29/11/2011 BBC News at Ten

Tonight at 10: Lower growth and higher borrowing. The perilous

state of the British economy. REPORTER: Are things worse than you

thought? The Chancellor sets off for

Parliament to deliver a Autumn Statement that spells out the scale

of the challenge ahead. More pressure on public sector

workers, as he tries to tackle the debt. We will do whatever it takes

to protect Britain from misstep storm, while doing all we can, all

we can to build the foundations of future growth. It is his failing

plan that has pushed up unemployment and pushed up

borrowing. It is his reckless gamble that has made things worse

in Britain. And public sector job losses could reach 700,000. We will

have reaction on the eve of the big strike over pensions. Also tonight,

chaotic scenes in Tehran, where hundreds of protesters break into

the British embassy compound. A former News of the world's

journalist tells the Leveson Inquiry that his former bosses knew

all about phone hacking. Rebekah Brooks and Andy Coulson, they are

the scum of journalism for trying to drop me and my colleagues in it.

And why a former parliamentary aide accused of being a Russian spy can

stay in the UK. And I will be here with Sportsday

later in the hour on the BBC News Channel, including all of tonight's

goals from the three Carling Cup Good evening. Feeble growth, rising

unemployment and higher borrowing. That is the reality of Britain's

economic troubles. It is all in the context of a potential collapse of

the euro-zone. The overall picture presented by the Chancellor in the

Autumn Statement was worse than many had predicted. Mr Osborne

acknowledged that growth will be much lower than forecast back in

March. Borrowing will be significantly higher than previous

estimates and public sector pay rises will be capped at 1% from

next year. We will have all of the reaction and analysis. We start

with our political editor, Nick Robinson.

This was the statement that George Osborne never wanted to deliver.

The moment he would have to travel from the Treasury to Parliament to

tell the nation that the Government will not have balanced the books by

the next election. Our debt challenge is even greater than we

thought because the boom was even bigger, the bus Stephen deeper and

the effects will last even longer. -- the bust even deeper. Those

effects, has a Commons was told, will mean more -- more pay now,

more pain tomorrow and more pain for longer. Why? Because of what

those working behind the door of Number 11 have been told by the

independent forecasters at the Office For Budget Responsibility.

That, over next few years, there will be �111 billion in extra

borrowing. That growth next year will not be 1%, it will be just

0.7%. As a result, they predict that, in total, 710,000 public

sector jobs will go. The Chancellor blamed inflation coming from abroad

and the crisis spreading from the eurozone. Much of Europe now

appears to be heading into a recession, caused by a chronic lack

of confidence in the ability of camp -- countries to deal with

their debts. We will do whatever it takes to protect Britain from this

debt storm. Whatever it takes me is that many of us will end up working

longer. The state pension age will be increased from 66, up to 67,

starting in the year 2026. That will affect anyone under the age of

52. Whatever it takes also means more unwelcome news for public-

sector workers, on the eve of strikes and protests over cuts to

their pensions. The Chancellor has decided to tighten the squeeze on

public sector pay. It has already been frozen for all but the worst

paid until 2012. After that, there will now be a 1% cap on the pay

bill for the next two years. While I accept that a 1% average rise is

tough, it is also fair for those who work to pay the taxes that will

fund them. And there was to be more. Although out-of-work benefits will

increase with inflation, many tax credits are to be frozen, although

not those paid to the disabled. You can see why some ministers might

have been wondering when it would all end. The Chancellor had some

fresh good news. Rail fare increases will be a little lower,

and fuel increases as well. For the fuel duty from August to be only

three pence higher than it is now. George Osborne could not plan his -

- claim his plan was on course, but he did insist there was no choice

but to stick to it. Leadership for tough times, that is what we offer.

I commend this statement to the house. If Labour's response had

been just one sentence, it would have been, we told you so. The

Chancellor, said Ed Balls, had blamed everyone but himself.

