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Stern Warning

By the end of this century, global temperatures could soar to levels unprecedented in all of human history. Lord Stern tells Tony Grew...


Words: Tony Grew


Oscar Wilde once said that the only thing worse than being talked about is not being talked about. That isn’t a problem for Lord Stern. To the journalists at the Independent, he’s “the world’s most authoritative climate economist”. Over at the Telegraph, he’s been described as “the most dangerous man you have never heard of”.

“I don’t think anyone enjoys public attacks, but if you speak about public policy then you are going into an area where these things come,” Stern explains when he meets The House in his office at LSE. “In climate change the attacks are particularly unpleasant. There are big vested interests, and many scientists have come up against horrible personal attacks. Nigel Lawson on the Today programme referred to a very distinguished scientist, Dame Julia Slingo, as ‘that woman’. Steve Schneider, a wonderful climate scientist from University of Berkeley, was constantly having to change the security systems on his house, constantly receiving threats.”

Stern is the climate change equivalent of a household name. The Stern Review on the Economics of Climate Change, released in 2006, laid out the economic impact of climate change on the world economy. It is inarguably one of the most important documents about climate change ever published. It had a profound influence on the Climate Change Act 2008, which set the UK on course to become a low-carbon economy by imposing targets to reduce net greenhouse gas emissions by 80% from a 1990 baseline by 2050.

Nicholas Stern, an economist and lecturer, became The Lord Stern of Brentford in 2007 and has been Chair of the Grantham Research Institute at LSE since it was founded in 2008. His latest academic paper, ‘Endogenous growth, convexity of damages and climate risk: how Nordhaus’ framework supports deep cuts in carbon emissions’, has been co-written with the Grantham Institute’s co-director Dr Simon Dietz. Stern and Dietz argue that recent reports from the UN Intergovernmental Panel on Climate Change have underestimated the financial costs of climate change because the economic models used have “severe limitations”. “Standard economic models, such as those cited in the IPCC report, have made assumptions that simply do not reflect current knowledge about climate change,” Stern said last month.

He tells The House that climate change ‘deniers’ are following a similar pattern to the tobacco industry’s response to a link to lung cancer. “We are shifting round probability distributions. Like giving up smoking. You don’t discount the risk of lung cancer, you just make it much smaller,” he says. “In this context the deniers would say we can disregard the risk of lung cancer from smoking – ‘I suppose it could happen but it is trivially small’. That is the game the tobacco companies played. They said this is about risk and since we don’t know exactly what the risks are, let’s assume they are small.

“There is a very good book by Naomi Oreskes and Erik Conway called Merchants of Doubt which traces attacks on science over quite a long period of time – smoking, acid rain, climate change – and shows there is a systematic similarity in method. When you are dealing with uncertainty, you say ‘we do not know what will happen’, which is true. But it is our job to consider the risks that we face and how we can make those risks less.”

Stern uses language with a precision one would expect from a world-renowned economist, but there is still frustration at the antics of deniers of the facts of climate change. “I think it is often denial of the science. Sometimes it is deliberate minimisation of risks, sometimes it is asserting that while the risks might be there you can be very confident they are small.

“There has been some shift from the outright denial of the science, which is just daft given 200 years of very serious science. That has shifted over time and now it is more likely to take the form of ‘whilst there might be something there, we can be very confident the risks are small’.”

Stern says that while we cannot be sure how big the risks are, “you can give evidence on the possible magnitude of the risks and there is very powerful evidence those risks could be big”. “To assert you can be confident the risks are small is a perversion of the science. It gently or grudgingly concedes there might be some effect there, but the denial shifts.”

Politicians prefer the language of certainty to that of risk and probability. Stern says his latest paper shows the situation could be more serious than he initially thought. “I have said over the last five or six years that it is more serious than I gave the impression it was in the Stern Review because the information has changed.

“Most of what we say is about things that are not certain – it is about likelihoods, things that could occur, sometimes we can’t even talk of probabilities. We are very cautious about saying things with total confidence – I always try to speak the language of risk. What we know about climate sensitivity at the moment suggests that if we go on as we are, that sometime at the end of this century or early in the next century the temperature increase, with a probability of perhaps 50%, could be about 3.5C to 4C relative to the end of the 19th century. That is the kind of statement we have to make.

“What people don’t understand is how big a statement that is. That is extraordinarily strong. We have not been at that temperature for maybe 30 or 40 million years. We have been around as human beings for perhaps 250,000 years.”

Stern agrees that the challenge is one of communication. How can scientists, economists and political leaders get the message to voters? He gives a handy analogy. “If someone offered you an airline flight with a 90% chance of getting there and not crashing what would you do? It is our job to try to express ourselves in a way that is true to the data analysis we have, but communicates better about risk. We know from basic behavioural psychology that human beings are actually rather bad at handling and understanding risk.”

Stern is upbeat about two major changes since he wrote his review in 2004 – China, and the rise of technology. “I don’t think we anticipated how quickly technology would change – it is remarkable. Partly economies of scale, learning by doing and things like solar; partly new techniques, partly ICT giving you much more opportunities for energy efficiency and managing demand. Our ability to handle climate change has moved forward much more rapidly than some of us anticipated.”

Stern has been visiting and studying China for a quarter of a century. Recent changes are as much about national self-image as science, he argues. “They have really realised over the last five years just how big they are in world output, world trade, world emissions, they have taken on board that other people react to China. It is not China emerging into a world where they are entering a stage that is already there and might not be affected too much by their entrance. Now, they are front and centre of this stage. They realise that what other people do is influenced by what they do.

“China has changed in terms of the un-liveability of many of their cities – it is difficult to breathe in Beijing or Shanghai at certain times of the year. China has really woken up to this and has been in the lead in many ways of driving the costs of alternative technologies down. It will be in the lead in bringing the cost of nuclear down. What you have seen is that as Europe has wavered, China has started to really take the problem seriously and, indeed, started to change its ways.”

