18/06/2014 Scotland 2014

Could an interest rate rise Pierce Scotland's recovery?

Good evening. Welcome to Scotland 2014.

Where you live could matter more than ever if moves to tackle

a growing housing bubble in London put Scotland's economy at risk.

But would it make any difference if we were independent?

We've been to Spain to meet the Catalans who say our referendum

And the politicians who say they'll try to keep an independent Scotland

And get those three lions off his shirt.

Why a supermarket chain has banned English World Cup songs

What is the biggest risk to the Scottish economy?

Could it be the booming housing market in London?

The warnings from the Bank of England are clear.

They think they will soon have to raise interest rates to tackle

soaring house prices in the South East.

But what would a rate rise do to the Scotland where property prices

Julie Peacock has been finding out what your money can buy in London

and Glasgow and asking how one-size-fits-all interest rates

Pretty, but bubbles are not always so attractive in the housing market.

Once again, rising prices are sparking fears of a housing bubble

that could damage the economy. House prices have risen almost 10% in a

year, but the figure disguises regional variations. In Scotland, it

was a 5% rise. In London, it was 19%. What happens when the bubble

gets too big, as many fear is happening in London? You could burst

it by increasing interest rates and dampening demand. That might not be

such a good idea for Scotland's smaller bubbles of growth. To give

an idea of differences in the market, we went to the same street

in different cities. In first Ave west London, house prices four times

what you would pay for a similar home in first Ave, Glasgow, where

the market is recovering still. After the crash there were five

years of a depressed market. Only now are we seeing sustainable

growth. Only now are values catching up to where they were in 2007. A 1%

rise in interest rates would affect each differently. An immediate rise

would have a further dampening affect on the market locally. I

would like to see interest rates remain at the current and very

impressive rates that they are, before any increase perhaps towards

the end of the year. But in London, few think that don't interest rate

rise would dampen a market fuelled by foreign investors. Since 2006,

houses have doubled in value, selling to 1.3 million. A rise in

rates will make people think about what they borrow in terms of

mortgages. London house prices have been dictated generally by supply

and demand and the demand is greater than supply. In Scotland, experts

think that attempts to curb the housing boom in London pose a threat

to the recovery in Scotland. There is pressure to push up rates soon

and we do not think the British economy, the Scottish economy

warrant this. You should not use a national instrument to deal with a

London problem. One solution and two problems. How do we make the

Scottish bubble grow and make sure the London bubble does not burst?

Joining me are Professor Jim Gallagher,

a Better Together advisor, and the SNP's Kenneth Gibson who is

Should we be worried that a rate rise to cope with London house

prices would have a deleterious effect on the Scottish economy? The

Bank of England hurts to think of the whole UK, including Scotland,

and also London, which is an extraordinary international city in

the middle of the UK. As your programme pointed out, as much as

the bubble is driven by external demand, the simple tool of

increasing interest rates might not be the right one. If we were

independent, we would still have the Bank of England setting the rates.

That is the case because with a monetary union we would be in the

same blind. I agree what the professor said. -- bind. A lot of

the problem is because people rich in capital are buying bigger houses

in London will -- London. When we look at the problem that is part of

a one size fits all interest rate policy, that it independent Scotland

would not be able to do anything about separating itself from the

London market. There are things you can do. Mark Carney, the governor of

the Bank of England, does not believe that interest rates should

deal specifically with house prices. He said they will probably go up

before the end of the year. The European Union has one rate. You

have to look at the entire economic package and not just this specific

problem in isolation. Professor, how much attention to the monetary

policy committee at the bank of England paid to what is happening in

Scotland, or are they more concerned about the inflating bubble in

London? The duty of the Bank of England is to look at the whole of

the UK. It is not an easy balancing act to have. Your question

identified the real issue. If you were to follow the policy of the SNP

and become independent, but still managed somehow to keep the same

currency and the same monetary system as the rest of the UK, you

are in a worse place than now. You would have no obligations to

Scotland and no control over what the Bank of England does. If there

is a lesson, it is if you want to manage the UK economy, the way to

manage it is to stay within the UK. I do not think that it is the case.

