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Wednesday, 7 November, 2007

  • Newsnight
  • 7 Nov 07, 06:13 PM


oilrig203x100.jpgThe White House warned today that oil prices are "too high" as US crude hit $98-per-barrel. So are high oil prices all bad? With prices expected to breach $100 shortly and petrol at UK pumps now more than £1-per-litre, tonight we ask how the rising price of crude is affecting the geo-political balance of power. The International Energy Agency says world demand for oil will grow from 84 million to 116 million barrels per day. So how do we secure future supplies and from where?

Sir Ronald Cohen

We have an exclusive interview with Sir Ronald Cohen. A Labour donor and a close friend of Gordon Brown, he's the multi-millionaire city businessman who founded Britain's first private equity company, Apax. Earlier this year he warned that the growing wealth gap between rich and poor could spark riots on the streets of London. Now he has a book out about how to be a successful entrepreneur. We'll be speaking to him about his book, his relations with the prime minister, taxation, the ethics of private equity and more.


MPs are debating plans to extend the current laws on how long terror suspects can be held and questioned without charge. The government wants to increase the 28 day limit to 56 days but opposition parties say they aren't yet convinced this is necessary. Meanwhile pressure is building on the Metropolitan Police Commissioner Sir Ian Blair to resign over the shooting of Jean Charles de Menezes. Richard Watson will have the latest developments.

Welfare Reform

Is Britain failing some of the poorest and neediest members of society by creating a culture of dependency through the benefits system? This is a view which is gaining currency in political circles here and the model which has swayed them is Wisconsin. David Grossman has been to the state to assess the success of Governor Tommy Thompson's Welfare Reform model and look at why it has provoked such interest in the US and here.


Film director Ridley Scott talks to us about violence and gun crime here and in the States. His new film American Gangster opens here next week.

And don't forget our immigration special - click here to join the debate.

Welfare - The British Position

  • David Grossman
  • 7 Nov 07, 04:45 PM

The Conservatives think the public mood on welfare has changed. The big shift they think has happened as a result of last week’s revelations about the numbers of foreign workers employed in the UK over the past decade. The current official estimate is 1.5 million. Parliamentary answer 18 July 2007

Over the same period it appears that the number of welfare claimants has fallen hardly at all. According to the former welfare reform minister Frank Field:

"The economy has been growing each quarter since late 1992 but the numbers of working age claimants moving into work has been modest. I calculate the numbers have fallen from only 5.7 to 5.4 million. The government asserts the total is 4.7 million. The independent Statistics Commission has been asked to arbitrate.

"Yet, whatever the outcome, the spotlight will be on the failure of the £84 billion welfare to work programme.”
Frank Field MP - Daily Telegraph 3 November 2007

The big question that the Conservatives now think the public is asking is a simple one:

“How come all these foreign workers can find jobs in the British economy when so many British people seem stuck on welfare?”

Before the clock ran out on him Tony Blair was desperate to push through changes, perhaps sensing that he hadn’t done enough on welfare reform in the past. He appointed David Freud to propose radical reform. Mr Blair predicted this review would throw up some pretty difficult political challenges for the government.
He told the House of Commons Liaison committee on 6 February 2007:

“When we publish David Freud's Welfare Reform Programme.......there will be some quite difficult proposals in relation to how people come off benefit and into work - lone parents, people on incapacity benefit and so on.”

So it proved. The Freud report recommended a radical shake up of the welfare system. Contracting out welfare to work programmes to all sorts of organisations, including private sector providers, who will be paid by results.

Gordon Brown’s government has so far not fully embraced the Freud Report - Peter Hain MP, the Work and Pensions Secretary told an audience in September:

“I have yet to be convinced that David’s specific proposal based around 11 regional contacts, thereby replacing a one-size-fits all state monopoly approach, with a one-size-fits all private monopoly approach is the answer.” Peter Hain MP 12 September 2007.


This kind of welfare reform is already commonplace in the United States. Wisconsin led the way in the mid-90s.

Under the then Republican Governor Tommy Thompson the state cut out cash welfare benefits almost entirely, instead the money was spent on helping people find work. In his conference speech this year David Cameron praised what had been achieved in Wisconsin:

“....where they've cut benefit roles (sic) by 80%, and the changes we will make are these: we will say to people that if you are offered a job and it's a fair job and one that you can do and you refuse it you shouldn't get any welfare.”