That European “wavering” represents a huge missed opportunity, Stern says, arguing that the economic crisis has diverted attention from climate change. “When you have got interest rates on the floor and unemployed resources, that is the moment to invest in the growth story of the future, that’s when to invest in a safer world.”

He is politely sceptical when asked if the Conservative/Lib Dem coalition is, as David Cameron claimed it would be, “the greenest government ever”.

“It is not clear that it is.  Neither is it a particularly interesting league table to play in,” Stern observes. “A better question is ‘are we really understanding as well as we should the magnitude of the challenge, the magnitude of the changes, the opportunities in those changes?’ My answer is no. It is disappointing, but if you look round the world, the world has changed. But we should not just be distorted by European spectacles. The most important thing in terms of encouraging long-term investments is the right kind of incentive structures, but just as important is stability in those incentive structures, so people are making long-term investments. It is very important to keep stable signals and that is what has been so disrupting.”

He adds: “Some things have stayed stable – we have the climate change legislation and the climate change committee and carbon budgets. Those have proceeded and those are good things, but you have also had the noises off.”

Some Conservatives have been accused of regarding the green agenda as ‘crap’, while Labour has focused its rhetoric on the Big Six energy companies and promised a ‘price freeze’ if it forms the next government. Stern says there is “a really bad understanding of where the price increases over the past eight or nine years came from”.

“Basically the cost of electricity faced by homes has in large measure been determined by the price of gas,” he explains. “And what you have seen over the last decade is a very big increase in the world price of gas. That is not in the hands of the energy companies, it is something they face. Reading some of the newspapers, you would have thought it was the renewable targets that had driven up the price, but they have had a very minor role in all this.”

Stern says “climate denial, which is particularly associated with some of the backwoodsmen in the Tory party” is one of the factors holding the UK back when it comes to green energy innovation. “A major recession has diverted attention from these issues and a big rise in gas prices has forced up electricity prices – note that it is the hydrocarbon prices that have forced it up. So you have these things coming together and that has changed the politics.

“Ed Miliband is taking the view that the big increase in prices has been cumulative rip-off artistry from the energy companies. I don’t think that is an entirely good description of price increases over the last decade. It is price increases in energy that have quite understandably concerned people. It is a big slice of their budget. Where does that come from? Mostly from the rise of the world gas price. Has it come from an increase in the monopolistic practices of the energy companies? That has to be established. Remember, an increase in the monopolistic practices, you would have to argue, has caused that increase.

“Has it come from extra emphasis on renewables? Demonstrably very little of it. What that case is predicated on was the anger over the price increases, but to put it down to ‘green crap’ or to the monopolistic practices is quantitatively to have the tail wagging the dog.”

Lord Stern has the platform of the upper house to continue his work on the economics of climate change. He wants to spend more time at Parliament when his commitments allow – as well as his work at LSE, he is President of the British Academy.

“There are many extraordinarily interesting people in the Lords who have really important life experiences that they bring to the table, particularly among the crossbenchers. People like Eliza Manningham-Buller, former head of MI5; John Browne, who has run a major energy company; Bob May and Martin Rees, who have been president of the Royal Society.

“I have been a bit disappointed by a number of people who have just come up through the Commons and sometimes seem to behave in the way the Commons behaves. My impression of my fellow peers is variable. Some of them are extraordinary talented people with great life experience, but not all of them.

“I do try to get there at least on Wednesdays, but one of my intentions over the coming years as I manage to control my commitments a bit better is to put more time in. I am full of admiration for my colleagues who really settle down over the scrutiny of legislation. I have come to realise how important that is.”   




Iain Martin: As summer recess approaches, will Westminster again get the July jitters?

There is a long history of intensity of feeling in July clouding the judgment of those in power. What is it about Westminster and the ...


As an editor I used to work for liked to put it: “They always go mad in July.” By “they”, he meant MPs and political journalists, and by “mad”, he meant that by now every year some of the inhabitants of the Palace of Westminster have become over-excited. The end of term in the hothouse is looming and the beach beckons.

Sometimes the hysteria centres on a serious potential scandal, such as the recent child abuse allegations and claims that complaints about powerful figures were suppressed and not properly investigated in the 1980s. In other years, people will have serious difficulty remembering in August just what it was that got them so agitated a few weeks previously. In journalistic circles, this phenomenon is so well-known that the BBC’s Jim Naughtie chose The Madness of July as the title for his recent thriller. But what is it about Westminster and July?

There is a long history of intensity of feeling in July clouding the judgment of those in power. The Suez crisis of 1956 began in July. On the 26th of that month, President Nasser of Egypt announced that he intended to nationalise the Suez Canal, a declaration which threatened British interests.

So robust was the mood of the House the next day when MPs met on the 27th that Anthony Eden, the Prime Minister, became convinced – entirely mistakenly – that he had sufficient support on the government benches to take whatever measures he deemed necessary in response. From there he embarked on a course of action that culminated later that year in military disaster, diplomatic disgrace and resignation.

In July 2011, it seemed as though MPs were about to bring down the media mogul Rupert Murdoch. When it was revealed that the mobile telephone of the murdered schoolgirl Milly Dowler had been hacked, MPs were in uproar. The News of the World was closed, David Cameron announced a public inquiry into the conduct of the press and Murdoch himself was summonsed to appear in front of a parliamentary committee. These were serious events, but the sense at Westminster in that period of there being an imminent cultural revolution ended up being overheated nonsense.

Indeed, heat and sheer exhaustion may be the root of the problem. In the heat and humidity of summer, sweaty London cooks. And unfortunately, despite its many other virtues, large parts of the Palace of Westminster lack adequate air conditioning. By July, the various combatants have also usually exhausted themselves after months of work. Since the conference season in the preceding autumn, it has been ‘head down’ for the party leaders, ministers, MPs and advisers. Everyone needs to hit the refresh button.

Incidentally, before assorted MPs complain, I am aware that recess does not equal holiday, and that constituency work will continue on the ground while ministers carry on commuting and being ministers. But most MPs – and journalists – will find time this summer for several weeks in the sun, involving the reading of books which are too often about politics.

