01:27. > :01:29.But what would a rate rise do to the Scotland where property prices
:01:30. > :01:34.Julie Peacock has been finding out what your money can buy in London
:01:35. > :01:35.and Glasgow and asking how one-size-fits-all interest rates
:01:36. > :01:51.Pretty, but bubbles are not always so attractive in the housing market.
:01:52. > :01:56.Once again, rising prices are sparking fears of a housing bubble
:01:57. > :02:03.that could damage the economy. House prices have risen almost 10% in a
:02:04. > :02:09.year, but the figure disguises regional variations. In Scotland, it
:02:10. > :02:16.was a 5% rise. In London, it was 19%. What happens when the bubble
:02:17. > :02:23.gets too big, as many fear is happening in London? You could burst
:02:24. > :02:27.it by increasing interest rates and dampening demand. That might not be
:02:28. > :02:32.such a good idea for Scotland's smaller bubbles of growth. To give
:02:33. > :02:37.an idea of differences in the market, we went to the same street
:02:38. > :02:42.in different cities. In first Ave west London, house prices four times
:02:43. > :02:49.what you would pay for a similar home in first Ave, Glasgow, where
:02:50. > :02:53.the market is recovering still. After the crash there were five
:02:54. > :02:59.years of a depressed market. Only now are we seeing sustainable
:03:00. > :03:05.growth. Only now are values catching up to where they were in 2007. A 1%
:03:06. > :03:11.rise in interest rates would affect each differently. An immediate rise
:03:12. > :03:16.would have a further dampening affect on the market locally. I
:03:17. > :03:22.would like to see interest rates remain at the current and very
:03:23. > :03:27.impressive rates that they are, before any increase perhaps towards
:03:28. > :03:31.the end of the year. But in London, few think that don't interest rate
:03:32. > :03:40.rise would dampen a market fuelled by foreign investors. Since 2006,
:03:41. > :03:44.houses have doubled in value, selling to 1.3 million. A rise in
:03:45. > :03:49.rates will make people think about what they borrow in terms of
:03:50. > :03:53.mortgages. London house prices have been dictated generally by supply
:03:54. > :03:59.and demand and the demand is greater than supply. In Scotland, experts
:04:00. > :04:04.think that attempts to curb the housing boom in London pose a threat
:04:05. > :04:09.to the recovery in Scotland. There is pressure to push up rates soon
:04:10. > :04:15.and we do not think the British economy, the Scottish economy
:04:16. > :04:21.warrant this. You should not use a national instrument to deal with a
:04:22. > :04:26.London problem. One solution and two problems. How do we make the
:04:27. > :04:30.Scottish bubble grow and make sure the London bubble does not burst?
:04:31. > :04:31.Joining me are Professor Jim Gallagher,
:04:32. > :04:34.a Better Together advisor, and the SNP's Kenneth Gibson who is
:04:35. > :04:47.Should we be worried that a rate rise to cope with London house
:04:48. > :04:53.prices would have a deleterious effect on the Scottish economy? The
:04:54. > :04:59.Bank of England hurts to think of the whole UK, including Scotland,
:05:00. > :05:03.and also London, which is an extraordinary international city in
:05:04. > :05:12.the middle of the UK. As your programme pointed out, as much as
:05:13. > :05:15.the bubble is driven by external demand, the simple tool of
:05:16. > :05:22.increasing interest rates might not be the right one. If we were
:05:23. > :05:31.independent, we would still have the Bank of England setting the rates.
:05:32. > :05:34.That is the case because with a monetary union we would be in the
:05:35. > :05:43.same blind. I agree what the professor said. -- bind. A lot of
:05:44. > :05:55.the problem is because people rich in capital are buying bigger houses
:05:56. > :06:00.in London will -- London. When we look at the problem that is part of
:06:01. > :06:06.a one size fits all interest rate policy, that it independent Scotland
:06:07. > :06:12.would not be able to do anything about separating itself from the
:06:13. > :06:17.London market. There are things you can do. Mark Carney, the governor of
:06:18. > :06:23.the Bank of England, does not believe that interest rates should
:06:24. > :06:32.deal specifically with house prices. He said they will probably go up
:06:33. > :06:36.before the end of the year. The European Union has one rate. You
:06:37. > :06:42.have to look at the entire economic package and not just this specific
:06:43. > :06:47.problem in isolation. Professor, how much attention to the monetary
:06:48. > :06:53.policy committee at the bank of England paid to what is happening in
:06:54. > :06:58.Scotland, or are they more concerned about the inflating bubble in
:06:59. > :07:04.London? The duty of the Bank of England is to look at the whole of
:07:05. > :07:11.the UK. It is not an easy balancing act to have. Your question
:07:12. > :07:16.identified the real issue. If you were to follow the policy of the SNP
:07:17. > :07:21.and become independent, but still managed somehow to keep the same
:07:22. > :07:27.currency and the same monetary system as the rest of the UK, you
:07:28. > :07:30.are in a worse place than now. You would have no obligations to
:07:31. > :07:35.Scotland and no control over what the Bank of England does. If there
:07:36. > :07:43.is a lesson, it is if you want to manage the UK economy, the way to
:07:44. > :07:49.manage it is to stay within the UK. I do not think that it is the case.
