Conference Special Daily Politics

Afternoon, folks. Welcome to this two-hour daily politics special on

the Tory Party conference in Birmingham. We are on from now

until one owe owe -- 1.00. We will bring you the Chancellor's

address live and uninterrupted. George Osborne says he will make

sure the rich pay their fair share as he prepares to cut welfare

spending by another �10 billion after the election. Will there be a

new tax on the rich? And exactly where will the welfare axe fall?

David Cameron says he wants Britain to renegotiate its relationship

with the rest of Europe and that fresh consent from the British

people will be sought. But does the party think the Prime Minister

should commit to a referendum now? We need a referendum on the euro as

soon as possible but the key issue is it should be a proper referendum,

in or out. We will be talking about that bungled rail franchise deal

that's going to cost taxpayers tens of millions of pounds. The

Transport Secretary, Patrick McLoughlin, joins us. We will be

asking Philip Hammond if the Government has any hope of sticking

to its plans for balancing the nation's books.

All that's in the next two hours. With us for the duration Norman

Fowler, a member of Margaret Thatcher's Cabinet back in the day,

now a member of the House of Lords. Welcome. Thank you very much.

start with George Osborne's speech. We are told he will be on his feet

before noon but he's already been a busy boy this morning, setting the

scene making it clear that he needs to find another �10 billion in

savings from the welfare bill from the year 2015 onwards. This is what

he had to say earlier. Conservative Party, the modern

Conservative Party, is on the side of people who want to work hard and

get on and we are very clear that dealing with these enormous debts

this Government inherited has to be done fairly, that the rich have to

pay the greatest share. But it's an illusion to think that you can

leave in tact a very expensive welfare state where some people are

better off, not in work, than going out and looking for work and that's

precisely what we are tackling and people watching your programme this

morning who are getting up, getting ready to go out to work, are angry

at the fact that some of their taxes are going to support those

who enjoy a lifestyle on benefits which, frankly, they wouldn't be

able to enjoy in work. Mr Osborne going there for welfare

t plays well in the focus groups in the opinion polls. This is a

Chancellor that's got to rescue his credibility, hasn't he? One of the

worst received Budgets in living memory and the Tories poll position

has not recovered since. Inevitably that's the case, perhaps not

inevitably, but it is the case and we have been going through a rough

period for one reason or another. It's interesting what he is saying

about welfare and the joint position of Iain Duncan Smith and

the Chancellor on this. It's going to be very difficult. I used to be

social security Secretary for six years. I went all through this with

Nigel Lawson. The only thing one hopes is that it doesn't get in the

way, it doesn't devalue the universal credit which is going to

come in, which is a major reform. Treasury aren't particularly

interested in social reform, they just want the money but this is

rather important reform that's taking place and it would be a

great shame if it got tarred by saying this is simply a money-

cutting exercise, which it isn't. Although the Chancellor and Mr Iain

Duncan Smith wrote a joint article this morning in The Mail, we know

they've been at loggerheads. We know there's been a huge battle

between the Treasury and Department of Work and Pensions over welfare.

It's inevitable. Having done it with Nigel Lawson, I tell you it's

absolutely inevitable. The Treasury want as much money as they can get

out of the welfare budget and for many good reasons at times. But I

think battles between the social security Secretary and the

Chancellor, you should only be surprised if there aren't such

battles. I had horrendous battles with Nigel Lawson. We took - major

proposition off the cabinet table and postponed a whole meeting

because Nigel in his usual way put in something like, could we have an

extra �2 billion at 24 hours' notice. So these kind of battles

inevitably take place. It's what happens after that. If anyone kind

of comes along and says that's not the case that's rubbish. The other

thing I think about welfare is this, we always talk about the young

people and young people and certainly it's the case they must

be encouraged into work. We should also remember that things have

changed since skaf Beveridge's time. People are retired. We should look

at that area. Politicians and Chancellors and Prime Ministers,

don't much like looking at that. Good to have you here. Let's get a

sense of the mood at conference and talk to to -- Polly Toynbee and

Peter Oborne. What does David Cameron need to do this week.

of all he has to unite his party. They're fractious here, the way

parties are when they're not doing well. If you are falling in the

polls, you see virtually no sign of being able to improve your position

at the next election because no sitting Government has ever

improved its position while in power. So they look as if they're

destined to either coalition again, which they hate, or to failure. So,

inevitably there is a lot of arguments going on. He needs to

talk to his party, but of course he needs to talk to the people and

needs to perspwaeud them -- persuade them he is the nice man

they thought they had elected. Difficult in the face of these

incredible cuts which run against any notion of compassion. OK, Peter,

what about answering Ed Miliband last week who, broadly, consensus

was he did a good job? Yes, I rather disagree with what Polly is

saying there, I think David Cameron has to do more than unite his party.

He has to stand up to his party. He has to say, look, let's go back to

the decent, honest vision we brought into politics in 2010.

Let's stand up for the coalition, stand up for the big society, let's

say that - point out the real one nation party is David Cameron's

Conservatives and not Ed Miliband's audacious attempt to grab the

middle ground last week F he does what some people, most people may

be want, and lurches off into the right, I think he will cause

himself short-term gain but a lot of long-term trouble. On that issue,

we have been talking about welfare cuts. Nothing new there. They're

talking again about this ten billion savings and it's populist,

would that help regain the credit ground or is that slipping to the

right? Before answering that, can we point out Norman Fowler you had

on earlier was was probably - many of the problems the welfare states

faces today are down his total failure to grasp the issues. Thank

you very much, Peter! Yes, you were useless, Norman. All right, let's

concentrate on today. It is very odd, something has happened here

which is that we had IDS, Iain Duncan Smith, at loggerheads with

the Treasury and he has agreed, has he? I would like to see what they

the cuts are. One thing Norman Fowler said I agreed with, he has

to keep that universal credit and if he doesn't, this programme of

welfare reforms is finished. presumes on that basis that Iain

Duncan Smith has been persuaded that that measure of cuts can now

be taken from the welfare budget but is it just rhetoric? Will they

be found even if Iain Duncan Smith has agreed to it? I am sure that

now he's agreed they will be found and I am sure that they've

earmarked whatever they are. We have to remember is that the �18

billion already cut is according to the institute for fiscal studies by

almost any historical or international comparison the

biggest cut anyone has made, another �10 billion? A lot of them

haven't come in yet. Next April there is going to be when the

disability cuts come in, when two thirds of families with disabled

children lose their disability living allowance altogether. When

large numbers of people lose their mobility, that means their mobility

scooters are going to be repossessed. At the same time,

council tax benefits o comes in for the first time, very like the poll

tax, collecting small sums of money from large numbers of poor people

who won't and can't pay. At that point popular opinion is going to

turn around and they're going to say these cuts weren't a good idea

after all. One of the other issues that's is in danger of splitting

the Tory Party is the issue of Europe. David Cameron seems to have

ruled out an in-out referendum, somehow that going down? I don't

know actually. I haven't sort of sussed out what's going on. He

would have been completely mad to give in to calls for a referendum.

I think he needs one of the messages the Prime Minister must

get across this week is that we have got a national economic crisis.

We have got a really serious programme of Government reforms in

education and welfare. You lurch off into some mad-Referendum at a

time of massive distraction from politics on a domestic level, he

would have lost the plot. What about palpable excitement of Boris

Johnson's arrival? Well, you know, he's fun. He makes people laugh.

They'll enjoy him. He will be preposterous and outrageous, I

don't think he is much trouble to Cameron right now. He is not even

in in parliament, let alone in the cabinet and I don't think this

party is crazy crazy - he is standing in the wings looking

rather glamorous, popular after the Olympics, as if he had run the

Olympics, which he didn't. And he is an irritant but I don't think

it's serious, it doesn't seem there is an important idea logical

difference. They're cut from the same cloth. Do you agree or is

there more worry and fear at the centre of the Number 10 operation

about Boris Johnson's popularity? This is one of the great non-

stories of our time, the Boris Johnson versus David Cameron story.

The fact are he is not an MP. He is the Mayor of London. He won't

become an MP until sometime after the Prime Minister steps down.

