"Constitutional reform is a waste of time, pure and simple," John McTernan, the former adviser to Tony Blair, wrote in a thoughtful Daily Telegraph column last week. "It never actually achieves its avowed end of reconnecting the voters with democratic institutions." But Nick Clegg is taking no notice. Today he is publishing the government's plans for Lords reform. The Clegg announcement, and David Cameron's 90-minute appearance at the Commons liaison committee, will be the highlights in a busy day.

Here is the full list of what's coming up.

9am: The cabinet meets.

9.15am: Lord Hodgson publishes a report on how "red tape" stops people volunteering. The report was commissioned by the Cabinet Office last year.

9.30am: Inflation figures for April are published.

10.30am: Boris Johnson gives evidence to the Commons culture committee about the Olympics.

12.30pm: John Vine, independent chief inspector of the UK Border Agency, gives evidence to the Commons home affairs committee.

3.30pm: Nick Clegg unveils the government's plans for Lords reform in a statement in the Commons.

3.30pm: Jeremy Hunt, the culture secretary, and BBC presenters Sir David Attenborough and Brian Cox give evidence to a Lords committee on the BBC Trust.

4pm: David Cameron gives evidence to the Commons liaison committee. The session will last 90 minutes and focus on the economy and military intervention abroad.

Around 4.30pm: Chris Huhne, the energy secretary, is expected to make a Commons statement setting out carbon emission targets for 2025.

I'll also take a look at the review into the future of the high street being announced today, headed by Mary Portas. And there's bound to be some reaction to Liam Fox's declaration that he does not support the government's plan to enshrine overseas aid spending targets in law. Fox set out his views in a letter to Cameron which has mysteriously been leaked to the Times.

As usual, I'll be covering all the breaking political news, as well as looking at the papers and bringing you the best politics from the web. I'll post a lunchtime summary at around 1pm, and an afternoon one after Cameron has finished giving his evidence to the liaison committee.

Ministers have been heading to Number 10 this morning for cabinet. But Liam Fox chose to go in through a side door to avoid taking questions about his leaked letter about aid spending.

Mary Portas has been giving interviews this morning about the review into the future of the high street that she will be carrying out for the government. PoliticsHome has been monitoring them. Here are the main points she's been making.

• Portas claimed that up to one third of high street shops could be empty if closures continued at the current rate.

We're losing shops, we're losing retailers and what's ending up in some instances is we've got practical ghost towns. The end of 2008 we had about 6% shops vacan and by the end of 2010, that went up to about nearly 15%, doubling, and if that keeps up we'll have town centres and high streets with a third of our shops just missing.

• She said she would not use the review to attack large corporate businesses that own chains of shops.



• She said she would not just be talking to retailers. "It's not just looking at what's happening in the shops," she said. "I'll be looking at the town centre managers, talking to them, talking to the government, local councils – it is a really big issue."

Here are the headline figures from the inflation statistics.

• The consumer prices index rose to 4.5% in April from 4% in March.

• The headline rate of retail prices index (RPI) inflation fell to 5.2% in April from 5.3% in March.



• The underlying rate of RPI inflation fell to 5.3% in April from 5.4% in March.

Here is the Office for National Statistics release about the inflation figures. And here is the statistical bulletin (pdf) with more detail.

Women are suffering disproportionately as a result of the government's spending cuts, according to an academic report published today. Here's an extract from a Press Association story summarising its findings.

The study, carried out by women's groups and experts at the University of Warwick, warned that hard-won gains for equality were in danger of "unravelling" as a result of planned spending cuts, which may even trap more women in violent relationships.

Published jointly by the Centre for Human Rights in Practice at the University of Warwick and Coventry Women's Voices, the report predicts that cuts to adult social care, legal aid, benefits, and public sector pay freezes will all have a greater impact on women than men.

The eight-chapter report, billed as a snapshot of the situation in Coventry in March, concluded that planned and potential cutbacks will hit women hardest and may have a negative impact on their human rights.

Co-author James Harrison, of the University of Warwick's Centre for Human Rights in Practice, said: "This assessment is a projection of what the spending cuts might mean to women.

"It uses Coventry as a case study but the findings are relevant to the whole of the UK."

Dr Harrison added: "Public authorities, both nationally and locally, have legal obligations under the Equality Act and the Human Rights Act to promote equality and protect human rights.

"They need to take these obligations very seriously when making decisions about budget cuts."

You can read a summary of the Centre for Human Rights in Practice report here (pdf) and the full 64-page report here (pdf). Here's the key paragraph from the summary.

The report concludes that many of the spending cuts will have a disproportionate impact on women. Others will affect both women and men equally but will have a potentially damaging impact on certain groups of women (for example changes to benefits for disabled people which will affect both disabled women and disabled men). Taken together these cuts will lead to greater inequality between women and men in Coventry. For some women the combination of cuts may have a negative impact on their human rights.