Families, pensioners and businesses already know it is hurting. With

billions of pounds more in borrowing to pay for rising

unemployment, today we find out the truth. It is just not working.

he were Chancellor, he said, he would cut taxes now and spend more

to get people back to work. after just 18 months, his plan is

leading to falling growth, rising unemployment and �158 billion more

in borrowing, the country either needs a new Chancellor or a new

# On the 12th day of Christmas, the This was the day when the list of

reasons to complain about cats got longer. He managed a number of

important things today, of which was capital investment in

infrastructure. The sting in the tail is that it is back loaded

after 2013. What we needed was spending up front to stimulate the

economy. Tonight, we all know what they have known at Number 11 for

some time. The outlook is bleak, the forecast is that it is not

In a very detailed statement, the Chancellor also outlined a range of

other measures. Benefits were to go up by 5.2% from next April, and the

basic state pension will increase by �5.30 per week. He announced

more than �1 billion of money for schools in England and he also

announced plans to help people by their own homes. The CBI welcomed

help for small businesses, the Government's pledge to underwrite

�40 billion of loans. There is also an extended holiday and business

rates. The Chancellor also confirmed �5 billion in capital

spending, with 35 road and rail projects planned across England. So,

the figures published today suggests that spending controls and

tax measures will have to remain in place beyond the next election to

bring down the deficit. It means a squeeze on household finances. It

means thousands of job losses in the public sector. The Government

will have to borrow more than predicted. Stephanie Flanders is

here to assess the figures. A lot of bad news, not all due to

the euro-zone or even the Chancellor. In many ways, the real

game changer in a statement has come from the Independent Office

for Budget Responsibility. It has decided that the growth we have

lost recently, we are not going to get back. In the Budget, the OBR

was expecting national output, GDP, to grow by 1.7% this year and 2.5%

in 2012. Those have been cut, down to 0.9% this year and just 0.7% in

2012. If you think about it, in the OBR's first report, just after Mr

Osborne became Chancellor, its forecasts suggested that the UK

economy would be about 13% bigger at the end of the parliament and at

the start. He now thinks that our national income will grow by just

7% over those five years. That would just take us back to where we

were in 2007. Crucially, the OBR thinks the loss

of national output is permanent. The implication is that they is not

much room for a Plan B. A lot of extra spending now would trigger

extra inflation, more than growth. Many economists say that is too

pessimistic. I think it is wrong to suggest, as many officials do, that

the economy has suddenly lost its entrepreneurial zeal. The main

problem is an inadequacy of demand and confidence, rather than

anything else. The OBR's decision has implications for the entire

economy. For example, then a 1 million fewer new jobs forecast

over the next five years than we expected only eight months ago. Yes,

it means a lot of extra borrowing for the Chancellor. That new

borrowing means that Mr Ross Brawn has had to announce not a Plan B,

but a Plan A plus. New spending cuts, worth �15 billion a year by

2016. Without that extra austerity, the OBR says the Chancellor would

have broken his fiscal rules on debt and new borrowing. Back in

March, he was due to borrow �46 billion in the last year of the

parliament. That has now gone up to �79 billion. That is higher, even,

than Labour was forecasting before the election. Back then, Mr Osborne

said that a government that was expecting to borrow that much, for

that long, would lose the confidence of the financial markets

and probably lose us our AAA credit rating as well. Was that true? We

will never know. It doesn't seem to be true right now, at least as long

as other governments are looking even worse. At the moment, the

market is not engaged in a beauty contest, but an ugly contest. The

UK looks less ugly than European counterparts. But if you look at

the outlook for the UK, you see that it will become the most

indebted of the currently AAA rated governments, with the sole

exception of the United States. Over time, there is a prospect that

the UK rating could come under scrutiny. Gloomy though they are,

remember that all of the numbers in today's statement as soon that the

crisis in the euro-zone gets resolved and business and market

confidence comes back next year. If today's market fears about single

currency come true, by the time of the budget the news from the

Chancellor made even worse. -- made even worse.

How will the measures affect families throughout Britain, as

household budgets come under pressure? And how will small

businesses benefit, because their performance is essential to the

economic recovery. Plymouth is used to weathering the elements. But

this is starting to feel like a prolonged battering. Four weeks

before Christmas, and we found a high street here unseasonably quiet.