Where I think there is a potential in this hypothetical scheme of this

non-story, a potential issue is between saying Boris Johnson and

George Osborne, which ever other leadership contender emerges after

David Cameron. But this is one of the great fabrications, a space

filler, it's no reality. Tpwu works well. Thank you both very much.

We need to let Norman Fowler respond to that unprovoked and some

may say unnecessary attack. He is repraising his performance on

Newsnight. What would you like to say? I have always made it a rule

in political life never to take the slightest bit of notice of Peter

Oborne. It's a mutual love affair. What's the history to that, why did

he decide to have a go at you at a position you held years ago?

think it's all personal. It's really important! Absolutely no

idea. The one point I would make about my period is that if the

Government had taken my advice and taken my proposals back in the

1980s and we had abolished the second pension, the second state

pension and had a compulsory private pension, we would be in a

much better public spending position today and that's why I am

very anxious that when we come to the public spending and the welfare

cuts now that we don't make the same mistake and we forget about

the reform. OK, we won't put you and Peter together, or maybe we

should! I think we will! It's time for our daily quiz and this weekend

David Cameron has finally joined the micro-blogging site Twitter.

But so far he is not following many other people, not tpoting me, yet.

Why not? I have sent him a note. Shall I have a word with him?

At the end of the show Norman Fowler will give us the kregt

answer. -- correct answer. You have time to think about it! Do you know

the right answer? Don't tell us. So, just over half an hour to the

Chancellor's big speech. We can talk to Mr Osbourne's cabinet,

Philip Hammond, the Defence Secretary. He's turned up on time

today, unlike yesterday! I do occasionally, Andrew. It's not like

you have police outriders to get you, oh, you do and you were still

late. Never mind. I have only come from the hotel across the way.

have people with blue lights getting you over there, too. Let's

get down to business and follow up what I wanted to do yesterday. Mr

Os Osbourne is making it clear, it was in the red book but he is

talking openly about it, that he needs another �10 billion in in

welfare cuts. Has he shared with cabinet colleagues any idea of how

$:STARTFEED. He and Iain Duncan Smith had extensive discussions

about how they are going to take forward an an agenda which

addresses the fairness question and the affordability question. Taking

out another substantial chunk of cost from the welfare budget, costs

that was pushed into that budget during the period of the Labour

Government simply isn't affordable and doing it in a way that supports

our fairness agenda. Addressing the questions that have been

articulated this week about the fairness of people who are not in

work, being able to afford and enjoy lifestyles that people who

are in work frankly would struggle to afford.

I understand that and that's the principle behind it, but that's not

what I asked you. I asked you how is the �10 billion going to be make

up? Do you have any inkling of where the cuts will come? Well, for

example, we have already floated the question as to whether young

people leaving school should be able to receive housing benefit

before they have been in the workplace. Whether there should be

a minimum age threshold for accessing housing benefit, trying

to ensure that people who are out of work, with the support of

benefits, enjoy a lifestyle no better, no more generous than

people who go out to work and earn their living.

But is this... It is one area that we will be looking at.

But you are only looking at. Are you only floating ideas for the �10

billion? Are we going to have a national debate about it or do you

have any plans? The �10 billion is a clear figure.

It won't be achieved until 2016/17. So there is time for Iain Duncan

Smith as the Secretary of State responsible to work out proposals

to consult as necessary, to introduce any legislation or

regulations that are required to ensure that by the time we get to

2016/17 we have taken out a further �10 billion.

But hold on... Did it in a way that's consistent with our broader

objectives of fairness and making sure that work work pays.

The Chancellor told us these cuts have to start in 2015? 2015/16, the

the �10 billion is the 16/17 Budget figure. It will build up through

15/16 to �10 billion in 2016/17. So you have to start the cuts in

2015/16 and they will Total �16 billion? No, �10 billion.

In welfare, but he has to find savings of �16 billion? That's

right. That's right. Where is the other �6 billion going to come

from? The Chancellor made made very clear, the welfare figure that he

has identified is based on the assumption that across the

remainder of Government on average, departments continue the percentage

rate of reduction in budget that they have had over this Spending

Review period. It means extending the squeeze on departmental budgets

by one further year into 15/16 and then delivering these welfare

savings on top of that. The Chancellor and the Prime

Minister have said that the rich are paying their fair share at the

moment and should continue to pay their fair share, but does this

mean that there will be new specific measures on the rich to

pay more or they will just continue to pay what they pay?

Well, let's be clear, first of all. The rich are paying a higher share

of taxes in this country every year than they were in any year under

the 13 years of a Labour Government and that's even after we've

abolished the damaging 50 pence rate of tax. So the rich are paying

a higher share and they will go on paying a higher share. That's

because everybody else's salary has frozen. That's only because average

earnings are static? No, I don't think so. It is because

George Osborne introduced additional taxes which hit the rich.

Over every Budget this chancellor has presented to Parliament, has

increased the share of taxes paid by the rich. So will there be more

measures? Well, let me just finish this point. This is the most

important specific measure. It is about making sure that people on

high incomes or people with high wealth pay the tax that they are

supposed to pay. It is about clamping down on aggressive

avoidance and evasion and we have made massive strides in that area

where Labour over 13 years failed to do anything effective at all. So

the rich are paying a higher share. Tax evasion and avoidance will

continue to be clamped down on and that means the rich will go on

paying a higher share of the total tax bill.

Well, we know what he ruled out. He ruled out a mansion tax. He ruled

out a wealth tax. He ruled out new council tax bands. So what is left

if he wants to do something additional? There there be

something additional or not or is it just the old chestnut of tax

avoidance? It is not an old chestnut, by the way. We have

brought in over the life of this Spending Review, we will have

collected something like an additional �18 billion by clamping

down on tax evasion and aggressive tax avoidance.

By doing what governments are meant to do, collect tax? And what the

last Government failed to do over 13 years so we are tackling that

problem. We have grasped it and we are dealing with it. As far as

additional and any additional or new taxes or changes in rates are

concerned that is a matter for the Chancellor that he will announce in

his Budget in the usual way. Do you accept that if he is to get

the support of the Lib Dems for �10 billion in welfare cuts that he has

to come up with something more more for taxing the better off? Yes or

no? No, I think what the Lib Dems will want to see is a fair solution

where they are assured that at each turn of the handle those most able

to pay are contributing an appropriate share and that the

rich... What will the next turn of handle be on the rich? You are

going to take �10 billion away from the poor people in society. What's

the next turn of handle for the rich in the society? We are going

to remove costs that are no longer affordable that was put in there by

the Labour Party who increased welfare spending by �75 billion a

year. That was money the country never could afford... Mr Hammond

you are not not answering my question. Could you please answer

the question, it is only right? I can't speak for the Liberal

Democrats, but I know that the Liberal Democrats regard as very

important the continuing raising of the lower threshold four income tax.

A measure which helps those who are working on relatively low incomes

very significantly. I would expect the Liberal Democrats to want to be

reassured that we're going to be able to continue to pursue that

agenda as part of the chancellor's overall package.

I know you have to go. I want to ask you major defence merger. You

must have a huge interest in this. As it stand this is Monday morning,

the decision has to be taken by Wednesday. Does it look to you as

if this merger is going to go ahead or not? Well, the decision that has

to be taken by Wednesday, by the company, is whether they feel they

are close enough to getting agreement between the the

shareholders on both sides, between the two companies, between the four

governments including the US Government that are involved in

signing off this deal. Whether they are close enough to make it worth

asking the Stock Exchange to extend the deadline. I don't think there

is any chance of getting the deal done by Wednesday, but the company

will make the call tomorrow whether it wants to apply for an extension

of Government. -- extension of of time.

The French Government having 9% of the merged group. The German

Government having 9%, but the British Government, the British

people would have none. Is that your position?

