ANY QUOTES USED MUST BE ATTRIBUTED TO MURNAGHAN, SKY NEWS

DERMOT MURNAGHAN: Now let’s continue examining today’s crucial referendum in Greece, what effect could the result have on the rest of the eurozone and on the UK economy?  Well I am joined now by the former Conservative Chancellor, Lord Lamont, a very good morning to you Lord Lamont.  Our thoughts first of all have to be with the Greeks themselves in all this doesn’t it?  The vast majority of them have done nothing more than want to work quite hard and want to look after their families yet whatever happens in this referendum, yes or no, is there a good way out for Greece?    

LORD LAMONT: No, I think whatever happens the result is going to be extremely messy.  The odd thing is in this referendum whether you vote yes or no, both sides are saying stay in the euro, it’s a question of on what terms so it’s very difficult to know what difference this is actually going to make.  

DM: How do you think the government has handled it then?  Syriza, a radical party elected six months ago with all these high hopes of renegotiating things, is it ending in tatters?

LORD LAMONT: Let me just say this, Syriza’s politics are not my politics, I’m a Conservative and they are radical left, they have done many things I don’t agree with but having said all that, I think an awful lot of the fault also lies with the European Union and with the IMF.  I think they have made the big mistake and the big mistake was in 2010 when they did not write off a larger proportion of the Greek’s debt.  Now you may say that’s a strange thing for me to say as Conservative but it is just being realistic.  This debt cannot and will never be repaid and when people say, oh the Greeks are playing to the public, that’s exactly what the Germans are doing, the Germans daren’t admit that the debt which they actually underwrote to Greece will never be repaid, they can’t admit that to their voters and actually I think it’s time to be real. The IMF, their chief economist Mr Blanchard, has actually been saying this, that they ought to write off a larger part of it.

DM: So do you think a no vote would bolster that case and it actually might happen?  

LORD LAMONT: Well unfortunately the whole thing has been so provocatively handled and there is so much ill-will on both sides that I don’t think it will necessarily.  I think if there’s a no vote there is a great danger that the banks won’t reopen, there will be a long period of negotiations.  The Greeks are saying oh no, there will be a settlement immediately but I very much doubt that and if the banks don’t open the Greeks will have to introduce a parallel currency, issue IOU’s which will be very close to having the Drachma reintroduced, so this could be very, very traumatic.  

DM: But is it a small enough economy and far enough away for there not to be a great backwash for the UK economy or could there be a slow knock on effect, it effects the whole of the eurozone and then of course the eurozone will be affected?   

LORD LAMONT: If it affects the eurozone it will affect us.  The eurozone is saying it won’t affect them, we must hope that they are right, they are in possession of the facts but can they be absolutely sure about it?  It will affect the eurozone I think in the longer run because the next time there is a crisis, let us say over Portugal, people will wonder well, is Portugal going to go the same way as Greece?  So if Greece does leave I think the credibility of the monetary union will be severely undermined.  But what I think this crisis illustrates is a very important political point, that if you have a monetary union, a single currency without having a political union, it can’t work, it’s completely at odds with the idea of national democracy and national elections.  People might say well, the Greek people are voting against the rules but what’s the point of having elections if can’t vote and change the rules?

DM: But to follow that analysis through, political union could take decades, if it ever does happen.  If it doesn’t happen well then the eurozone can’t continue to exist, that it must ultimately fall apart.  

LORD LAMONT: Well it might stumble, stagger, muddle though.   

DM: As long as the Germans are ultimately prepared to see outflows of funds from their country.

LORD LAMONT: Well that is the logic of the euro, that the stronger countries should aid the weaker countries but that has been resisted from the very word go and I came across this when I was negotiating our opt out from the single currency in 1991 and the Germans were most insistent, there must be no bail outs.  There actually was a no bail out provision in the Treaty for the single currency but of course when the Irish crisis came along and the Greek crisis came along and the Portuguese crisis came along, what did they do?  Set out one, two, three bailout funds completely in contravention of the Treaty.

DM: And on the political side of this referendum and its effects on the UK, how do you think it has been absorbed campaigning on both sides, or about to campaign, in our referendum, a different issue but still concerning the European Union?

LORD LAMONT: Well I think it could affect in this way, that there will have to be more and more integration in the eurozone as we’ve just been discussing and that may turn some people off in this country.  Also I think if there is complete chaos, say there’s a breakdown in order in Greece and I very much hope there won’t be, but if there were I think not just the Greeks but I think the eurozone would actually get some of the discredit for this and this could affect the way people look at Europe in a referendum in this country.

DM: A couple of thoughts lastly Lord Lamont on the budget, three days’ time, on Wednesday.  Do you think the Chancellor should take the first opportunity in this parliament to cut the higher rate of income tax?

LORD LAMONT: Well I know I was quoted as saying that but it’s not quite what I said.  I just was asked the question, do I think he should cut it?  Well I think he should cut it but I didn’t say he should cut it in this budget but I think it certainly should be done at some point.  But the Chancellor is going to be in this budget I imagine going further down the road of reducing the deficit, he is going to be by all accounts introducing some relief on inheritance tax, he is cutting welfare at the same time.  He’s got to balance this politically, if he is being hard on welfare he is going probably to act on non-doms or something else as well, this might not be the time to cut the top rate of tax.  He’s got to do it at some point and it’s up to him but he’s got to get a political balance in his budget.

DM: And what about this issue that’s on the front page of the Sunday Times today, that he’s thinking about lumping the BBC with an awful big charge there, this exemption, this break you get in paying the licence fee when you are over the age of 75, making the BBC rather than the Treasury pay for that, it’s something like £650 million at the moment.

LORD LAMONT: Yes, I hadn’t heard of this idea before but actually I think there’s something for it.  There is an argument for saying the BBC should carry the cost of the licence exemption for elderly people. The BBC are in a situation where the licence fee income is shrinking, this will shrink it a bit further but I think they can make some economies.

DM: But people will  say this is the Conservative party being vindictive, we know there were issues after the general election with some of the coverage and some within the party think the BBC were less than fair or whatever and that this is payback.

LORD LAMONT: If it were done for that reason it wouldn’t be right but I don’t think that’s why it’s being done.

DM: Okay, what about the issue then of being able to allow the BBC to charge for the i-Player, this dodge that people have found I suppose, they don’t need to pay the licence fee because they are watching recorded programmes on a laptop, allowing the BBC to move into those areas?

LORD LAMONT: Well you are getting out of my … I do use an i-Player but I was about to say I don’t know how easy it is actually for them to charge for it and to make that fool proof.  I use the i-Player, I’m not that bad, I’m technologically backward but not that backward.  I wouldn’t much like having to pay for it but I daresay I’ll have to pay for it and lump it.  

DM: Okay, Lord Lamont, thank you very much indeed, very good to see you.