03/10/2016: Conservative Party Conference Daily Politics

Welcome to a sunny Birmingham where in half an hour

the new Chancellor - Philip Hammond - will make his

Why is he ditching George Osborne's budget deficit targets?

Philip Hammond will tell the Conference that he's easing off

the pace of deficit reduction and plans to borrow more to invest.

But what's changed in the economy to justify this change

The Chancellor will pledge ?3 billion of public money

But is this all new money, how many new homes and will it be

anywhere near enough to solve the housing crisis?

"A country that works for everyone" that's the motto emblazoned all over

the Conference centre here - but how can Theresa May's

ambitious rhetoric on social justice be achieved?

And they've been a little reluctant to come to me -

so we sent our Adam out to hunt down the three Brexiteers.

. John Fox, have you been told to keep a low profile? -- doctor Fox.

It looks like a low profile to me! All that coming up

in the next two hours in this Daily Politics

Conference Special. Philip Hammond, the new Chancellor,

will get to his feet in half an hour. We will bring you that live

and uninterrupted. Here with me now though -

two of the best political minds here to chew over the news

from Conference so far. They have put large amounts of money

in my bank account for me to say that! LAUGHTER

The Guardian's Political Editor Anushka Asthana and the Times

Yesterday we had the Brexit announcement yesterday, the Prime

Minister is hoping that will go away today, but where are we now?

Regarding Brexit. Theresa May is a very popular woman with the right of

her party and if you read it today with the Daily Mail, this lady's not

for turning. They did not take very long to mentioning her steel capped

shoes, I notice. What did she actually say? She said immigration

is going to be a priority, something we knew, she said the European court

of justice will be, as well, but she let herself open after that, we

don't really know what the Brexit deal is going to look like that we

will be pushing for. We do know, even though they won't say it about

when we add up everything that has been said, we will not fall under

the jurisdiction of the ECJ and we want a free trade deal and we want

the end of free movement. We are out of the single market in the sense of

being a member, even though we will have access, but they know we can't

stay in it. That is right. What she is doing something David Cameron

didn't do when he was trying to renegotiate our relationship with

the European Union, he never said if you don't give me a good deal on

prepared to say to the British people we should leave. Theresa May

is saying to, our European counterparts, if you don't give me

anything, we are still going. She is saying she still going to deliver on

her promise to control borders. What she is hoping the European leaders

will give us is a better deal than some of the critics think at the

moment. She is going to ask for the moment to begin with. I think she

will still ask to be in the single market, despite not meeting any of

the criteria -- ask for the moon. Is there any concern, when it comes to

putting this repeal of the European community's act through Parliament

that she will be in trouble? I don't think MPs in Parliament will vote

against the idea of repealing the European Community 's act because

everyone knows there has been a referendum and everyone knows what

the outcome was. MPs will not be churlish not to say they will vote

against that as an idea, but what this allows people to do is to amend

the legislation as it goes to Parliament and maybe to cause a bit

of trouble. This boat will only happen after Article 50 is

triggered, Britain is already on the debate about -- this vote.

Parliament will not in that vote be able to stop Brexit from happening,

they would just be able to potentially amend its character.

Very strong words from Theresa May, saying that MPs cannot have a vote

on trigger 50. What about in the House of Lords? It is six to just

one in favour of Remain. It is not off the agenda, there is plenty of

pretext, if her agenda is being frustrated by anyone, you are right

to highlight the House of Lords, but she can go to an election and said

she wants a mandate to deliver her social and Brexit agenda. Lots

of course the government is hoping we will stop talking about Brexit

for the duration of this conference. So the Chancellor Philip Hammond has

said that he'll ease off But what do Conference goers

here think about progress We sent Adam out with

his balls to find out. When George Osborne was Chancellor

he was all about driving down the deficit and even getting the public

finances into surplus but Philip Hammond seems less bothered, but

what about people at the conference? Do they want to ease off with

deficit reduction? Hang up the phone and do the mood box. One of the

Brexit ministers will stop I will go for ease off because of Brexit.

Before that I was crackdown. I think George Osborne did a good job, but

many people look at him and they don't like him. Was he a bit

obsessed with cuts? Maybe. I'm going to stop you there, Andrea, would you

like to have a go at The Daily Politics, would you like to have a

go at The Daily Politics, would you like to have a go at The Daily

Politics, would you like to have a go at The Daily Politics, would you

like to have a go at The Daily Politics balls? Are you politely

dismissing my balls? You cannot run a country on a deficit budget. We

need to finish what we have started. I suppose you are allowed to read

that now he has gone. You weren't allowed to read that last year.

Thank you very much. Cracked on. Is there more that can be cut from the

public finances? Yes. Such as? Some areas of the health service. You

want to cut the NHS? No, but I want to cut the administrators. George

Osborne has the edge, I think. Should we have a surplus for 2020?

If we can, definitely. Don't abandon the target and keep going. Why are

you watching that Boris Johnson speech when you could be doing The

Daily Politics balls? Are ministers able to do this without Prime

Minister real authority gritter Mark of course. -- primer ministerial

authority? What does this mean? It is about the deficit reduction. We

have got to crack on. It is time to ease off on the austerity, we have

more important things on the table. Deficit reduction? Crack on. When do

you want it gone by? As soon as possible. Philip Hammond, the party

faithful have issued their instructions, many want you to get

on with cracking on with getting it down. STUDIO: There we go. We do

need to do our research the famous People's budget which led to a huge

stand-off with the House of Lords, it was not Campbell Bannon, he died

in 1905, it was Asquith who was the Liberal leader in 1909. But Campbell

Bannon did put some of the changes in place. Asquith's famous words,

what were they? Keep your eye on Paisley, that's the way the country

will go, I'm not sure you can say that now. No. Philip Hammond has a

difficult juggling act, he has to do a change in direction but he has got

to give convincing reasons pick up the vat different, -- to give

convincing reasons, and it can't be that different after what has gone

on over six years. We are still spending too much on day-to-day

expenses, current expenditure, but I would ease off on squeezing capital

spending, with global borrowing rates so low it makes sense to

borrow long-term to improve our roads and railways. Cabinet spending

is down. Exactly. George Osborne was wearing his high viz jackets, but he

cut capital spending and we weren't investing for the long term, but I

think it is important that we change in the post Brexit world, many

people on the left feel we have become the sweatshop of Europe,

workers' rights will be thrown out of the window and we become a highly

deregulated low tax, no rights workforce, but I think what we are

seeing from Theresa May and Philip Hammond is a different vision, high

infrastructure and high skills and high investment. Almost as though at

the time we are leaving the European Union we are becoming more European

and more Christian Democratic in how we construct our policy. Didn't Ed

Balls want to borrow to invest? Quite similar to John McDonnell,

there has been a continuation. He wanted to borrow for everything, not

just investment, that is the difference. We talk about

politicians wanting to have their cake and eat it, and I think Philip

Hammond would have taken two balls and put them in both holes if he had

done that. He will say they want to ease off, no more targets, but on

the other hand he will say they will crack on with fiscal consolidation

and this is about messaging, Philip Hammond did not think targets were

good idea and I think we will see a change in tone from George Osborne's

days. Not long to wait. Thank you for being with me this morning.

So, the Chancellor Philip Hammond will be getting to his feet

in the conference hall to deliver his set-piece speech

So what do we know about what he's likely to say?

There has been an overnight briefing.

Mr Hammond, who as Foreign Secretary, was in favour of Remain,

warned this morning of an economic "rollercoaster" as Britain

He insisted the UK Economy is "very strong going into this period"

but that there needed to be a "realistic expectation

of the turbulence" once Article 50 is triggered which Theresa May said

yesterday would happen by the end of March next year.

In his speech today, the Chancellor will confirm

that the government is abandoning his predecessor,

George Osborne's, fiscal target to get the UK budget

And that this new fiscal framework will be set out

in the Autumn Statement in November for the "new circumstances

Mr Hammond will also launch a ?3 billion Home Building Fund

for England, to build 25,000 extra homes over the next four years

and a further 200,000 houses in the longterm.

The move has been seen as a signal that the Government will allow

for greater borrowing to boost the economy if needed during the two

years to 2019 that the UK will have to reach a deal with the EU.

I've been joined by the minister for digital policy and ally

of the former Chancellor George Osborne, Matt Hancock.