This market trader said she had never known things so slow. We are

all struggling to make a living here. It is just getting high at --

harder and harder. We have to work twice as hard, for longer hours. I

don't know. What do we do next? People in Plymouth, as across the

rest of the country, knew that the economic outlook was not exactly

bright and sunny. But there seems to be genuine shock here that the

forecast is now quite as miserable as the latest figures suggest.

Plymouth is clearly hurting. The airport is about to close. The

football club has only recently emerged from administration. It is

an old naval city, with low wages and a large public sector. The

hospital is now one of the main employers. Today, health workers

like Susie heard that after two years of pay freezes, she will get

a rise of 1%. It's nothing, is it? Christmas is cancelled this year,

due to the fact we cannot afford it. The rich are getting richer, the

poor are getting poorer. It is awful. In a hotel near the seafront,

we found this local businessman preparing for a meeting. He is

generally encouraged by the Chancellor's latest efforts to get

industry growing. Support to small and medium-sized businesses,

fantastic, yes. But what about the micro businesses? What about those

of us who are one, two, five people? We fall through the cracks.

For many, the gloomiest news is that they might have to work longer

before they retire. The state pension age increasing to 67,

sooner than expected. That means Laura, out Christmas shopping,

could face another 45 years of hairdressing. I've already got bad

wrists. By the time I and 67, I am not going to be able to do it

anyway. I'll be spent -- standing on my feet all day, I would be able

to do that then. Tonight, the Institute for Fiscal Studies said

that households are facing an unprecedented squeeze in living

standards. There may have been red skies over Plymouth this evening,

but few people here are expecting a Well, during his statement, the

Chancellor called on trade unions to abandon the public sector strike

planned for tomorrow. The dispute is over changes to public sector

pensions. He said the strike would damage the economy and cause

inconvenience to millions of people. The unions say they have no other

option available, after the failure At this Primary School in Yorkshire

this afternoon, pupils went home knowing there would be no school

tomorrow. It will be a similar story across much of the UK.

Parents will have to look after their children instead. And it is

not just schools. Tomorrow, up to 2 million public sector workers are

expected to walkout. And they include many who work in the health

service, although emergency cover will be provided. It is likely to

be the biggest strike seen in the UK for a generation. At

demonstrations and on picket lines, emotions are likely to be running

high. Following the news that workers face a two you pay cut and

just 1%, while more than 700,000 public sector jobs could go. This

kind of arbitrary announcement by the government, without any

negotiation or discussion of any sort, that is not conducive to

positive negotiations to resolve the already difficult dispute that

we face a public service pensions. The government wants to cut the

cost of pensions for millions of public sector workers. It is asking

them to contribute more, an average of around 3%, and work longer, in

line with the state pension age. For a new type of pension scheme

based upon their earnings over their career. The eve made a

generous offer and it is quite wrong, it's irresponsible for

strike action to be happening when discussions are still going on. We

met with the civil service unions today. There are meetings on

Thursday with the teachers' unions, the health unions, because we want

to make progress. There is progress being made, that is what is so

frustrating. Tonight, the government warned of disruption to

schools, council services at ports and and the health service. Sir

Leonard pfennig runs an NHS trust. He's had to deal with NHS strikes

before. I was managing this hospital during the winter of

discontent in the late 70s. We have dusted off those plans, got

everything going and we are confident we will see the day

through. But many others, including Jim Bailey, will be going on strike

for the first time. He's been in teaching of almost 40 years. Most

of my staff are going out on strike, very reluctantly, myself included,

but we feel we have to make a stand. Tomorrow the union members will

stage the biggest strike since the late 70s, but the government

insists that the deal on the table is fair for all. On the eve of that

strike, and has the full impact of the Autumn Statement is becoming

apparent, let's talk to Nick Robinson in Downing Street, and to

Stephanie, who has rejoined us in the studio. Let's talk about

credibility, that is at the heart of lots of the debate we've seen

today. Where is this credibility of the government as you see it this

evening? The Chancellor has had to eat the Prime Minister's words

tonight. David Cameron said the Budget would be balanced until the

time of the next election, it won't. The cuts will go on foot two years.