:07:50. > :07:55.Other areas of the UK are affected, not just Scotland. We believe that
:07:56. > :08:00.having a shared currency, which means a shared interest rates, will
:08:01. > :08:06.give benefit in terms of exports and reducing transaction costs. The
:08:07. > :08:11.committee at the moment have to look at what a rate rise would do to the
:08:12. > :08:14.whole of the UK and look at parts of the country where house prices do
:08:15. > :08:21.not rise as fast as London. If Scotland was independent, but in a
:08:22. > :08:26.currency union, the committee would not have to worry about our economy
:08:27. > :08:31.to the same extent. You would expect to have representation on that
:08:32. > :08:38.committee. Scotland would not have a bigger say than it does now. We have
:08:39. > :08:46.no say at the moment. But they are considering the effects here on the
:08:47. > :08:50.UK. I do not think you could possibly argue the UK Government
:08:51. > :08:59.doesn't have some influence on the committee. Professor Gallagher, is
:09:00. > :09:04.Scotland represented on the MPC? One thing he said was right. The
:09:05. > :09:11.committee is not a geographical representation, it is people who are
:09:12. > :09:16.experts in their job and appointed on merit, not representative
:09:17. > :09:21.processes. The job we have is to look after the whole of the UK, that
:09:22. > :09:27.is their job. That is the task they are set. Scotland has a voice in
:09:28. > :09:32.that through being represented in Westminster, which sets up the frame
:09:33. > :09:35.for the whole thing. The monetary policy framework, the task given to
:09:36. > :09:40.the Bank of England and their targets, the taxpayer support
:09:41. > :09:45.available to the Bank of England, that is done through Parliament,
:09:46. > :09:48.where Scotland today is represented. If we are independent, we will not
:09:49. > :09:57.have that representation and influence that will be bad. It
:09:58. > :10:02.allows us to control fiscal levers and that will allow us to make
:10:03. > :10:09.Scotland more competitive. We are talking about a narrow argument but
:10:10. > :10:19.the reality is we would have control over taxation and fiscal levers to
:10:20. > :10:25.stimulate the Scottish economy. We would be willing to accept tight
:10:26. > :10:29.monetary policy rules. One of the great unknowables of
:10:30. > :10:32.the referendum campaign is how long it would take for an independent
:10:33. > :10:34.Scotland to join the European Union. One
:10:35. > :10:36.of the obstacles to membership could come from Spain, which is battling
:10:37. > :10:38.with pro-independence movements in Fiona Walker has been to try to find
:10:39. > :10:44.out whether Spanish polticians would try to block Scotland's entry into
:10:45. > :11:00.the EU in the event of a yes vote. These people are proud Catalans.
:11:01. > :11:04.Might they affect the outcome of the Scottish referendum? I am in Spain
:11:05. > :11:12.to ask whether Scotland's future could be in these hands? This is
:11:13. > :11:18.designed to show Catalonia could stand on its own feet as a nation.
:11:19. > :11:23.Every foot on every shoulder is part of a display of solidarity and for
:11:24. > :11:29.many of them symbolism is political, as if to shout from a
:11:30. > :11:33.great height that they want a vote. We use it as a symbol because it
:11:34. > :11:41.shows how together we can build a better country and society.