Welcome back to the programme. Why is he abandoning George Osborne's

targets? Clearly things have changed and the economy has changed and

there was a vote for Brexit and this is a perfectly reasonable response

to that. George Osborne said if we voted for Brexit there would have to

be a punishment budget, what happened? Circumstances have changed

and we have seen what has happened in the economy over the summer and

the appropriate response, we have seen that in monetary policy, the

cut in interest rates, and clearly given the uncertainty and the

challenges, it is more difficult to get to that point. The punishment

budget threat was wrong? I don't think it is worth going through the

referendum. I think it is. You said all manner of things would happen,

you said we would have a punishment budget if we left, but we haven't

had a punishment budget, and the physical targets are going to be

loosened if anything, so that was just plain wrong -- fiscal targets.

What matters is how we respond to policy now. The report you told us

in the past is unreliable, then it covers how we look at what you tell

us in the present and future? It is only fair to admit that the

punishment budget was a huge mistake and is unnecessary even though we

voted to leave? What the Chancellor has set out in what we have heard

about this morning, he was talking about this morning, how you respond

to the circumstances now. Things have changed. On this point, there

is an important question of how the economy responds given Brexit and

there are signs that has not been as bad as the independent forecasters

predicted and I think that is good news. What has changed?

You say the fiscal targets have been changed because the economy's

changed. In what way has the economy changed in the 100 days since we

voted to leave? The forecasts are going back to where they were before

June 23rd, so what's changed? Some of them have come off. There has

been a rebound after that. I think that's good. The jobs numbers have

been good. If you look at, for instance, the services sector. Rose

in July? Fell very sharply in July then rose again. Back in August?

You've got to look at what's actually happening in the economy

and then you've got to set fiscal policy according to that. But before

the referendum, the consensus forecast was that the economy would

grow by around 2% this year. 100 days into the Brexit process, the

consensus forecast is back at 2% so I ask you on the broad macro

economic figures, what has changed to justify a change in the targets?

The forecasts for next year are lower than they were before the

vote. That is a change. And if you think about it, you've got to set

fiscal policy according to what is expected to happen. So we'll receive

the forecast from the Office for Budget Responsibility ahead of the

Autumn Statement and that's what you've got to use as the basis.

Look, when the circumstances change in economics, you then have to set

your policy according to your best assessment of the circumstances.

People making the forecasts that the economy will slow next year are the

same people that made the forecasts that it would slow in the immediate

aftermath of June 23rd, they were wrong. Well, according to the

figures and surveys, there was a big dip in July. Now, there has been a

rebound, but I think that's good news and now we've got to assess

things, according to where we are. If you start to reassess the deficit

figures, doesn't that mean all that six years of relentless emphasis on

deficit reduction, in the end you were inflicting pain on the British

people that wasn't necessary? No. I think that's completely wrong. The

reason it's wrong is that the deficit is down by two thirds

already. It was at a historic high. It was wholly unsustainable. It's

still unsustainably high now, still needs to come down, but we always

said the pace at which you bring that down should be set by economic

circumstances and what is possible. The new Chancellor is making an

assessment on the new economic figures, given the new facts, and

then we'll set that out. So the deficit will continue to come down?

I certainly hope so. Where else are you going to cut if you are going to

increase spending on infrastructure investment? The deficit was already

projected to fall because it's been coming down from 10% of GDP, down by

two thirds, it was projected to go down further than that. I'm sure

we'll get the full figures in the Autumn Statement. But what the

Chancellor was saying today was that the pre-Brexit proposal to be able

to read surplus is not going to be possible. He's been very clear that

the deficit needs to come down. He's also going to spend more though. If

you thought you had to get the deficit down because if you didn't

you would pay a penalty in the bond markets but it turns out in this

strange time of QE you don't pay a penalty? I put that the other way

around. Because we have the clear commitment, political will and

determination to get it down, that's why those bond rates have remained

low or one of the reasons. Countries with far worse fiscal positions than

us, far bigger percentage of their GDP into national debt, they are

borrowing just as cheaply as we are? There were hardly any countries that

had far worse fiscal positions than us. National debt is 135% of GDP.

They borrowed a bit more expensively than us. There has been no penalty

for those who've had more expensive fiscal policies? That's not true.

Italy's deficit was smaller than us at the start of the process, it's

now bigger. And they are borrowing cheaply? No. We had several years in

which we had a potential crisis in the borrowing rate when the cost of

its borrowing were much, much higher higher than us because we have got a

plan and they didn't. The fact is, you are now telling us that we'll be

able to borrow more than planned, to borrow to invest, and we won't pay a

penalty in the bond markets and we can still borrow just as cheaply as

we have? Correct. Correct? That's not exactly how I put it. You have

to have a sustainable fiscal position. The current level is still

sustainable and it still needs to come down. Ed Balls campaigned on

this in 2015, he wanted to borrow more to invest, that's what you want

to do? There is a difference in two important ways. One is of scale, we

haven't heard the full details from the Chancellor yet, I'm sure we'll

cut to him in a minute, but the second is a determination. We have

proved over and over again that we are willing to take the decisions

necessary to make sure we have sustainable public finances. We have

discussed this many times. I am absolutely clear in our

determination to have sustainable public finances. This is Ed Balls

light isn't it? No. No. You are going to borrow, he was going to

borrow, he may have borrowed not quite as much. You deny that you

could do that in the election campaign, you said we couldn't

borrow more to invest? No. The distinction is, we have got the

political will and plan to bring the deficit down. The Ed Balls plan? The

plan according to Labour was not to get there at all. ?3 billion for new

home-building, how much of that is new money? Well, you will see where

the money comes from set out in detail in the Autumn Statement. But

this is money that wasn't in the budget for house building before if

that's what you mean. ?2 billion is being borrowed? Well, ultimately...

Which you told us you couldn't do, borrow to build? No. This is about

getting money into house building. By borrowing? It's one of the most

important things we can do is getting house building... We know

that, why didn't you do it before? We had a whole series of different

policies in this area. Which have worked? We are going to take a

slightly different approach, using public sector land. And using the

public sector balance sheet to pay for it. When you take the measures

together, I've seen figures, but how many new homes a year will this

produce? The aim of these packages specifically is to get just over

200,000 new homes. Per year? And over... We have also got to make

sure that at the same time, the private sector house building gets

going faster than it has been. This will be private sector housing won't

it? Part of it is on public sector land and using the public and

private balance sheets. Owned by land builders, that is incredibly

important. So 200,000 houses a year? Just over in total. That is what

David Cameron pledged when he became Prime Minister. What did he achieve?

In terms of starts, the starts... Completions? What is the average

completion rate under the Cameron years. Why don't you tell me?

123,000. Exactly. That's the average over the six years. So nowhere near

200,000? No. It was incredibly difficult at first because we were

still in the throes of the great recession. Actually that figure came

up and the fact that, of course, the starts figure improves before the

completions figure by its nature and that figure had got up to pre-crash

levels. Actually it hasn't. After six years of Conservative

Government, how many houses did we complete in the last fiscal year? I

haven't got that figure in my head. 145,000. Right so it's gone up. Way

behind. Still the lowest completion figures since the 1920s. That's not

actually right. Because what you've got to look at is how fast we have

managed to get the starts in housing going because that's going to

foreshadow completions in nine months or a year when the houses get

done. The starts in the year to June 2016 for 144,000, which is actually

lower than the 145,000 you managed to complete the previous year so the

starts are not starting up. We should have an injection of more

support to get more house-building and to bring more house builders on

instead of just the big ones that we've got at the moment. I've got

that, I understand that. Yes. But Gordon Brown made the same promises,

Tony Blair made them, 200,000 houses a year, I mean the Blair Brown

averages are better than yours but not great. Brown 136,000

completions, Blair was 148,000 completions. No-one, politicians

again and again tell me we'll get to 200,000, we never get it, we still

get these incredibly historic low completions and I don't understand

why what's being announced today is really going to make any difference

to that? What I don't understand is this argument that because it's

difficult we shouldn't try. Of course we should. Making sure that

we get that level of house building up is important. There's a huge

amount of work that's gone into it. And this is a slightly different

approach because all of that approach that you talked about in

the past was all based on trying to incentivise on the private side and

then some local authority and Housing Association building. This

is using the central Government balance sheet in a new way. Sure.