Other areas of the UK are affected, not just Scotland. We believe that

having a shared currency, which means a shared interest rates, will

give benefit in terms of exports and reducing transaction costs. The

committee at the moment have to look at what a rate rise would do to the

whole of the UK and look at parts of the country where house prices do

not rise as fast as London. If Scotland was independent, but in a

currency union, the committee would not have to worry about our economy

to the same extent. You would expect to have representation on that

committee. Scotland would not have a bigger say than it does now. We have

no say at the moment. But they are considering the effects here on the

UK. I do not think you could possibly argue the UK Government

doesn't have some influence on the committee. Professor Gallagher, is

Scotland represented on the MPC? One thing he said was right. The

committee is not a geographical representation, it is people who are

experts in their job and appointed on merit, not representative

processes. The job we have is to look after the whole of the UK, that

is their job. That is the task they are set. Scotland has a voice in

that through being represented in Westminster, which sets up the frame

for the whole thing. The monetary policy framework, the task given to

the Bank of England and their targets, the taxpayer support

available to the Bank of England, that is done through Parliament,

where Scotland today is represented. If we are independent, we will not

have that representation and influence that will be bad. It

allows us to control fiscal levers and that will allow us to make

Scotland more competitive. We are talking about a narrow argument but

the reality is we would have control over taxation and fiscal levers to

stimulate the Scottish economy. We would be willing to accept tight

monetary policy rules. One of the great unknowables of

the referendum campaign is how long it would take for an independent

Scotland to join the European Union. One

of the obstacles to membership could come from Spain, which is battling

with pro-independence movements in Fiona Walker has been to try to find

out whether Spanish polticians would try to block Scotland's entry into

the EU in the event of a yes vote. These people are proud Catalans.

Might they affect the outcome of the Scottish referendum? I am in Spain

to ask whether Scotland's future could be in these hands? This is

designed to show Catalonia could stand on its own feet as a nation.

Every foot on every shoulder is part of a display of solidarity and for

many of them symbolism is political, as if to shout from a

great height that they want a vote. We use it as a symbol because it

shows how together we can build a better country and society.

Would you like a referendum like Scotland has? I would love a

referendum. We want to vote. Hearing from Catalonian 's confirms our

referendum is not just about us -- Catalonians. In Scotland we are

weighing up the issues that affect us if we vote in September. Our

referendum could have implications across Europe. It is seen as a

benchmark of how to hold a referendum. We are being watched

closely, none more so than in Catalonia. Like Scotland, Catalonia

is split between those who are for independence and those for the

union. All eyes are on Scotland. The Catalonia, the Scottish referendum

is of paramount importance because it shows it can be done in Western

Europe, within the European Union, in the 21st century, in democracy

and peace. The Spanish government tells us it is impossible. Is the

process in Scotland setting a precedent in Europe? Yes it is

important for us and other people. The Catalan people are looking at

how an independent Scotland would negotiate membership of the European

Union, something that is hotly debated it is easy for Scotland to

join, it might make it seem possible to Catalonia. Catalans sang this

during the Franco dictatorship, which ended in 1975. Their democracy

is treasured and so is the European Union. Would Spain look to Scotland

to send a message to Catalonia? They could use the veto. Again, I do not

know if you want to be in the history books, the one who put the

veto to the will of the people when the main relations with these

people, which is the UK, has allowed them to do that. The Scotland, who

see membership of the EU is a deal-breaker, could the stance of

Spain affect how they vote? This issue of becoming a member after

being independent is an issue in Scotland because the issue was

brought up in Spain with Catalonia. I think the situation with Catalonia

and Spain is making it more complicated in Scotland, because it

is not an isolated case. It makes it more critical, I think. Treaties and

statements from Europe are being interpreted in one way by Better

Together, and in a different way by the yes campaign. These things

matter because they can tell ask whether a country like Spain could

potentially block Scotland as an independent country from entering

the European Union. Would it? I would like to find out. The minister

declined to be interviewed. His ruling party was prepared to talk.