In the light of Liam Fox's leaked letter to David Cameron about aid spending, Harriet Harman, the shadow international development secretary (and deputy Labour leader) has urged the government to legislate on this matter now.

Britain's overseas aid saves lives in the developing world, but it is also in our national interest to tackle the underdevelopment which can cause conflict. This Tory manifesto promise [to increase aid spending to 0.7% of national income by 2013] has been reiterated by the prime minister at international forums. He must show that Britain keeps its word. The way to show they are not going to break this manifesto commitment is to bring in the promised legislation now. The government must keep the promise.

Yvette Cooper, the shadow home secretary, is speaking at the Police Federation annual conference today. Some extracts from her speech have been released in advance and in them she suggests that the government cuts will lead to crime going up.

While Labour was in government crime fell by over 40%, and it is a tribute to communities, the police and other organisations involved in fighting crime that this is the first time since crime records began that a government has left office with lower crime than when it started. Now the Tory led government is putting that progress at risk. Most people want crime to come down further, yet ministers seem to be turning their backs. To meet a political timetable for cuts, they are taking police off the beat just when they are needed most. The first Tory home secretary and the first Tory prime minister to call for cuts in police officers rather than cuts in crime. They used to be the party of law and order once. Not now. These are the ingredients for a perfect storm. Fewer police, fewer powers, weaker prevention, weaker action once crimes are committed. The government is turning their backs on the fight against crime. And it is communities that will pay the price.

Harriet Harman has now challenged David Cameron to sack Liam Fox over his comments about aid spending. According to PoliticsHome, this is what she told BBC News.

I think what David Cameron has got to do is, he's got to say to Dr Fox that unless he supports this part of the manifesto and part of the coalition agreement, he can't stay in government. You can't have a situation where the manifesto makes a promise to the people, the coalition agreement reiterates it, and then a member of the Cabinet simply decides they don't agree with it.

(It's a good try, but not a particularly good description of the constitutional reality. Ministers are routinely expected to support government decisions that they don't personally agree with. This only becomes untenable if they start sounding off in public. Having a letter leaked to the Times doesn't quite count, although there are suspicions that Fox is pushing the boundaries of what he can get away with.)

Angela Eagle, the shadow chief secretary to the Treasury, has put out a statement about the inflation figures.



These are concerning figures, which show inflation now running at more than double the target rate. Across the country millions of people on low and middle incomes are being squeezed from every direction by rising prices made worse by the Tory VAT rise. The squeeze has been compounded from last month by cuts to tax credits, cuts to childcare support and the child benefit freeze. And to make matters worse George Osborne's decision to raise VAT at a time of rising world food and oil prices looks increasingly like an own goal as high inflation continues to threaten a rise in mortgage rates for homeowners. The Bank of England has been put in an impossible position by George Osborne. It has been left to do all the work to support a recovery that's been choked off by the Tory-led government's fiscal policy to cut deeper and faster than any other major economy in the world.

You can read all today's Guardian politics stories here. And all the politics stories filed yesterday, including some in today's paper, are here.

As for the rest of the papers, here are some stories worth noting.

• George Parker and Chris Giles in the Financial Times (subscription) say that Gordon Brown thinks he could still become head of the International Monetary Fund, despite opposition from David Cameron.

Gordon Brown believes he still has a chance of winning the top job at the International Monetary Fund, telling friends he has global backing that could trump the opposition of David Cameron, his successor in Downing Street. The former UK Labour prime minister has told colleagues that Mr Cameron does not have a veto in the decision on who should succeed Dominque Strauss-Kahn, the IMF's managing director, who is embroiled in sex crime allegations. Mr Brown had been taking soundings in Washington and Paris before Mr Strauss-Kahn's arrest in New York and believes that his candidature could win support from those who recognise his role in tackling the 2008-9 financial crisis ... "He's come back from Washington and Paris and feels quite emboldened," said [one colleague of Brown's]. "He's not taking No for an answer. He's got people who will back him and will put him forward.

• Rachel Sylvester in the Times (paywall) says the Liberal Democrats are losing their enthusiasm for Lords reform.



But, having been burnt in fire by the AV referendum campaign, [Nick Clegg] is not planning to turn himself into the frontman for selling the reforms. Instead, Lord Strathclyde and Mark Harper, MP, both Conservatives, will be sent out to sell the policy to the public. "Nick's got bigger fish to fry," explains one strategist. "Clearly it's something we want to have achieved before the next election but we are also aware it doesn't blip that hard on other people's radar." A Tory Cabinet minister puts it slightly differently. "They've decided they don't want to look like constitution obsessives, which is odd given that for 100 years they've been banging on about nothing else."

• The Daily Mail says Chris Huhne's estranged wife is prepared to give evidence against him in court in relation to the allegations that he asked her to take speeding points on his behalf.

