0:00:03 > 0:00:06Spending has been Britain's national obsession.
0:00:06 > 0:00:11There's nothing we've liked better than to splash a bit of cash.
0:00:11 > 0:00:17The richer we've got, the more we've all fallen in love with spending.
0:00:17 > 0:00:18And you know what?
0:00:18 > 0:00:21So have our politicians.
0:00:23 > 0:00:26Only now the party's over.
0:00:26 > 0:00:28We're feeling the pinch
0:00:28 > 0:00:32and our politicians are facing some hard choices.
0:00:32 > 0:00:36In this series I'm out to get us talking about your money
0:00:36 > 0:00:40and how they spend it. We'll examine who gets what and why.
0:00:40 > 0:00:44- So do you want to give her the money?- Actually, no.
0:00:44 > 0:00:46Oh, you don't want to give old people the money?!
0:00:46 > 0:00:49- I thought you said you did. - Old working class people.
0:00:49 > 0:00:53And I'll be showing what bang you get for your buck.
0:00:53 > 0:00:54The cost to you -
0:00:54 > 0:00:57a mere £5 billion.
0:00:58 > 0:01:02C'mon! We'll find out who forks out the most in tax...
0:01:04 > 0:01:08..and explore the bizarre way the system actually works.
0:01:08 > 0:01:10They have VAT but they don't have VAT,
0:01:10 > 0:01:12but that's not a biscuit it's a cake.
0:01:12 > 0:01:15It's as clear as mud, isn't it? It really, really is.
0:01:15 > 0:01:19I'll be finding out why spending's set to keep rising.
0:01:19 > 0:01:22Well, there's not many people coming to you saying,
0:01:22 > 0:01:26"Here's what we can stop doing." There's a lot of people queuing up
0:01:26 > 0:01:28saying "Here's what we can start doing,
0:01:28 > 0:01:30"here's somewhere else to spend our money."
0:01:33 > 0:01:38And how politicians keep getting into tangles over tax.
0:01:38 > 0:01:42Talking about tax and politics is like talking about sex in public.
0:01:42 > 0:01:45Everyone knows it's around, but they don't like to talk about it.
0:01:45 > 0:01:49We'll be discovering why politicians keep fooling themselves
0:01:49 > 0:01:53that the economy will always be plain sailing.
0:01:53 > 0:01:57But what they and what we amateur sailors have to know
0:01:57 > 0:02:01is that it can all change incredibly fast.
0:02:03 > 0:02:06Right now, we're facing the biggest spending squeeze
0:02:06 > 0:02:08since the Second World War.
0:02:08 > 0:02:11Tonight, we find out how on earth we got here.
0:02:12 > 0:02:15If you've ever wondered how politicians
0:02:15 > 0:02:19spend your money or why they spend it in the way they do,
0:02:19 > 0:02:22follow me - we'll find out.
0:02:36 > 0:02:39I'm on a mission to get us talking about how we spend,
0:02:39 > 0:02:43and where better to start than one of Britain's shopping temples -
0:02:43 > 0:02:45Manchester's Trafford Centre.
0:02:45 > 0:02:48I've got something in my briefcase which means
0:02:48 > 0:02:50I've had to borrow a security guard.
0:02:50 > 0:02:53It's full of your money.
0:02:53 > 0:02:56That's right, yours.
0:02:56 > 0:03:00This is how much the government spends
0:03:00 > 0:03:02on behalf of every family each year.
0:03:02 > 0:03:04About £20?!
0:03:04 > 0:03:06About £20?
0:03:06 > 0:03:09'£20! Well, how much do you reckon?'
0:03:11 > 0:03:13- I've got something for you here. - Oh, yeah!
0:03:13 > 0:03:17- This is for you. Your money. - Lovely.- How much is there?
0:03:17 > 0:03:19£4,000?
0:03:19 > 0:03:21£5,000? £10,000?
0:03:21 > 0:03:23£20,000?
0:03:24 > 0:03:26£22,000. That's yours.
0:03:26 > 0:03:28- Ah, lovely.- It's a lot of money!
0:03:28 > 0:03:31- Oh, I know. Taxpayers' money.- Yes.
0:03:31 > 0:03:33- Oh, my God!- Is that a bit tempting?
0:03:33 > 0:03:35Yes, it's nice.
0:03:35 > 0:03:37Am I making you think "I'd like some of that"?