If Scotland votes yes and has to negotiate an entry into the European

Union, can you say with certainty Spain would not object? We preferred

to be together. That is the prevalence point of view in Spain.

Is that a yes or no? With this framework, I would think the

politicians... Is that a yes or a no? The independent Scotland will

have to go through the whole process. It is technical. Scottish

voters would like to have the information before they vote. It is

the first pitfall in the road. It'll be at the end of the road. Serbia,

Bosnia, the former Macedonia, they have been trying for decades to get

to Europe. With Scotland have to join the queue and wait even up to

ten years? Scotland will have different standards. Many standards

will be close to those countries I have mentioned. What is going to

happen to your currency and pension system? Those are the questions that

need to be solved before voting. Scotland is already part of the

European Union. Because it is part of the UK. The UK is the whole

country. All our institutions complying with the EU regulations as

they stand. What are the barriers to Scotland becoming part of the EU

quite quickly Margaret Keogh the whole procedure. You have to go

first, you have a new country. If Scotland did the conditions for

European Union membership, would you say yes. When the situation comes,

we will see. There is a political will to what is happening in

Scotland, it will have repercussions in Spain. The Spanish ruling parties

assuming it wouldn't be an option for Scotland but not everyone

agrees. We will not know for sure until after the Scottish referendum

when the United Kingdom is either standing tall order about to

collapse. That was Fiona Walker reporting.

Joining me now is Patrick Harvie from the Scottish Green Party.

From the sounds of what she found out in Spain, it sounds as though

there is a real possibility the Spanish may try to delay, if not

block, got fish and sea to the EU. I think what is fairly clear from that

interview is that that is a strong incentive in the Spanish governing

party, especially those who are hostile to the Catalans to have

their own referendum, a clear incentive for them given impression

this is a problem. Much like we have seen a similar dynamic around

Germany unification that reunification, the problem it was

portrayed as in the period before the mandate existed, I think will

give way to pragmatic solutions. If Scotland has decided to become an

independent country after September this year it'll be nobody interest,

nobody 's interest, not least the are recognised their own fishing

interests, nobody 's interest to have Scotland's removed from the EU.

Is that true? There are political interests at work that the Spanish

would like to cast doubt on the independence country that project.

In the. They have every incentive for their own internal political

reasons to hold up Scottish membership. If they were canny bee

would recognise that if Scotland had voted yes and they then try to stem

me doubt, try to undermine the democratic will of a country, but

would provoke even more passion, I think, among people seeking

self-governance in Spain to see why should we place our faith in a

government that doesn't respect the right of a democratic body of people

to make their own decision. If the Spanish government 12 engaged with

Catalan and persuade them independence would not be that

option, it is not by saying they don't respect democratic outcomes.

That is why we would not block of veto Scottish membership but they

can make sure it takes a while. The Foreign Minister said himself that

Scotland have two wait in line. It could take several years. Being

outside the EU for even two or three years could be damaging. It is a

different scenario. The different dynamic. Not least the differences

in the complex duties of the European treaties. -- complexities.