A close friend said Vicky Pryce would swear in court that she was busy all day in central London when the offence was committed 40 miles away in Essex ... As political support ebbed away from the Energy Secretary at Westminster, Essex Police appointed a senior detective to look into the allegations that Mr Huhne broke the law. Sources said that if Miss Pryce co-operates and provides corroborating evidence, it is almost certain to lead to a full criminal inquiry. This could mean Mr Huhne facing charges of attempting to pervert the course of justice.

• James Kirkup in the Daily Telegraph says Steve Webb, the pensions minister, wants Britons to ditch the idea that old age begins at 59.

"The idea that 59 is old belongs in the past. We need to challenge our perceptions of what 'old age' actually means," [Webb] will say. "It is no longer the time where people are sitting back and enjoying the 'twilight' of their lives, instead it is often a time for new choices and new opportunities." The Department of Work and Pensions will today publish research from Kent University showing differing views of when youth ends and old age begins. The study, Predictors of Attitudes to Age Across Europe, shows that British people are described as "old" far earlier than their European counterparts, with the label typically being used for those of 59 and older. By contrast, the Greeks regard old age as starting at 68. In Denmark, the figure was 64, and 63 in France.

• Philip Stephens in the Financial Times (subscription) says Policy Network has come up with an explanation as to why the centre-left is doing badly all over Europe.

The think-tank's opinion surveys show that people are frightened about the power and inequalities of markets, but also lack faith in the capacity of politicians and the state to do much about it. Voters remain attached to European welfare systems, yet believe that centre-left parties are likely to raise taxes too much with too little benefit in the way of improved services. Pull together these various and sometimes tangled threads and the story that emerges is of a collapse of trust in the state – and, unsurprisingly, weakening support for parties that see government as the central agent of social and economic progress. The answer to austerity is not big government ... The mistake made by politicians of the centre-left has thus been to mistake anger with the excesses of the market for public backing for the traditional state. [Dominique] Strauss-Kahn might have offered valuable proof of economic competence alongside more familiar progressive values. What is absolutely clear, though, is that the ground has shifted under the centre-left. It needs a new map.

• Mary Riddell in the Daily Telegraph says the bible of "Blue Labour" is being published today as an ebook.

Where New Labour, with the exception of Mr Blair's early flourishes, adopted the prose style of a cornflakes packet, Blue Labour supplies the party's storytellers. Mr Rutherford and other ebookers, notably Jon Cruddas, are powerful narrators drawing on sources from Wordsworth to E P Thompson. Mr Miliband, who has heeded their message, will also need their rhetoric. Otherwise critics will maintain that Adenoidal Ed, though no Worsdworth, will surely find himself wandering lonely as a cloud unless he can become more prominent and more eloquent. "He will have to grasp the nettle, or he'll be out in two years," says one Blue Labourite.

It's a big day for Anglo-Irish relations, with the Queen now just arriving in the Republic. My colleague Adam Gabbatt has all the details on his live blog.

The Labour party has launched a Refounding Labour consultation website to collect ideas on party reorganisation. Peter Hain published a consultation document (pdf) on this subject earlier this year and today he has written a piece for PoliticsHome promoting the consultation website. Neil Kinnock has also written a blog post for the new website. It's worth quoting from, because it's full of vintage Kinnockisms.

I've always sought to apply the realism of the maxim "the victory of ideals must be organised". That's what the party is for so don't miss this great opportunity to contribute directly to renewing Labour so that we are recognised as the one political movement that can properly serve the communities and the age in which we live. Since we all know that the future belongs to those who prepare for it and punishes those who don't, let's get on with achieving new strength to gain new advances - it will aid our cause and, even more vital, it will help our country and the world.

Lord Hodgson has published his report into the way "red tape" could be cut for charities. According to the press notice (pdf), it says that "a suffocating blanket of red tape and an insidious mythology about being sued are deterring millions of Britons, volunteer organisations and charities from helping out more fully in society." The 42-page report (pdf) doesn't seem to be quite as alarmist as that, although it does contain a very odd appendix listing 20 things that people are actually allowed to do, like helping at a school sports day or wearing goggles in swimming lessons. This list is supposed to "shatter a few myths" about rules allegedly banning various activities, although it is hard to believe that anyone really believes that swimming goggles are somehow illegal. The report makes various recommendations, including reforming the law to clarify the extent of volunteer liability.

Here's a lunchtime summary.

• Downing Street has reaffirmed its commitment to enshrining Britain's overseas aid spending target in law. "It is coalition policy, it is Government policy, it will be made law," the prime minister's spokesman today, after a letter from Liam Fox, the defence secretary, to David Cameron saying that making these targets statutory would be a mistake. Number 10 also condemned the fact that Fox's letter has been leaked. Harriet Harman, Labour's deputy leader and the shadow international development secretary, has challenged Cameron to sack Fox over his stance. (See 11.05am.)