0:03:37 > 0:03:40- Do they spend it well? - I wouldn't say so, no.- Why not?
0:03:40 > 0:03:42Cos we don't see much of it.
0:03:42 > 0:03:44It would definitely help in my life.
0:03:44 > 0:03:47Actually, it wouldn't. It's all fake I'm afraid.
0:03:47 > 0:03:49I'll still take it!
0:03:51 > 0:03:54You see, while we all hear a lot about cuts,
0:03:54 > 0:03:57we don't have a clear idea about what the government
0:03:57 > 0:03:59actually spends on us.
0:04:03 > 0:04:08So let's start with that £22,000 I've been hawking around.
0:04:08 > 0:04:10Where does it all go?
0:04:12 > 0:04:15Add all those £22,000s up together
0:04:15 > 0:04:20and you get a pretty eye-watering amount - £692 billion.
0:04:20 > 0:04:22Now there are seven big budgets
0:04:22 > 0:04:26which make up more than three quarters of all government spending.
0:04:26 > 0:04:27Let's have a look at them.
0:04:27 > 0:04:29There's transport, law and order,
0:04:29 > 0:04:34defence and, at the moment, bigger than them all, debt interest.
0:04:34 > 0:04:37But the three really big ones are these.
0:04:37 > 0:04:42Education - that's about £2,800 per family.
0:04:42 > 0:04:46In total, over £90 billion.
0:04:46 > 0:04:50Health - that's about £3,800 per family
0:04:50 > 0:04:53or in total about £121 billion.
0:04:53 > 0:04:58And then Social Security, the whopper, £194 billion.
0:04:58 > 0:05:03For every family, that's just over £6,000.
0:05:03 > 0:05:06That, of course, isn't just benefits for the unemployed or disabled
0:05:06 > 0:05:08but the big pension bill as well.
0:05:10 > 0:05:12Now let's ignore the deficit for a moment.
0:05:12 > 0:05:17The big problem facing politicians long term is that those big bills
0:05:17 > 0:05:20just keep rising.
0:05:25 > 0:05:29This is Spitalfields Market in London,
0:05:29 > 0:05:33where, once a month, pensioners gather for a tea dance.
0:05:35 > 0:05:37Many here are over 80 -
0:05:37 > 0:05:41glorious proof that we are living longer, often healthier lives
0:05:41 > 0:05:45but ones, let's face it, with higher bills attached.
0:05:49 > 0:05:52First things first though. Could I make it onto Strictly?
0:05:56 > 0:05:59I haven't a clue where I'm going. You're very good at leading.
0:05:59 > 0:06:04'In 1901, there were just 60,000 people aged 85 or over.'
0:06:09 > 0:06:11You can't, you just know it in your head!
0:06:11 > 0:06:15'Now there are 1.5 million, 25 times as many.
0:06:15 > 0:06:18'And that figure is set to double in the next 20 years.
0:06:18 > 0:06:21'There'll be 3 million over 85 year olds.'
0:06:24 > 0:06:26Am I learning?
0:06:27 > 0:06:31'What we're all learning is just how expensive that will be.'
0:06:33 > 0:06:35You're getting there!
0:06:35 > 0:06:39I can now feel the rhythm, I'm not sure what I'm doing with my...
0:06:39 > 0:06:42- Oh!- Sorry.- Sorry, my fault.
0:06:42 > 0:06:47In 50 years' time, we're forecast to be spending £80 billion more
0:06:47 > 0:06:50each year just to cope with our ageing population.
0:06:50 > 0:06:53That's more than double the defence budget.
0:06:59 > 0:07:01If you had to hold up cards like they do on Strictly?
0:07:01 > 0:07:04- On your dancing?- My dancing. - You can't dance.
0:07:04 > 0:07:06- No?- Oh, don't say that.
0:07:06 > 0:07:08- No, he can't.- No?(!)
0:07:08 > 0:07:10I didn't tread on your toes too often?
0:07:10 > 0:07:13No, you didn't tread on my toes at all. You were a perfect gentleman.
0:07:13 > 0:07:15Thank you very much.
0:07:15 > 0:07:17Now with so many people living to a good age,
0:07:17 > 0:07:21do you ever think where the money will come from to pay for it?
0:07:21 > 0:07:24No, I don't worry about that because I'll be six feet under by then!