He had the Prime Minister of Britain at the time, Margaret Thatcher,

speaking at conferences saying German reunification would not only

be legally complex that would take many years. It is dangerous even to

contemplate it. As soon as the mandate existed it is then within a

very short order. I suspect that in the European question those

campaigning for the no vote, whether for foreign interests for domestic

interests are painting things as insurmountable problems. Those

issues will give way to pragmatic solutions if the Scottish people

decide in their democratic vote in September to decide to become an

independent country. Many thanks. Now for a look at some

of the other stories making Data collected in Germany may have

helped kill suspected terrorists. According to the BBC Internet child

sex abuse is at an epidemic scale with over 112 million files of

sexual images being detected by American authorities. The New York

Times reported in tax biggest oil refinery has fallen to ISIS forces

after a week of fighting. Joining me now to discuss some

of the stories getting the most attention tonight are journalist

and historian, David Torrance along Thanks both are coming in to talk to

us. Let's start with Ed balls down in Westminster. He was appearing

before the Scottish affairs committee talking about the

possibility of a currency union. The BBC described it as saying, he said

in all good conscience he couldn't negotiate Kevins union after a vote.

It is picked up by some of the other newspapers differently. That's ever

listen to what he had to say. Would you resign as Shadow Chancellor if

the line changed and a Labour government decided to have a shared

currency? I could never... I can't imagine being part of the start of a

negotiation that alone the end. That is what he said. Appearing in the

Herald tonight. We can see the headlines.

This is the kind of thing, or is it, that drives yes campaign is

absolutely crazy when somebody says something negative about

independence and then it is exaggerated. Do you think you said

he would resign? He didn't use the word resign at all. He did look

uncomfortable at that question being asked. Although I can't imagine he

wouldn't have expected it. I'm not sure about nationalists. You could

read into it that what he is saying about it is you wouldn't be there.

Whether that means he would resign is another matter. Is that the

Herald flaming it up a bit? Not necessarily. I don't think they have

used in their heading inverted commas to say it was actually

resign. This is then putting a bit of spin on it saying effectively

that is what he said. An important contribution, he and the lightning

they would not be a currency union. That is the whole point of this

intervention is to once again that as far as they are concerned the

currency union is not going to happen. It has been repeated by the

Chancellor, the Shadow Chancellor and by the Chief Secretary to the

Treasury. Every time you talk about it supports for the yes campaign

goes up. I think that might be a slight overstatement. They certainly

believe it is beneficial from their point of view. I have always thought

that the currency union in the event of a yes vote is actually quite

likely. I can perfectly understand why Better Together is saying that

in advance. You agree? I think the government, the Chancellor in the UK

governments, will do what is best for the rest of the UK and go into

business mode. The terms and conditions is the key thing. On

that, there could be real problems. A currency union itself would be

agreed. I don't know if I review shop in Morrisons. They'd responded

to hundreds of complaints they had there were 64 English football songs

on the playlist that are playing in their supermarkets. They have sold

the snap they are to be banned. England World Cup songs shown the

red card. Would it drive you crazy if you were getting a pint of milk

and you were hearing those songs? It would from the point of view, not so

much about the song itself, but the singers themselves. I am one of

those few Scots who want England to do well in this. You are supported

in England? I wanted them to beat Italy. I have always liked English

football. Because Scotland and Ireland are not there, it makes

sense to support England. It was one funny to eat saying it is a shame

Morrisons wouldn't be playing them and songs because what about the

terms of Scots who will supported in England? I am one the tens. This is

to be a very controversial business whether Scots men would support

anybody but England are whether they would get a high England team. We

haven't heard from Alex Salmond saying he would be supported in

England. I am pretty sure the First Minister has indicated that. He said

he wishes them well. He has been noncommittal. Andrew Wilson who I

saw earlier, a former ex--- SNP, got into trouble saying that Scotland

should be relaxed about supporting England. It wouldn't bother me. I

would rather stick pins in my eyes than watching football. I am trying

to block it out. World in motion is not a bad song. They have got their

own troubles. They have their results tomorrow. It will show a

profit fall and job losses on the way. Is this distracting little bits

from their wider woes. Many thanks for coming in.

That's all from us tonight. Thank you for watching.

I'll be back at the same time tomorrow night.

But stay tuned now for Jeremy Paxman's last outing on Newsnight.

When will see his like again? Goodnight.