• Inflation has leapt to its highest level for two and a half years. It hit 4.5% on the consumer price index last month. As Julia Kollewe reports, the increase "wrongfooted the City and intensifies the dilemma for the Bank of England over how much longer it can keep interest rates low to support the flagging economy." Labour said that the figures were "concerning" and that the Bank of England had been put in an "impossible position" because it is expected to control inflation without choking growth. (See 9.32am, 9.35am and 11.37am.)

• Boris Johnson has told a Commons committee that the Olympic games will have a "transformatory" effect on east London. "For 200 years that part of London has obviously been in a different economic, social world from other parts of London – there is no doubt about it," the London mayor said. "It has been a place where people arrive, it has been a destination for migration, it has been a destination of traditionally poverty and underachievement but what we are trying to do with the Olympic park is something, I think, very remarkable and ambitious." After the Olympics there would be "a genuine new urban environment in east London that will be completely unlike anything we have seen before."

• James Paice, the agriculture minister, has unveiled plans to cut regulations affecting farming. In a statement, he said that some of the recommendations from the independent Farming Regulation Task Force would be implemented immediately.

Nick Clegg hasn't even published his Lords reform plans yet, but the reaction has already started to come in.

Peter Facey, the director of Unlock Democracy, has put out a statement saying that the government must ensure that, after so many failed attempts in the past, this time Lords reform actually happens.

A majority of the Cabinet have voted in favour of a 100% elected House of Lords. The question now is to what percent they are committed to making it a reality? Is this another box to be ticked off in a Government business plan and then kicked in the long grass, or a piece of legislation which the Government is determined to put on the statue book, by the Parliament Act if necessary?

And Andrew Copson, chief executive of the British Humanist Association, has said that reserving some seats for Church of England bishops in the reformed Lords (as Clegg is expected to propose) would be "an affront to democracy".



The presence of unelected prelates is an anomaly within our system of government, and their retention, even in diminished numbers, would be an indefensible affront to democratic principles. In no other legislative chamber are elected or appointed representatives deemed so insufficiently qualified to deal with matters of belief and morality that they require supplementing by clergy.

Bernard Jenkin, the Tory backbencher (and a former shadow defence secretary) has said that Liam Fox was entitled to question the Conservative party's commitment to raising aid spending to 0.7% of national income. According to PoliticsHome, this is what he told the World at One.

This argument breaking out like this was absolutely inevitable because of the way various decisions of the government have been arrived at. We don't have a national strategy that unifies consideration of the aid budget with the defence budget, for example. In fact, the aid budget decisions were made quite early on in David Cameron's leadership in total isolation ... and yet the defence budget is suffering very severe cuts as a result of the spending crisis. It is quite legitimate for the defence secretary to chafe at this constraint that is imposed on him by decision that is made in isolation from strategic questions a long time ago.

Almost 80% of peers think House of Lords reform is either fairly or very unlikely this parliament, according to a survey conducted by ComRes. It questioned a representative sample of 121 peers and found that 58% of them think it is fairly unlikely and 20% very unlikely. Even Lib Dem peers are sceptical about Lords reform proceeding; 55% of them think it is unlikely to happen this parliament. Amongst Tory peers the figure is 86%.

The survey also shows very little support in the upper house for having a Lords made up of 300 elected peers (which seems to be Nick Clegg's ideal option). Only 15% of peers are in favour of this, and 78% are against. Amongst Tories, only 7% are in favour.

Here's an afternoon reading list.

• Boris Johnson tells Metro in a Q&A lifestyle interview what gets him out of bed in the morning.

Sheer exuberance and joy at doing this job. I virtually erupt from bed like a rocketing pheasant. I then go for a run, because if you go for a run in the morning, nothing can get worse. You've got the bad bit out of the way.

• Paul Goodman at ConservativeHome on Liam Fox's latest maneouvres.



"A source close to Dr Fox" told the Times - on the record - that "the Defence Secretary fully supports the principle of a 0.7% target on international aid." And it can be argued that the paper's take on Fox's letter goes further than its words. The Defence Secretary doesn't say that the target should be scrapped: rather, he writes about whether it should be set it law, how quickly it should be hit, and what it should consist of. But the last point yokes Fox's concerns to the instincts of Conservative activists. The Defence Secretary indicates that some spending from the defence budget should be shifted into the aid one, which won't make him any less popular with Party members than he is already. The Conservative right has no leader. It has prominent figures on both the front and back benches - Iain Duncan Smith, David Davis, John Redwood. Whatever its source, an effect of the leak will be to remind Tory MPs and activists of Dr Fox's credentials. No wonder Downing Street, according to the Times, that "a Downing Street source said that they 'watch Dr Fox closely'."

• Max Atkinson on his blog is surprised that Sky's decision to televise supreme court hearings has not received more media attention.