Are you going to build a lot of new council houses? We have built far

more... But they didn't build any. Are you going to build a lot of

them? There is a combination of council houses, yes, also Housing

Association and social housing and then houses, private sector houses

for people to buy. It's good to have you back on. We

have run out of time. When do you think you will return to frontline

politics? Who? You. I'm having a whale of a time. That's different

from frontline politics. I'm on the Daily Politics, Andrew. You're

always on the Daily Politics! You're always on that. It was delightful to

see you again, thank you Matt Hancock, who is the Minister for

Digital policy these days! Whatever that means. Anyway, shall we have a

look in the hall and see what is going on. The Transport Secretary

Chris Grayling is making his speech. He's reconfirmed the Government's

commitment to HS II and, given that we are in Birmingham, he's pledged

?12 billion towards the transport component of the so-called Midlands

Engine. ?12 billion, where's that come from? The north is the northern

powerhouse, the Midlands has the Midlands engine. We'll have to see

what Lincolnshire gets next or Cumberland! We shall see. Anyway, we

are joined by Laura Kuenssberg, Paul Johnson of the IFS also. Welcome to

you both. I don't know if you heard my interview with Matt Hancock

there, but how much of this change in deficit reduction targets cast a

shadow over all the previous emphasis on deficit reduction?

Things have genuinely changed and, of course, the testify sit's come

down by an awful lot -- deficit's come down. By the original plan it

was meant to have gone now all together. That was down to the

economy not going anywhere near as well as hoped. What's happening now

is that we've got a huge amount of uncertainty over the economy over

the next three or four years, but actually the next ten or 20 years,

so to say that you are going to have a specific target given that

uncertainty, it's appropriate to move away from that, as indeed

George Osborne said he'd do. I'm sure we are still going to get some

focus on concerns about the total level of deficit and debt. Exactly

how that is couched, it remains to be seen. The amount of money from

the Midlands Engine is ?12 million, not ?12 billion! Quite a difference.

Sorry to have raised the hopes of the Birmingham people. Probably a

heart attack in Manchester! Mr Hammond has a difficult balancing

act, I suggest, Laura on two fronts today. He has to make a change in

policy, a change in emphasis on fiscal stance from his predecessor,

but at the same time, that is one thing, the other thing is he can't

really tell us what he has in store until the Autumn Statement on

November 23rd? Absolutely and he's constricted in that sense on both

sides. In his nature, he's a very different kind of politician. Over

the years we have gotten used to the Chancellor's speech being a huge

event, the Chancellor had his own hat stuffed full of his own rabbits,

he enjoyed revealing things with a flourish towards the end of the

speech, rounded that too and in a sense George Osborne carried on that

tradition, with the Chancellor having almost as big a day as the

Prime Minister's speech. But he's not that kind of character, it's

partly because he has to keep his goodies for the statement. The data

about the post-referendum is only just starting to trickle in so they

are not sure what position they'll be at the end of November. It's a

measure of the fact this is a different Government. He's a

different kind of politician, Theresa May is a different kind of

politician, flash is out, if you like, but Philip Hammond is

nonetheless very determined, as we have seen from this morning, to

basically sketch out a different path. Targets are out, frameworks

are in and politically, maybe not practically, but politically that is

very different. Infrastructure spending is the new

buzzword. Whereas infrastructure spending can improve the long-term

supply side performance of the economy, in terms of Keynesian pump

priming it doesn't have much of a speedy impact? That is broadly

right, and the important thing about the infrastructure and improving the

long-term economy, it is a long-term think governments can have a big

effect on our productivity, but not next year, maybe in ten years,

because these things take a while. In terms of pump priming, these

projects take a long time to happen. If you look back at the last Labour

government, every year they were missing by billions the amount they

were hoping to spend on infrastructure, they just couldn't

get the money out of the door, and we actually don't know, even if you

wanted to pump prime, we don't know if this is the next couple of years

when you want to pump prime or it is a longer-term thing when we actually

come out of the European Union. Theresa May has been out this

morning in Birmingham and was visiting a building site,

politicians have a special like of building sites. The whole city is

undergoing a massive renovation programme. Not wearing high

visibility jackets, there, unlike the previous Chancellor. There she

is. I'm told this is the new HSBC headquarters. The big bag coming to

the Midlands. One of the interesting things, in the speech from savage

avid and what will be undermined by Philip Hammond, something broader,

ministers are on the one for policies which will be able to show

a difference before the next general election -- on the hunt.

Infrastructure promises have been scattered around like confetti in

the last couple of years and everyone thinks it is a good idea,

who doesn't think we should invest in the future of the country? The

problem is it takes years to make a tangible difference in terms of jobs

and a tangible difference in terms of the lines of voters, and

ministers have a sense that they are not just looking for the right thing

to do, but things they believe they can show progress on before the next

general election. That is what is behind some of the announcements

from Sajid Javid, they want to be able to do things they can show

progress on, which is not easy. Mr Obama said they were shovel ready

jobs, but then he had problems showing them. That is the

difficulty. The Chancellor is being introduced, so I may interrupt you,

but it seems you can widen the deficit and allow for slower deficit

reduction and you pay no penalty in the bond markets which we would not

have thought ten years ago. In large degree that is a reflection of the

weakness of the world economy, people are looking for what they

consider to be a relatively safe market, sovereign debt, despite the

relatively high level of deficit, it still looks very safe relative to

the uncertainties that surround the rest of the UK economy and the

international, me. In terms of the change to go for investment in order

to be able to spend cash which is not a change from the previous

administration, even though George Osborne said he might go down this

path. Philip Hammond and Theresa May have not woken up thinking, we are

now going to be full throttle Keynesians, they are not huge

converts to massive borrowings, to massive projects, and I understand

it will be relatively small, ?2 billion borrowing for housing and

equivalent amounts for other projects, and so this is a change,

but this is not a 180 degrees flip for them to be pursuing a different

economic philosophy. With housing committee to get the planning

permissions, that can happen quickly, you can employ a lot of

people and people have new houses and they buy a new kitchen -- with

housing, you can get the planning permissions. It is what happened and

helped the 1930s in this STUDIO: -- in this country. Planning

permission is the problem. It is easing up little, no government has

come anywhere near meeting the targets they have set themselves so

there are constraints, but you can probably build housing more quickly

than you can build a big New Road. Or a high-speed railway. It has a

political problem for this party, because of the demand for more new

homes which is greatest in the Tory Home Counties shires. Indeed. The

new Communities Secretary Sajid Javid was addressing Tory

councillors last but, maybe not reading them the riot act, but he is

pretty determined to say to the foot shoulders and -- the soldiers, -- to

the foot soldiers, he says they have got to be not as controlling and

protective of the parts of the country that you represent. We have

heard this on politicians before. Many times. You lose count of the

number of times this has been said, but I suspect late in the year there

might be more legislation, another housing white Paper, perhaps, that

will go further in easing up planning restrictions. There has

been a bit of change, but nowhere near enough if the government is to

get anywhere near its target. They are way behind the target, this must

be the longest introduction of the Chancellor of the Exchequer in

living memory. The MP introducing him is still talking. Would it

matter if in the Autumn Statement he doesn't set a date for a surplus?

Would anyone care? Is it not more important that the markets CB

deficit gets smaller and smaller, and the surplus was a kind of George

Osborne conceit. -- see the deficit. I think you are right, given the

uncertainty it would be a mistake to say we will get to surplus in 2020

or 2023, but he can set out a path and an ambition and he can say that

we will come as George Osborne did, we will aim in five years' time to

be getting to surplus but if the economy changes we will adjust what

we are trying to achieve and push it further out. Is the Prime Minister

going to get away and stop talking about Brexit question what can they

not help themselves? It will be interesting to see a Philip Hammond

addresses it in any detail, but I don't think he will. It is

overshadowing everything at this conference, no question. It was a

cute political ploy for Theresa May to give a speech yesterday, a

long-time aide Tory leader has done that on the first aid conference, --

a long time since a Tory leader has done that on the first day of

conference. Her plan was to get that out of the way, but that is all the

chat. People are saying, did she really mean it yesterday when she

said there would be a hard Brexit? Party leaders always say what they

need at that moment. Of course they do. At last, here we go. Into the

conference call for the Chancellor of the Exchequer, Philip Hammond, to

give his first address to the Tory party faithful at the annual

conference in his new position as Chancellor. This is Philip Hammond.

Amanda, you held off a ferociously pincer movement in Cannock Chase

annual result was one of the highlights of that result last May

and we congratulate you on a fantastic achievement. APPLAUSE

It is great to be back in Birmingham and a privilege to address this

conference as Chancellor of the Exchequer. And I don't think I'm

giving away any state secrets in admitting that I just might have

hoped to have been a Treasury minister a bit earlier in my

political career. In fact having been shadow chief secretary for

three years until the 2010 general election, I rather suspect that that

infamous note from Liam Byrne, you remember the one, dear Chief

secretary, I'm afraid there's no money, I rather think that note was

meant for me, but it went to David Laws, who published it, and is now

trying to get it back. It became the shortest political suicide note in

history, perhaps. Liam Byrne, your message to your successor was an

admission of Labour's abject failure. APPLAUSE

I will let you into a secret, my predecessor didn't leave me a note.