Well, it depends on the other protective arrangements put in

place. We will want to make sure that British jobs, British

interests, British defence interests... What's the the answer

to my question, Mr Hammond? think it could be done with a

reduced French Government stake. If the French Government is prepared

to reduce its stake and dismantle arrangements which have given it

the ability to control the company then with the addition of

safeguards, and national security agreement for example, safeguards

about where the business will be headquartered, what the composition

of the board will be, we think it will be possible... So the French

Government will have a stake in this new entity, but the British

will not? Is that your your position? The French Government has

a very large stake at the moment. Our position is that they will have

to make a considerable reduction... But we won't take a stake, and the

French will still have one. It is a simple question and it demands a

simple answer for our biggest manufacturing company in this

country. The French will continue to have a stake and the Germans, we

won't. Is that the British position? As long as that stake

does not give them effective control or an ability to interfere

in the management of the company and that means it has to be below'

certain level, putting them on a par with big institutional

investors who will own significant single digit percentage stakes in

the merged group. What we can't have is this business going forward

with the French or the German State able to direct its activity. That

would not be acceptable. OK, Mr Hammond, thank you.

What we have heard from the Defence Secretary, the British want the

French, the French and the Germans have 15%, maybe more each at the

moment and what he is saying, if they come down to 9%, we will

accept that. So the French would have 9%, the Germans would have 9%,

we would have none. Does that seem sensible to you?

I thought what Philip was saying was actually sensible because what

he is trying to say is, what he was saying effectively, was that we

shouldn't get into a position where the French and indeed the German

stake overwhelmed the company to the point that they had control.

That's the point... Between them they would 18% and the British

Government would have zero percent. That's my point? I understand the

point you are making. All right.

It wouldn't be a Tory Party conference if we didn't talk about

Europe. So don't worry, we will! David Cameron has dangled the

prospect of a referendum on Europe, but not now. The Prime Minister is

out to appease Tory Euro-sceptics, but the delay of his words

infuriates them. Adam has been doing his referendum with the Daily

Politics Balls. Let's test the mood on this idea of

a European referendum. Specifically the timing. Would delegates like to

have one later as David Cameron has suggested or go ahead and get on

with it now? We need to wait and see what happens in places like

Greece, Italy, Ireland, and possibly Germany as well before we

make any decisions really. We have had our first ball in the

no box, but the lady who did it wanted to do it anonymously.

want to see a different European Union not the sort we have got now,

but is that enough to say we should be altogether? That's why it is the

wrong time to ask it. It is not the best time to be

worrying about who is in the EU. I am in a rush. It takes ten

seconds. If it stops people people voting

for UKI. We don't need the infighting and

let's get on with running the country. Hi, Andrew, great show.

REPORTER: Do you trust David Cameron to deliver a referendum

now? Not in the month ever Sundays! Would you like to vote? Du want to

have it sooner than the Prime Minister Prime Minister sounds like

he wants to have it? I think it has got to be in the fullness of time.

How about that? Nice and vague. Oh, that's the no box.

When should the EU referendum be, I think we need a referendum on the

EU as soon as possible, but the key issue is it should be a proper

referendum, in or out. David Cameron wants it to be later,

doesn't he? I am not sure what David Cameron wants. The position

is developing, but I think sooner or later it will have to be in or

out and I look forward to that. When would you like to have it?

Today. This afternoon would be convenient.

I found a red ball. How did that get in there? Secretary of State,

would you like to do our Daily Politics survey? Do you remember

the days when you were on the Daily Politics every day? I do pretty

much, yeah. Good. Happy memories then. When

shall we have the EU referendum, now or later? We have Not had the

chance to vote for several years. Give us the chance now.

In the end, it looks like a small majority have sided with David

Cameron and feel now is not the time for an EU referendum, but it

Let's talk to Mark Reckless and Richard Ashworth. You want a

referendum but David Cameron has ruled out an in-out referendum.

want a referendum sooner than later and I think it's important that's a

real referendum that gives people a choice as to whether they want to

stay part of the EU and that's what I want to see. Sooner rather than

later and a real referendum on EU membership. You are not going to

get either of those, are you? David Cameron made it clear he doesn't

want it on in-out and doesn't want it now. Well, I think it has to

give people the opportunity choose whether or not we stay part of it.

Whether the other side of that referendum is the status quo or

something new with a eurozone or a few powers back, I think that

question is open. But I don't think we can go to the next election

saying we are going to try and persuade the other 26 countries to

let srus a few powers back and by the way, if you vote Conservative

we are going to take that as your consent to stay in the EU. So David

Cameron's making a mistake by not offering a substancive referendum

before 2015? Well, I don't think the policy is entirely clear at the

moment. I think it is. If you listen to David Cameron, he said I

think the trouble with the straight yes or no is we stand today is I am

not happy with the status I do so I don't want to say yes to that but I

don't think would be right to leave right now. No referendum on in-out

and no referendum on sooner rather than later. As we go into the next

election and the European election for Richard, we will hope to be

clearer about what our policy is. I think, if David Cameron's able to

go in there and try and get powers back, if we can say to the civil

service by the way, the people are going to get a vote on whether we

stay in on that base to say will be a inkrepb I have to try and get

powers back. The key thing is ultimately the Conservative Party

has to allow the people of Britain a choice as to whether we stay in

the EU or we become an independent country again trading with Europe

but governing ourselves. On that last point do you agree there has

to be at some stage, preferably before 2015 a referendum on whether

we stay in or leave? It's difficult to determine the timing of a

referendum. Indeed the way that you will do it. The Prime Minister was

exactly right when he said in November we have got some very

critical negotiations about the seven-year budget. Shortly after

that we have got the negotiations for the 17 eurozone countries to

integrate more. Now, that's an opportunity for the United Kingdom

to redefine our relationship. It would be wrong, therefore, for us

to prejudice Britain's position going into those negotiations by

having a very early referendum but more to the point, you wouldn't

know what kind of Europe and who kind of relationship with Europe

you are describing to the British people without having that

negotiation first. Not now... you advising David Cameron use his

veto? I am certain he will, there are big issues the United Kingdom

can't agree to, inkraoezing size of the budget, abolition of rebate, I

am certain the veto will will be used if they come up. Are you

saying no to an in-out referendum? It's not as easy as that. Why not?

Because the Prime Minister now has the opportunity to redefine

Britain's relationship with the European Union. Actually if you

said to the people, do you want a trading relationship with a very

important trading partner, which does not involve degracious,

actually -- integration, gives us the opportunity to bring some

powers back from Brussels. That's the position Wye like to be.

need to wait, we need to know what we are dealing with and what sort

of Europe there's going to be before we have a referendum on what

we don't know? I think it's a fair point that Europe is in a state of

flux. The important thing for me is once we have had those negotiations

that then the people get an opportunity to decide whether we

want to stay in the EU on that basis or whether we prefer a

relationship more like that of Switzerland where they sort of

trade freely with the EU but they're not part of the

institutions, they're only paying a small amount towards it. Their

people can govern themselves. you like Britain to be like

Switzerland? No, I wouldn't. Firstly, because Britain isn't like

Switzerland, we are a bigger nation. We have a different kind of economy.

We play a bigger part in the world. I would like to have far more say

in Europe than Switzerland does, for example. I don't see the

attraction of that. I don't see the attraction of a major manufacturing

nation like Britain having to be like Norway or Switzerland, waiting

to find out what the regulations are Brussels are imposing and then

having to apply them all to the letter, to the word, without any

say. Also, may I say, making every bit as big a contribution to the

funding of the European Union as we do, as members. There you go, Mark

Reckless. Well, I think the Norwegian and Swiss contributions

are significantly smaller than ours, but... I am sorry, they're not.

am sure we can look at the numbers after this. What I would like to

say is in Switzerland, as in the United States or Japan, for

instance, if you want to export to the EU you have to meet EU

regulations on your exports to the EU. They don't have to apply all

those EU regulations to their exports outside the EU and their

own domestic economy. I just think economically we could be so much

better off if we weren't paying �19 billion a year for the privilege of

having 26 other countries make our laws for us. That is a gross cost,

without the money that you get back, for example, to regional funding

and to the common agricultural policy so the net cost is not

anything like that. But the contribution per person is about

the same as the contribution per person from Norway. Why else would

the European Union allow somebody else to have a free ride if

Britain's to have a free ride, then the poles and Germans or French

would say we will have a free ride, too. Because they sell more to us

than we do to them and they sell almost as much to Britain as to the

United States and Japan together T would be highly unusual for people

selling that much to want to cut off perhaps their most important

partner. The critical point of that argument is it is 50% of our trade

but to the whole of the European Union we are 11% of their trade. So

you are hardly having an even debate. Fascinating though this is,

about the economics of it, the politics is clearly demonstrated by

the two of you, that the issue would split the party. Do you want

that? Well, what we should do is just allow the people to decide on

this absolutely crucial question for our country that no one under

the age of 55 has had an opportunity to vote on. But your

party doesn't agree on that. should agree to offer people that

vote to allow the people to decide, and then allow anyone within our

party and outside to make their own arguments as to which side they

want to be on. Afterwards we come together just as these issues have

been discussed in the past. Do you trust David Cameron? The real

debate we should be having is that actually under the Labour Party,

Labour signed us up to the Lisbon Treaty, Labour signed up to about

100,000 pages of regulations. The British Conservative Party offers

the British people the opportunity to redefine that relationship, get

away from that regulation. That's where we are both joined together.