0:07:24 > 0:07:26It's my problem, you mean?
0:07:26 > 0:07:29I think our children have that worry, not us.
0:07:29 > 0:07:31It's going to get more pricey, isn't it,
0:07:31 > 0:07:35- with so many people living older? - Yes, it certainly is.
0:07:35 > 0:07:38But I'm not that anxious to go anywhere yet!
0:07:38 > 0:07:41I'm going to hang on as long as possible,
0:07:41 > 0:07:42and I hope everyone else does.
0:07:42 > 0:07:45Mind you, we've worked a lot of years,
0:07:45 > 0:07:49- and we've paid in a lot of years.- Yeah.- All of us.
0:07:55 > 0:07:59Even if you dance as badly as I do, you leave the tea dance
0:07:59 > 0:08:02at Spitalfields feeling pretty good.
0:08:02 > 0:08:06It's a celebration of growing older, rather than people moping about it.
0:08:06 > 0:08:09And yet as our politicians try to keep in step
0:08:09 > 0:08:13with our ever-ageing population, they find themselves
0:08:13 > 0:08:15getting into a tangle too.
0:08:19 > 0:08:23You see, politicians find it very hard to cut back
0:08:23 > 0:08:27on spending on the elderly so let me tell you a story.
0:08:27 > 0:08:31It's about winter fuel allowance, a new benefit introduced
0:08:31 > 0:08:34by Labour in 1997 at a cost
0:08:34 > 0:08:38of £268 million in today's money.
0:08:38 > 0:08:41The winter fuel allowance, when it was introduced,
0:08:41 > 0:08:43was intended as just a little bit of extra help.
0:08:43 > 0:08:47£20 a year for every pensioner, regardless of how wealthy they were.
0:08:47 > 0:08:51But that was soon to change when Gordon Brown was accused of being
0:08:51 > 0:08:56a miser when he introduced an increase in the weekly pension
0:08:56 > 0:08:59of just 75p.
0:08:59 > 0:09:00The fury that that produced
0:09:00 > 0:09:02confirmed what every politician knows -
0:09:02 > 0:09:08there is nothing so terrifying as a pensioner who feels wronged.
0:09:08 > 0:09:14Tony Blair even dubbed them "like Rottweilers on speed."
0:09:15 > 0:09:20Britain's pensioners went into battle over the 75p rise.
0:09:20 > 0:09:23Oh, it was an insult wasn't it?
0:09:23 > 0:09:26Absolute insult to all of us.
0:09:26 > 0:09:30Norah Knight was so angry about this year's 75p pension rise
0:09:30 > 0:09:34she sent it back to Gordon Brown in the form of a cheque.
0:09:34 > 0:09:37Then to add insult to injury,
0:09:37 > 0:09:40she was astounded to find the Treasury cashed her cheque.
0:09:40 > 0:09:45And when pensioners start hijacking buses you know you're in trouble.
0:09:45 > 0:09:48ALL: What do we want, pensions rights!
0:09:48 > 0:09:51The then Chancellor Gordon Brown
0:09:51 > 0:09:53decided to throw money at the problem.
0:09:53 > 0:09:56And winter fuel allowance went up...
0:09:56 > 0:10:00The winter allowance is currently paid to all 8 million
0:10:00 > 0:10:03elderly households at £20.
0:10:03 > 0:10:07I've decided to raise it to £100.
0:10:07 > 0:10:09..and up...
0:10:09 > 0:10:12It will be paid not at £150,
0:10:12 > 0:10:13but at £200 for every...
0:10:13 > 0:10:16CRIES OF DISCONTENT
0:10:16 > 0:10:18..for every pensioner household.
0:10:18 > 0:10:19..and up...
0:10:19 > 0:10:23For this year, for those over 70, on top of the winter fuel payment,
0:10:23 > 0:10:27we will pay an additional £100 to each household.
0:10:30 > 0:10:35So by 2004, the cost had risen to...
0:10:35 > 0:10:40£2.3 billion, eight times more than it originally cost.
0:10:43 > 0:10:46With fuel bills rising you might say, "Why not?"
0:10:46 > 0:10:50But can we really afford to keep giving it to everyone,
0:10:50 > 0:10:52no matter how rich they are?
0:10:52 > 0:10:54I've got £200 here, right.