But if he had this is what it would have said, dear Chancellor,

employment is up, wages are rising, the deficit is down and income tax

has been cut for tens images of people, that is the Conservative

record, and that is the difference Conservative leader makes. APPLAUSE

Anyway, I got to the Treasury in the end. I'm delighted to have such an

excellent team supporting me. David Gauke as chief secretary, J Ellison

as chief financial secretary, Simon Kirby, ably supported by Steve

Barclay the Commons whips. Please give them a big round of applause.

APPLAUSE I went down to the Bank of England

last week to check on the gold reserves, what is left of them. You

remember Gordon Brown sold half of them off at the bottom of the

market, losing British taxpayers a staggering ?7 billion in the

process, another example of Labour's failure. We last met in this hall

two years ago on The Eagles the fight of our political lives -- two

years ago on the eve of the fight. There was our Conservative vision of

a future, with the economy moving forward, and Labour's offer with a

vision of Britain going back to the old days of tax, spend, and waste.

It is a credit to your hard work and the good sense of the British people

that we won that fight and we should not forget the debt is party owes to

the man who led us out of opposition and into coalition and then on to

form the first Conservative government in 18 years. Our former

leader and Prime Minister David Cameron. APPLAUSE

But today, my friends, we meet on the eve of a different challenge. No

less daunting and no less crucial to the future of our country. That vote

on the 23rd of June, the first of its kind anywhere in Europe, was a

defining moment, not just of this Parliament, but of this generation.

The moment when the British people decided to change direction and map

out a new path for our country's future. Whichever side of the

arguing we were on we should not forget this, only one mainstream

political party was prepared to give the British people their say and

only one party delivered that referendum and only one party

unhesitatingly accepted the result. This great party, the Conservative

Party. APPLAUSE That result in June gave clear voice

to a desire by the British people for an end to political union and

the restoration of control. Control, that keyword. Control over the roles

and regulations that govern their lives, control over who can live and

work in their country, and control over how their money is spent. And I

can reassure the British people of this, that message has been received

loud and clear. No ifs and buts, no second referendum, we are leaving

the European Union. APPLAUSE But it is equally clear to me that

the British people did not vote on June 23rd to become poorer or less

secure. So our task is clear. Repatriate our sovereignty, control

our borders and seize the opportunities that the wider world

has to offer. But do all of this while protecting our economy, our

jobs and our living standards. Now, the message may be simple, but I can

assure you, the process will be complex. Successful negotiation with

the EU 27 will demand patience, experience, meticulous planning and

steely resolution. And I know of no-one better equipped to guide us

through these negotiations than our brilliant new Prime Minister,

Theresa May! APPLAUSE.

We should approach these negotiations with self-confidence.

Our economy is the fifth largest in the world. Our nation is built upon

a history of global trade. Our people are responsible for some of

the most significant inventions and discoveries of history. So no-one

should be in any doubt that we have the skills, the ingenuity and

determination to make a success of Brexit. Starting from a position of

strength. And thanks in no small part to the onningions of my

predecessor, we enter these negotiations with an economy that is

fundamentally robust. It's easy to forget, six years on, the scale of

the legacy of Labour's great recession that we inherited in 2010.

Turmoil in the markets, a banking system still reeling from the

crisis, a deficit of more than 10% of GDP, the highest in our peacetime

history, an economy on the brink. It was the decisions that George

Osborne took in those early days that pulled us back from the

precipice and set us on a course to recovery. The tough early choices...

APPLAUSE. Those tough early choices and the

doggedness in sticking with them delivered that intangible but

indispensable commodity - credibility. Credibility in the

markets that helped secure record low borrowing costs, incredibility

with business, securing the investment that supported our

recovery. And the results are clear for all of us to see. 2.7 million

people more in work today under a Conservative Government than in 2010

under Labour. Did we hear that achievement being

Lauded in Liverpool last week? Of course not. Because Corbyn's Labour

Party has abandoned the agenda of working people deserted the middle

ground of British politics in favour of the socialist ideaology of the

Metropolitan left-wing elite. Leaving us, the Conservatives, as

the true party of British working people.

APPLAUSE. Of course, for much of his time as

Chancellor, George Osborne faced Ed Balls across the despatch box.

Remember Ed Balls? I know you remember him from Saturday night,

I'm asking if you remember him in his more minor role as Shadow

Chancellor? ! By the way, you know Ed wasn't their first choice for

Strictly, they were going to ask Corbyn to do it but then someone

told them he had two left feet! LAUGHTER.

I watched Ed on Saturday night. I don't want to sound like Craig Revel

Horwood but I have to say, I think his charleston is probably better

than his economic analysis. Because he told us back then that

our policies would push the economy into recession, but he was wrong.

Since 2010, Britain has grown faster than any other economy in the G7. He

said, we would never replace lost public sector jobs with new private

sector jobs, but we did. Not one for one, but seven for one.

And that's not all. We got our deficit down by nearly two thirds,

we cut the welfare bill, we have kept mortgage rates low protecting

millions of homeowners through difficult times, we have cut income

tax for 30 million people and taken four million low-paid workers out of

income tax all together. I say, not bad for an economy that looked out

for the count when we took it over in 2010 and a record of which this

party can be justly proud. APPLAUSE.

But we cannot rest on our laurels. We must look to the future, to the

economic challenges ahead. Let's start with the immediate challenge.

The markets have calmed since the reference dumb vote and many of the

recent data have been better than expected.

That is the underlying strength of our economy. But there is no room

for complacency. Many businesses which trade with the EU are

uncertain Tebbit a what lie -- about what lies ahead.

About the deal that will be done, about the changes they'll have to

make to adapt to the post-Brexit world and about what it will all

mean for their employees, their company, their business model.

I understand their concerns. Business, after all, hates

uncertainty. But let me repeat the pledge of the

Prime Minister yesterday. As we negotiate our exit from the EU and

our future relationship with it, this Government will fight for the

best possible deal for British business and British workers, the

best possible access to European markets for our manufacturing and

services industries and the best possible freedoms for our

entrepreneurs and global exporters ensuring that Britain after Brexit

will remain one of the best places in the world for a business to

invest, to innovate and to grow. APPLAUSE.

The independent Bank of England successfully cut interest rates to

restore confidence in the wake of the vote. But as the economy

responds over the coming months, fiscal policy may also have a role

to play. So let me be clear. Throughout the

negotiating process, we are ready to take whatever steps are necessary to

protect this economy from turbulence. And when the process is

over, we are ready to provide support to British businesses as

they are just to -- they adjust to life outside the EU. Because Brexit

does mean Brexit and we are going to make a success of it.

In the meantime, I can offer some additional certainty to British

business and other organisations bidding to receive EU funding while

we are still a member. I've already guaranteed the funding for projects

signed prior to this year's Autumn Statement. Today, I can go further.

The Treasury will offer a guarantee to bidders whose projects meet UK

priorities and value for money criteria, that if they secure

multiyear EU funding before we exit, we will guarantee those payments

after Britain has left the EU, protecting British jobs and

businesses after Brexit. APPLAUSE.

As Conservatives, we know, of course, that no-one owes us a

living. But a country has to live within its means. A fundamental part

of maintaining our global competitiveness is getting our

public finances back in order. We should of course be proud of our

achievements in fiscal consolidation, but the work we began

in 2010 is not finished. The deficit remains unsustainable. And the

decision to leave the EU has introduced new fiscal uncertainty.

Last year, the Government borrowed ?1 in every ?10 we spent. And piling

up debt for our children and our grandchildren is not only

unsustainable, it's unfair. And more, it's downright unconservative.

The British people elected us on a promise to restore fiscal discipline

and that is exactly what we are going to do. But we will do it in a

pragmatic way, in a way that reflects the new circumstances we

face. The fiscal policies that George Osborne set out were the

right ones for that time. But when times change, we must change with

them. So we will no longer target a

surplus at the end of this Parliament.

But make no mistake, the task of fiscal consolidation must continue.

It must happen within the context of a clear, credible fiscal framework

that will control today's expenditure, deliver value for money

and get Britain back living within our mens.

At the Autumn Statement in November, I will set our our plan to deliver

long-term fiscal sustainability while responding to the consequences

of short-term uncertainty and recognising the need for investment

to build an economy that works for everyone, a new plan for the new

circumstances Britain faces. A Conservative Government

demonstrating the flexibility, the common-sense and pragmatism that's

made our party the most successful political party in British history.