The prohibition on recording (whether audio or video) court hearings originates from the much older ban on taking still photographs in courts - which was originally introduced because indoor photography used to require the use of flash powder. In those early days, it was rightly feared that this would be a major distraction to the ongoing proceedings. But the rules were never updated when photographic technology had developed to the point where fast film made it easy to take quality pictures in low light. Nor were they updated when television and video technology no longer needed elaborate and potentially distracting lighting systems.

• Bagehot on his Economist blog on Chris Huhne's difficulties.

Talking to one senior Lib Dem last week, I was taken aback when he asked me if I knew of Salmon Chase, a deeply ambitious man who served as treasury secretary to Abraham Lincoln during the Civil War. President Lincoln acknowledged Mr Chase's abilities, the MP explained, but also regarded him as an inveterate plotter. Mr Lincoln once accused Mr Chase of being "like the blue-bottle fly", laying his eggs in "every rotten spot he can find", in the hope that some might hatch, I was told. Such opportunism reminded him oddly of Mr Huhne, the Lib Dem confessed, in a way that suggested he, for one, would not be heartbroken if the energy secretary were to one day simply to buzz off.

My colleague Damian Carrington has written a post on his environment blog about Chris Huhne's announcement this afternoon about the carbon budget. In the light of what Huhne is going to say, Damian has upped the government's rating on the Guardian's green-o-meter. But the coalition is still only on 2.5 out of 5.

Nick Clegg will be making his statement on Lords reform shortly. But the prospects of full-blown Lords reform getting through parliament before 2015 must be slim. After Labour removed most of the hereditary peers in 1996, it promised a "second stage" of Lords reform. There were four white papers, as well as a royal commission, a joint committee of both Houses, two rounds of voting on the issue in the Commons and endless reports from outside bodies. But "second stage" Lords reform never happened. No wonder most peers think that Clegg's plans will never make it to the statute book. (See 2.26pm.)

Nick Clegg is delivering his statement now about Lords reform. David Cameron is sitting next to him.

He says plans for an elected Lords go back to the time of the Asquith government.

People have a right to choose their representatives, he says.

The Lords is known for its "wisdom and expertise". But its reputation is undermined by the fact that it is not elected.

Clegg says he chaired a committee drawing up plans for an elected Lords.

Today's plans represent "a genuine collective effort over time".

They will be considered by a joint comittee of MPs and peers. That committee will report early next year.

Clegg says he and Cameron want the first elections to the Lords to take place in 2015. He knows what he wants to achieve. But he will be pragmatic about how the government achieves this.

Clegg is now getting down to detail.

• There should be 300 members of the Lords. But this is only a recommended figure.

• The draft bill proposes 80% elected, 20% appointment. But the Lords could be 100% elected. Under the 20% appointed model, those 60 peers would be crossbenchers.

• The number of bishops in the Lords would be cut from 24 to 12.

• Elections would be staggered. This would prevent the Lords being a mirror of the Commons. The bill proposes election by single transferable vote, but another form of proportional representation could be used, Clegg says.

• Election using a list-based system has not been ruled out.

• The Commons would still be predominant. It would be in charge of finance. The Lords would continue to be a revising chamber.

• Reform would be introduced over three electoral cycles.



• It would be up to the parties in the Lords to decide how to reduce the number of existing peers.

Clegg says his plans are "careful" and "balanced". They represent evolution, not revolution.

The government is prepared to listen, and to adapt. But it is determined to act.

Sadiq Khan is responding now for Labour. He praises Nick Clegg for the way he chaired the cross-party committee drawing up these plans. Getting Lord Strathclyde to agree with everyone else on the committee was quite an achievement, he says.

Khan says the Tories are the obstacle to reform.

Clegg supports a fully-elected Lords. But his draft bill would create a Lords in which 20% of peers were appointed, plus 12 bishops, plus government ministers.

Khan says he has 11 questions. They include:

• Why should PR be used, after Britain has rejected AV?

• What would the cost of Lords reform be?

• What would be the role of the bishops?

• Will the government use the Parliament Act?

• Will coalition peers be whipped to vote for the bill.

Khan says the bill is a "huge anti-climax". It shows how irrelevant Clegg has become.

Nick Clegg is replying to Sadiq Khan. He says that Khan's "sour" remarks failed to rise to the spirit of the occasion.

It would be easier to take Khan's criticisms about not having a 100% elected Lords seriously if Labour had managed to get any of the Lords elected.

Responding to Khan's questions, Clegg says it is impossible to say what the cost of the plans would be. It would depend on how long it takes to reduce the size of the Lords.

The government wants legislation on the statute book by 2015.

The legislation will be treated like all government legislation. It is set out in the coalition agreement. Clegg says he will use all the legislative tools available to get it through. In other words, coalition peers (and MPs) will be whipped to support it.

Eleanor Laing, a Conservative, asks what will happen when the Lords competes with the Commons for "democratic legitimacy".

