ANY QUOTES USED MUST BE ATTRIBUTED TO MURNAGHAN, SKY NEWS

DERMOT MURNAGHAN: Let’s restart by taking a look at the Sunday papers and I’m joined now I’m glad to say by the boss of the world’s largest advertising company, he is none other than Sir Martin Sorrell, Conservative MP and George Osborn’s right-hand woman Amber Rudd – you liked that didn’t you? – and the editor of the Financial Times, Lionel Barber. Well a very good morning to you all and let’s start with you, Sir Martin, and this might be music to your ears this story you’ve chosen, real incomes up.

SIR MARTIN SORRELL: Well real incomes up but for lower incomes not for the higher incomes and maybe the slump is ending. I just came back from China, I spent a week in China, in Beijing and Tianjin, a group of CEOs there, a lot of them Europeans and they certainly are prepared for another four to five years of hard economic numbers in Western Europe so I think the general view, this is a bit of a surprise. Maybe George Osborne is not as wrong as others think.

DM: I was going to say, maybe it might be more music to Amber’s ears because of the amount of money you don’t make for the United Kingdom, it’s not the biggest market in other words is what I’m saying, I mean you are betting aren’t you, gambling on the fact that the economy has got to lift soon or politically you’re not going anywhere are you?

AMBER RUDD: Well I’d call it more of a strategy than a gamble perhaps, Dermot, but this is excellent news. Of course we have to be cautious, there is no room for complacency but there are good signs that next year, that’s exactly what we want to see, real incomes going up and I’m particularly concerned about making sure that people on the lower incomes benefit from that and so far this is what the projections are going to be for next year, so it’s encouraging, it’s encouraging.

DM: But I mean Lionel, it takes a while to feed through, what are the indicators, what are the encouraging indicators we’re looking at? Inflation of course going down and hopefully continuing to do so, what else is in there?

LIONEL BARBER: Well, it looks like people at the lower end, and we describe that as people under £50,000 a year earnings, will have more money in their pocket. It’s also true that the employment numbers this week were quite encouraging, more people in work and if you are in a double dip recession – as people claim, according to the statistics, I’ll come to them in a minute – you wouldn’t expect those numbers to be so favourable. I think that much depends on the external environment, in the eurozone for example, we are still very exposed there, however there is some good news coming out of the eurozone with the ECB, European Central Bank, now has got German backing, secured German backing for intervention in the bond market so interest rates are coming down there and the promise too of some serious reforms in the peripheral countries. So I think there is a little bit of optimism but Martin’s point is really correct, we’re looking at slow growth for some time in Europe.

SIR MS: It’s interesting, in China UK was separated a bit from continental Europe, people were more gloomy about France, Italy and Spain, not Germany and not so much the UK. The UK actually seems to be in a little bit … while I was there they announced their $2 billion investment so there is some good news happening and I think the UK has been insulated by not being in the euro at least.

DM: But I mean the great unknown within all this, Martin and Amber, you’ll know this as well, is okay people might have a little bit more money in their pockets, the thing is psychologically how confident do they feel and what will they do with it? Will they use it to pay back debt or will they go out and spend it?

AR: It is moving in the right direction so you are absolutely right, we need more confidence back in the market, back with people, back with companies, hopefully they will spend their money but this is the start of it I believe.

DM: Politicians like you will have to start talking about talking about green shoots and you are very, very wary about that.

AR: Very, very wary of that phrase but I like reading it when other people say it!

LB: Just one last point, the banks have got to start lending. Still credit channel’s blocked, that’s the key and that’s about confidence.

DM: Let’s move on to another story, we’ve got to look at this, Amber, Hillsborough, the scandal of Hillsborough, the cover up, what’s been going on for so long.

AR: Yes, I am very pleased that the Independent have run this on their front page and then for several pages in it. It was an incredibly moving moment in the House of Commons this week, I’ve been a Member of Parliament for two and a half years and it was probably the most moving moment. It was straight after PMQ’s, everybody stayed and waited and the Prime Minister got up and read this statement and the House was absolutely silent, you could have heard a pin drop, and completely united. Andy Burnham made a very compelling statement as well, he’d led on this before the Prime Minister, so it was really moving. It was about time and it was a shocking description of the events.

DM: Well the front page of the Independent as you say refers to a criminal disgrace, is it your view that there has to be continuing investigation and, if necessary, criminal prosecutions?

AR: I certainly think so. The scale of the cover up and the lies that were told sound absolutely, well criminal to be honest, so I hope that is looked at.

DM: Another big story on the front page of the Mirror and indeed other papers, Lionel you’ve been looking at this and talks of a criminal prosecution in this one as well, the pictures of the Duchess of Cambridge.

LB: Well it appears to be the case that Buckingham Palace and Prince William have decided they want to pursue this through the courts against the publishers of the photographs, that’s a French magazine. We’re told that photographs will be published tomorrow in Italy and today in Ireland, an Irish newspaper published the photographs. Now I think this is a gross intrusion of privacy, there is no parallel whatsoever with the pictures that were taken on iPhones of Prince Harry, that’s utterly different circumstances and I think the Palace is absolutely right to go ahead with prosecution.

Sir MS: Will the litigation be against Mondadori because [inaudible] both the French and the Italian?

LB: Mondadori of course being owned by Silvio Berlusconi, who we know does have a record in cavorting shall we say.

Sir MS: And according to another story may be a candidate again to come back as Prime Minister.

LB: He may be a candidate but whether he will actually …

Sir MS: But it will certainly generate some publicity for him.

LB: My money is on Mario Monti.