APPLAUSE. Now, contrast this balanced

responsible approach with the shambles of Labour in Liverpool last

week. In denial about their record in

office, deluded about the state of the public finances today, not once

did Jeremy Corbyn apologise for the mess that Labour left behind.

On the contrary, his Shadow secretary says their mistake was not

to have spent more. If you think their past record is bad, let's look

at their plans for Britain's future. Corbyn's big idea is to spend an

extra half a trillion pounds. That's 7,700 for every man, woman and child

in the UK. I just hope he remembers when he

goes to bed at night to water the magic money tree.

Now look, we could speculate as to how Labour would pay for a spending

splurge on this scale, but fortunately, we don't have to.

Because we have the answer. From Labour's last Shadow Chancellor,

Chris Lesley. This is what he said last week about how Labour would

fund Corbyn's plan. You'd have to double income tax, you would have to

double national insurance, you would have to double council tax and you

would have to double VAT as well. So there we have it. From the mouth

of one of their own. Labour condemned as totally unfit to govern

this country. APPLAUSE.

With nothing to offer the hard-working people of Britain, and,

as always, it would be the poorest and the most vulnerable who would

pay the biggest price. So, my friends, we in this party have a

great and solemn responsibility because we alone carry the burden of

ensuring that Labour can never again wreck the British economy. The

Conservative commitment is to build a country and an economy that works

for everyone, to raise our living standards and grow our national

wealth. Not just for today, but for future

generations too. We know how to do that, we

Conservatives, we have proved it time and time again.

Cleaning up Labour's mess. We'll do it by making the British

economy the most outward looking, most dynamic, most competitive

high-wage, high-skilled low-tax economy in the world.

We do it by making sure that after our EI exit, we continue to attract

the brightest and the best, the highest skilled and the most dynamic

entrepreneurs, scientists, engineers and managers from around the world,

building a strong and vibrant economy as the bedrock of our strong

and vibrant society. A Conservative vision of the future of Britain. And

I'll tell you this, it's a million miles away from the la-la land

Labour was describing in Liverpool last week.

To deliver that strong economy requires long-term sustainable

growth. And long-term sustainable growth requires us to raise the

national productivity. Before you switch off, I know productivity

doesn't necessarily set political pulses racing but bear with me while

I try to convince you that it should. How about this? You probably

know that the national productivity is lower than that of the United

States and Germany, and maybe you even feel resigned to that fact. But

did you know that it is lower than France and Italy, as well. Had you

made the connection about what that means in the real world, because

what it means is that millions of British workers are working longer

hours for lower pay than their counterparts in Europe and the

United States and that has to change if we are going to build an economy

that works for everyone. If we raised our productivity by just 1%,

every year, within a decade we would add ?250 billion to the size of our

economy, ?9,000 for every household in Britain. Productivity should set

political pulses racing. It is a decades-old problems swept under the

carpet for too long. But under this government we are going to put this

in the spotlight, right at the forefront of our policy agenda and

at the heart of our industrial strategy. We know where to start.

Our productivity performance in this country is grossly uneven. Still too

reliant on a few key sectors and still too focused on London and the

south-east. The good news is, we know how to do productivity, parts

of London have the highest productivity in Europe. The bad

news, the productivity gap between the capital and the second, third

and fourth cities is greater than in any other major economy in the

world. And closing that gap will be key to Britain's future outside the

EU. That is why we are doing regional devolution deals and why

tackling those regional differences will be one of the key drivers for

the industrial strategy that Greg Clark is developing now. And there

is the skills challenge, we've made huge progress over the last six

years, how many people in this room ten years ago would have believed

that in every year since 2014, maths would be the most popular A-level

subject in English schools? But it was. That is a tribute to

Conservative education reforms. APPLAUSE

Despite that progress, there is a huge gap between our skills base and

that of our key competitors. It is holding people back from achieving

their full potential and it is holding our nation back in the

global race. And there's more. Our stock of public infrastructure bang

which is near the bottom of the developed countries league table

after decades of underinvestment -- languishes near the bottom. All of

this must change to build an economy which works for everyone. We need to

close that gap with careful targeted public investment in high-value

infrastructure and encouragement of more private business investment in

British enterprises. If we are going to see economic growth distributed

more evenly across the regions and sectors of our economy, and more

fairly between the generations, there's another big challenge that

needs to be tackled. The on affordability of housing. Because

despite the action we have taken, fewer and fewer young people are

able to afford to get their foot on the first rung of the housing ladder

and buy their own home. Quite simply we are not building enough new

homes. This is a long-term challenge. But there are short-term

measures we can take and the package that Sajid Javid announced earlier,

?3 billion home-builders fund and the 2 billion is proud of new

investment for construction on public land is a clear demonstration

of this government's determination to tackle this challenge using

everything at our disposal because making housing more affordable will

be a vital part of building a country that works for everyone. And

this government is determined that the dream of home ownership should

be for the many and not for the few. Making sure that we have world-class

infrastructure is vital to maintaining our competitiveness but

it is a very long-term agenda. One that can be and often has been

knocked off course by short-term political considerations. That is

why we announce the national infrastructure commission, to define

independently the nation's long-term infrastructure needs and to

prioritise and plan and to test value for money and to make sure

that every penny spent on infrastructure is properly targeted

to deliver maximum benefit. And today I recommit to putting the

commission at the very heart of our plans to renew and expand Britain's

infrastructure, making sure that it is long-term economics and not

short-term politics, that drives Britain's vital infrastructure

investment. Part of Britain's productivity transformation will,

from innovation. -- will come from. The new technologies which are right

now making their way from university labs and facilities into early stage

production, offer Britain a much bigger prize than incremental

productivity improvements. Because at the cutting edge of many of these

new technologies UK is becoming a world leader once again. Not just in

the science but in the application of it. And in the innovation that

follows. Over the last few years unnoticed by most of us,

entrepreneurs and scientists from home and abroad have been turning

Britain into a hub of tech innovation. Global businesses have

followed, hungry for the inventions and innovations they are generating.

Developing technologies that will change fundamentally the way we work

and the way we live. Driverless cars, the internet of things,

artificial intelligence, 3-D printing, Virtual reality, advanced

robotics, I will be honest, I had no idea until a few weeks ago just how

much I don't know. And I had even less idea how much I still wouldn't

be able to understand even when clever people had explained it to

me, but the truth is, this is the future, our future and our

children's future. A whole new world that really would have sounded like

science-fiction just a few years ago, but is now a reality taking

shape in laboratories and incubators and factories across Britain, there

is a once in a generation opportunity for Britain to cement

its role as a leader in tech innovation. My ambition is clear, I

want to see what is invented here developed here, I want to see what

is developed here produced here, I want to see jobs and profits, and

yes I want to see tax receipts here in Britain. APPLAUSE

I want to see the fruit of British genius being harvested here in

Britain as we move into a fourth Industrial Revolution, creating

jobs, wealth, and success to future proof our economy post Brexit. We

are well placed to do it. More competitive than ever. Up to seventh

place in the world league table last year, from tenth the year before. We

have world leading universities and research institutes, a trusted legal

system and an advantageous time zone, the English-language, our

secret and unfair advantage. And vibrant markets. A 20% we have one

of the world's most competitive corporation tax rates and as it

falls to 17% by the end of this Parliament it will be more

attractive still. Of course this explosion of creativity and

innovation that I've spoken about hasn't happened solely or even

mainly because of government policy but it could easily be snuffed out

by the wrong government policy. We must carefully maintained the

conditions that have brought this activity to Britain in the first

place. Including the ability to attract the brightest and best to

work here in our high-tech industries. And where we see that

there are government interventions that work we should be prepared to

make them, so today I can announce another ?220 million of support to

tech innovation spread across two initiatives. ?100 million to extend

the biomedical fund which takes revolutionary science from the lab

and delivers it to health care interventions and a further ?120

billion to nurture the tech transfer offices which put universities and

entrepreneurs together to get the science out of the lab and into the

factory, that is a Conservative government investing in Britain's

future. I've made my argument that we will

not overcome Britain's productivity challenge unless we overcome the gap

between cities and regions, but this is about politics, as well, because

one of the key messages of the referendum campaign was that large

parts of our country feel left behind. They see the country getting

richer but they don't feel part of that success. A dangerous divide is

opening up between those who believe they have a stake in the economy and

those who don't. It is one of the central missions of this government

to tackle that divide, to see the benefits of growth provided more

equally across the regions and generations, and a key part of this

agenda is harnessing the economic power of our cities. The Northern

Powerhouse project takes a visionary approach, linking the great cities

of the North into a coherent economic entity, an interconnected

region that live as growth by making it easier and cheaper for and

individuals to move goods come people and ideas. I want to pledge

to you today that the Treasury under my leadership will continue to drive

the Northern Powerhouse project, working in partnership with local

leaders to see it deliver its potential for people in the North.

