13/05/2012 Sunday Politics East


13/05/2012

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Here in the East: The banks whose deals are costing

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businesses thousands in interest. And the coalition relaunches in

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Apology for the loss of subtitles for 2004 seconds

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Essex, but has the Queen's speech Hello and welcome to Sunday

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Politics in the East, I'm Etholle George. Coming up:

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The only way was Essex this week. All three party leaders headed for

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the county in the wake of last week's local elections and before

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the Queens speech, which aims to help business cut red tape.

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But first let's meet our guests for this week - George Freeman, the

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Conservative MP for Mid Norfolk, and Steve Morphew, the the former

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Labour leader of Norwich City Council and current President of

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the Norwich Labour Party. Let's begin with a quick word about

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the day of action by public sector unions in protest at to changes to

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their pensions? D back this action? Yes, I do. I think if they're going

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to fight their anything, that is what I would expect them to fight

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for. What I was pleased to see is those people who were demonstrating

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saying it wasn't public sector pensions that were the problem, it

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was private sector. George, I used surprised there has not been more

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action? If you look at the rest of Europe there has been many more

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protests. I think the reason is the public do understand across the

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board that we have inherited a real mess. It is disappointing that

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Steve and the Labour Party are backing these strikes. A wave of

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strikes and not what this country needs. We are being as fair as we

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can about how we pay of these debts. Even the private sector will wonder

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what the public sector are complaining about. Many in the

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private sector a way below on pension provision and has -- have

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pensions nowhere near as generous as the public sector.

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In the week the Queen's speech has announced a banking reform bill,

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concern is growing among the business community over interest

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rate swaps. They are supposed to insulate companies against interest

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rate hikes, but they also prevent them from getting loans on the

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current lower rates. Some businesses say they are being

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crippled by interest payments after being sold a product they say they

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didn't need, leaving them hundreds of thousands of pounds worse off.

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Our business correspondent Richard Bond reports.

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On the face of it everything's fine at Colne Valley Golf Club in Essex.

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The greens are lovely and, well, green - and membership is holding

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up well. But a dark cloud looms overhead. It's made it very

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difficult to relax any time. You're always thinking I must get some

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more money to pay the bank. dark cloud hanging over the club is

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an interest rate swap. A complicated financial product

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intended to provide protection from rising interest rates. But in this

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case, the cause of much unhappiness. Five years ago, Jennifer Smith and

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her son Tom borrowed more than a million pounds from Barclays

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Capital to buy the freehold of the club. But though interest rates

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have fallen to close to zero, the Smiths are stuck paying interest at

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six per cent. It is costing us a fortune. �4,000 a month. It has not

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helped us at all, we are not able to invest in people, in machinery.

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It is made it very difficult for us. Barclays said the Smiths had

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complained to the Financial Ombudsman, who had found in favour

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of Barclays. The bank was satisfied it had provided enough information

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to the Smiths so they could make an informed commercial decision. As

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many as 2000 small firms are thought to have bought interest

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swaps in this region. Had they risen and not fallen, maybe the

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issue would not have been in the headlines. But there is a growing

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view that these products were Miss salt. James Ducker used to sell

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swaps for high street banks. He became so disillusioned he left to

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set up a business advising small firms about swaps. He runs it from

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his home at Willingham. I do think there was widespread mis-selling

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across the country from all the banks to all sectors of businesses.

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It was a massive scale. In what way with Amis sold? A essentially it

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comes down to a lack of explanation of risk. If they go down, how much

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do you pay? And also the breakage cost of leaving these things.

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Meetings are been held with MPs to raise the issue. Evidence is also

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being gathered from firms who have complained. But Mr shied of coming

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for the -- most are shy of coming forward. It's almost as if they are

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ashamed of having done something wrong. They don't want to be

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connected with it in any way. there are many more cases out

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there? We are aware of some are run into hundreds of thousands of

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pounds. The banks say swaps can in certain circumstances be good for

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their clients. In the case of Colne Valley, Barclays says it is

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continuing to work very closely with the Smiths. Many other firms

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are locked in talks with their banks to get out of what's turned

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out to be a financial nightmare. Well, joining us is Paul Adcock,

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who runs Adcock's Electrical, a family store in Watton, in Norfolk,

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which has suffered exactly the same difficulties. Mr Adcock, tell us in

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general terms about how people like you have been affected? It's really

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been extremely difficult. These things were sold on the basis they

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would offer us protection. The business, all businesses, would

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have invested a lot. In our case, having agreed the loan, our

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business manager then approached us and informed us that the bases they

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predicted the interest rate would rise, because we had taken the

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Sloan, suggested we should consider some sort of interest-rate

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protection. That seems to be generally the pattern that is used.