This year, the inhabitants of the Palace of Westminster are in more need than ever of a proper rest. When the Commons returns, briefly before the party conferences of September and October and shortly before the result of the Scottish independence referendum is known, it will be portrayed by my industry as the start of the long election campaign. If the Scottish vote on 18 September goes the wrong way (declaration, I’m for the United Kingdom), there will follow an extraordinarily intense period of activity as the break-up of the UK is negotiated.

If Scotland votes to stay, then there will be a more conventional pitch into a pre-election period. All the party leaders will use their party conferences to begin framing an appeal to the electorate ahead of May 2015.

In the final months of the year, attack lines will be tested and election machines patched together or fine-tuned. There will then be a remorseless battle fought for the headlines and for the domination of the airwaves, as the parties try to convince a sceptical electorate.

Before all that, everyone needs a holiday.


Iain Martin is a political commentator




Born Again Banking

After spending 25 years in financial services, Andrea Leadsom knows a thing or two about the big challenges facing the City. The new E...


Words: Paul Waugh

Photos: Paul Heartfield 



“They were thinking, ‘you must be off your rocker’.” Andrea Leadsom is recalling a Parliamentary selection meeting, more than 10 long years ago. A political baptism in more ways than one, she had turned up to the Reading East event just hours after giving birth to her daughter. “The day you give birth, you feel like you can do anything,” she explains. “The day after, you feel like you’ve been run over by a bus…”

Rob Wilson won the selection race for the marginal seat that day, while Leadsom ended up as Tory candidate for the unwinnable Knowsley South in the 2005 election. But she was undeterred. When next interviewed for David Cameron’s ‘A-list’ of candidates, word of her previous post-natal heroics had got around.

Her interviewer asked her if she was ‘The One’ who had bounced from childbirth to a hustings meeting. “It was my ‘Top Gun moment’,” she says, referring to a scene in the Hollywood movie in which the hot-shot pilot reveals he’d flown his jet upside down, feet away from a Russian MiG. “You know, when Kelly McGillis says to Tom Cruise ‘So, you’re The One?’”

It’s safe to say that Andrea Jacqueline Leadsom is unafraid of notoriety, nor of fighting her corner. Having been eventually selected for South Northamptonshire, she nearly doubled the Tory majority and entered the Commons in 2010.

Typical of that intake’s independent-minded cohort, she proceeded to defy the whips on topics ranging from an EU referendum to gay marriage to HS2. Yet after a successful four years on the Treasury Select Committee, during which she memorably clashed with Barclays chief Bob Diamond, she joined the Government this April.

A former female financier in an era when machismo was the watchword in the City,

the Economic Secretary to the Treasury is certainly well placed for her new role. Today, her duties include reform of the financial services industry in which she worked for 25 years. City competitiveness, bank lending and Help to Buy are all in her packed in-tray. And she’s in a hurry.

With the hangover of the 2007/8 financial crisis still lingering, does the City at least now ‘get it’ and is learning the lessons of what went wrong?

“I would say that at the top echelons of the banks, absolutely. But I think there’s quite a long way to go to really change the culture. I think it did become very transaction-oriented and I think it will take time to recover that,” she says. “I think we are still going to see a lot of cringeworthy announcements.”

What does she mean by ‘cringeworthy’? “We’ve had a number of issues over bank wrongdoing,” she replies, referring to the Chancellor’s recent Fair and Effective Markets review of benchmarks in commodities and foreign exchange.

“There are inquiries going on, there are some pretty serious allegations out there, we’ve still got PPI going on. There are still things happening and redress under way. So it’s quite difficult to just sort of forget about that and move on. There’s still a lot of baggage.”

Yet she stresses her job is to accentuate the positive as well as not forget the negative.

“What we are trying to do is to really get to the bottom of everything that’s gone wrong but at the same time to move on and start looking to a more positive future.”

Does there still need to be some kind of ‘reckoning’ for the City?  “I think there does. But that’s ongoing and it’s good at the same time to have a new story to tell about more positive things.”

At 50, Leadsom speaks with the authority of someone who knows the finance industry better than most. She points out that as early as 2000, when she was both Head of Corporate Governance and Senior Investment Officer at Invesco Perpetual, she developed a new way of rewarding staff based on short, medium and long-term performance of their teams and the company. “I’m very, very proud of that. When anyone says ‘you can’t pay banks on a quantitative scheme’, I’m like ‘yes you can, I’ve done it’.

Thanks to Invesco’s star fund manager Neil Woodford the firm shrewdly shunned banking stocks in the run-up to the financial crisis. But a key event sticks in Leadsom’s mind.

“Our US equity fund manager I remember in about 2006 coming in to see the chief investment officer who I worked directly for and with and saying that the US property market is going to hell in a handcart, that people are so over-borrowed and over-lent to that they are buying properties with no deposit and then they are just handing back the keys because they can’t afford it any more. He was painting a really dramatic picture and I certainly remember that Neil Woodford was not touching any securitisation for quite a long period. So in that sense I suppose the fund managers had an inkling.”

Leadsom stresses that Invesco, working out of Henley-on-Thames, was “slightly removed” from the City. But she certainly was in the Square Mile when she worked her way up through Barclays in the decade beforehand. “’87 to ‘97 was a really telling period because I had my time in the dealing room, where I took the view that the money market guys were the honest ones with the cardigans and beards. They would never fiddle anything. So the day we heard about the Libor rigging, I just thought ‘well if Libor is rigged then what wasn’t rigged?’”

When she was running the Barclays investment banking team, she saw small brokers, equity specialists and partnerships steadily merged and bought out by big banks and asset management firms. “The whole concept that they used to have of a partnership, where ‘if I make a mistake I lose my shirt and my children leave their private school’ and that sort of scary thing, literally became huge golden hellos, massive bonuses and no down side,” she says.