But I also want to tell you that our ambition is not limited to the

Northern Powerhouse. We want to create the conditions for success in

the north, the South, and everywhere in between. There is nowhere more

ripe to benefit from a similar approach than the Midlands. The

Midlands engine with its hub in Birmingham powers 11.7 million lives

generates ?220 billion for our economy and produces 18% of UK goods

exports, more than a fifth of our total manufacturing output. In this

great region there are 320,000 more people in work than there were in

2010. But both productivity and economic growth have lagged behind

the UK average. We have developed our long-term economic plan for the

Midlands and is already delivering. But we can and we will do more. We

are working with the West Midlands combined authority on a second

devolution deal to include new powers on transport, criminal

justice, data, planning and skills. With Andy Street, our fantastic

mayoral candidate for the West Midlands, now in place, a great

future is within the region's rasp, at the very released I can promise

you this, this region will never be knowingly undersold -- grasp.

APPLAUSE The Northern Powerhouse, the

Midlands engine, two great projects that can be emulated across written.

Indeed, I suspect the limiting factor might only be our ability to

think of snappy titles for new regional projects -- across Britain.

But be assured we have passed a tipping point in devolution in this

country, a decisive and irreversible shift in the economic and political

power balance. Britain's economy will be the better and the bigger

for it. Conference, the British people have made a bold decision,

and our party trusted them with the nation's future in a referendum. And

now they trust us to deliver on their decision. We will not let them

down. We are going to leave the European Union to repatriate our

laws, to assert the supremacy of our courts, to control our borders, but

we are not going to turn our backs on the nations of Europe. Let us

resolve that as we leave their union, we will remain the best of

neighbours but the closest of trade associates and the strongest of

security partners. But our economic future must not be defined by Brexit

alone. So as we tread that path, to becoming an independent sovereign

country once again, and forge a new and exciting role for our nation in

the world let us resolve to tackle the challenges at home with renewed

vigour, dealing with the deficit, raising our productivity, the

balancing our economy and rebuilding our infrastructure. And making sure

that everyone in every part of our country can contribute and benefit

from the growth that follows. Standing tall, attracting the best

to deliver the vibrant successful economy that will mean when future

generations look back on our decision in 2016, they'll see, not

the end of an era, but the beginning of a new age. Not a country turning

inward but a nation reaching out, decisively, confidently to grasp new

opportunities, a bigger, better, greater Britain, truly a country

that works for everyone. Thank you. APPLAUSE.

STUDIO: The Chancellor Philip Hammond finishes his first key note

address to the Tory Party Conference as Chancellor. It was a pretty long

speech, short on anything new or any new announcements. Maybe he's saving

them all up for the Autumn Statement on November 23rd. He boasted about

the recovery that had occurred under this Government. He said the

Conservatives were the true party of the British working people. He said

a divide was opening up between those who were doing well out of the

economy and those who weren't. It remains to be soon what is going to

be done about that. He had a swipe at Ed Balls who, of course, is now

more famous as a dancer than a Shadow Chancellor. He had a few

things to say about fiscal policy. He confirmed what we already know,

that they are no longer aiming for a surplus in the national budget by

2020. Indeed, it could be that they'll drop the very idea of aiming

for a surplus, but he did talk about fiscal sustainability which suggests

he still hopes that the deficit over time will continue to come down. I

guess it means the deficit never came down anything as quickly as Mr

Osborne first told us it would in 2010. He then moved to a new more

slower reduction for 2015 to 2020, now Mr Hammond I think is probably

moving to stage three of deficit reduction which means it will be

even slower than stage two under Mr Osborne. He did say that he was

going to look to invest in various areas as well. He's already

announced something on housing, which don't know yet what else, but

he did say we had to do that. He spent some time on productivity and

I suppose we'll think with an increase investment may address that

poll. Paul Johnson from the Institute for Fiscal Studies, have I

missed anything out? Nothing terribly new. We knew he wasn't

going to aim for the surplus in 2020 and he's given us no sense of what

the new fiscal rule will be. That doesn't surprise me, it will come in

the Autumn Statement in November. He's dealing with uncertainty. He

focussed on productivity, it's what underlies wage growth, he gave us

some sums there, saying if you increase productivity 1% a year, you

get hundreds of billions after ten years, absolutely true, the problem

of course is how do you deliver that productivity. How does Government

deliver it too? How indeed. He was right about some things. It does

depend on skills, infrastructure and building and some things Governments

have decided notlet to do in the past. We could have had a decision

about a runway a lot quicker which would have been good for

productivity. You can build extra roads but people don't like them.

You can build extra houses on green fields but people don't like them.

All these are good for productivity. So there are big decisions to take

there. He said something interesting. He did focus and

re-affirm George Osborne's commitment to devolution and to

giving additional powers to local authorities and to regions. I think

that was quite for me a big part of what he said. There is no, it would

seem, going back from what I think we'll see over time as quite a big

change in the way we run our economy and politics. Maybe if he really

believeded in devolution he'd move the Treasury to Manchester? ! He

would but... Then you would have a whole different view of the world.

Parliament seems to be moving out of its building soon, they could move

the whole that bang up there! In the broad sweep of things, we don't know

how much he'll slow down, he's going to slow down the pace of deficit

reduction? That is my guess. Let's remember, if the economy grows a bit

less quickly than was hoped in March, even to he follows through

exactly with George Osborne's spending cuts and so on on, we still

won't get to a budget southern plus, so simply saying we are not going to

get there doesn't tell us anything about the scale of any other change.

There's clearly some indication of what looked like some really quite

modest increases in spending on house building and so on which might

help both in the short run and the long run, but I think we are going

toff to wait until the Autumn Statement on November 20rd to find

out more detail -- 23rd November. If I were him, I would still be waiting

for more news on the economy over the next year to 18 months. To see

which way it's going? Yes. Exactly. We don't know the course of the

economy yet. We could forecast it going up and down and changing all

the time. It's a little unfair to have a crack at Ed Balls, is it not,

when his overall fiscal policy now sounds a little like Ed Balls? Well,

the last Labour manifesto suggested aiming for what essentially would be

a ?20 billion or ?30 billion deficit by the end of the Parliament because

they would have been happy to borrow to invest. The Chancellor didn't say

that is what he was aiming for, but he's certainly pushing in that kind

of direction. Thanks for being with us. Pf pf

Yesterday Pf pf was Brexit day here at Conference.

We learned of course that Article 50 will be triggered before March next

year, starting the formal two-year process of negotiations.

And there'll be a vote in Parliament next spring confirming that Britain

will leave at the end of that process, the Great Repeal Bill

Adam was listening to the speeches and trying to get some

answers from the ministers in charge of Brexit.

Here is our Adam. APPLAUSE.

. A speech from the Prime Minister on a Sunday at Tory conference! Most

unusual. Must be something big like when she'll start the legal process

of leaving the EU. Let me be absolutely clear. There'll

be no unnecessary delays in invoking Article 50. We will invoke it when

we are ready and we will be ready soon.

We will invoke Article 50 no later than the end of March next year.

APPLAUSE. And Brexit means Brexit which means

what exactly? We voted to leave the European Union

and become a fully independent sovereign country. We will do what

independent sovereign countries do. We will decide for ourselves how we

control immigration, and we'll be free to pass our own laws. But we

will seek the best deal possible as we negotiate a new agreement with

the European Union. APPLAUSE.

Then there was the big we veal, the Great Repeal Bill. We'll soon put

before Parliament a Great Repeal Bill which will remove from the

statute bobbing once and for all the European Communities Act.

This historic Bill which will be included in the next Queen's Speech

will mean the 1972 Act, the legislation that gives direct effect

to all EU law in Britain will no longer apply from the date upon

which we formally leave the European Union. And its effect will be clear.

What about the three Brexit ears, the trio of Government ministers who

had to draw up the detailed plans for all of this? David Davis, the

Brexit secretary, Liam Fox the international trade secretary and

Boris Johnson, the Foreign Secretary. Rumour is they have been

told to bite their tongues and not talk to the media much this week.

We'll see. Dr Fox, are you keep ago

low-profile, have you been told to? Does this look like a low-profile to

you? Are you going to come on the programme? Not at the moment. Are

you allowed to do interviews. People are saying you have been sat on and

you are not allowed to talk to the media? Who, me? Quite fast there,

David Davis! No proper interview bus two out of the three did give

speeches as part of Brexit Sunday. I know some people suggest we should

ignore the rules, tear up the treaties, I say that's not how

Britain behaves. What kind of message would that send

to the rest of the world? If we want to be treated with good will, we

must act with good will. I think that vote on June 23rd, I

think that was a vote for economic and political freedom and freedom

for this country. APPLAUSE.