Clegg says this is why it is important for the Lords to be elected in a different way.

Labour's David Blunkett makes a similar point. He also suggests that peers elected for 15 years will not be accountable.

Clegg says the idea of giving peers long, non-renewable terms of office was in the report from the Wakeham commission set up under Labour.

Labour's Frank Dobson says it would be better to decide the functions of the Lords before deciding its composition. If the Lords is elected, any "self-respecting" members of the Lords will not feel bound by the conventions restricting its powers.

Clegg says all the other groups that have looked at this have concluded that this should not be a problem.

You can read the press notice about Clegg's plans here. And here's the white paper and draft bill (pdf).

What was striking about Clegg's statement was how non-committal he was about quite how Lords reform takes place. He kept stressing that his plans were open to change.

It was also clear that there was a great deal of opposition to the plans in the Commons.

I'm bailing out now to concentrate instead on David Cameron's appearance at the liaison committee.

David Cameron is now giving evidence to the Commons liaison committee. He will be talking about the economy and military intervention overseas. The session will run for 90 minutes.

They're starting on the economy. Andrew Tyrie, the chairman of the Treasury committee, is asking the first set of questions.

Q: Can the government increase the trend rate of growth?

Cameron says he thinks this is possible. The government has published a growth review. But he cannot say what effect this will have on the trend rate of growth.

Adrian Bailey asks what the government will do to increase bank lending.

Cameron says the recent figures on bank lending are "disappointing". But Project Merlin - the agreement with the banks designed to increase lending - should be judged over the whole year.



Q: What will the government do if the level of bank lending continues to drop?

Cameron says under Project Merlin, the government said it would not raise further taxes on the banks if they increased lending. If the banks don't fulfil their side of the deal, the government will be free to impose more taxes on the banks.

Cameron says Project Merlin was very much his initiative. He wanted to reach a longterm settlement with the banks.

Adrian Bailey, the Labour chairman of the business committee, asks why the government is cutting the number of staff working for UK Trade and Investment.

Cameron says UKTI has to cut its costs. But the number of staff working for it overseas is not being cut, he says.

Margaret Hodge, the Labour chair of the public accounts committee, says Vince Cable said Project Merlin should have concentrated on net lending, not gross lending.

Cameron says that if the government had focused on net lending, it would have given the banks an incentive to ask firms not to repay money on time.

Margaret Hodge asks what sanctions the government will use if banks fail to honour their agreements on lending.

Cameron says the banks know that it is "unhealthy" to be in a permanent state of war with politicians. That is quite a sanction, he goes on.

Alternatively, the government could manage the banks themselves. But that would be dangerous. Politicians are not bankers, Cameron says.

Q: What evidence do you have to show that your growth policy is working?

Cameron says growth in the UK in the first quarter of 2011 was ahead of America's.

But Britain is going through a very difficult process. Three quarters of growth used to come from housing, finance and immigration. That was not sustainable.

There are 400,000 more people in work than a year ago, he says.

The Bank of England has said there are signs that the economy is rebalancing.

There are no fiscal measures the government can take; the government has no more money. And there are no monetary steps that can be taken, because interest rates are already very low. That is why the government is looking at supply-side measures.

Q: But this feels like a period of stagflation?

Cameron says the bond yield has fallen in the UK over the last year by 44 basis points. In countries like Greece and Ireland it has risen sharply.

Anne Begg, the Labour chairman of the work and pensions committee, says some of those losing disability benefit will not be able to find work.

Cameron says employment is growing all over the UK. Under the government's plans, organisations will be paid more for getting the hard-to-place people into work.



Q: But some people won't be able to find work, and they will still lose benefit?

Cameron says that people who genuinely cannot find work should be "generously supported". But others can find work. Some need help. And some should never have been on disability benefit in the first place.

Graham Stuart, the Conservative chairman of the education committee, asks about youth unemployment.

Cameron says there is a schools problem (poor quality education), a welfare problem (benefits offering no incentive to work) and an opportunity problem (not enough jobs).

There is also a government problem he says. Government is not well organised to look after 16 to 18-year-olds who leave education. The coalition is trying to address this, Cameron says.

Q: Is there a case for vocational training from the age of 12?

Cameron says he supports the ideas in the Wolf report. It was a powerful report, he says.

Andrew Miller, the Labour chairman of the science committee, says that Cameron agreed to spend more time with government scientists at the last hearing.

Cameron says he has done this. He has had a dinner for scientists at Number 10. And science funding has not been cut, he says.

Miller asks about particle physics. Cameron says he met a particle physicist last night.

Cameron says he is interested in introducing a Nobel-style prize for engineering in the UK. Ideas like this can raise the profile of science, he says.

Labour's Joan Walley, chair of the environmental audit committee, says Cameron hasn't mentioned green growth yet.

Cameron says that he was waiting for her. His attempt at a joke doesn't seem to go down very well.