“And that was in the mid-90s. I absolutely remember thinking at the time ‘why doesn’t the Monopolies and Mergers Commission think anything about this?’” And when Barings went bust, Leadsom recalls that the Bank of England dealt with it quite well.  “Eddie George was very quick to act, unlike with Northern Rock and he instantly rang me and a number of other key bankers to Barings and said ‘right we need to stop a run on the bank on Monday morning’. So we spent the weekend calling round different banking counterparts to sort of say ‘it will all be fine’.

“For me, that experience in 1995 really highlighted to me the later tripartite regime under Labour. The reason why there was a run on a bank [Northern Rock] was because everyone was looking at everyone else, thinking ‘You’ll take the lead, won’t you?’ ‘No, no, no I think it’s you’. There was that lack of accountability.” The new regime introduced by George Osborne has proved “essential”, she says. “When things go wrong the buck stops with the governor.”



Central to her mission at the Treasury now is to change the banking culture through more competition. “My big raison d’ être in this job is that competition should trump regulation,” she says. “People will always find a way round regulation, by definition. But actually competition is the great transparency, the great equaliser. Alongside regulation, that’s my agenda.”

Maybe competition is the best deregulator? “I’m hesitant to use the word deregulation where banking is concerned…but in the sense of making it easier to compete and in sense that new tech is making it easier to access finance and set up new diverse sources of finance.”

Leadsom praises some more established banks for their innovation. “For example Banco Santander have just set up an agreement with Funding Circle, a peer to peer funding organisation, where if Santander turn someone down for SME finance they will refer them to the Funding Circle and vice versa. Because a bunch of individuals with a bit of spare cash might find a proposition interesting that didn’t meet the bank’s lending and credit criterion.”

The rise of ‘challenger banks’ is key to the Treasury’s reforms too. “If you go to Kingsway [in London] and walk into the MetroBank, you’ll get doggie biscuits and a baby-changing facility, a colouring corner…and it’s in a retail space,” she points out.

This is an agenda, like others, that stems back to her days on the Treasury Select Committee.  “In 2010 we heard that MetroBank was the first full service banking licence to be awarded in 100 years, that’s astonishing. Now following all the regulatory changes one of the big changes was to reduce the barriers for new entrants.

“The more challenger banks we have, the smaller the market share going forward of the dominant big four, the better it is for everyone. My agenda as a minister is to massively ramp up competition and challenger banking.”

The new Small Business, Enterprise and Employment Bill has new moves to boost transparency for businesses looking for finance. But it also has another key plank of the agenda that Leadsom helped push four years ago.

“When I started here and got elected on to the Treasury Select Committee, the first thing we did was to look at cheques. And at the time volumes were falling off and there was a move to perhaps just get rid of them. Following that inquiry, the banks agreed ‘no, we won’t get rid of them’.

“And here we are four years on looking at a new lease of life for cheques. Absolutely amazingly, the banks have agreed the technology. This is the fin-tech agenda which we intend to be at the forefront of globally.”

Under the plans, people will be able to photograph their cheque and text or email it to their bank, who pay in the sum. The minister says it meets the needs of small traders like window cleaners, but also helps the elderly.

However, Leadsom says she wants the banks to fast-track their two-year plans to introduce the new system. “I’d really like it to be faster. My call to the banks is don’t let’s leave it two years.” The Treasury will now call for plans to be ready within a year instead.

One area where Leadsom was critical of Treasury policy as a backbencher was over the Help to Buy scheme. But she no longer believes that the scheme’s house price cap should be lowered from £600,000 to £350,000, pointing out that 95% of the scheme applies outside London, where national prices are much lower. “So actually you don’t need to change things unless it’s a problem. Overwhelmingly, it’s achieving its aspiration of helping people to get their first home.

“With my correspondence I get many more letters from people saying ‘I’m desperate to get a mortgage, why have you done this mortgage market review?’ rather than people saying ‘oh, you know, property prices are ridiculously high’.”

And are those letters as a minister or as a constituency MP?  “As a minister. Well, it’s both because everyone else’s correspondence comes to me if it’s on Help to Buy. So I get everyone’s letters, it’s so nice!”

Key to the Economic Secretary’s role is promoting the City overseas and she says the recent deal with China to make London the global centre for offshore remnimbi trading was “fantastic”. And only this week she opened the Stock Exchange to mark the listing of the first-ever Sharia-compliant bond outside the Islamic world.  “We are ahead of Luxembourg, which at the moment has a certain ring to it,” she says, smiling.

The reference to Jean-Claude Juncker’s birthplace is a nice cue for the other arena where the Treasury is trying to boost the British case: the EU. As a founder member of the Fresh Start Group of MPs, Leadsom has more interest than most in the topic of getting a reformed Brussels, with deregulation and competition her main priorities.

But if the EU fails to reform, would it be worth being outside the bloc?

“That is for a time in the future. Obviously [if there’s] a nonsense reform that doesn’t achieve anything, then it might be. But at the moment I’ve spent four years working extremely hard trying to find things that would make it worth staying in.”

Changing the City’s culture on women is another Government aim, not least through its targets for numbers of female board members. Mining giant Glencore Xstrata has just announced it will no longer be the only FTSE 100 company without a woman on its board. But have the Square Mile and Canary Wharf changed their tune on sexism more broadly?

“All I can say is my 10 years in the thick of the City, compared to my four years in Parliament, I would say Parliament is a million times less sexist, less misogynist, more egalitarian. People here make a real effort. People laugh at the Tea Room chat, but that’s nothing compared with how the City was. But I left the square mile in ‘97 so it’s a long time ago. I think things are a lot better.”

For Leadsom, the equation is simple: more diversity means better business decisions.

“To me it’s just ridiculous to not have a diverse range of views and people. If you want to know what life’s like on the front line, ask someone who’s been there. And if you want to know what life’s like as a working mum, trying to juggle the school run and the cleaning and the Sunday roast, then ask a mum.”

She stresses that diversity isn’t simply about gender. “That’s not just about women and men. That’s about different age ranges, different ethnicities, you just need a diverse range of views.”

But the minister recalls a Westminster Hall debate earlier this Parliament when Helen Grant quoted the chairman of a board explaining why he didn’t hire women. “He said ‘we all think the same way and we all look at things the same way and we always agree and we never have any arguments’.”