:11:42. > :11:50.Would you like a referendum like Scotland has? I would love a
:11:51. > :11:58.referendum. We want to vote. Hearing from Catalonian 's confirms our
:11:59. > :12:01.referendum is not just about us -- Catalonians. In Scotland we are
:12:02. > :12:06.weighing up the issues that affect us if we vote in September. Our
:12:07. > :12:13.referendum could have implications across Europe. It is seen as a
:12:14. > :12:18.benchmark of how to hold a referendum. We are being watched
:12:19. > :12:23.closely, none more so than in Catalonia. Like Scotland, Catalonia
:12:24. > :12:31.is split between those who are for independence and those for the
:12:32. > :12:35.union. All eyes are on Scotland. The Catalonia, the Scottish referendum
:12:36. > :12:40.is of paramount importance because it shows it can be done in Western
:12:41. > :12:45.Europe, within the European Union, in the 21st century, in democracy
:12:46. > :12:50.and peace. The Spanish government tells us it is impossible. Is the
:12:51. > :12:59.process in Scotland setting a precedent in Europe? Yes it is
:13:00. > :13:04.important for us and other people. The Catalan people are looking at
:13:05. > :13:08.how an independent Scotland would negotiate membership of the European
:13:09. > :13:12.Union, something that is hotly debated it is easy for Scotland to
:13:13. > :13:21.join, it might make it seem possible to Catalonia. Catalans sang this
:13:22. > :13:27.during the Franco dictatorship, which ended in 1975. Their democracy
:13:28. > :13:37.is treasured and so is the European Union. Would Spain look to Scotland
:13:38. > :13:41.to send a message to Catalonia? They could use the veto. Again, I do not
:13:42. > :13:50.know if you want to be in the history books, the one who put the
:13:51. > :13:54.veto to the will of the people when the main relations with these
:13:55. > :14:02.people, which is the UK, has allowed them to do that. The Scotland, who
:14:03. > :14:08.see membership of the EU is a deal-breaker, could the stance of
:14:09. > :14:12.Spain affect how they vote? This issue of becoming a member after
:14:13. > :14:17.being independent is an issue in Scotland because the issue was
:14:18. > :14:22.brought up in Spain with Catalonia. I think the situation with Catalonia
:14:23. > :14:29.and Spain is making it more complicated in Scotland, because it
:14:30. > :14:38.is not an isolated case. It makes it more critical, I think. Treaties and
:14:39. > :14:42.statements from Europe are being interpreted in one way by Better
:14:43. > :14:46.Together, and in a different way by the yes campaign. These things
:14:47. > :14:51.matter because they can tell ask whether a country like Spain could
:14:52. > :14:54.potentially block Scotland as an independent country from entering
:14:55. > :15:01.the European Union. Would it? I would like to find out. The minister
:15:02. > :15:07.declined to be interviewed. His ruling party was prepared to talk.
:15:08. > :15:10.If Scotland votes yes and has to negotiate an entry into the European
:15:11. > :15:26.Union, can you say with certainty Spain would not object? We preferred
:15:27. > :15:35.to be together. That is the prevalence point of view in Spain.
:15:36. > :15:40.Is that a yes or no? With this framework, I would think the
:15:41. > :15:48.politicians... Is that a yes or a no? The independent Scotland will
:15:49. > :15:52.have to go through the whole process. It is technical. Scottish
:15:53. > :16:02.voters would like to have the information before they vote. It is
:16:03. > :16:09.the first pitfall in the road. It'll be at the end of the road. Serbia,
:16:10. > :16:14.Bosnia, the former Macedonia, they have been trying for decades to get
:16:15. > :16:21.to Europe. With Scotland have to join the queue and wait even up to
:16:22. > :16:26.ten years? Scotland will have different standards. Many standards
:16:27. > :16:32.will be close to those countries I have mentioned. What is going to
:16:33. > :16:38.happen to your currency and pension system? Those are the questions that
:16:39. > :16:41.need to be solved before voting. Scotland is already part of the
:16:42. > :16:47.European Union. Because it is part of the UK. The UK is the whole
:16:48. > :16:57.country. All our institutions complying with the EU regulations as
:16:58. > :17:01.they stand. What are the barriers to Scotland becoming part of the EU
:17:02. > :17:09.quite quickly Margaret Keogh the whole procedure. You have to go
:17:10. > :17:12.first, you have a new country. If Scotland did the conditions for
:17:13. > :17:23.European Union membership, would you say yes. When the situation comes,
:17:24. > :17:26.we will see. There is a political will to what is happening in
:17:27. > :17:31.Scotland, it will have repercussions in Spain. The Spanish ruling parties
:17:32. > :17:35.assuming it wouldn't be an option for Scotland but not everyone
:17:36. > :17:38.agrees. We will not know for sure until after the Scottish referendum
:17:39. > :17:41.when the United Kingdom is either standing tall order about to
:17:42. > :17:48.collapse. That was Fiona Walker reporting.
:17:49. > :17:53.Joining me now is Patrick Harvie from the Scottish Green Party.