My concern about Labour is what happens to the Conservative Party

if they offer a referendum on the EU, whether we stay part of it

before we do. Thank you. That's right. There is a risk they could

outflank you on this issue. Thank you very much. Would you like a

taste of the krfrpbs now? -- conference now? All right then.

Don't say I am not good to you! Conservative Party members were

treated to a speech from the leader of the Conservatives in Scotland,

Ruth Davidson. She spoke about the importance of keeping the union

together, as she would. Here is a flavour of her speech. Global

security, international trade, a stable currency, low interest rates,

the strongest social cultural and economic bonds with consistent

welfare across the nation. These are all powerful examples of the UK

in action. It is no coincidence that these are the very things that

separatists want to assure Scottish voters will not disappear. If

things are going to change in Scotland, the SNP seems to say,

everything must stay the same. But things wouldn't stay the same.

Scotland's relations with every nation and institution, in

particular the EU, would be reset and have to start from scratch. We

know that the campaign to keep our country together will be long and

sometimes tough and we don't underestimate the challenge that we

face but for all Alex Salmond's bluster, this is not a done deal.

Polls today show that fewer than a third of Scots support independence,

just 28%. And the more people see the SNP's offering, the less

appealing it becomes. That's why the Scottish Government is spending

hundreds of thousands of pounds in courts trying to keep information

from the Scottish people. That's why they're refusing to publish the

future costs of their free electoral bribes and that's why

they're twisting and turning on fundamentals like the Queen, the

current and membership of NATO. Indeed, in the parliament in

Edinburgh every policy, every bill, every SNP act must fit in with

their overall goal of bringing the United Kingdom as we know it to an

end. And that's something which affects every one of us, not just

Scots. Victory for the UK and the referendum must be emphatic. It

can't be by an inch, it has to be by a mile to provide the stability

essential for our continued prosperity. And that's where all of

you can help. Ruth Davidson there. What is the tactic from the

Conservative side in terms of the issue of Scottish independence,

We should put out the advantages of the union which are many. I

remember John Major putting these clearly when he was Prime Minister.

Shouldn't you allow the other pro- unionist parties, because of the

level of unpopularity of the Tories in Scotland? No I don't think you

can do that. You can't just withdraw from the political field.

There was a time when we had more seats in Scotland than anybody else.

But those times, I do concede, have long gone. But I think we should,

the Conservative Party above all, should be arguing for the union and

should be arguing, not in a strideent way but in a way that

says new Scotland have got everything to gain from it as well

as the rest of the United Kingdom. And briefly, just to continue the

debate we were having about a referendum on membership of Europe

or whatever can be agreed, the last point there by Mark Reckless that

Labour could possibly outflank the Conservatives here by offering a

referendum before, that's a real risk? I think, I mean, the other

argument is we will be outflanked by UKIP. The Conservative Party

just has to decide what they're going to do and I think that the

real danger is, and you almost saw it with that discussion today, we

get back to the old days and John Major's Government of two MPs on

the green debating Europe. We don't want to go down that. If we should

have learned anything from those years, it's that totally counter

productive. It gives the impression we are a divided party. If we go to

the election and went into the... Well, you are divided. To the 97

election still arguing about this... How do you prevent it, do you offer

that referendum and say so now? way do you it is you set out, or

David Cameron sets out exactly what it is that he wants, which I think

the most sensible thing to do would be to say look, we are going to

negotiate, redefine the position and then we will put it to a

referendum. As it happens, I am not against referendums. I was arguing

for one a long time ago. But I do think that actually to have a

referendum at this point with Europe in crisis would be

absolutely crazy. So the big event of today is a few moments away.

George Osborne's speech to the party conference is going to kick

off in probably about five minutes, although they usually run late.

It's been a turbulent few months For the Chancellor after his budget

sparked weeks of negative headlines. Who is the man behind the red box?

We have been speaking to some of his colleagues past and present.

He is the Chancellor who brought in spending cuts, the Conservative MP

who is close toast the Prime Minister -- close toast the Prime

Minister. A family man with a wife and two children but what kind of

man is George Osborne? I worked with him and he was political

Secretary to William Hague before he got into parliament in 2001. He

was a bright guy, a loyal guy. Occasionally brash, because we all

are in our late 20s, early 30s but he was clearly a guy who was going

places and everybody knew it. George, whose first stphaeupl

Gideon until he changed it as a teenager, became the youngest

Conservative MP ever when he was elected after Martin Bell choose to

stand elsewhere. He rose up the Tory ranks quickly, becoming Shadow

Chancellor in 2005. Claire Perry worked with him two years later and

says he was the kinds of man who was always juggling work and family

life. I used to see his diary and it would be crammed, take Liberty

to school, go to Luke's play, look at the schools with him in the

midst of the run on Northern Rock or whatever it was, he does try to

be a good dad and father in the constraints that we all face of a

busy working life. His wife, here with him at the Royal wedding, is

the daughter of David Howell, a former cabinet Minister under

Thatcher. Osbourne was privately schooled at St Paul's in London and

went on to read modern history at Oxford where he was a member of the

He was a boy growing up in London. Cheered here ahead of his Mansion

House speech, George Osborne has been booed by by crowds a the

Olympics and he is aware of his unpopularity according to Nick Nigh.

He used to work work with him. He knows what his strengths and his

weaknesses are particularly the way he can come across sometimes in

public, which is one of the reasons why he limits his appearances and

he adopts what people call the submarine strategy of emerging when

he has something to say and says it and goes quiet.

A loyal friend and second in command to the Prime Minister,

theirs is a different relationship to that of their predecessors.

There is a large door between Number Ten and number 11 and it

used to be lock and guarded by a policeman. Now, it is open. The

little Camerons are trotting in, there is an Osbourne family bud gee.

For now George Osborne's plan is to get the economy growing and his

This is Nick Robinson at the conference in Birmingham. Nick,

let's talk about the man for a minute. He produce add Budget whose

aftermath was probably the worst received in living memory. It

resulted in Tory polling falling and not recovered. His personal

ratings falling and not recovered. There is a lot hanging for him,

never mind the Government, in this speech?

Not just on this speech, Andrew. But on what happens in eight weeks

time. I think the way you should judge this speech is what it tells

us about what will happen in eight weeks time. On 5th December, the

Chancellor stands up and delivers what most viewers would regard as a

Budget. It is called the autumn statement. It is one of the two big

statements that happen in the year. That statement will unveil the

official forecasts, no no longer written by by politicians, about

whether he is on course to meet his borrowing targets. We know now, not

what they are saying, but we know clearly they will say he is off

course and therefore, what he says here will provide a framework for

the script of what he will have to announce on 5th December. The the

headlines will be, "Sticking to the course course" and that phrase he

used when the Tories were in opposition in 2009, "We are still

in it together.". The problem they face Nick, as you well know, and I

heard you talk about it. They may say they are sticking to the court

martial, but when -- sticking to the course, but when it comes to

deficit reduction, they have they have been blown off course. That's

the glue of the coalition. This is meant to be the purpose of the

coalition? That's right. He cannot stand up

today and say, "We are on course to deal with the debt or deal with the

deficit." There is a figure you will hear every Tory spokesman use

at every opportunity which is the deficit is 25% lower than when they

took over. Of course, what they don't say is what you have riferd

to is -- referred to in this financial year, in the first four

or five months, borrowing up, not down, by 20%. As a result, debt is

geght bigger, not -- getting bigger, not smaller. What will he do? What

you have seen the Chancellor prepare for is to say, "Yes, come

5th December, the Budget-style statement, I might have to rewrite

the so-called fiscal rules. The rules that say to the financial

community "this is what we are going to do about borrowing. But I

don't have to recite my spending cuts -- rewrite by spending cuts."