He moves on and summarises the green deal. People have not focused on how important it is, he says.

He says he has personally called companies like Siemens urging them to invest in the UK.



Q: Why did the Treasury stop the Green Investment Bank having borrowing powers straight away?

Cameron says the Green Investment Bank eventually will have borrowing powers.

Walley asks about the carbon budget. Cameron says Chris Huhne is about to make a statement on this.

There will be a "review clause" in the announcement that will allow Britain to reconsider its plans if other EU countries don't set their own ambitious carbon targets, he says.

Laurence Robertson, a Conserative who chairs the Northern Ireland committee, asks about the economy in Northern Ireland. Cameron says links between Britain and Ireland have never been stronger.

Anne Begg asks about the extra tax imposed on the North Sea oil industry in the budget.

Cameron says this is a "very important" British industry.

The government's tax is fair, he says, because the oil price has gone up. Profits from the oil and gas sector will still be 50% higher than a year ago, he says.

Malcolm Bruce, a Liberal Democrat, says some oil companies are now reconsidering their decision to invest in the North Sea.

Cameron says he does not accept that the government has made investment in the North Sea unprofitable.

Andrew Tyrie, the Conservative chair of the Treasury committee, asks what rebalancing the economy actually means? What is the correct level of spending as a proportion of GDP?

Cameron says he has never had a target for this. But borrowing should be sustainable.

Tyrie asks what an appropriate savings ratio would be?

Cameron says the government does not have a forecast or a target for the savings ratio. Its aim is to get the structural budget back into balance.

Q: And what about the balance between finance and manufacturing? Finance accounts for 8% of GDP and manufacturing 13%?

Cameron says rebalancing means that growth has to come from places it did not come from in the past.



Q: So you want slower growth in services and faster growth in manufacturing?

Cameron says he wants faster growth in manufacturing?

Q: Doesn't that mean the share of growth coming from somewhere else will need to be cut?

Cameron says he also wants to more growth in the private sector, because there will be less growth in the public sector.

He also says he does not agree with "that Hungarian economist" (who he? anyone know?) who says that services are essentially bad, and manufacturing good.

Tyrie says he he has not had "much of substance" from Cameron in his answers. Cameron said he did not want to see income disparities reducing, Tyrie claims.

Cameron says he does want to see income disparities between the regions narrowing. Over the last decade they have widened.

The session has now moved on to foreign affairs.

Richard Ottaway, the Conservative chairman of the foreign affairs committee, asks what the exit strategy is for Libya.

Cameron says it's the implementation of UN security council resolution 1973 and the Libyan people being safe. It is hard to imagine the country having a future with Gaddafi still in charge, he says.

Alan Beith, the Lib Dem chair of the justice committee, asks what a command and control centre is. Is it anywhere were Gaddafi is based?

Cameron says he will not give a running commentary on targeting.

Ottaway asks if Cameron would consider a negotiated settlement with "the regime".

Cameron says that "that is now where we are". He wants Nato to "keep turning up the pressure".

Ottaway asks how bad repression has to get before Cameron thinks of intervention. He is thinking of Syria, he says.

Cameron says that what is happening in Syria is "appalling".

But there's a difference between Libya and Syria. In Libya Britain was invited to intervene by the Arab League. That does not apply in Syria.

Ottaway asks about soft power and the BBC World Service. Isn't it a mistake to cut the Arab service?

Cameron says every organisation in Britain has to "cut its cloth". It is up to the BBC World Service to decide how it cuts its budget, he says.

He does not think the BBC World Service was asked to make an "unmanageable reduction".

James Arbuthnot, the Conservative chair of the defence committee, asks if it is true that the Ministry of Defence has been given extra time to achieve an extra £1bn in savings.

Cameron says he does not recognise that figure. He does not recognise many of the MoD figures he sees in the press. But he does recognise some of the "letters" he reads in the press, he says, in a dig at Liam Fox. "There are quite a lot of them [leaked letters]," he adds.

That seems to be intended as a reprimand to Fox.

Arbuthnot suggests the strategic defence review has not stood the test of time.

Cameron says he does not agree. The defence review had to happen.

He says he has learnt more about the MoD from Libya and Afghanistan. He has been particularly impressed by the role played by drone.

Arbuthnot asks about a newspaper story suggesting the Americans are alarmed by his desire to withdraw troops from Afghanistan.

Cameron says Arbuthnot should not believe everything in the papers. The Americans appreciate the work British troops are doing.

Arbuthnot says he asked the chiefs of staff last week if they would describe Britain's aim as being to have a "full-spectrum capability". The heads of all three services said that was no longer Britain's aim.

Cameron says he thinks Britain does have a full-spectrum capability. Britain has the fourth largest defence budget in the world. The defence chiefs are standing up for their services. The relationship between the prime minister and the military should be a "robust" one. They should be able to have a frank discussion. Military chiefs will never say they have everything they want. If they did, their staff would complain.