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In our case, we won't necessarily that concerned about it at the time.

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We are plant for that outgoing amount. With due respect, what is

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the difference between your situation and her family was taken

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at a fixed rate mortgage, gambling, in effect, that interest rates

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would change in a different direction? The difference is the

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you know where you off with a mortgage and you have agreed to

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have accepted that level of payment. The difference with the project

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that we ended up with was it was sold on the basis that it protects

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you against rising interest rates. There was very little mention of

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what would happen when interest rates went down. Kenya express what

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do you think of these products? Probably not on television.

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Effectively, we have been sold a timebomb. At the time, it was sold

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on the basis that there would be little cost attached and it wasn't

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until later that the hidden costs have come to light. George, what do

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you think about these? Well, I think this is a real problem. I am

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working with a group of people in Parliament who are raising this and

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we want the FSA to looking to it. In every case, Miss selling is a

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serious accusation. But in general terms? I think the problem is this.

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The banks over the last few years have become far too focused on the

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billion dollar business, they have neglected and local high-street

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businesses. That is a symptom of what is going on. We see it in

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local branches closing. If we're going to support local businesses

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growing, we need banks where that is their core business. Banks have

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got relationship managers who are good people doing their best, but

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the culture of banks is becoming too big and remote. Steve, isn't it

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up to businesses to be more or where of projects that they are

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being sold? Is in not their responsibility? There is certainly

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a responsibility but the banks are supposed to be there to grow their

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business. And if they are compensating -- concentrating on

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making profits of dodgy deals, then they ought to be an investigation.

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If businesses cannot rely on bankers, then the trust

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relationship, which is essential that any sort of successful

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business, just disappears. George, we heard about the banking reform

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bills separating the retail arm with the domestic calm in the

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Queen's Speech. Will that help? that is important. Investment

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Banking, which is the derivative trading and investment products

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business, and high-street banking have been emerged -- merged in

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these banks. So we want barracks whose heartbeat is back on the High

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Street. In America, they have 20,000 banks. We have five or six.

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This reform bill begins the process of separating these banks. I been

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we may well have to go further. Paul Adcock, what would you like to

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see happen now? I want to understand the FAC -- the F as a

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really getting their teeth into it. Lots More Business as I felt brave

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enough to come forward now that it is in the media. -- many more

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businesses. There are a growing number of people like ourselves, so

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there is not a voice and in meeting has been organised for affected

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people in Oxford next weekend. So the profile has been raised

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significantly and the legal backing for the claims has increased as

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well. Thank you for joining us. Following last week's devastating

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result at the polls, where should the Prime Minister and his Deputy

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pitch up to renew their vows, but Essex? Labour's leader also got in

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on the act. All this in preparation for the highpoint of the week, the

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Queen's speech, when David Cameron said he would keep his focus on the

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economy. But has the government really done enough to silence its

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critics? Here's Andrew Sinclair. This was the week that the

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Government reconfirmed that the economy is still the most important

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thing. David Cameron and Nick Clegg chose Britain's last tractor

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factory in Basildon to renew their coalition vows. I'm afraid we

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cannot let up on the difficult decisions we made to cut public

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spending and get our deficit and debt under control. I know it's

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hard, I know it's difficult, but when you have a debt problem, the

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one thing you mustn't do is keep adding endlessly to that debt.

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then, 24 hours later, the pomp of the state opening of parliament -

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there are 15 new bills but by common consent the most important

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are the ones that reduce the burdens on business: cutting red

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tape, less use of employment tribunals and making it easier to

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get investment. The most important priority is getting the economy

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moving. Dealing with the deficit, creating jobs and creating

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prosperity. So helping businesses to hire people, making it easier

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for people you to hire people is positive for the economy and good

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for people who are unemployed and searching for jobs. On Friday, the

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the man who is partly responsible for abolishing red tape was

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speaking to business leaders in Norfolk. Just about everyone in the

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room complained that bureacracy was holding them back. It doesn't come

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out in normal human language, does it? You have to employ people of a

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legal nature to actually understand it. It is about finding what you

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need to do, which is really quite difficult at times, and then the

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amount of forms you need to fill in. There is no panacea by just

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scrapping regulation. We don't suddenly see a great growth in the

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economy. But the burden of red tape has certainly gone too far, whether

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it is on employment or any other aspect of running a business.

