ANY QUOTES USED MUST BE ATTRIBUTED TO MURNAGHAN, SKY NEWS

DERMOT MURNAGHAN: Well the Prime Minister was accused last week of having no industrial strategy, that came from the Labour leader Jeremy Corbyn.  It’s after the news that thousands of jobs are to be lost in Britain’s steel industry as world prices have collapsed by more than half.  In just a moment I’ll be speaking to Vince Cable who was until May of course the Business Secretary but first I’m joined from Oxfordshire by the former Deputy Prime Minister, Lord Heseltine, a very good morning to you Lord Heseltine.  What’s happened to the steel industry?  Does it seem we are now back to letting market forces alone dictate our industrial strategy?  

LORD HESELTINE: Well if you ignore market forces the chances are that you will have an industrial strategy based on supporting yesterday’s industry.  The market is unstoppable and invariably it wins.  The difficulty is for governments to help the industries keep up with changing opportunities and this means of course ensuring the education system provides the standards, the skills, the training system provides the skilled people, that the research budgets of academia and industry are keeping ahead of where we are and that the government is looking comprehensively at what governments can properly do and subsidising yesterdays industries is a pretty dangerous thing as we’ve found in this country at huge cost over the last 50 or 60 years.  There is a world shortage, I’m sorry, over-supply of steel at the moment and so trying to sustain individual plants is a very expensive and questionable activity.  Very painful for the people who suffer but on the other hand, if you are going to lose your job this is probably as good a time because the number of new jobs in the economy today is one of the most exciting features of this economy compared with many others.  

DM: But is it necessarily about adapting to new industries?  This glut as you describe it in the world steel industry has been coming for some time, shouldn’t good governments see that coming and perhaps help the existing industries to develop niche products and things like that?

LORD HESELTINE: I’m sure that for example in the Automobile Council which Vince Cable who you are going to speak to in a minute set up, there will have been very long discussions on this subject because they are major steel users but then of course you have the complication of whether you produce the basic steel products or whether you are more concerned with the high end of the product range and I haven’t the slightest doubt that this matter has been very clearly discussed with industry and the government officials in the Automobile Council but in the end what this government is doing is creating more jobs at a faster rate than we’ve ever seen so that indicates that we’re going with the stream of where the demand is for British products.  

DM: But is it a strategy the like of which you developed during your time in power or is that just happenstance?  Do you detect, beyond the Northern Powerhouse, a fleshed out plan?  

LORD HESELTINE: But you see to me the Northern Powerhouse is one of the most exciting industrial strategies that we’ve seen in this country in my lifetime because although the headlines all talk about the Northern Powerhouse and the role of local government, in all the deals that are being done which I have obviously read with great interest, the role of the private sector is central and that has never happened in this country before.  There is now a real effective working partnership based on the local opportunities and the local strengths of the individual economies in the north, and it will spread throughout the rest of England, so that the industrial wealth creators are now a dynamic part of the way this economy is expanding and coping with tomorrow’s challenges. That’s never happened in my lifetime before.   

DM: And can I ask you, Lord Heseltine, about this issue it seems going right up to Cabinet Level, about tax credits which are affecting your party.  It has been oft quoted at the moment, the Denis Healy adage, the Chancellor when in a hole should stop digging.  

LORD HESELTINE: Look, every Chancellor is in a hole at some stage but if they are going to be great Chancellors they need to know what’s the nature of the hole. Now the nature of the hole is that the economy is not delivering anything like enough wealth in order to sustain the existing fabric of society, that’s the hole. George Osborne has committed himself to filling the hole over a period of time, in the course of this parliament and it is not easy to do.  Whenever he takes a controversial step there will be these sort of rows, media fanned of course, and the trick of the Chancellor is to have the guts to see it through.  Of course if he wants to make adjustments because the facts indicate there is a problem as opposed to the pressure groups, then he is Chancellor and he can do that but it would be quite wrong for him every time the wind blows harshly to assume that the facts are against him.  Let’s see what the facts are, for example what’s going to happen to the increase in wages which are rising quite significantly.  There’s the new Living Wage which is coming on stream and there are all those people who will change their jobs, there is a possibility that there will be more overtime work with the expanding economy.  All of these factors are very difficult to predict in advance and so my guess is, I cannot know of course but my guess is that George Osborne will not automatically assume that all the scary forecasts are based on anything other than the natural flow of politics which is to criticise.

DM: Of course there is another dimension to this, Lord Heseltine, the House you now inhabit, a constitutional side to this and the fact that the Lords may try to kill this measure.  Your advice to the Lords who may think about doing that?

LORD HESELTINE: I think they are playing with fire.  There is a lot of discontent about the nature of the House of Lords and there is quite clearly a view in the House of Commons which has been expressed in several divisions about this measure and for the House of Lords to dig in and say, look, we won’t have it, will really raise the most profound constitutional issues which can’t be in anyone’s interests.  Let’s have no doubt, the Commons are going to win this issue one way or another but the most likely losers are the House of Lords themselves who will find their powers curtailed or stripped or whatever it may be and whilst there may be a short term boost to their morale on the Labour and Lib Dem benches, the cost to them and to the way in which our constitution works is unpredictable and I hope they will have the sense to recognise that this is a House of Commons backed measure and it’s not in the nature of our constitution for the House of Lords to resist that.  

DM: Great talking to you again, Lord Heseltine, thank you very much indeed for your time.