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DERMOT MURNAGHAN: Now then, this week we’ll get the first estimate of how much the economy grew in the second quarter of this year. Economists are already predicting a small amount of growth, about 0.6% perhaps in the months from April to June, green shoots you might say but is the government doing enough to encourage growth, do the green shoots need a bit of watering? Well I’m joined now from Oxfordshire by the former Deputy Prime Minister, Lord Heseltine, and a very good morning to you. Well green shoots might perhaps be a bit premature but is the ground well enough prepared for them to appear?

LORD HESELTINE: Oh I don't think there’s any doubt that the mood has changed. All the indicators are moving in that direction and for me the most interesting one is some of the confidence indicators which are moving positively so whether you have actually got a percentage statistic that says how the thing is up by one or two percent, which it probably is at the moment, is one thing but the mood which is the mood of confidence, which is the essential prerequisite of recovery, that undoubtedly is improving.

DM: What do you put that down to, the mood? I know it is indefinable and politicians debate it but is it government activity or is it the fact that the sun’s shining and Britain seems to be doing fairly well at sport at the moment?

LORD HESELTINE: Doing miraculously well at sport but I think it’s one of those things like an elephant, it is very difficult to define but you know it when you see it. I don't think you can allocate responsibility, something changes, people suddenly feel that there’s an opportunity as opposed to a threat and the mood is pervasive. That I think is happening and, my word, not before time.

DM: We ask about government action and you mentioned it there in your first answer of course, action on the housing market, the buying scheme that the Chancellor – and the money hasn’t become totally available – it is the housing market that seems to be leading the charge but worries must arise there about whether another unsustainable boom is building.

LORD HESELTINE: Well the Chancellor is as aware of that as you and I are and so he will take that very carefully into account and I’m sure the new Governor will. We’ve learnt some harsh lessons but on the other hand, it is widely accepted that the housing and construction industries are relatively easy to stimulate and if you are looking for recovery, want to push the economy, not surprisingly look at that.

DM: But the question arises doesn’t it, what happened to rebalancing given that the stock market is up as well, house prices are moving up, it looks an awful lot like the 1980s and indeed the early 2000s.

LORD HESELTINE: I don't think you can fairly say that. If you look at public sector jobs which have gone and the very much larger number of private sector jobs that have more than replaced them, you realise there is a rebalancing going on. I have a feeling that there’s more to come. I know some of the fields I’ve been working in for the government, the plans that we’ve put in place are unfolding – perhaps a bit slower than we wanted but they are still unfolding and there is more to come, so I take a rather more optimistic view about the prospect of rebalancing and one thing I know for sure is that the Chancellor personally feels very preoccupied to this. It is easily said, not all that easily done and there are forces at work in Whitehall that are not as keen as he is but there’s no doubt at all in my mind that he has a strategic view about the need to rebalance.

DM: And in particular, you touched on it there, the No Stone Unturned report, a lot of that was in the budget that the Chancellor presented but there is a sense, isn’t there, that well, perhaps, we don’t have to do all these things if the economy is turning anyway. Would your warning be, well don’t ignore the structural changes that need to happen because they will benefit us for the long term?

LORD HESELTINE: No, I would be appalled if they were to take that attitude and I am not for a minute suggesting that they are going to but my report was designed to try and deal with some of the long term deficits and deficiencies in this country and it would be very worrying if the palliative of a short recovery were to remove the urgency. I happen to think that the reforms that Michael Gove is doing have been necessary for decades, perhaps a century. I think what Iain Duncan Smith is doing on the employment field is a world solution that is very urgently needed but I also think that injecting into the psychology of this country the need for growth as a priority and working out in detail, department by department, how to get it is long overdue and part of that process is frankly to re-excite and re-empower the energies of the great cities of this country which made us what we were and which have become increasingly subjected to a dominance, an overbearing dominance in my view, of the capital city London.

DM: And on that issue of confidence and back to that mood which seems to have turned within your own party, so much so that some on the back benches, some senior Conservatives it must be said saying perhaps we should decouple from the Liberal Democrats sooner rather than later, the Prime Minister this morning saying he’d like to see the party unshackled.

LORD HESELTINE: I’m sure that every party wants to be able to do what it wants to do but I think the Prime Minister as a man of principle, would be very wary of jumping, so to speak, at the first flush of good news. The public would see that as a rather opportunist gesture and I think it would be out of character with the integrity that the Prime Minister who initially took the view – he could have gone for a minority government and many people, perhaps even me, believed that was the right option but he didn’t, he put the national interest at the forefront and I think he has been much respected for it. I don’t myself think the public would admire somebody who the moment the weather looked a little bit more favourable, sought to exploit that and I think he is committed to 2015 and I think he will win the election, I believe, then but he will do it on principle and with his integrity intact.

DM: Lord Heseltine, great to talk to you as ever, thank you very much indeed for your thoughts.

LORD HESELTINE: Thank you very much indeed.