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notable things in the Queen's speech: the energy bill, which

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makes the development of another sizewell more likely. And the

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groceries bill will give farmers a better deal when selling to

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supermarkets - but many at westminster were left disappointed

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by this speech. I would have liked to see more about tackling growth,

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helping families and lowering taxation, reducing petrol prices.

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The issues in my constituency that people have come to teach -- talk

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to me about. Energy bills, water bills, the cost of transport across

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the East, and petrol as well. the last two years, the Government

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has kept insisting that fixing the economy is its main priority. That

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remains the case. Some Tories have said they are still frustrated by

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the lack of reform. Some blame the Lib Dems, others the slope

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machinery of Westminster. But they hope that the poll ratings will

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improve. George, the local election results were pretty disastrous.

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That performance in Basildon was a show of unity, but there was no new

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substance to it, was there? disagree. I agree the election

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results were bad, it was a classic mid-term drubbing from an angry

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population. We have heard that phrase time and again, I'm not sure

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where it's come from, but it was more than that, more than an mid-

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term drubbing. No, I think it was a classic mid-term drubbing, the

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electorate saying to the government, don't forget that we are in pain

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and we need due to be on our side and wishing to help those of us out

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here feeling the pain. I think it is important that Nick Clegg and

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David Cameron went back and reminded people that its coalition

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was put together to straighten the economy and deal with the debt

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crisis we inherited, and to put the economy first. But in your heart of

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hearts were you disappointed there was nothing new coming from

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Basildon, from that show? No, not from that speech. The Queen's

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Speech was the importance speech, and there are some important

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measures in there. The titles are clunky and don't really tell the

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full story. The banking reform bill is really important, to separate

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investment banking from retell. There are some really important

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stuff in there and business deregulation is really important.

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Steve, we cannot spend what we don't have, can we? We have to get

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the deficit down. We do, but we can do that in two ways, either by

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turning the heating down and freezing to death, or we can invest

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in installation and keep the place warm and he's the temperature down

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while we pay for the Investment. What we're doing at the moment is

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freezing to death rather than looking at how to make this work

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for the future. Let's talk about specifics, these plans to talk --

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to cut red tape, they are stuck in the right direction? I haven't

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actually had anything of substance yet. I have heard that they will

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cut red tape on a number of occasions. What I have heard in do

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know about his around employment tribunals, and I think they are

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frankly misleading. George, was there enough and the Queen's

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Speech? I could not disagree more. We haven't seen the built yet. I

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used to go back man ran up a small business. -- I used to run a small

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business. What we need is a charter. We know what is happening. In this

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Queen's Speech, George, was there enough? There was nothing to

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promote growth, was there? there enough - you can never have

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enough to promote growth and the Queen's Speech is only a list of

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Bills. Business deregulation is really important. If you talk to

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businesses, big businesses will tell you they are getting the

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message, they know the government is serious on the deficit. You have

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seen some big announcements recently about investing in big

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projects. So now we must focus on small businesses, particularly

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employment legislation. We have to leave it there.

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Now, it's time for our weekly Could the election of a new

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President in France affect nuclear plans at Sizewell? It's in the

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interest to not only power brands but make returns in other countries.

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That's a no then. Could the misery of travelling by train in East

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Anglia be alleviated by improvements at Ely junction?

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Growth is being held back because we don't have the capacity we need.

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Well, maybe. Will this weeks' strike action over

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public sector workers' pensions be the last?

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And why the only way was Essex for not only the coalition, but for Ed

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Miliband too, who came to thank Harlow for voting Labour. We are

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determined to get the economy moving and to get the government to

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stand up for the hard-working people of Harlow.

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And as for whether all this rain has helped end the drought, well,

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don't get your hopes up. It will take a summer of wet weather, and

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preferably in autumn and winter of wet-weather, to get us back to

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where we need to be. George, I know you are campaigning on the you

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junction. What is the long-term plan? We are taking a big message

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to government. If you want to grow the economy, East Anglia can give

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the sustainable growth, but we can't run a 21st century economy on

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19th century infrastructure. It's in our interests to enable people

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living in those areas to live sustainably. Steve, I'm hoping we

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can end up on a note of harmony. Would you welcome this Investment?

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Absolutely, and even more between Norwich and London. The economic

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case is overwhelming. We need to put the investment in. It's no use

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just talking about cutting spending. There are some things we do have to

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spend on, and that is infrastructure and growth.

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That's all for now. You can keep in touch via our website, where you

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