ANY QUOTES USED MUST BE ATTRIBUTED TO MURNAGHAN, SKY NEWS

DERMOT MURNAGHAN: Time now to take a look through the business pages of today’s papers and I’m glad to say I’m joined now by the former Conservative Chancellor, Lord Lawson and by Roland Rudd, recently named the most powerful PR man in the country and chairman of the think tank Business for New Europe. Gentlemen, a very good morning to you and thanks for taking the time to peruse the business pages and Lord Lawson, you kick us off with a story that been obviously dominating for a couple of weeks at the very least and we know will go on for many weeks and months to come, the issue of Barclays, Libor and, the issue you’re looking at, whether Bob Diamond should take his whole pay off or not.

LORD LAWSON: Well I think clearly he shouldn’t. He has been obliged to resign because he was at the head, he was responsible for a culture in the bank where things happened that should never, ever have happened and also there is another thing too. He is an extremely formidable character and incidentally, Barclays is not the only bank that has misbehaved, don’t run away with that but we’ll learn about others. Nevertheless, he is responsible for Barclays and also during that time the Barclays shareholders had a very lousy deal, he hasn’t delivered value for shareholders and he has been presiding over a serious culture which I think means the whole banking system in this country needs to be reformed.

DM: Okay, but just on the pay off, Roland Rudd, we heard Lord Lawson there and I think most people would agree but we saw the wrangle that it took with Fred Goodwin to cut his huge pension which he was legally entitled to. Do you think Bob Diamond should say okay, I may be legally entitled to this but in actual fact it’s better just to let it go?

ROLAND RUDD: Yes, I do. The difficulty for Bob Diamond is that the facts don’t look good as Lord Lawson was saying, in the sense that since he went on the board the share price, if you put a pound into Barclays when he went on the board it is worth about 30p today and during that time he has taken out about £120 million. Now it’s very difficult for anybody to understand – I think you have to give him credit for ensuring that the bank wasn’t bailed out by the government and I think he did take some quite big bold decisions but clearly it’s too much and I think the board will be wanting to ensure that doesn’t happen.

DM: So with your PR hat on, if you were advising Barclays, clearly they have taken a lot of reputational damage here, this would be part of the healing process, would it not?

RR: Yes, unquestionably, and they have to ask him to take less and they have to ensure that he takes less and I suspect he will want to take less because he loves living in Britain, it’s great that he has actually devoted his career to Britain and if he wants to work in Britain again he needs to ensure he doesn’t take that sort of money away.

DM: Lord Lawson, you said of course others are in the firing line, it’s just Barclays whose head was put above the parapet first. Do you think the same thing then should apply, the same rules should apply to other banks who are caught up in this Libor fixing scandal?

LORD L: Yes, I do and I don’t see why not. I think it is an appalling scandal, anyhow it has come out now and a whole lot of things have to be done and that should affect all the banks, absolutely, not just Barclays, and all the people who in positions of high responsibility.

DM: So a lot of heads could roll?

LORD L: A number of heads could roll, we’ll have to see the facts. Obviously we can’t prejudge it but other banks, and not just other British banks incidentally, there are foreign banks involved.

DM: That’s a fair point.

RR: Just very quickly, I think one of the big differences with this is that at the other banks, that Lord Lawson quite rightly talks about, it is at two or three levels below the senior management and I think that is different from Barclays where it went right to the top.

DM: Okay, now your first story you’ve chosen for us Roland, Norway flies the flag for a life outside the European Union. Are you suggesting something there?

RR: No, I’m not actually. It’s a wonderful story and it says how fantastic Norway is doing but buried at the bottom it has got a few salient facts, notwithstanding the fact that anything Norway wants to do in terms of the European Union, in terms of any trade at all, it has to apply rigorously to the single market rules and in fact what it’s known as, it’s known as facsimile membership because in fact they have to do exactly what the European Union asks them to do but they have absolutely no say in it. So it sounds incredibly attractive and indeed they pay less, in all it’s about half a billion as opposed to us with ten billion but of course even if we were part of the European Free Trade Association, we would still be paying two or three billion and we would be asked to do everything we’re asked to now with no say.

DM: How about that, Lord Lawson, I mean if you did that kind of thing you’d still have to jump through the hoops but you don’t have a seat at the table.