Having seen the Wisconsin system in action I have a few thoughts on the chances of introducing it in the UK:

1. In America it only worked because both parties signed up to it. Although the idea came from the Republican Party, it took Bill Clinton, a Democrat trying to connect with working class Republicans to sell it nationwide.

It is the first law of public service reform that the People who think they will lose out under any change usually have more motivation to make a lot of noise.
This includes not just the recipients of welfare under the current system but also the public sector employees (and their unions) who administer the current system. If all political parties are signed up to the changes then there is less chance that one or other party will backtrack in the face of hostile headlines.

2. In America the politicians managed to change the way the public thought about welfare. It was no longer seen as cruel or mean to cut someone’s welfare in order to force them to get a job. In fact thinking changed 180 degrees. It was actually seen as cruel to keep someone on welfare a day longer than necessary. The only way out of poverty is through work, not bigger, more generous handouts. Although many British voters have started to ask questions about welfare it’s by no means clear that the link in the public’s mind between cutting benefits and “meanness” has been broken. If people suspect that the motivation for welfare reform is purely to save money it becomes a far harder political sell. It only worked in the US because voters became convinced it was a better system for everyone including the welfare recipients themselves.

3. The American system relies on a huge and well-resourced charitable sector. In Wisconsin I went to the amazing Open Door Cafe at the Cathedral of St John the Evangelist in Milwaukee. Here volunteers provide over 200 hot meals a day, six days a week for homeless people. It appeared to me that many of the people who use the service are not really in a position to get a job however much the welfare system “incentivises” them.

They have in the jargon “multiple barriers to work” for example mental health problems, drug or alcohol dependency, and are often illiterate. Someone needs to help these people if the state withdraws from providing a universal right to welfare benefits. All British political parties say they want to beef up the voluntary sector in the UK but we are nowhere near American levels of charitable action.

What happens now?

The Conservatives are set to publish their proposals on welfare reform early in the new year.

The government’s green paper In Work Better off: Next Steps to Full Employment was published in July. The consultation period on it has just finished. It’s not yet clear when and even if the government will introduce a new welfare reform bill.

Watch David Grossman’s film about Welfare in Wisconsin here

The Second Bounce of the Ball by Ronald Cohen

  • Newsnight
  • 7 Nov 07, 12:52 PM

In the latest entry into the Newsnight bookclub, businessman Sir Ronald Cohen offers budding entrepreneurs guidance on how to approach the challenges and opportunities ahead of them.

Sir Ronald Cohen speaks to Newsnight on Wednesday, 7 November.

secondbouncecover_203.jpgExtract from The Second Bounce of the Ball: Turning Risk into Opportunity by Ronald Cohen published by Weidenfeld & Nicolson at £20.00.

There is a cliché that entrepreneurs are born, not made. If I think back on my experience, I know this is not entirely true. Yes, all entrepreneurs share certain personality traits: a high level of confidence and high levels of optimism, energy and determination. But the people who become entrepreneurs come in all ages, shapes and sizes, and their entrepreneurial skills vary considerably.

There has been a significant increase in the number of entrepreneurs during the three decades in which I have been a professional investor. This speaks not so much for a sudden growth in the gene pool of ‘born’ entrepreneurs, as for the opportunities that have opened up for all kinds of people to use their entrepreneurial ability.

Continue reading "The Second Bounce of the Ball by Ronald Cohen"

What do you want this Wednesday?

  • Newsnight
  • 7 Nov 07, 10:03 AM

Today's output editor is Carol Rubra:

Good morning,

ball_203.jpgThere are a few interesting things around - what do you think we should lead on today? Cancer, party funding, 28 days detention, something else?

We also have an exclusive interview with Sir Ronald Cohen. He's a Labour donor and close friend of Gordon Brown, a multi-millionaire city businessman who founded Britain's first private equity company. His book on how to be an entrepreneur - called The Second Bounce of the Ball - is out this week. What would you like to ask him?

Welfare Reform - David Grossman has been to Wisconsin to look at the state's influential welfare reform model. The policies there became a template for the rest of the US and now some here interested too.

Who else should we be talking to? What else should we be doing?


And don't forget our immigration special - click here to join the debate.

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