Our credibility comes from a willingness of a Government to cut

spending and increase taxes, to carry on cutting spending and

increasing taxes for much longer than they originally planned to do,

way beyond the end of this Parliament, into the next one,

after the next general election and to say that's where his credibility

comes from, not the fact that the economy is off course.

Nick, we are going to dip in and look at what our cameras can see in

the conference hall. That's the chap from the Olympics.

The Government has to find �10 billion in cuts. It wants wants the

rich to pay their fair share of taxes. But I am right in thinking

we don't know hat welfare cuts - what the welfare cuts will amount

to and I have not been able to find out if the rich are going to pay

additional taxes or carry on paying what they are paying? I am told

they will pay additionam additional taxes. You are at the beginning

afcoalition negotiating process. We are unfamiliar with this. We think

that ministers can wait for their speech and unveil what they are

going to do even though they haven't managed to tell you how

they are going to do it. If George Osborne wants to put taxes up on

the rich, as he says he does, he has to get the scale, the type

agreed with Nick Clegg. What he is doing in public is negotiating with

Clegg saying, "You want a mansion tax. You are not getting one from

the Conservatives. You want higher council tax bands from the rich?

You are not going to get get them from the Conservatives." He wants

to go and say, "I would be willing to consider this. He put up

stoovrpd -- stamp duty. He has to do that. He will go to the Lib Dems

and say, "Here is my starting position. �10 billion worth of

welfare cuts. This is how I would do it, A, B, C, D and they would

have to say, "We are not not doing this. You saw Nick Clegg say, "I

would not sign up to a freeze on benefit rates." It is what the Tory

wants to do, but Nick Clegg said no. But he left the door open to

increasing the rate of benefits lower than the rate of inflation.

You are seeing a public negotiation. One coalition partner with the

other. How is Mr Osbourne's stock with the

Tory faithful. Chancellors become unpopular, people like Nigel Lawson

and Ken Clarke, they remain popular with their party faithful. Can the

same be said of Mr Osbourne? No. For the reasons you said in in

your opening session. They lost faith in a guy they knew was no

great public performer, but thought had a a bit of the magic Alastair

Campbell dust. When he stands up in a few seconds time, he has to say,

"Go back to basics. I was right in the past, I am right now.".

Prime Minister joining the Chancellor in the hall. He is going

to listen to his chancellor's speech. No surprise there. Lets

hear the Chancellor of the Exchequer, George Osborne. Thank

you for delivering the Games and making Britain proud.

APPLAUSE You are joining a strong team at

the Treasury. Chief secretary Danny Alexander and our Conservative

colleagues, Greg Clarke, David, James, Greg Hands, and David

Merritt, thank you for the support that you give me and the great job

you are doing for our country. APPLAUSE

Now, ladies and gentlemen, in 1972, when a Conservative Prime Minister,

two years into office was faced with economic problems and over

powerful unions, we buckled and we gave up. The result was higher

inflation, more strikes, and the three day week. A decade later, in

1981, when another Conservative Prime Minister and Conservative

chancellor two years into office were faced with economic problems

and powerful unions, we did not give up, but pressed on and

overcame. APPLAUSE

Today, in the face of the great economic challenges of our age, we

here resolve, we will press on, we shall overcome.

APPLAUSE We made a promise to the British

people that we would repair our badly broken economy. That promise

is being fulfilled. The deficit is down by a quarter. There are one

million more private sector jobs. The economy is healing. That

healing is taking longer than we hoped because the damage was

greater than we feared. But let the message from this conference be

clear, we will finish the job that we have started.

APPLAUSE And there is another promise we

made - on the eve of the conference, on the eve of the election, I told

this conference, "We are all in this together." It was more than a

slogan. It spoke of our values and of our intent. That there would be

sacrifices and cuts that would be tough to make, that everyone was

going to have to play their part and that in return, we would build

an economy that works for all. We took the risk. Few political

parties anywhere in the world are prepared to take before an election.

Quite simply we told the people the truth about the hard road ahead.

Now some say we paid a price for that. But at this -- but of this I

am sure, our country would have been all but ungovernable if we had

not been straight with the public before asking them to cast their

vote. APPLAUSE

So three years later my message remains the same - we're not going

to get through this as a country if we set one group against another,

if we divide, denounce and demonise. We need an effort from each and

everyone, one nation working hard together. We are still all in this

together. APPLAUSE

We know what the British people mean by fair. That those who put

something in should get something out. That we support those who

aspire so we can help those most in need. That the cost of paying off

our debts cannot possibly be borne by one section of society alone.

Let's be clear, those with the most should contribute the most.

APPLAUSE Each one, each one of my Budgets

has increased taxes overall on the very richest. In every single year

of this Parliament, the rich will pay a greater share of our nation's

tax revenues than in anyone of the 13 years that Labour were in office.

APPLAUSE And we've achieved that while

getting rid of a cripplingingly uncompetitive 50 pence rate that

raised no money and cost jobs. APPLAUSE

It is a completely phoney conception of fairness that you

stick with a tax rate, you know raises no money, that you know

drives away jobs and investment. That you know weakens the economy

just to say you have kicked the rich. The people who pay the price

for that, are not the rich, but the poor looking for work and there is

It's wrong that it's possible for someone to be better off on

benefits than they would be in work and we are right to change that,

too. APPLAUSE That's why I insisted on a cap on

benefits so no family can earn more out of work than the average family

earns in work. And can you believe it? Labour voted against that. All

that talk about something for something and they've learned

nothing about anything. Where is the fairness? Where is the

fairness we ask for the shift worker, leaving home in the dark

hours of the early morning, who looks up at the closed blinds of

their next door neighbour sleeving off a life on benefits? When we say

we are all in this together, we speak for that worker. We speak for

all those who want to work hard and get on. This is the mission of the

modern Conservative Party. We represent, not the factional

interests of organised Labour, nor do we indulge in the lazy politics

of envy. We leave it to other parties to mark people by their

background, to divide, to try to reorder and pre-distribute society

by the rules of their favourite sociology textbook. We modern

Conservatives represent all those who aspire, all who work, save and

hope, all who feel a responsibility to put in, and not just take out.

Whether it's the owner of the corner shop, staying open until

midnight to support their family. Or the teacher preferred to defy

her union and stay late to take the after school club or the commuter

who leaves home before the children are up, comes back long after

they've gone to bed because they want a better life for them. Or the

pensioner who saved all their life and doesn't want to spend it all as

they want to pass something on to their children and grandchildren.

Or the entrepreneur who doesn't cash out and pack up, but devotes

their flair and energy to building the next success story. They are

all part of one nation, one nation working together to get on. That is

the nation we represent. These are the people I will serve as

Chancellor. APPLAUSE and by the way, that's what being a

party of one nation is all about. It's about a whole programme for

Government. It is rissable to believe you can become a party of

one nation simply by repeating the words one nation over and over

again. Of course we all know why he did it. The Labour leader wants to

pretend he is moving to the centre, when all can see he is moving to

the left. But as it is revealed as an empty

gesture, people will be more let down by the reality than they were

attracted by the pretense. You can imagine Benjamin Disraeli's

disappointment, moments after the joy of being told there really is

reincarnation, he discovers he's come back as Ed Miliband. To the

people of Britain I say this, whoever you are, wherever you come

from, if you're working for a better future, we are on your side.

Ladies and gentlemen, I see this this Conservative Prime Minister,

David Cameron, close-up. He is an outstanding Prime Minister of

judgment and integrity. APPLAUSE. But more than that, he is leading a

Government of change, of profound long-lasting change. Beneath the

sound and fury of the daily debate, a silent revolution is taking place.