LORD L: Well there are two quite separate things. There is the Norwegian formula and there is also the question of whether we’re inside or outside the European Union, we don’t necessarily have to have the Norwegian formula and I think there is a, I can see going ahead a real crunch decision point for this country because if you look at what is happening to the eurozone, that disaster area, that fiasco, they are saying and they now think is true, they have realised belatedly, the only way you could possibly make the European monetary union, the eurozone, work is if you have a full political union, a United States of Europe, so the European Union is going to have to go one of two ways. Either they are going to have to say well, we’re going to go all the way to a full blooded political United States of Europe, in which case we would have to come out as there is no way we could be part of that. Or else, which is more likely and more sensible I think, they say we are going to abandon the single currency, abandon t

he European monetary agreement and then say where did we go wrong and have a new version of Europe of which we would be a part.

DM: But that Norway story could push us even further because there is a real head of steam up in this country, we can’t deny it, in questioning in some cases our very future within Europe, and saying okay well the Norwegian model is wrong, we’ve got to get even further distance from them.

RR: That’s true and there are a lot of people who think we could be like Norway and all I’m pointing out is I think the attractiveness of actually being like Norway – I mean can you imagine, you think of the rows now when Britain is asked to submit to EU wide regulations or rules because of the single market, imagining that was happening when we had absolutely no say in them? I mean there are some very important energy rules actually being thrashed out now amongst the Council of Ministers. Norway, when those rules are actually made up, Norway will be told to implement them in full, no questions, no ifs, no buts, in full. Britain would never like that …

LORD L: No, we don’t want the Norwegian model but there are others, the Swiss model actually is a much better one.

DM: Well I want to talk about models, different models for the set-up of the House of Lords, you picked this one up Lord Lawson – Lords test of mettle for David Cameron, crucial votes coming up later this week. There is a letter actually that the Observer are reporting, a couple of colleagues of yours opposing this, we’ve got Lords Lamont and Howe writing amongst others, saying this is going the wrong way. Why haven’t you signed up to that letter?

LORD L: Well I never have signed up to round robin letters, I always do my own campaigning as an individual, that’s my but it is, it’s quite extraordinary that we should be going towards this absurd reform, so-called reform which is actually the abolition of the House of Lords and its replacement by a chamber of people elected because they are on a party list, decided by the political parties who are politicians who are not good enough to get in the House of Commons, that’s why they are …

DM: Well I suppose you proved you were good enough to get in the House of Commons first before you went there.

LORD L: So that is what they are proposing as a group and it is complete rubbish, it is highly damaging and I hope that the so-called programme motion, the timetabled motion which will be voted on I think on Monday night after the second reading, I hope it will be defeated.

DM: But what about this issue with the coalition partners, the Conservative’s coalition partners, the Liberal Democrats, I mean a lot of Conservative back benchers want this to be the point at which David Cameron says to Nick Clegg we’ve got way more MPs than you, we’re calling the shot here.

LORD L: This is a major constitutional issue and nobody would dispute that. How you set up your parliament, how you have your second chamber of a parliament, that is a major constitutional issue and there are a large number of Conservative MPs who object to it on constitutional grounds. They also say why should we be pushed around by the Liberal Democrats? They want it for reasons which are not entirely clear, maybe they think it would advantage them or not, but we’re not going there.

DM: Roland Rudd, I’m thinking about your PR perspective on this, there are those that say this is clearly not the most burning issue in the world, certainly not even within the United Kingdom and other elements said from a government point of view it’s better to be discussing this than the handling of the economy or relations with the EU or how we regulated the banks.

RR: I think that’s a very fair point and I think most people would be aghast that this is one of the key issues that is being debated at the moment. It clearly does not resonate with people in the way that clearly the economy does. Having said that, I can understand why Nick Clegg has made it so clear that he is not going to agree to the boundary changes, which obviously benefit the Conservatives, unless he gets Lords reform through because he has to be able to show that he is actually driving his own agenda and he is getting things through that he asked for.

DM: There are those who say it is a tactical error in PR terms in that it has enraged those that may have been thinking, on the Conservative side who may have been thinking it was in the Coalition Agreement, it was in our manifesto who now think we’re not going to have this kind of blackmail, so it’s counterproductive.

RR: There is a bit of that but there is also the fact that there are quite a few Conservatives of course that don’t want the boundary changes either so they are actually playing in a sense to them and they have a different view so it is quite a difficult threat to make.

LORD L: But there is another reason why the Conservatives would be ill advised, and I don't think they would wish to submit to this blackmail because there was a deal originally and the deal was that we have the boundary changes which are independently assessed by the Boundary Commission because they are objectively a fairer system than the present system. We have the boundary changes which do slightly benefit the Conservative party because the Conservative party was disadvantaged by the unequal size of the constituencies before, but we’ll do that in exchange for the referendum on the electoral system. If you accept that you blackmail for one issue and then if you try that again …

DM: We’re off air! We have to end I’m sorry, Lord Lawson, Roland Rudd, thank you very much.