It wouldn't have made a very tasty meal for George Osborne. On the

other hand, what he is able to say is, look, I have taken the measures

today, tough measures that were necessary to stay within those

rather more flexible deficit targets. That proves that I have

credibility. He has got the endorsement for that and the Office

for Budget Responsibility, and he is able to claim that things are

all rather worse overseas, particularly in Europe. What is

intriguing on the eve of those strikes is that instead of stepping

back from confrontation, he has used this autumn statement to say

there will be no concessions on pensions and, what's more, there

will be a further curb on public sector pay. I know that government

insiders believe that the public is with them, both on the deficit and

on public sector pay. Particularly private sector workers who had it

tough, both in their pay packets and with their pensions. There's

another possibility and it is this. That the government now believes

that its credibility depends on its willingness to have a confrontation.

Stephanie, all of this happening in a much bigger context. We are

talking about the debt crisis in the eurozone. Put that into the

context as you see it and the importance of today's events.

think we've been looking, as I mentioned, if things go worse in

the eurozone, that is not built into this forecast. That is

something which would make the numbers even worse. We have seen

things get a bit worse today. Italy tried to borrow from the markets

and was able to do that but at a very high rate, well over 7%,

getting on for 8% in one case in order to borrow from the markets.

That tells you something we've been seeing over the last few weeks.

Investors taking seriously the possibility that they won't get

through this crisis, that the eurozone will break up. At the same

time, we've had politicians and governments are a bit further away

from coming up with a solution. There was a meeting of eurozone

finance ministers today, George Osborne has gone to be with them in

Brussels. They are admitting they might not be able to come through

on the promises they made a few weeks ago in the summit. This is

not looking good. In a sense, you'd have to say that George Osborne

does now have an explanation, built in excuse if things go was over the

next few months. He will be able to say the eurozone played a big part

in it. Anti also has, it Ed Balls says you should be spending a lot

more to boost growth, rightly or wrongly the OBR today has said

there isn't much space for doing that. The politics of that might be

easier but the economic reality for the UK is pretty grim. Coming up...

Accused of spying, a Russian woman tells us about her successful fight

to stay in Britain. I have simply lost a year of my life. I couldn't

do anything. Lots of people believed I was a spy is simply

because the British government said There were chaotic scenes at the

British embassy in Tehran earlier today, when hundreds of protesters

stormed two compounds and ransacked the buildings there. They were

angered by Britain's support for new sanctions, which are aimed at

stopping Iran's nuclear programme. David Cameron has called the

protests out ridges and indefensible. -- outrageous. The

embassy had been expecting this to happen, ever since Britain impose

new sanctions on Iran last week and the Iranian parliament voted on

Sunday to throw out the British ambassador. It was clearly pretty

well organised and the police seemed fairly half-hearted about

stopping it. The British should goal like the Americans did, she

says. Leave this den of espionage. The demonstrators climbed over the

gates and attacked the Chancery building inside, trashing it and

grabbing Sue veneers. This one has got a picture of the Queen. After

they left, Iran's foreign ministry issued an apology. But the damage

had been done. We hold the Iranian government responsible for its

failure to take adequate measures to protect our embassy, as it is

required to do. Clearly there will be other further and serious

consequences. But alongside the anger here at the Foreign Office

there is also a feeling that we've seen it all before. Various times.