Some of the biggest issues in politics, so big people thought

them too controversial to fix, we have been prepared to tackle. A

state that had become too expensive to pay for. Public sector pensions

we couldn't afford. People earning low incomes but still paying income

tax. Businesses fleeing Britain because our taxes were too high. In

welfare, policing, and education, services that were crying out for

reform. Government that had become too centralised, the constant drip-

drip of powers to Europe. When you are tackling all of these big

issues, of course the mid-term politics are difficult. But I tell

you this, I'd rather have these difficulties because we are

tackling these big challenges, than wake up like Tony Blair did after a

decade in power and discover he Let us all, all of us, be proud

that we're contributing to the most radical and reforming period of

Government this country has seen for a generation. Yes, we've done

it in coalition. But we could have done none of it without a coalition.

Here's a fact about our constitution that we all know, what

David, you might call a magnet factor, you can't win the votes you

need in parliament for each and everyone of these changes without a

majority. And the Conservative Party at its best has always known

its responsibility. We would rather confront the choices and dilemmas

of Government, than bask in the blissful irrelevance of opposition.

APPLAUSE Now, we face more hard choices this

autumn. The truth is that the damage done by the debts and the

banking crisis was worse than we feared. The rise in the world oil

price has been larger than anyone forecast. Sadly, the predictions

that you made, that I made, that almost everyone here made, about

the euro, turned out to be all too true. This makes the job more

difficult, but it doesn't make it any less urgent. Yes, we've cut the

budget deficit by a quarter. But it tells you something about just how

big it was that the deficit is still higher today than when a

British Government went begging to the IMF in the 1970s. Now this

Wednesday I am also going to a meeting of the IMF. Don't worry,

because of the resolve of the British people, I go representing a

country that is seen as part of the solution, not part of the problem.

That is only because of the credibility our plans have earned.

Now I know our plans have been criticised, but the critics don't

seem to agree. Some say we're going too fast. We should be spending and

borrowing even more. They're curious -- their cure kwrougs

suggestion Kuerten kwrougs suggest -- in good times and bad, in boom

and bust, their answer is always to spin and borrow more. And they

think -- spend and borrow more. They think there is such a thing as

a free lunch. They They think that extra borrowing could pay for

spending or temporary tax cuts in an attempt to put money in the

pockets of consumers. But the extra borrowing would come at the cost of

higher interest rates and everyone would know that there will be

higher taxes to pay for it coming down the track. The higher interest

rates would pick the very pockets of the working people you are

trying to help. And the fear of extra taxes would undermine their

confidence. In other words, our critics would gamble everything.

Our credibility, our financial stability, our low interest rates,

the cost of our debt. They would risk everything on the dubious idea

that a few billion more of spending would dramatically improve the

fortunes of the trillion and a half pound British economy. I will not

take that risk with the British economy. In that 70-minute speech

last week to the Labour conference, do you know how many times Ed

Miliband mentioned the deficit? Not once. Not once. No mention of

perhaps the most acute problem facing the country. People

marvelled at Ed Miliband's feat of memory. And so did I. He spoke for

over an hour about the problems of Britain and forgot to mention that

we had a Labour Government running He told us about his life story,

but forgot to mention he spend a third of his life working for

Gordon Brown. Maybe someone hit him over the head with a mobile phone?

What was the biggest memory laps of all? He forgot to say the three

things that the British people want to hear from the Labour Party -

we're sorry, we spent too much, we don't do it again. APPLAUSE

Now he may be trying to forget, we're never going to let him.

Labour must now be trusted to run the country's public finances again.

Now as well as those critics saying we're cutting too fast, there are

those who say we're cutting too slow. Because some of those who say

this are our friends on the debt issue, I want to address the point

very carefully. I am the first to say we should have lower taxes and

a smaller Government. And I am the Chancellor who is cutting the size

of Government faster than anyone in modern times. We are reducing the

size of Government from almost 50% of our national income, to just 40%

in just five years. I just don't think it's realistic to cut a great

deal faster than that. And as we reduce employment in the public

sector, we have to do it at a pace that allows the private sector to

fill the gap. We promised the British people we would protect

decent public services as we dealt with the deficit and so we will. We

have never argued that you stop what economists call the automatic

stableisers from operating. The lower tax receipts and extra

Government payments that follow, if, for example, the global economy

turns down. Our public spending plans were designed to give us

flexibility and credibility. The flexibility to respond to the

economic conditions in the world around us. The credibility that

each day earns for us record low interest rates in the world bond

markets. Our detailed tax and spending plans have brought us

stability, but they only cover the next two years. And we must now

take some very serious decisions about what we do after that. Let me

tell you about my approach to these decisions. Our published plans

already require us to find �16 billion of further savings. As I

have said, the broadest shoulders will continue to bear the greatest

burden. But I am not prepared to contemplate things that make no

economic sense, and destroy jobs. So we won't have some kind of

temporary wealth tax, even Dennis Healey thought that was a bad idea.

Our future lies as a country where wealth creation is not something to

be penalised, but encouraged. And nor am I going to introduce a new

tax on people's homes. APPLAUSE. would be sold as a mansion tax but

once the tax inspector has his foot in the door you would soon find

most of the homes in the country labelled a mansion, homes people

have worked hard to afford and already paid taxes on, it's not a

mansion tax, it's a homes tax and this party of home ownership will

When it comes to the richest, the first place I will look is those

who are not paying the taxes we expect them to pay today. We will

continue our ruthless pursuit of tax evasion. We will make

aggressive tax avoidance more and more uncomfortable. This is not

idle rhetoric, thanks to our action, we are collecting �4 billion more

every year from those who avoid or evade tax and we will take new

measures to collect even more. The Conservatives are the party of low

taxes for the many, not the party of no taxes for the few.

APPLAUSE If there are other ways to increase

revenue from the very top without damaging the enterprise economy, we

will look for them. But our country's problem is not that

working people pay too little tax, it is that Government spends too

much of their money. APPLAUSE

And I'm determined that once again the great bulk of savings must come

from cutting Government spending, not increasing taxes.

APPLAUSE Now I have said before that 80% of

our total effort to cut the deficit must come from reduced spending and

that should remain the case. As we have shown in the last two years,

it is possible to do that while improving our public services.

Crime has fallen. Hospital waiting lists are down. School standards

are higher. In Government, this party, this party is achieving

something invaluable. We're destroying the left-wing myth that

the success of a public service is measured only by how many pounds we

spend on t not by whether it heals our sick our he had kates our our

children or makes our streets safe. This is because we are doing it

carefully and doing it right. And if we want to go on doing that and

limit the cuts to departments, then we have to find greater savings in

the welfare bill. �10 billion of welfare savings by the first full

year of the next Parliament. Iain Duncan Smith and I are committed to

finding these savings while delivering the most radical reforms

of our welfare system for a generation with a Universal Credit

so that work always pays because it is not just about the money. It

comes back to fairness and to enterprise. Four how can we justify

the incomes of those out of work rising faster than the incomes of

those in work? How can we justify giving flats to young people who

have never worked when working people twice their age are still

living with their parents because they can't afford their first home?

How can we justify... APPLAUSE

How can we justify a system where people in work have to consider the

full financial costs of having another child while those out of

work don't? APPLAUSE

And here is the broader point - how could a country, that wants to

compete in the world economy possibly explain that it is cutting

budgets on things like schools and science because it couldn't summon

the political will to control welfare? For in this country, we

face something even greater than recovery from recession and the

problems of the past. We face the shock of the future. Something my

great friend William Hague talked to us about yesterday and what a

brilliant Foreign Secretary he is. APPLAUSE

William told us yesterday, I will tell you today, the economic crisis

has accelerated a change that was already happening in our world.

Prosperity and the power it brings is shifting to new corners of the

globe to Asia, and the Americas and even now Africa. I'm proud of our

commitment to international development, but the truth is that

free enterprise is lifting hundreds of millions of people out of

poverty, more quickly than all the Government aid programmes of the

world put together. That's good news for them. And good news for us

too. It creates vast new markets for British exports, but only if we

rise to the challenge. Western democracies like ours is is being

without without worked, kout competed, outsmarted by these new

economies and the economy for countries like Britain is this -

are we going to sink or swim? And the truth is some western western

countries won't keep up. They won't make the the changes needed to

welfare, education and tax. They will fall further and further

behind. They will become poorer and poorer. I am determined that will

not be the Britain I leave to my children or you leave to yours.