Malcolm Bruce, the Lib Dem chair of the international development committee, asks how much money Arab countries are donating to the Libyan operation.

Cameron says the Arab countries have played "a very positive role". But he would like to look at the figures further.

Bruce asks about Liam Fox's letter to Cameron about enshrining the overseas aid target in law. When will the bill come?

Cameron says the government is committed to hitting the 0.7% target by 2013. The legislation on this will be brought forward. "It's the government policy. It will happen," he says.

Keith Vaz, the Labour chair of the home affairs committee, asks about Yemen.

Cameron says he is trying to encourage democratic participation in the country.

Vaz asks if Cameron would back a military operation to target Anwar al-Awlaki, the head of al-Qaida in the Arabian peninsular who is based in Yemen.

Cameron says al-Awlaki is a dangerous individual. But Britain will always act within the rule of law.

Vaz asks about the death of Osama bin Laden, and what it means for relations with Pakistan.

Cameron says he does not think the president or prime minister of Pakistan knew that Bin Laden was hiding in their country.

Asked about Iran, Cameron says Britain should not "big up" the Iranian regime. It is more backward and incompetent than people think, he says. It's a "basket case".

That's it. The session is over. Previously these sessions used to go on for about two and a half hours, covering every subject under the sun. Today was meant to be shorter and more tightly focused. As he left, Cameron said that he thought the new format was an improvement.

I'll post a summary shortly.

Here's an afternoon summary.

• David Cameron has confirmed that 400 or more British troops will leave Afghanistan over the next year. Giving evidence to the Commons liaison committee, he said: "Our enduring force level remains at 9,500 but as you know our force level has been above that, if you include special forces and some of the extra operations we've undertaken. There will be around 400, perhaps slightly more troops coming out of Afghanistan in the coming year, up to February 2012."

• Cameron has said that he wants to create a Nobel-style prize for engineering. Giving evidence to the committee, he said: "One of the ideas we are looking at is to produce in Britain a sort of Nobel-style prize for engineering, something that would happen every two years and have a massive sponsorship and endowment behind it. For these things to work, they have to have a real pedigree, a boost of money and status behind them."

• Cameron has also hinted that banks could face higher taxes if they do not honour their commitments to hint lending. In his evidence to the committee, he said the Project Merlin deal with the banks guaranteed no new taxes on the banks in return for promises that they would increase lending to businesses. "The banks recognise that it is extremely unhealthy in a modern, competitive market economy to be in a permanent state of war with the politicians," he said. "It was a deal, it was an agreement and they have to meet their side of the agreement or we don't have to meet ours."

• Nick Clegg has said that he wants to see the first elections to the House of Lords in 2015. He set the target as he published a white paper on Lords reform alongside a draft bill. The bill stipulates that 80% of the Lords should be elected, but Clegg stressed that he was willing to accept changes to his proposals. The draft bill will be considered by a joint committee of MPs and peers before legislation gets introduced into the Commons next year. Many MPs expressed opposition to the plans and, in his own statement on Lords reform, David Cameron only expressed the desire to make progress on this issue. "Reform of the House of Lords has been on the agenda for more than 100 years and many governments have considered the complex issues which surround it but full reform has not yet been achieved," he said. "This government is committed to resolving these issues so that progress can be made."

• Chris Huhne, the energy secretary, has unveiled plans to halve carbon dioxide emissions by 2025, giving Britain the most ambitious targets on greenhouse gases of any developed country.



• Lord Hanningfield, the Tory peer on trial for fiddling his expenses, said that being in the Lords left him "out of pocket", a court was told. The court heard that Hanningfield argued that Lords expenses were "an allowance scheme, not a reimbursement scheme" when he was interviewed by the police. He "averaged out" his claims to recoup the money he spent on his parliamentary duties, he said. "I have spent all of my money, £200,000, being a peer, and I have claimed £150,000 back. I have claimed what I thought I could within the law. I have never done anything illegal in my life."

• Kenneth Clarke, the justice secretary, has said parliament should consider the matter of privacy. Asked in the Commons about the need to provide "clarity" to judges on the issue of privacy, he replied: "We will consider these matters and indeed it is probably right to say that parliament passing a Privacy Act might well be the best way of resolving it. But I think we need to get somewhat nearer to a consensus and one needs to know exactly how you're trying to strike this balance before something is submitted to the judgment of parliament."



• Nick Herbert, the police minister, has been strongly criticised at the Police Federation conference. As Alan Travis reports, he was told he should be "ashamed" of the government's planned reforms. Herbert was also invited to resign from his job and return as a volunteer "special" minister in an echo of the use of forced early retirements powers by the West Midlands police.

• Willie Rennie has been elected unopposed as the new leader of the Scottish Liberal Democrats.

That's it for today. Thanks for the comments.