And each time that the British embassy in Tehran has been attacked,

it is always for the same reason - it is because the there is series

inviting at the very top of politics in Iran itself. There is a

major split between the country's religious leader, Ayatollah

Khamenei, and President Ahmadinejad. And it is growing. And contrary to

what you might expect, President Ahmadinejad is the one who is

trying to stop things getting too bad with the outside world. This

sense, though no other, President Ahmadinejad is the more moderate of

the two. The British Embassy took the brunt of it all today but the

real aim of the extremists may well have been to make relations with

the West in general as difficult as possible. A former News of the

World journalist has told the Leveson Inquiry into press

standards that reporters at the paper routinely hacked people's

voice mails. Paul McMullan said Andy Coulson introduced the

practice when he became deputy editor. Both Mr Coulson, who later

served as a close adviser to David Cameron, and Rebekah Brooks have

subsequently denied any knowledge of the practice. This report

contains flash photography. He worked for the News of the World

for seven years, becoming its deputy features editor. He is Paul

McMullan and at the Levenson ING -- the Leveson Inquiry he became the

first person with direct knowledge to say under oath that the paper's

editors knew that phone hacking was taking place. He was asked first

what he knew about phone-tapping. In your experience, how common was

voice mail interception by journalists at the News of the

World? Not uncommon. These journalists swapped numbers with

each other. They might swap, I think they swapped Sylvester

Stallone's mother for David Beckham. At this point Lord Justice Leveson

said he need not incriminate himself. The cross-examination

turned to what editors knew. your editors know that voice mails

were being intercepted? Yes. We did all these things for our editors,

for Rebekah Brooks and for Andy Coulson. Rebekah Brooks was editor

of the News of the World from 2000 to 2003. Andy Coulson, from 2003-

2007. Both have denied knowing about phone hacking. Mr McMullan

was furious that the it initial police inquiry had ignored their

alleged part in this. Rebekah Brooks and Andy Coulson, they are

the scum of journalism for trying to drop me and my colleagues in it.

How dare these people just throw us to the wolves and one of the Scot

free, as they did for about a year. Mr McMullan said another -- a

bodyguard to Princess Diana had once asked for �30,000 for

information about her movements. A former Daily Star reporter said the

tabloids were more interested in getting away with it than telling

the truth. And a Guardian journalist, who has investigated

phone hacking, said he no longer trusted the press to regulate

itself. In eastern Afghanistan NATO outpost has been attacked by

insurgents. Some from across the border in Pakistan. The incident

has added to the tension between NATO and Pakistan, following the

killing of 24 Pakistani soldiers last week in a Nato-led airstrike.

Our correspondent has sent this report from the province close to

the border with Pakistan. In the skies above Afghanistan's most

eastern edge, a delivery to a remote American base. The airdrop

lands right on target outside Combat Outpost Margah, just five

kilometres from the Pakistan border. But as Afghan and US soldiers go

out to retrieve the supplies, insurgents in the hills nearby are

watching. Suddenly the base is under attack. We've just had the

siren that there is more. You've just heard another explosion near

the base, that's the third we've heard this day. That strike landed

just outside the perimeter walls. Some of the shelling was coming

from insurgents across the border inside Pakistan. Charlie Company,

228, were quick to respond. Fire! The sergeant explained the origin

of the attacks. It seems like they are coming from the east. They are.

That's exactly which way we expect them to fire from because it is

With each shelling the insurgents were narrowing their aim and

getting closer to their target. As the shelling continued, F 16

fighters were called in. Heavy artillery was fired, hitting

positions a few hundred metres inside Pakistan, bringing the

attack to an end. No one on the base was injured. This is a border

and a strain like never before. But for the insurgents who move freely

across it, it hardly seems to exist. A Russian woman accused by MI5 of

spying for the country has won the right to stay in Britain. MI5 had

claimed that Katia Zatuliveter had been passing secrets to Moscow

while having a relationship with her employer, the Liberal Democrat

MP Mike Hancock. And Immigration Appeals Commission rejected the

claims and decided that she should not be deported. A Russian spy in

Westminster? Was she a honeytrap sent to seduce and to steal

secrets? That was what MI5 claims about Katia Zatuliveter. But today

she heard a judge reject that claim and throw out an attempt to deport

her to Russia on grounds of national security. It was an

absolutely horrifying experience. I have simply lost a year of my life.

I couldn't do anything. Lots of people believed there was a spy,

simply because the British government said so. She had worked

for Lib Dem MP Mike Hancock, then a member of the Defence Select

Committee. Suspicions were raised by her four year affair with him,

as well as with a NATO official. Catching Russian spies used to be

the bread-and-butter work of the security service, MI5. In this case

they certainly had their suspicions, based on Katia Zatuliveter's work

in Parliament. But the problem was they had very little evidence.

scariest part was that I have seen that these people were

unprofessional and paranoid. Everything they've seen in Russian

people was a spy. If you are Russian in this country you are

raised by. They could not understand how a Russian in London

can speak the English language. Home Office argues there were

grounds for suspicion. But while Katia Zatuliveter had her private