:17:54. > :17:59.From the sounds of what she found out in Spain, it sounds as though
:18:00. > :18:05.there is a real possibility the Spanish may try to delay, if not
:18:06. > :18:10.block, got fish and sea to the EU. I think what is fairly clear from that
:18:11. > :18:16.interview is that that is a strong incentive in the Spanish governing
:18:17. > :18:19.party, especially those who are hostile to the Catalans to have
:18:20. > :18:25.their own referendum, a clear incentive for them given impression
:18:26. > :18:33.this is a problem. Much like we have seen a similar dynamic around
:18:34. > :18:36.Germany unification that reunification, the problem it was
:18:37. > :18:44.portrayed as in the period before the mandate existed, I think will
:18:45. > :18:47.give way to pragmatic solutions. If Scotland has decided to become an
:18:48. > :18:51.independent country after September this year it'll be nobody interest,
:18:52. > :18:57.nobody 's interest, not least the are recognised their own fishing
:18:58. > :19:02.interests, nobody 's interest to have Scotland's removed from the EU.
:19:03. > :19:06.Is that true? There are political interests at work that the Spanish
:19:07. > :19:16.would like to cast doubt on the independence country that project.
:19:17. > :19:18.In the. They have every incentive for their own internal political
:19:19. > :19:24.reasons to hold up Scottish membership. If they were canny bee
:19:25. > :19:29.would recognise that if Scotland had voted yes and they then try to stem
:19:30. > :19:35.me doubt, try to undermine the democratic will of a country, but
:19:36. > :19:41.would provoke even more passion, I think, among people seeking
:19:42. > :19:44.self-governance in Spain to see why should we place our faith in a
:19:45. > :19:49.government that doesn't respect the right of a democratic body of people
:19:50. > :19:56.to make their own decision. If the Spanish government 12 engaged with
:19:57. > :20:00.Catalan and persuade them independence would not be that
:20:01. > :20:05.option, it is not by saying they don't respect democratic outcomes.
:20:06. > :20:10.That is why we would not block of veto Scottish membership but they
:20:11. > :20:17.can make sure it takes a while. The Foreign Minister said himself that
:20:18. > :20:21.Scotland have two wait in line. It could take several years. Being
:20:22. > :20:28.outside the EU for even two or three years could be damaging. It is a
:20:29. > :20:32.different scenario. The different dynamic. Not least the differences
:20:33. > :20:40.in the complex duties of the European treaties. -- complexities.
:20:41. > :20:45.He had the Prime Minister of Britain at the time, Margaret Thatcher,
:20:46. > :20:49.speaking at conferences saying German reunification would not only
:20:50. > :20:54.be legally complex that would take many years. It is dangerous even to
:20:55. > :21:01.contemplate it. As soon as the mandate existed it is then within a
:21:02. > :21:08.very short order. I suspect that in the European question those
:21:09. > :21:14.campaigning for the no vote, whether for foreign interests for domestic
:21:15. > :21:17.interests are painting things as insurmountable problems. Those
:21:18. > :21:21.issues will give way to pragmatic solutions if the Scottish people
:21:22. > :21:22.decide in their democratic vote in September to decide to become an
:21:23. > :21:25.independent country. Many thanks. Now for a look at some
:21:26. > :21:43.of the other stories making Data collected in Germany may have
:21:44. > :21:48.helped kill suspected terrorists. According to the BBC Internet child
:21:49. > :21:52.sex abuse is at an epidemic scale with over 112 million files of
:21:53. > :21:59.sexual images being detected by American authorities. The New York
:22:00. > :22:01.Times reported in tax biggest oil refinery has fallen to ISIS forces
:22:02. > :22:03.after a week of fighting. Joining me now to discuss some
:22:04. > :22:06.of the stories getting the most attention tonight are journalist
:22:07. > :22:18.and historian, David Torrance along Thanks both are coming in to talk to
:22:19. > :22:21.us. Let's start with Ed balls down in Westminster. He was appearing
:22:22. > :22:25.before the Scottish affairs committee talking about the
:22:26. > :22:31.possibility of a currency union. The BBC described it as saying, he said
:22:32. > :22:38.in all good conscience he couldn't negotiate Kevins union after a vote.
:22:39. > :22:42.It is picked up by some of the other newspapers differently. That's ever
:22:43. > :22:51.listen to what he had to say. Would you resign as Shadow Chancellor if
:22:52. > :23:00.the line changed and a Labour government decided to have a shared
:23:01. > :23:04.currency? I could never... I can't imagine being part of the start of a
:23:05. > :23:09.negotiation that alone the end. That is what he said. Appearing in the
:23:10. > :23:16.Herald tonight. We can see the headlines.