APPLAUSE And it need not be. If we go on

making the fundamental, deep rooted changes needed so that our country

can grow and compete and prosper. Delivering the further cuts to

business tax that we have promised. Supporting Michael Fallon's

deregulation plans, seeing through Michael Gove's school reforms and

by the way those school reforms are the single most important long-term

economic investment this country can make.

APPLAUSE Our entire economic policy is an

enterprise policy. We will be the Government for people who aspire

like the people who start a new business and who work in that

business and want to own shares in it. Today, we are setting out

proposals for a radical change to employment law. I want to thank

Adrian Bee croft for the work he has done in this area.

APPLAUSE Now this idea is particularly

suited to new businesses starting up and small and medium sized firms.

It is a voluntary, three-way deal. You the company, give your

employees shares in the business. You the employee, replace your old

rights of unfair dismissal and dedone dancy with new rights of

ownership. And what will the Government do? We will charge no

capital gains tax at all on the profits you make on your shares.

Zero percent, capital gains tax for these new employee owners.

APPLAUSE Get shares and become owners of the

company you work for. Owners, workers and the taxmen all in it

together, workers of the world unite.

APPLAUSE M I am a low tax, small Government

xiv, but I never thought the State is without a role to play in the

economy. We're Conservatives, not anarchists.

We have never allowed uncontrolled capitalism free reign. It was these

Labour politicians, not Conservatives, who let the banks

run rampage because they didn't understand that to work for

everyone, markets need rules. I am the Chancellor in a Government that

has done more to reform finance and banking than any before it,

commissioning and implementing the Vickers Report, ring-fencing the

high street banks when Labour wouldn't. Putting the Bank of

England back in charge and working with them to fund new lending. New

creating a British business bank. And when we find those Backers

involved in scandals like LIBOR, we are not going to give the money

back to the banks as Labour did, we are giving the money instead to

those who represent the very best values in our country, our veterans

and our injured soldiers. APPLAUSE

Ladies and gentlemen, we're reforming banking so it serves our

economy and supports families and businesses. That is part of our

interprice strategy -- enterprise strategy. People ask how are we

going to earn our way in the world? This is how -- with an enterprise

strategy that safeguards low interest rates. With an enterprise

strategy that reduces taxes on entrepreneurs and the low paid.

With an enper price strategy that creates confidence that this

country has a Government Government can pay its bills. We will pay our

way through the skills and the talents of the British people.

Ensuring our scientists, our engineers and our apprentices are

the best in the the world. We will be activists, building

infrastructure, roads and power plants and broadband, we will be

activists for high-speed rail and air capacity, and cut through the

delays and red tape, and where was there more red tape than in our

planning laws and enterprise enterprise strategy, means

investing in renewable energy. We are today consulting on a generous

new tax regime for shale gas so Britain is not left behind as gas

prices tumble on the other side of the Atlantic.

Our enterprise strategy is accepting Britain faces competition

from all over the world and backing what we're good at. When I hear

about Britain's global lead in aerospace, I want to extend it.

When I see Britain's genius in animation, media and computing, I

want to promote it. When I read of the new frontiers in synthetic

biology and reagaintive medicine, I want us to pioneer them. Together,

with some of our leading businesses and universities, we today announce

�1 billion of new science investment in the areas where we

lead the world. That is a modern industrial policy and I am its

champion. Let's get on with it. APPLAUSE

And throughout, let's hold in mind who we do it for. That corner shop

owner, that teacher, that commuter, that pensioner, that entrepreneur,

that shift worker leaving their home in the early morning. They

strive for a better life. We strive to help them. Ladies and gentlemen,

I have shared with you today the challenges and the decisions I have

to confront in the coming months. I asked for your support and your

trust and your resolve as we go through these challenges together.

We knew two years ago that the task we were taking on was a great one.

It isn't too much to say that the future prosperity of our country,

the future of a free enterprise system under law, even the

stability of Europe is in question in a way it is not -- it has not

been before in my lifetime. I cannot pledge to you simple answers

or a quick solution. This year has shown we are a country confronted

on all sides by great difficulties, but this year has also shown we

live in a country of courage and creativity. A country that can can

do incredible things and succeed when we pull together. We never

forget that to be the Government of such a country is an honour and

when we make the hard decisions, we do not make them alone because we

have the British people at our side and together we can deliver.

Thank you very much. The Chancellor of the Exchequer

finishes his annual address at the Conservative Party Conference. He

said that the damage they inherited from the economy was much worse

than they feared. This was why the austerity is going to last until

2018. He blamed oil prices, the size of the deficit and the

continued troubles in the eurozone. He claimed the deficit was higher

now than when the IMF were brought in in 1976. No change, no U-turn

kind of speech here. He did announce however a new change in a

labour law which is that if you give up some of your employment

rights then you will get shares in the company that you are with and

you will get the shares with the capital gains tax free when you

come to sell them. The shares maybe worth nothing, but there has been

lots of proposals like this. It is the first time this has been linked

to a change in employment law, that's probably the new thing there.

A muted applause for Mr Osbourne, he didn't bring them on fire there

and he is a man that has to establish his reputation with the

Vicky Young is saying the - - Lib Dems. There will be a joint

spending plan agreed to this parliament. Mr Osbourne is talking

about making cuts of �10 billion in welfare, ten is part of the 16,

over two years. It's likely this will mean finding �6 billion in

welfare cuts in the first year of 2016.

The Lib Dems are still insisting that they will consider the welfare

cuts only if the Conservatives agree to the the... That's an

announcement through the BBC. We heard the Chancellor's speech. We

are joined now by the shadow Treasury Minister, Chris Leslie and

Norman Fowler, is still here. It's your party, what did you make of it,

the speech? I thought it was a good speech. I mean, the fact is that

what he was saying is we are going to press on. It's quite a difficult

speech in that sense. You were right in your analysis that what he

was saying was we are going to continue with the policies and

therefore, it is a difficult speech as you well know in conference

terms to make. I thought the very interesting phrase he used was that

the economy is healing. I hadn't heard him use that phrase. It's the

official buzzword. Mr Hammond used it in an interview for a Sunday

paper. I think even Mr Osbourne used it in another interview.

Healing is the new green shoots. Well, it's the new green shoots.

It's a better phrase, incidentally than the green shoots. You can tell

that to your friend Norman Lamont. I will! I think the issues, you

know, we have already gone into the major issue about welfare, it's

going to be difficult. And of course the fact of the matter is

that we did inherit the most God awful mess from the last Labour

Government. I think that is now well-established and I think what

Labour have to do is saying, not so much having a bash here and bash

there, but what actually would you cancel of the things that apart

from 50p tax? We are going to go to Birmingham in a second to hear from

our political editor, Nick Robinson. Before I do, Chris Leslie, there is

a certain irony about the Chancellor talking about more cuts

to come in later years, when we know the deficit in this financial

year is rising, not falling. But if I could park that for a minute,

because we have talked about it, we are agreed on that... I may need to

come back to it. I wouldn't stop you. But will you now have to get

involved in this argument over what cuts are going to be made in 2015-

16 and 2016-17? Can you avoid saying anything about that. We are

two and a half years away from that general election and the beginning

of that spending period. The cuts have to be decided or spending

plans before. The key thing is this, the reason we have benefits bills

soaring so much is because we've got growth totally flat. We are in

recession. To hear the Chancellor, you would think that all was rosy

in the garden. He didn't mention unemployment, he didn't really

confront that issue, as you have parked about borrowing actually

quite significantly high, 22% higher this year. Surely what our

task is now before 2015 is to focus on job creation. We can start to

range in some of that welfare cost, start to boast revenues for the

Exchequer. At no point did we hear anything new about job creation and

growth. That's the frustrating thing that makes me and others

angry outside. They look at this Chancellor and see a man in denial.