Although assiduously loyal to George Osborne (“In case you were asking, George and I get on really, really well!”) Leadsom herself has never been afraid of an argument, not least on issues affecting her constituents. One such big issue is HS2. Does she still back the voters locally and is she hoping for more conveniently timed Brussels meetings when the bill is next voted on?

“On HS2 I’m absolutely firmly committed to getting decent compensation and mitigation for my constituents and I think there’s a long way to go yet,” she says. “And I’ve petitioned myself on the grounds I think the construction period needs to be more thought through, I think there are certain individual cases of families so badly affected by the route of the line by maintenance loops that they need to be treated as exceptions so I’m completely committed to getting the best deal I can for my constituents.”

She can’t vote against the bill because she’s a minister, but is it possible she may never actually vote for it? “Unfair question…,” she replies, adding: “I have voted against it. I voted against the paving bill.”

Another local cause close to her heart is the Northamptonshire Parent Infant Project (NORPIP), which aims to help parents of children under two to bond better with their offspring to avoid a raft of social, educational and mental health problems later in life.

She says she was inspired to get involved partly by her mother, a trained midwife who was an expert in post-traumatic stress in new mothers, and a similar neighbouring scheme in Oxfordshire.

But she also drew on her own experience as a mother. “When my first son was born I was at Barclays, I was a senior executive, they wouldn’t let me go part-time. I had two miscarriages, I had a bout of post-natal depression,” she explains.

“I don’t want to over-egg it because it didn’t last very long and actually going back to work sorted me out. But I certainly remember the period after my first child being quite traumatic and unlike anything ever before.

“I absolutely understood the problem and over the last 15 years I’ve learnt the solution is in intervening in that peri-natal period and severe depression or domestic violence can have utterly life changing consequences for the baby and many of the ills of ours society, violent crime, homelessness, psychosis, self-harming can be laid at the door of a very bad early start. But so too can a lot of poor mental health, backache, depression, relationship breakdown.”

A mother of three, Leadsom has found fellow women in Parliament eager to take up the cause. But with several female MPs from all parties standing down at the next election, it looks like there will be fewer from the 2010 intake. Why does she think so many are calling it a day?

“I think everyone has their own reasons, I think you could very honourably do five years and call it a day. It used to be that you had a job for life. Now you don’t and actually to stay somewhere for five years in the real world for five years is quite a long time. Equally, for some people they perhaps come into Parliament expecting to do something dramatic and then finding it’s harder than they expected. Other people don’t take to the lifestyle or the hours.”

But Leadsom is an enthusiast for Parliament. “I totally love it, I love the camaraderie,” she says. “I have 16 Conservative female MPs coming round to my flat for dinner tonight. And we are being cooked for by the son of one of my female colleagues. He is cooking for the girls and it’s going to be a right laugh. Thai curry and then something chocolaty.

“Luckily we will be literally saved by the bell because we will have to leave at 9.30 [for a Commons vote at 10pm]. Because there’s only so much trouble you can get up to in that couple of hours,” she says, laughing. “Am I allowed to say that?”

As for her own ‘girl’, she’s very much in evidence in Parliament. Her 10-year-old daughter, who was born at home just hours before that infamous selection meeting in Reading, is often in the Commons meeting up with her mum. "She loves it!" her mother says.

A decade on, Andrea Leadsom is still keen to prove that women in politics ‘can do anything’. And fewer people may think she is ‘off her rocker’ any more.   




Back to the Future

After decades in the economic doldrums, has Japan finally returned to form? Ambassador Keiichi Hayashi talks to Sam Faroqui about the ...


Words: Sam Faroqui

Photos: Josh Kearns 



In February 2009, making the case for his stimulus package as the US economy reeled from the fallout of the 2008 crash, President Obama warned that a failure to take decisive action could see a stateside repeat of Japan’s ‘lost decade’ – the period from 1991 to 2000 (followed by a considerable hangover in the noughties) during which the country experienced no significant economic growth. Somehow, Japan – the site of the post-war economic ‘miracle’, the home of high tech – had become a byword for chronic stagnation and economic failure.

But a couple of days after Japanese premier Shinzo Abe declares his signature economic strategy has finally brought an end to deflation, the country’s ambassador to the UK, Keiichi Hayashi, is eager to emphasise that things have changed.

“Japan is now full of business opportunities. Under Abenomics, the prime minister has repeatedly said that Japan is back,” he says. “After almost one and a half or two decades, Japan is getting out of this vicious deflationary spiral. Share prices have gone up by over 50% over the past two years, and there has been positive economic growth – five, six quarters of positive growth over the past year and a half.”

Abenomics, the Japanese prime minister’s three-pronged effort to turn around his nation’s economy, is composed of the ‘three arrows’ of fiscal stimulus, quantitative easing – as favoured by the UK’s own central bank – and structural reforms. Encouraging greater inward investment will be a key part of that ‘third arrow’, the Ambassador explains.

“The prime minister himself has made it very clear that the government in Japan wants to see more foreign direct investment into Japan, and in fact he has set a target of doubling the amount of foreign direct investment into Japan by 2020,” he says. “It’s quite a challenge, but in order to do that he will have to implement all sorts of reform measures to encourage foreign investors to be keener on investing into Japan.”

As regards outward investment, Hayashi is keen to stress the importance to Japan of its business relationship with the UK.

“From our perspective, the UK is also an excellent business opportunity,” he says. “Currently, about 1,000 Japanese companies are operating in this country; this has created more than 160,000 jobs. In fact, in terms of inflow of Japanese investment, the last year was a record high at £8.6bn, which is a huge sum.

“In terms of Japanese investment to foreign countries, it is second only to the United States, so our investment to the UK exceeds that to China. So it’s quite an important business partner.”

Indeed, in perhaps the most prominent area of that partnership – car manufacturing – Nissan’s factory in Sunderland produced over 500,000 cars last year, more than any other UK-based manufacturer. And although auto exports to the European Union have tailed off relative to those to the rest of the world in recent years, the majority of Nissan UK’s exports – which account for 80% of production – is still destined for the EU market.