And, at a packed fringe event, Liam Fox revealed he shed a tear on

referendum night when he realised his side had won.

That was Brexit Sunday, the Tories just hope this conference doesn't

turn into Brexit Monday, Brexit Tuesday and Brexit Wednesday too.

Our Adam reporting there. We are joined by our guests now.

Dominic Grieve, we know when Article 50 will be triggered and we know the

1972 Act, everything in that will be put on to the British stat due book.

Are you happy with that approach? Putting the 72 Act on to the statute

book, it's indispensable if we are leaving but it doesn't answer the

question for business about what the relationship with the EU from

outside will be thereafter. Bear in mind that the moment we put it in

the statute book, after we leave, divergence will start to occur

immediately. I think the key issue for business is, what will be the

framework of our relations with the EU from outside of it which will

enable them to carry on trading. So in a sense, the great Repeal Act is

I think important, but it's not the central part of Brexit. When do we

get to know, Bernard Jenkin, even a rough idea of what our relationship

will be with the single market once we've left? If we have talks and

reach constructive agreement, we'll tidy up all the things like

agriculture, fishing data and mobile telephones and civil aviation, but

hope will 'll also be an interim agreement to keep the tariffs at

zero, to keep the services sector open on both sides, so that we have

to time to develop a comprehensive economic partnership over a much

longer period. The European Union's problem is two fold. First of all,

they tend to take a very long time to develop trading relationships. I

mean, how long has TTIP been doing and how long has it taken to do the

that nayedian deal, six years, a very long time -- Canadian deal. It

requires Norwich Union any morety and ratification by all member

states. We can't -- unanimity. What do you say? I don't disagree about

the sort of frustrations that we may encounter in the course of

negotiating Brexit. But the bottom line is that we are in meshed

economically with our European partners -- enmeshed. Unless we want

a chaotic Brexit at the end of it, meaning we refer to a WTO

membership, we are going to have to build structures which will fetter

us to some extent. It doesn't matter how you do it that,'s how

international relations are conducted. I always worry that

there's an element of fantasy about Brexit, but somehow this wonderful

moment comes, you have the Great Repeal Bill, the day comes when we

leave and suddenly there is a brave new world, there isn't. It's a world

of complex, commercial relationships underpinned by new treaties, just as

we had old treaties, and whilst it's true the new treaties may not be

Raing litted bay the European Court of Justice so we escape some of the

mechanisms of the EU, actually it will be replaced by new apparatus,

just as the international relations commercially with other states

outied the EU is regulated at present. He doesn't seem to think

it's worth a candle in other words? He was on the other side of the

debate. The point is that we could have a much simpler and more

straightforward relationship. The model might be the kind of

relationship that Canada has with the United States. The United States

Supreme Court doesn't make laws in Canada, the congress doesn't make

laws in can dasmt It's a Free Trade Agreement. Is that what you would

like? Yes, that is what we want. What is wrong with that? Nothing.

But if you look at the reality of the Canadian US Free Trade Agreement

because of the preponderance of economic power on one side of that

equation, it's one which ultimately gets driven by the larger partner.

You can't escape that. There is no pressure in Canada to come out. If

anything, the pressure is in America to do it away.

It is vital to their national interests, but when we voted to

leave, I myself have never quite seen it as independent data --

Independence Day, because it seems to me we live in an independent

world, and what some people aspire to with Brexit is unlikely to be

realised and so we have got the hard-headed and pragmatic about what

we want to achieve and how we achieve it. We Road need to submit

to the European court of justice as we do at the moment, that will give

us our independence -- we won't need to submit. We will need to decide

for ourselves. United Kingdom imports far more from the Europeans

than we export and so they have a huge vested interest. Yes, we had

that in the campaign, but from everything you say, you accept that

if you don't want to be... You want to end freedom of movement. You are

not going to be a member of the single market. That's impossible

now? Yes, no doubt about it. You replace it with a free trade

agreement? Yes, that might take some time. The interim arrangement might

not be for me agreed, we might just say, until we have a agreement we

will keep our tariffs at zero and keep our borders open for such and

such. If we said we are open, you can carry on trading with us and

selling your stuff tariff free, but then they say, no, we are going to

put up tariffs, what is the European Union going to look like? It will

destroy the British kind as to. -- car industry. It is perfectly

reasonable that we are offsetting, if we are raising that revenue, we

are spending on making this a very attractive country for investment.

Subsidies? But subsidies. Increasing training grants, grants for research

and element, many positive things we can do within the state aid rules.

Our biggest individual export country is the United States, and we

don't have a free-trade agreement with them. Our rules are already

very enmeshed with Europe, could we not move quite quickly if there was

goodwill on both sides to do a free-trade agreement? That is

possible, and I would be very much in favour of trying to achieve it,

but... You accept we can't be in the single market as a member? We could

be if we are prepared to accept the restraints, but I understand it

might be possible for us to negotiate a status for the United

Kingdom which is somewhat different for other countries, all those

things are possible. You can't be in the single market without being

subject to the ECJ? You would be subject to what is in effect the

younger brother of the ECJ and you would lose the influence in the

formulation of the regulations. I'm a pragmatist, but the reality of

trade and mutual interdependency is that you have to accept a framework

of rules and if you don't the question is, what will the economic

consequences be, and in my constituency I have companies there

because they have access to the single market and if they don't have

access to the single market they will move away. They will have

access, but they don't know what terms, so why should any

multinational at the moment, wondering where to expand next,

bring their foreign investment to Britain until everything you have

been talking about has been resolved? That is why there will be

pressure not so much on hard and soft, but quick, and click means

simple and simple means not getting involved in unanimity provisions, it

means offering a unilateral deal to the EU, pending a longer-term deal,

but it also means gives the few giving assurances to investors. We

could call that the make the Chancellor Philip Hammond said

he was hoping to break with austerity policies to an extent,

from his predecessor, but by how much we don't know, we have got to

wait for the Autumn Statement. The British people elected us on a

promise to restore fiscal discipline and that is exactly what we are

going to do. But we will do it in a pragmatic way. In a way which

reflects the new circumstances we face. The fiscal policies George

Osborne set out were the right ones for that time. But when times

change, we must change with them. So we will no longer target a surplus

at the end of this Parliament. But make no mistake the task of fiscal

consolidation must continue. Right. That was the Chancellor and are now

joined -- I'm now joined by David Gauke. The Chancellor boasted about

the recovery that has happened under this government, but the fact is,

GDP per capita has barely moved in the last six years. It is the case

that of the G-7 countries GDP as a whole has grown fast in the UK than

any other. Partly because of the amount of immigration that has taken

place, that you have said you will stop. If you divide the GDB by the

number of people in the country, compared to 2010, it has barely

grown at all -- GDP. We inherited a difficult set of challenges in terms

of the public finances and in terms of the after-shocks of the financial

crisis and the Eurozone crisis which had a significant impact upon the

us. Over that period we have seen a large creation of the number of jobs

and GDP growth has been significant. But not per head. We were faced with

problems of the year is own crisis in 2012 and the after effects of the

financial shocks which meant funding for businesses was very difficult --

the problems of the Eurozone crisis in 2012. UK has been growing

strongly by any measure you want to look at. But not by GDP per head,

that is my point. One of the reasons is that for most of the time you

have been in power real wages have fallen, they have not grown, so

people have been overall worse off in terms of the money they have

raised in Germany and France, where real wages have risen. To some

extent, if you are making a comparison with France and Germany,

real wages in the context where we have seen a very substantial

increase in the Labour force, which has not been the case in France and

Germany in the same way, so there has been away in which there has

been a trade-off between the two. It begs the question, what do we do

about it? As Paul Johnson said, if you want to drive up real wages this

is about driving up productivity and much of the speech today from Philip

Hammond was about how we can improve productivity, that is a long-term

challenge and we have taken steps over the last six years but there is

more to do. So far with no impact. If you are looking at improving the

skills base, that is something which isn't going to be a matter which is

solved in three, four, five, even six years, that's a long-term

project. If we are looking at encouraging more investment in the

UK and our policies on corporation tax for example have attracted more

investment to the UK, but the benefits of that investment is

something you see over a long period of time. Because something is

long-term, it doesn't mean that governments should not focus on it.