This is a Chancellor who thinks we can go steady as she goes, no

particular changes and we have a crisis of youth unemployment, a

crisis of long-term unemployment and it's hitting us all in the

pocket because of the welfare bill is soaring, directly as a result of

the recession he's caused. Pause your thoughts. We are going to go

back to Birmingham. Nick, it's hard to tell from here, you were there,

for a man who has to restore his credibility, even popularity with

his own party, never mind the wider country, it didn't seem much of a

great ovation at the end. Did we get that wrong? No, there wasn't

much of an ovation. He choose to walk straight off the stage,

presumably knowing that he wasn't likely to get one. He did one

simple thing, though, he did something to appeal to an older

Conservative audience, most of them in there are, who remember the

1980s, when Margaret Thatcher in 1981, two years into Government

said, the lady's not for turning. He said, we will press on, we shall

overcome. His message in a sense can be boiled down to that. I know

it's not going to plan, I know in effect that in a few weeks' time in

the autumn statement I may have to stand up and say borrowing is

growing, the deficit is growing, debt is growing, but my message is,

we plough on. We stick with the course because it is, in his view,

the right course. By that autumn statement, though we should start

calling it the winter statement, it is on December 5th, he has a

strange idea of what autumn is. If we then have the third quarter

growth figures, the growth, if there is any in the economy, for

July, jug, September. -- July, August, September. If the figures

disappoint that will be given what he said today that's a terrible

backdrop to the winter statement? It is absolutely a terrible

backdrop if it happens. Of course you heard Ministers talk rather

carefully about how the economy is healing. They want to avoid using

that language again that dates back a while, Norman Lamont in the 1990s

talked about green shoots of recovery, got very badly damaged by

claiming that too early. They want to avoid that so they're talking

about the economy healing. Behind the scenes Minister after Minister

says to me we think these growth figures aren't quite right. We

think the employment figures look better than the growth figures. We

think they're measuring something real, people in jobs. Whereas the

so-called GDP figures are a kind of economist's estimate of what's

happening in the economy. I don't think the figure will lead them to

change their mind tpwu would make the political and economic backdrop

harder. The crucial thing they're waiting for is not that figure, but

the forecast of the Office of Budget Responsibility. That new

office is tasked with a job of saying whether the Chancellor is or

is not on course to meet his own fiscal targets. The targets for

Government borrowing, in other words F they say he is off course

and remember they don't simply say off or on course, they tend to give

a percentage. He is this many percent likely to meet this or not

to meet it. That will be the toughest thing for him to do. In a

sense, he's told us a huge amount actually about the future. He's

given us, not specific details but he's said come December 5th, I

carry on as I have done up until now, wanting to cut spending by

four times as much as raising taxes, but still willing to raise taxes a

bit more, willing to cut welfare much more than cutting other

spending, because he thinks it's economically right and politically

popular. That he will do that on December 5th statement, and in a

spending round that will probably follow in the following year in

order to be announced as the spending cuts for 2015. So in a way

it may feel like you have learned nothing, you have in one sense

learned a huge amount. Thank you very much.

We will be bringing you here on BBC2 live full coverage of this

increasingly important statement, autumn statement, winter statement,

I am going to rechristen it, on December 5th. Norman, a political

question, how much misery can a Government continue to pile on a

nation nation, as an election gets closer, before it's too late for

people to think things are getting better? I think it's all down to

public perception. I don't think there's any particular time that

you can actually put on that. Obviously, by the time of the next

election, as we come into the next election, I don't think the opinion

polls matter quite so much. But by the time, 12 months, coming into

the next election, I think the country have got to see that things

are improving. I think before one just throws out Norman Lamont's

statement about green shoots, one should remember that there were

green shoots. That was the truth. You then went on to lose by the

biggest defeat I think since Lord Liverpool. Even you weren't around

that time. Not quite. It had nothing to do with that. The fact

was, as is recognised, we actually at the end, this is the tragedy of

that election, we had the strongest economy we had had for years, with

Ken Clarke taking over from Lamont. OK, let's stick with now!

The political difficulty I would suggest for Labour it seems from

the polls that your leader is not robust -- the lead is not robust

tphouf survive an outbreak of growth in the economy if it happens.

In other words, a sense that things were getting better. I don't know

about that. I think the public want to see a Government that's united

and has a plan for actually moving the country forward, not just

questions about reducing the deficit and dealing with debt but

also where are we going as a society? This is the one nation

Britain that Ed Miliband was talking about. But you can't have a

Chancellor who is essentially a recession denier, who is basically

saying no, well, our plans will continue to change as they set them

out in 2010. Somebody who promised to balance the books, remember by

2015 and now he can't do that because of all these soaring

welfare bills that he's provoked. He is refusing to change course.

It's so overwhelmingly necessary to stand up for those aspiring people,

the Chancellor talked about people wanting to get on. What about all

those people whose careers have been stunted? The 33,000 businesses

that have gone bust since the general election? All those one

million young unemployed, it's the youngest people actually in society

who are really hurting most of all. That's why we have got to get a

change of Government because we need an economic plan that can get

us on the right... I apologise, I have to go to Birmingham. Thank you.

You may want to stay and listen to this, we are going to talk to

almost your opposite number. The economic Minister to the Treasury,

Sajid Javid. Good afternoon to you. Can I ask you this, the Prime

Minister spoke yesterday on the BBC saying that he was rebalancing the

economy away from debt, not the deficit, rebalancing the economy

away from debt. In that rebalancing, can you tell us by how much he's

cut our debt? Well, you will know the first step to dealing with the

national debt under the previous Government tripled, is to deal with

the deficit. The deficit is the amount that we borrow each year

that's added to the debt. So the important thing is that the deficit

is falling, and the good news is that in the last two years the

deficit is down by a quarter. have talked about how it's rising

this year so far. I don't want to go that way. I want to stake with

debt. -- I want want to stick with debt. The figures is you inherited

a national debt of about 650 billion pounds. By 2015 it will be

1.4 trillion. In other words, it will double under your watch. Could

you explain to viewers how that's rebalancing the economy away from

debt? You are doubling it. Well, actually first of all we inherited

a national debt of about 920 billion, about 100 billion higher

than the number you gave. When the previous Government came to power

in 97 it was about 300 billion. First of all, it tripled and that's

important because that shows the size of the mess that we have to

deal with. Under this Government clearly the debt will continue to

rise until the deficit is brought under control. I think as the

Chancellor just said in his speech, that you can't turn around a

deficit which is equal to 10% of GDP, the largest of any

industrialised country overnight. It has to be a gradual process.

That's what we have been doing. That's why we have cut it by a

quarter. The Chancellor is right that we have got to continue with

that strategy because the first step to lowering debt is to lower

the deficit and that's what we need to do to build business confidence.

You are quite right, the eventual debt was around 900 billion, it was

about 650 billion before the efforts that were taken to stop the

banking system collapsing and we went into recession. I take that.

My point to you is that it's continuing to rise to reach 1.4

trillion. I don't understand how that's a rebalancing this side of

2015 but I will be happy to listen to an explanation. Could we now

both admit because we know it to be true, that you will fail to hit

your target of reducing debt by We have a clear target. Because it

is independent, unlike previous governments where epegsly under

Gordon Brown he would just fiddle the numbers who suit whatever he

wants to say, this Government can't do that. We set-up an independent

vigorous process and we will have to see what they say in December.

We come back to this phrase. I ask you again if you are adding, let's

take your calculations, half a trillion more to the national debt,

if as is clear to everybody including the Financial Times that

you will fail to hit your debt target, I don't understand how you

are making progress on rebalancing the economy away from debt?

Let me explain that, Andrew. The deficit is the key part to getting

the debt under control at the beginning. The deficit is the

amount we add to the debt each year. The deficit was �159 billion when

the Government came to to power it is down by a quarterment that will

keep coming down. That's the objective for this Government.

Clearly, you cannot get rid of a deficit of that size overnight. No

one would recommend that. As the Chancellor just said, we have got

to deal with this problem because we can see what happens to

countries that don't have a credible plan, although it takes

time, it is a credible plan, the financial markets understand that

and that's key as we are having to sell bonds in the market and if we

Apology for the loss of subtitles for 53 seconds

Are you predicting the deficit will be smaller this year than last year

despite the figures of the first five months? Because we have an