So, as the dust settles following David Cameron’s failed bid to block Jean-Claude Juncker’s candidacy for the EU Commission presidency – which the Prime Minister himself admitted had made the task of keeping Britain within the EU more difficult – where would a ‘Brexit’ leave the UK-Japan partnership?

The Ambassador is characteristically diplomatic, but his meaning is clear.

“In business terms, of course, the United Kingdom’s openness, transparency, and also perhaps rich intellectual infrastructure – legal service, accounting service and so on – and also easy access to the European market make the UK a quite attractive destination for Japanese investment,” he says. “So in that sense, the UK has become a very important business and economic partner for Japan, and serves as a gateway to the European market…

“I have to be very careful in what I say here, because the relationship with the European Union for the UK is to be determined by the government and people of the United Kingdom, and I do not want to speculate on what will happen if that happens. But in the context of what I said about the importance of the United Kingdom from the Japanese perspective, certainly one of the major attractions is the access to the European market.”

Furthermore, Hayashi indicates, withdrawal from the EU would see Britain’s global standing diminished.

“We want the United Kingdom to be a major player in the international scene, and of course there is no denial of the importance of the European Union,” he says. “We want the United Kingdom to continue to play a major positive role. We certainly want the EU to be outward-looking, not inward-looking, and I think we share the same sort of views, same perspectives in terms of trade, investment and so on. We certainly would like to see the continued relevance of the United Kingdom in the European context.”



Japan has its own concerns around representation on the international stage. Still the world’s third-largest economy in terms of nominal GDP, its calls for a permanent seat at the semi-ossified UN Security Council have thus far fallen on deaf ears.

“The UN Security Council is probably the most important global body in maintaining the peace and security of the world, and in that context, the Security Council has to be legitimate and representative and effective,” the Ambassador argues.

“Lack of representation would deprive the Security Council of legitimacy and effectiveness, and in that context, as far as Japan is concerned, Japan has both the will and the capacity to contribute as a permanent member of the Security Council.

“We have long been the second-largest financial contributor to the United Nations budget, and we have been playing a significant role in terms of participation in the UN peacekeeping operation and so on. So we are very much keen to see some kind of progress made in the work to make the Security Council more legitimate and effective, and in that context we are very much appreciative of the United Kingdom’s consistent support for Japan’s permanent membership.”

One issue which was the subject of notably tense exchanges at the Security Council earlier this year was the dispute between China and Japan over the former’s declaration of an air defence identification zone over a disputed area of the East China Sea and the visit of the latter’s prime minister to the Yasukuni Shrine, which honours the Japanese war dead, including – controversially – Class A war criminals.

The quarrel was played out closer to home in slightly surreal fashion, with first the Chinese ambassador to the UK, Liu Xiaoming, and then Ambassador Hayashi taking to the comment pages of the Telegraph to accuse the other’s country of seeking to play the role of ‘Voldemort’ in East Asia by resorting to provocation and militarism. This led to the delicious spectacle of Hayashi telling Jeremy Paxman on Newsnight – as Xiaoming waited to be interviewed in an adjoining studio (the two having refused to appear together) – “I don’t want to resort to ‘He-Who-Must-Not-Be-Named’ today”.

But today, Hayashi is at pains to play down tensions between the two countries, insisting Japan has no issue with the UK government’s decision to place its trading relationship with China front and centre of its push to get ahead in the ‘global race’.

“First of all, I think both Japan and the United Kingdom regard the increasing prosperity, the peaceful rise of China as an opportunity, not as a threat,” he says. “Japan itself has a huge economic business presence in China. I don’t think that we have any qualm or concern about other countries seeking business opportunities in China.”

Neither does he feel the Coalition’s focus on China has led it to neglect the relationship with Japan – though one detects, perhaps, an implied criticism of the level of attention paid to Tokyo by previous governments.

“I think generally we are happy about the importance this government has been attaching to the relationship with Japan,” he says. “At the beginning of my stint as Ambassador here – I arrived as Ambassador three and a half years ago – Japan was not very much discussed. That was a little bit disappointing from my perspective compared with the situation I saw back in the 1990s, when I was here earlier.

“But we feel that this coalition government recognised the importance of a Japan-UK partnership, I think from the beginning of the Coalition Government. In July 2010, the Foreign Secretary, William Hague, paid a visit to Japan, ahead of China, say.

“I don’t want to make comparisons with the past, but I think certainly we are happy about the fact that this government has been emphasising the importance of having a solid working relationship with what they call the ‘old allies’ like Japan.”

With the 21st century being billed as ‘the Asian century’, Japan will no doubt be looking to share in the spoils of the continent’s economic resurgence. But given competitors like India (which has now overtaken Japan as the world’s third-largest economy if GDP is adjusted for purchasing power parity) can draw on a population 65% of which is under 35, does Japan’s increasingly ageing population mean it risks missing out?

The Ambassador acknowledges that Japan “is fast becoming what is called the ‘ageing society’”, and says the government is “trying to address the issue from all sorts of aspects”. However, he insists the problem is not unique to Japan, but rather an inevitable consequence of successful economic development.

“This kind of demographic change is in a way a dilemma caused by economic success,” he argues. “People tend to live longer and with better nourishment and better healthcare as the economy progress – advances – and the desire to produce a bigger family to support the family income tends to decline.

“Sooner or later, every country, including China and India – in the case of China I think it will be sooner, and India, certainly not immediately but in the long run – will face this issue, as long as their economy makes an advance.

“So in a way I think we feel that our country is going ahead of others in this regard, so we want to turn the challenge into an opportunity. How? Firstly, we have to make efforts to encourage young families to produce more children, by extending financial assistance and other incentives or by facilitating child rearing, and so on.

“Also, we are trying to expand the scope of the workforce by engaging more women and more elderly people to participate in the labour market, and we may also have to consider making maximum use of the talents of workers coming from overseas.