DM: Lionel, I just wanted to ask you as a newspaper man, it must be a tough editorial conference where the FT decided not to publish them but seriously, do you feel the hands and the lenses of the British tabloids have been saved by Leveson or that they just wouldn’t have published them anyway? We know that Lord Justice Leveson is writing his report at the moment, they don’t want to stray into this territory even if they were tempted.

LB: Well it’s interesting that Richard Desmond, who owns the Daily Star and has an interest in the Irish newspaper, has come out very, very strongly against publication by the Irish editor. I think in people’s minds, in editor’s minds, Leveson lurks or looms but actually my view is that British editors fifteen years ago, ten years ago, would not have published these photographs. They would have recognised that there is no public interest whatsoever and it is a gross intrusion of privacy.

DM: They published photographs of Princess Diana exercising in the gym.

LB: But the point is that the French would have done it anyway as well and the big issue when you litigate, which I think we are all agreed is the right thing to do, the Palace or whatever is doing the right thing, is you give the whole thing more oxygen and you encourage more interest so there is this balance, because we don’t know if any more magazines will take it, and it is very difficult on the web as you know to eradicate this stuff, in fact you can’t.

AR: I just want to add that I think it is an absolute disgrace, to get my comments in there, but I also think it is sexual harassment and that is a really unpleasant addition to the fact that it is intrusion of her privacy.

DM: Martin, for your next story you are looking across to America, everyone is looking across to America. Is this secret weapon, or not so secret weapon of the Democrats, Michelle Obama?

Sir MS: I remember seeing Mr Romney’s wife at the convention, the clip on the BBC news the following morning was ‘I want to talk to you about love’ whereas Michelle’s was a much, much, much subtler and cleverer message which is ‘My husband is not interested in how much money you earn, he is interested in what contribution you are making the world a better place.’ She is Obama’s not so secret weapon and her speech at the convention was extraordinarily strong. In fact Biden’s speech was very, very strong and all the supporting speeches – Clinton’s speech was excellent, maybe a forerunner for Hillary Clinton going in 2016 and that’s part of what was going on there but some really interesting speeches and I think the gap is going to widen even further. I think that Obama will win by more than …

DM: Just that issue of the political wives having to get involved. I remember way back when …

Sir MS: What’s wrong with that?

DM: Well Hillary Clinton is a powerful woman in her own right, Samantha Cameron is, can we imagine that in British politics, of her standing up and saying more or less ‘I stand by my man’? Is there something strange about it to a British ear?

AR: I have very mixed feelings about it because on the one hand these women are making fantastic speeches on behalf of their husbands, why not, great, but I also like to see women getting up and making speeches on behalf of themselves to stand for election.

LB: But Michelle is, I mean she is what, Harvard Law School, Princeton, she is very, very strong, she is cut from the same cloth as Obama, she is there because they are a couple, they are very much like the Clintons I think.

AR: But you are electing …

LB: It is a somewhat newer phenomenon. I was in America all last week and I watched all the speeches and she was phenomenal. A friend of hers said that she had spent three months preparing for this speech, every auto cue, all the camera angles, fantastic.

DM: And then it looked so natural didn’t it?

LB: She practiced but the point is that the First Lady’s role has changed. If you think Betty Ford, Richard Nixon and Pat Nixon, these people were in the background. Now it’s a package. And by the way it is not necessarily that Mr Obama is going to win by a country mile.

Sir MS: We’ll see. We’ll have a lunch on that one!

DM: Well that will be interesting to be a fly on the wall. Amber, is this the green shoots, in the Times business section, good news indeed on the economy. Is that good news indeed question mark?

ARR: Yes, it’s a little cautious but again it is the same theme of pointing out in the Sunday Times, David Smith a very great economist, pointing out that there are some optimistic reasons to look at the economy and he is particularly focused on the narrowing of the trade deficit which is so interesting, which goes to the health of the economy. He is also saying we need to look beyond Europe, we are beginning to export much more successfully outside Europe and again that is looking to the long term strategy I think of trying to restore the country to full economic potential.

DM: Okay, I think before we get the last one in here, Lionel, again in the business section – this has turned into the business pages review – this huge merger between BAE Systems and EADS, what’s it worth? 30 billion it says there. The rise of the £30 billion monster.

LB: Well this is the biggest business industrial story for at least a decade. BAE is one of our top companies in the defence area and what’s so fascinating is that they’ve decided more than ten years ago to make America their most important market and in effect they have said we can’t make it, we’re throwing in the towel, we’ve got to merge with the Franco-German industrial giant which makes Airbus, the planes, EADS. So the question for me is, what’s the impact on jobs, what’s the impact on technology for this country and also, are we going to have a serious say in running the new giant? Where are the headquarters going to be, is it London or is it going to be in Toulouse and what role is the French government going to have? At the moment they’ve got a veto …

Sir MS: Who’s going to run it?

LB: Well it’s pretty clear it’s going to be a German paratrooper, ex-paratrooper, by the name of Tom Enders, who is the driving force behind this merger but this is going to be a very, very important story to watch, very interesting what the government, the UK government, decides serves our national interest and whether this company is actually going to …

DM: And potential for job losses in this country, a huge employer?

LB: And are the French who are at the moment raising obstacles to closure of plants in …

Sir MS: What would you recommend Lionel, if you were the investment banker or advisor to …?

LB: Well fortunately I am not an investment banker, I’ve got a good job as editor of the Financial Times.

DM: But what would you have done?

LB: Watch this space, we have got a big serious plan for Britain, a plan for Britain on the economy tomorrow, kicked off tomorrow by Larry Summers and then we’re going to have a big view on …

DM: A teaser. Sales of the FT will shoot up tomorrow! Thank you all very much, it’s good to see you, we’re out of time there.