:23:17. > :23:24.This is the kind of thing, or is it, that drives yes campaign is
:23:25. > :23:27.absolutely crazy when somebody says something negative about
:23:28. > :23:34.independence and then it is exaggerated. Do you think you said
:23:35. > :23:39.he would resign? He didn't use the word resign at all. He did look
:23:40. > :23:43.uncomfortable at that question being asked. Although I can't imagine he
:23:44. > :23:52.wouldn't have expected it. I'm not sure about nationalists. You could
:23:53. > :23:56.read into it that what he is saying about it is you wouldn't be there.
:23:57. > :24:04.Whether that means he would resign is another matter. Is that the
:24:05. > :24:08.Herald flaming it up a bit? Not necessarily. I don't think they have
:24:09. > :24:12.used in their heading inverted commas to say it was actually
:24:13. > :24:16.resign. This is then putting a bit of spin on it saying effectively
:24:17. > :24:22.that is what he said. An important contribution, he and the lightning
:24:23. > :24:28.they would not be a currency union. That is the whole point of this
:24:29. > :24:31.intervention is to once again that as far as they are concerned the
:24:32. > :24:36.currency union is not going to happen. It has been repeated by the
:24:37. > :24:39.Chancellor, the Shadow Chancellor and by the Chief Secretary to the
:24:40. > :24:45.Treasury. Every time you talk about it supports for the yes campaign
:24:46. > :24:48.goes up. I think that might be a slight overstatement. They certainly
:24:49. > :24:52.believe it is beneficial from their point of view. I have always thought
:24:53. > :24:57.that the currency union in the event of a yes vote is actually quite
:24:58. > :25:07.likely. I can perfectly understand why Better Together is saying that
:25:08. > :25:10.in advance. You agree? I think the government, the Chancellor in the UK
:25:11. > :25:15.governments, will do what is best for the rest of the UK and go into
:25:16. > :25:20.business mode. The terms and conditions is the key thing. On
:25:21. > :25:23.that, there could be real problems. A currency union itself would be
:25:24. > :25:32.agreed. I don't know if I review shop in Morrisons. They'd responded
:25:33. > :25:36.to hundreds of complaints they had there were 64 English football songs
:25:37. > :25:42.on the playlist that are playing in their supermarkets. They have sold
:25:43. > :25:48.the snap they are to be banned. England World Cup songs shown the
:25:49. > :25:53.red card. Would it drive you crazy if you were getting a pint of milk
:25:54. > :25:58.and you were hearing those songs? It would from the point of view, not so
:25:59. > :26:07.much about the song itself, but the singers themselves. I am one of
:26:08. > :26:13.those few Scots who want England to do well in this. You are supported
:26:14. > :26:20.in England? I wanted them to beat Italy. I have always liked English
:26:21. > :26:25.football. Because Scotland and Ireland are not there, it makes
:26:26. > :26:27.sense to support England. It was one funny to eat saying it is a shame
:26:28. > :26:32.Morrisons wouldn't be playing them and songs because what about the
:26:33. > :26:37.terms of Scots who will supported in England? I am one the tens. This is
:26:38. > :26:41.to be a very controversial business whether Scots men would support
:26:42. > :26:47.anybody but England are whether they would get a high England team. We
:26:48. > :26:54.haven't heard from Alex Salmond saying he would be supported in
:26:55. > :27:01.England. I am pretty sure the First Minister has indicated that. He said
:27:02. > :27:08.he wishes them well. He has been noncommittal. Andrew Wilson who I
:27:09. > :27:11.saw earlier, a former ex--- SNP, got into trouble saying that Scotland
:27:12. > :27:17.should be relaxed about supporting England. It wouldn't bother me. I
:27:18. > :27:25.would rather stick pins in my eyes than watching football. I am trying
:27:26. > :27:30.to block it out. World in motion is not a bad song. They have got their
:27:31. > :27:35.own troubles. They have their results tomorrow. It will show a
:27:36. > :27:41.profit fall and job losses on the way. Is this distracting little bits
:27:42. > :27:43.from their wider woes. Many thanks for coming in.
:27:44. > :27:46.That's all from us tonight. Thank you for watching.
:27:47. > :27:48.I'll be back at the same time tomorrow night.
:27:49. > :27:51.But stay tuned now for Jeremy Paxman's last outing on Newsnight.
:27:52. > :27:55.When will see his like again? Goodnight.