“But thirdly, about turning the challenge into an opportunity, we are trying to develop new products and services to meet the needs of the growing number of elderly people in society by way of robotics, new systems of providing care for the sick and elderly, and this could create a new overseas market because the world is soon to face the ‘ageing society’. So this could be a business chance for us.”

It’s an ingenious way to spin the issue. Yes, it may have the highest proportion of elderly citizens of any nation, but in that respect, Hayashi argues, high-tech Japan is once again ahead of the curve. 





This Exporting Life

The eyes of the globe may be on the World Cup, but this summer the football-mad Lord Livingston has a very different goal. The Trade M...


Words: Daniel Bond and Sam Faroqui

Photos: Paul Heartfield 



Lord Livingston is a believer. He’s convinced that “40 years of hurt” are finally coming to an end. The whole team, he says, deserves praise for “putting in the hard yards” in South America, doggedly beating off competition from around the world, and even surprising a few people.

But while the Trade Minister is a sports fanatic, sadly – and predictably – he’s not talking about the football. It’s the country’s growing export market which has got him animated. England’s World Cup squad has already flown home from Brazil, defeated and dejected. But the UK’s trade squad has no intention of leaving any time soon: after decades of neglecting the region, they’re finally getting results. 

“I go to places like Mexico or Colombia, and they have a really strong attitude about the UK, where they say ‘where were you? Where have you been all this time?’” Livingston tells The House from his office on the fifth floor of BIS’s Victoria Street HQ. “In a lot of places we just haven’t been around.”

For too long, he says, British governments – both Labour and Conservative – have ignored exports and allowed the UK to lag behind its competitors in Europe. But those wilderness years, he insists, are finally ending. UKTI helped around 40,000 companies to export goods and services overseas last year, and this year Livingston aims to ramp that up to 50,000. And at the top of his list is helping the UK’s small and medium-sized businesses achieve their export potential; only 16% currently sell outside the EU, compared with 30% of Italian firms.

“Going round the UK, I see so many companies with enormous potential and we need to build on that,” he says. “It’s continuing to do the hard yards, that’s what it’s about. There’s not one company or one place that suddenly transforms our export potential – it’s tens of thousands of companies. And we’re helping them.”

“We’re trying to make up for things from decades ago; things which just didn’t seem to rank on previous governments’ agenda. Our supply chain for motor vehicles has been weak, and we’re building that back up again, we’re seeing announcements of manufacturers setting up in the UK. We stopped providing financing for small companies for exporting. Because banks would do that, so what was the need? That was 20 years ago. We’re having to build that up again – so export finance has helped 50% more companies this year than last. But it’s still nowhere near where we want it to be, so we’re making further changes to build that up.

“If you have decades of things you were trying to put right, that’s a challenge. You can’t do it overnight. But the commitment of the whole government is really, really strong.”

The Government has set the target of doubling annual exports to £1tn by 2020 – a figure Livingston admits is “very ambitious”. “But there’s no point having a target which is easily achievable by doing what you’re doing,” he adds. “Why bother?”

“What this is doing,” he continues, “is dramatically raising the whole profile of exports in this country. To be clear, it’s not that the UK is a bad exporter, it’s the sixth-largest exporter in the world. We’re not a bad exporter. But we need to build on that. Given the quality of the firms we’ve got we can do more, and there are some areas of comparative weakness. And if you talk to businesspeople, they will tell you they’ve never seen a government as committed to business and to trade as this one is. And you’ll see the effect. We’re doing that and getting out and building on the excellent work of my predecessor [Lord Green], who did some excellent work.”

Livingston took over from Green last December after more than a decade at BT, culminating in five years as the firm’s CEO. Still only 49 – he will turn the big 5-0 later this month – his career has been remarkably precocious. After leaving Manchester University with a BA in economics at just 19, he trained as an accountant at Arthur Anderson, and went on to become the youngest-ever finance director of a FTSE 100 company aged 32.

Aside from business, his other love is football, and specifically Celtic: the Glaswegian became a non-executive director on the board of his hometown club in 2007. But despite his proud Scottishness, Livingston has mixed feelings about the Auld Enemy’s early exit from the World Cup this summer. While he describes Paul Gascoigne’s wonder goal against Scotland in Euro 96 as “one of the worst moments of my life”, he also admits he faced “moral pressure” from his English wife to back Roy Hodgson’s team in Brazil this time round. It’s a dilemma of split loyalties many will recognise this summer as the independence referendum approaches. As a Celtic-loving Scot married to an Englishwoman, “whose kids can’t decide which team to support”, Livingston says he understands the importance and the bonds of the Union as much as anyone. And he’s not going to give it up without a fight. “It’s not that Scotland can’t be an independent nation. Of course it can be. No one’s ever said otherwise. But both the UK and Scotland itself would be far richer economically, culturally and socially, together,” he says.

A number of businesses have come out in favour of a ‘No’ vote in recent weeks, warning that independence would create uncertainty and could ramp up costs. But others have complained about coming under pressure and intimidation from ‘Yes’ campaigners to stay out of the debate. The trend, Livingston says, is “very worrying”. “I hear that. I think there has been pressure,” he says. “It’s not good for the debate. But take, for instance, another debate, which is around the EU. I know there are some businesses which think one thing about the EU and some which think another. But I have never met anyone who’s said they’ve been getting pressure from somebody to change their position, from a government to change their position, or to not speak out. I think businesses should say what it means. It’s important. On September 19th, neither side wants to wake up and think ‘I wish I’d spoken out.’”

This is not about businesses or employers telling people how to vote, he is quick to add, but about making sure all the facts about independence are in the public domain. “What concerns me is the lack of fact basis in what the anti-Union people, the separatists, are saying,” he explains. “So President Barroso said you’ll have to reapply for EU membership, Alex Salmond says ‘no we won’t.’ The Chancellor and all other potential chancellors say you can’t share the pound, Alex Salmond says ‘of course we can’. You can’t be in that situation of just pretending these things aren’t the case. On September 19th if there is a vote for independence they [the Yes campaign] can’t say ‘oh, well actually I was wrong about all that’.