You might expect to see glimmers of progress, but UK productivity per

hour has not changed since 2007. It has not moved now in nine years. One

of the particular factors, you have used 2007 as a base point, it is a

reasonable point to make. The hit of the financial crisis on our

productivity was very considerable and continues to be considerable.

The question is, how do we improve our productivity which marked the

focus on our infrastructure and skills and attracting investment to

the UK, that has got to be the way forward. But you have slashed

infrastructure spending. We inherited a reduction in

infrastructure spending. Of course. But as a bit -- centage of GDP it in

fact declined to little bit and compare to other countries it is

rather small -- but as a percentage of GDP. If you look at government

spending in infrastructure and along with PPP, the UK is comparator with

other countries, but there is more we need to do to encourage private

sector investment in infrastructure, but the reality is the government...

If you look at transport, we have a set actual increase in the roads

budget over the course of this Parliament, it will be increasing by

three times over this period, we are investing more in the railways, for

any time since Victorian times, and so we are increasing expenditure

especially in that high-value infrastructure where there is good

economic return. What the Chancellor made reference to today, his

enthusiasm to look at ways in which we can do that consistent with a

commitment to getting the public finances under control. How can you

be the self-styled workers party win 6 million working people in this

country are less than the living wage? We are in a position where we

have created a lot of jobs in this country and we have brought in the

national living wage and that is providing a significant pay rise to

millions of people. We have cut taxes for the low paid and taken

millions out of income tax. 6 million people earning less than the

living wage, defined as ?9 15 in London and ?7 85 elsewhere in the

UK. Not much money for people at this conference, but 6 million

people earn less than that. That can't be right for a self-styled

workers party. What you do about it? That is your job. I will answer it.

You make sure those people pay less in tax and you make sure you have a

higher national living wage then you would otherwise do, but I come back

to this point, if we want to have a high wage, high skill economy, we

have got to make sure we have the environment to improve our skills

and our infrastructure, and it is very important, that we are a

country which continues to create jobs. Our record in the last six

years over job creation as a country is extremely strong by any

standards, historical or international, and it is good that

we are not a society that is played with mass unemployment. But again,

you are the self-styled workers party, Philip Hammond said this and

Theresa May said at yesterday, but UK workers in fact work longer hours

for less pay than the other... The original EU 15, so what is the

workers party doing about that? The reason why that is the case, as the

Chancellor made clear, that is because our productivity levels are

not as high as a number of our competitors. It comes back to this

point, sometimes worthy... Philip made the point about it will not set

the pulses racing, but how do we improve productivity as a nation.

Which hasn't changed since you came to power. These are long-term

challenges, but what we saw from the Chancellor, in a very serious and

thoughtful speech, was outlining ways in which we can improve that

productivity and how we can make long-term decisions to make sure

that the UK's productivity increases and it is true that that we benefit

people's wages. Abdeslam Ab For six years, or more

than six years, in the run-up to the election, your party told us that

the guiding light in its welfare reforms and its attitude to the

economy would be to make work pay, that if you got a job, and if you

did the right thing which Mr Osborne used to say all the time, it would

pay to work. And yet six years after you'd been in power, 50% of Pellow

citizens who're in poverty have at least one family member in work. So

in what way has that made work pay? They are working and they live in

poverty? Well, what we have seen is a significant increase in the number

of jobs in this country. Something like 2.7 million more jobs. But they

are still in poverty? In this economy, one of the reasons why we

have had this, and it's undoubtedly a success, in the last six years,

employment numbers are as high as they are. One of the reasons is

because welfare reform has played a part. More people are essentially

seeing that it's worthwhile for them working. Now, is there still more to

do, of course there is. I'm acknowledging that. It's not just a

case of more to do, relative poverty, which is still the official

measure of this Government, relative poverty among those in work is at

record levels. Record levels. How does that make you, the workers

party? The workers party are going to revolt if you carry on like this?

We are seeing a reduction in the number of workless households. I

understand that. My point is in-work poverty, you said work would pay.

Make work pay, get a job, do the right thing and you will prosper in

a Tory Britain, whereas among those who are in work, poverty, is at

record levels? What we are seeing is people who previously would have

been workless are now in employment. That's got to be a good thing. Now,

the next challenge, if you like, is how do we ensure those people who

perhaps in a previous era would have been out of work, they are now in

work but not earning sufficient. The next challenge is to ensure that

those people go on and earn more. Again, I come back to, how do you do

that? You can improve their living standards by taking them out of

income tax which we have done in four million cases. These figures

take that into account? You can help them by having a national living

wage whereby they are better paid and we introduced that. Taken that

into account? That will increase over the course of the Parliament.

But fundamentally, what you can do is ensure that we have got more

people who're highly skilled and that we have a society that is more

productive and that increase in product Ity ends up benefitting

People who're working, that is the point the Chancellor was making. I

know you can't give us any more details because we have to wait for

the Autumn Statement in November. But are we going to borrow more to

invest? As a Jens principle? I would make

two points about the Autumn Statement -- as a general principle.

The acknowledgement because of the uncertainty of the Brexit votes,

it's likely tax receipts will be lower than was previously projected,

so that means that we are not in a position to meet our 2019-2020

surplus. So the deficit reduction will continue to increase but at a

slower pace. So it might not even continue to reduce? We'll see what

the Office for Budget Responsibility determines and we await their

numbers. So that's the first point. The second point is that we are in a

set of circumstances where interest rates are very low. The way the

markets have moved, we can borrow more cheaply than previously. If

there is a case for high value infrastructure, and we have to be

pretty tough about this, this is not about relaxing day-to-day spending

but if there is a case for high value infrastructure that allows

long-term productivity, then, as the Chancellor made clear, we'll be

willing to look at that. Thank you very much for coming to speak to us

after the Chancellor's speech. This Autumn Statement is on November 23rd

and we'll bring it all to you here on the Daily Politics on BBC Two,

probably from, about 11. 30-3 o'clock. Earlier, the Communities

Secretary made his speech to conference so let's have a listen to

some of what Sajid Javid had to say. 1.5 million households contain at

least one adult who says he or she would love to buy or rent their own

home but they have simply not been able to afford to do so. Harold

Macmillan put it best more than 90 years ago. Housing is not a question

of conservativism or socialism, he said, it's a question of humanity.

Tackling this housing short fall isn't about political expediency.

It's a moral duty. It's one that falls on all of us,

not just in Parliament, but on businesses, if Local Government and

in local communities. I'm not afraid to stand up here and say that this

country has not built enough homes. We have to be honest about it.

In the last year of full records, we managed to deliver more than 170,000

additional properties across England. It's not a bad number, but

it's far fewer than we need. We need to do much better.

Everyone agrees that we need more homes. Too many of us object to them

being next to us. We have got to change that attitude.

So my message today is clear - it's time to get building.

APPLAUSE. There was Sajid Javid announcing

beefing up the housing programme and getting the numbers behind the

current rate of completion about 138,000 in England.

So the motto of the conference here is "a country that

works for everyone", echoing Theresa's May's

on Downing Street when she first became Prime Minister.

We're joined now by the former universities

He's now executive chair of the Resolution Foundation,

a think tank which focuses on living standards.

Plenty of rhetoric about being the workers' party and a country that

works for everyone. But I think you heard my interview with David Gauke,

there is a long way to go to turn that rhetoric into reality? There

is. David was right to say that productivity is a key part of the

challenge. But there is another part of the challenge which is what Sajid

was talking about, the work resolution shows housing costs are

one of the big pressures on living standards for people on low incomes.

The increase in the housing cost, it looks to be the equivalent of about

a 14p increase in income tax. If we can get more housing built and

because there is an increase in supply, see over time the cost of

housing starts falling, people will feel that as an improvement in their

living standards, their wages will go further, the moment low income

families have to put more of their wages into rents. Both in the

private and public sector. Yes. And also, I was looking at the figures

and because we failed to build enough houses to meet the demand,

the Housing Benefit bill has gone through the roof because people on

average incomes can't afford these rents so the state has to subsidise?

Yes, you are absolutely right. It's a double hit? There are more people

on means tested benefits and if people go from youth into middle age

and are still renters, the long-term challenge is what if you have got

many pensioners who aren't owner occupiers and millions of pensioners

claiming Housing Benefit so it actually makes sense in terms of

getting a long-term grip on public spending to make it easier for

people to own their own homes. That's why I think what Sajid said

today was absolutely the right thing. Shouldn't there be massive

council house building programmes? It's interesting you should say

that. When I look at what the Conservative Party did in the

1950s... 300,000 houses a year, Harold Macmillan Housing Minister

Yes, and he did private house building and public house building,

a combination. With Sajid's statement today, private building is

not on itself going to get us enough houses. Some will have to be public