“I’ve just been with a group of ambassadors and they were quite clear on the issue of a re-application for EU membership. The UK would want to be supportive of Scotland getting back in, but they would have to get back in and it’s not a short process. The EU has never done anything in 18 months. The process has unanimously got to be approved by each parliament. The terms are any EU member has to be a member of Schengen. Is that going to be waived? The rebate: I don’t think that’s going to be popular among a whole load of members of the euro. The basis upon which Scotland enters will be difficult, and there are a lot of countries that are extremely concerned about Scotland coming in. So the UK may be one of Scotland’s allies in this; but the fact is you have to get in.” 



On the UK’s own future in Europe, Livingston is more optimistic. He praises David Cameron for being almost a lone voice at the top table calling for a “reformed, competitive, prosperous” Europe, and says the business world has been overwhelmingly impressed with his calls for reform since his defining ‘Bloomberg speech’ in January last year.

“I was in Davos [at the World Economic Forum] shortly after he made that speech, and he was the absolute star,” Livingston remembers. “I wasn’t a member of the government, I was a businessman sitting in the audience, and all the foreign businesses really liked what he had to say, the sort of Europe he was envisioning. He was the absolute star of the show there.”

Unfortunately, he continues, there are too many other voices in British politics who want to make the EU debate about what the UK opposes, rather than what it supports.  “People love to define us, particularly our newspapers, by what we’re against in Europe. And it’s time we actually talked about what we’re for,” he says. “What we’re absolutely for is free trade, we’re for completion of the single market, we’re for a very competitive Europe. I think we should spend more time actually talking about that.

“And I have rarely met somebody who is a Eurosceptic who doesn’t want free trade. It’s something you can find common cause with virtually across the whole of Parliament.”

Livingston is keen to emphasise the potential benefits to the UK of the nascent Transatlantic Trade and Investment Partnership (TTIP), a proposed free trade agreement between the EU and the United States. While admitting negotiations towards the deal are not yet at the point “where the rubber hits the road”, he insists there’s been “a lot of progress”.

“If the intention is to do TTIP in the first half of next year, to basically reach agreement, that would be an outstanding achievement, it really would, given the scale of it,” he says. “And the level of ambition’s really big. Remember, it would be worth in excess of €100bn to the European economy, an ambitious TTIP. And even if you said ‘oh, that’s wrong by 30%’ – or 40%, whatever – at a time when we’re scratching around for 0.1%s of GDP, these are enormous numbers. £10bn to the UK – big numbers; worth pursuing.”

Although described by the US as a “companion piece” to the stalled Trans-Pacific Partnership (TPP), Livingston seems eager to differentiate the two, pointing to ex-WTO chief Pascal Lamy’s assessment of TPP as being “the last of the big old-style agreements”. TTIP, on the other hand, is “the first of the new generation of trade agreements”, he says, melding tariff reduction – which “in the old days would be the big thing” but is now “pretty easy and straightforward”; market access issues – “some of them will be reasonably easy, some of them will be tough”; and regulatory coherence – “that’s particularly the new thing”.

To illustrate the latter issue, Livingston recounts complaints from Europe-based companies both large and small that differences in the standard sizes of products between the EU and US are acting as a barrier to production for export. Indeed, he is at pains to counter the perception that TTIP will primarily serve the interests of big business, insisting that streamlining production will see benefits accrue both to small firms and consumers.

“People describe it as being about multinationals, when actually the people who will really benefit are the smaller companies and the consumers because they’ll get better prices because there’s one production line, more choice,” he insists. “And I think we need to talk about consumers more. You see some of the prices of things in Europe compared to the US, and there’s real opportunity.”

But it is the proposed inclusion of an investor-to-state dispute settlement (ISDS) clause in the agreement, which would allow foreign investors to sue national governments for violation of their rights under international law, which has perhaps done most to fuel concerns that TTIP will see large corporations handed overweening power. The European Commission, taken aback by the level of opposition to ISDS, has launched a three-month public consultation on the matter.

Similar clauses in various other trade agreements have seen the Slovak Republic left almost €30m out of pocket after a private health insurance company successfully sued the government there for rolling back a liberalisation of the sector enacted under the previous administration, and the Uruguayan and Australian governments sued by tobacco giant Philip Morris for introducing restrictions on branded packaging for cigarettes.

Livingston, however, insists such examples are “not a reason to not have an ISDS clause, but to have the right sort of ISDS clause”. He admits there are some “probably not great ISDS clauses around”, but argues a “correctly-worded” clause “with transparent processes” is necessary to protect investors from unfair treatment.

“Why do you need an ISDS clause? Because actually, action is sometimes taken in countries that need to protect investors, and if they don’t have them, it will make them more worried about investing,” he says. “Take, for example, Argentina’s nationalisation of oil assets without compensation – Repsol, for instance. Was that fair or reasonable, or did they need to be protected? Because they couldn’t rely on Argentinian law - and so it helps.”

While suggesting that the impact of existing ISDS arrangements on governments’ freedom to act in the public interest has been exaggerated, Livingston stresses the need to ensure TTIP features a “tighter, better, more modern ISDS clause”.

“Some people oppose ISDS clauses because they say ‘ISDS clauses are the end of public policy’; ‘it will mean the end of the NHS’; etcetera,” he says. “But there are all these ISDS clauses already, and we haven’t had it. What ISDS clauses should cover is discriminatory action against foreign players in the marketplace and the expropriation of assets. It’s not meant to cover genuine public policy issues.”

As for his own future, Livingston is characteristically open-minded. He will still only be 50 by the time of the General Election, and with a stint in government to add to his decades of business experience, the Scot will have the world at his feet. After 2015 will he carry on as a minister or opposition frontbencher? “I genuinely have absolutely no idea,” he replies, before adding: “But then again, I had absolutely no idea I’d be doing this job a year before, frankly a month before. We’ll have to see. They may not want me on the frontbench. I’ll have to wait till I’m asked.”   




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