0:10:54 > 0:10:57I want to know is it a good idea that the government
0:10:57 > 0:11:00gives £200 to old people for winter fuel allowance.
0:11:00 > 0:11:02- Is that a good idea?- Old people should be prioritised
0:11:02 > 0:11:05cos they don't work, and the pension is not really a good rate.
0:11:05 > 0:11:08- So give them this money? - Yeah, absolutely, yeah.
0:11:08 > 0:11:11- So do you want to give her the money?- Actually, no.
0:11:11 > 0:11:13Oh, you don't want to give old people the money?
0:11:13 > 0:11:16- I thought you did want to give them money?- Old working class people.
0:11:16 > 0:11:18- How about him?- Definitely not.
0:11:18 > 0:11:20- Don't give him the money.- Him?
0:11:20 > 0:11:23No way. These people are like, very wealthy.
0:11:23 > 0:11:26- Definitely.- Definitely a good idea? - Yeah. Heat or eat.
0:11:26 > 0:11:28Should he get the £200?
0:11:28 > 0:11:32- I suppose it has to be means tested, I suppose.- What about her?
0:11:32 > 0:11:35- No.- Or him?
0:11:35 > 0:11:36I think they're quite well off.
0:11:36 > 0:11:39They shouldn't get the £200?
0:11:39 > 0:11:41Umm... When you put it like that I suppose, no.
0:11:43 > 0:11:46So we like the idea of spending on the elderly,
0:11:46 > 0:11:50but we're not so sure about handouts to those who don't need them.
0:11:52 > 0:11:56And some wealthy pensioners agree, like nightclub impresario,
0:11:56 > 0:11:57Peter Stringfellow,
0:11:57 > 0:12:00a man so outraged by getting the money,
0:12:00 > 0:12:04he went to the trouble of trying to send it back.
0:12:04 > 0:12:06She's the big lady herself.
0:12:06 > 0:12:09- So Peter, you're 70?- 71st year.
0:12:09 > 0:12:12- Not short of a bob or two?- No.
0:12:12 > 0:12:14- More than one house?- Two.
0:12:14 > 0:12:17- More than one nightclub?- Three.
0:12:17 > 0:12:20Pay yourself enough to earn top rate tax?
0:12:20 > 0:12:22Not too short of half a million a year.
0:12:22 > 0:12:23Half a million pounds a year.
0:12:23 > 0:12:27So how important is getting £200 a year from the government?
0:12:27 > 0:12:29It's embarrassing to me.
0:12:29 > 0:12:31I don't ask for it, I don't expect it,
0:12:31 > 0:12:35it was not something that I knew was going to come along.
0:12:35 > 0:12:39You wanted the government to give you the chance to say no?
0:12:39 > 0:12:43Yes I did. Eventually, I got a letter back from them
0:12:43 > 0:12:47saying you will not be receiving it in future!
0:12:47 > 0:12:51"However, if you change your mind please let us know
0:12:51 > 0:12:52"and then we'll reinstate it."
0:12:52 > 0:12:54But that's not what I wanted.
0:12:54 > 0:12:58I wanted them to change the whole policy of not giving it
0:12:58 > 0:12:59to people who don't need it.
0:13:02 > 0:13:06I think the problem with winter fuel allowance, it's indiscriminate
0:13:06 > 0:13:10it's not targeted, it's not means tested so your actually giving
0:13:10 > 0:13:15a reasonably significant amount of money overall
0:13:15 > 0:13:17to people who didn't need it.
0:13:17 > 0:13:22- Why did it happen then? - It happened because we have a great sympathy for the elderly.
0:13:22 > 0:13:28We wanted and we pledged to create dignity for people in their old age.
0:13:28 > 0:13:30You were in a hole as a government?
0:13:30 > 0:13:32You'd increased the pension by 75p.
0:13:32 > 0:13:34We had also shot ourselves in the foot one year.
0:13:34 > 0:13:40by giving a very modest increase in the state pension
0:13:40 > 0:13:44and there was inevitably a great backlash against that
0:13:44 > 0:13:48so there was a bit of politics in this.
0:13:50 > 0:13:52A bit of politics which comes at a very high price
0:13:52 > 0:13:57and doesn't target money on those who need it most.
0:13:57 > 0:14:01Even those who worked closely with Gordon Brown at Number 10
0:14:01 > 0:14:05think it's not the best way to spend our money.
0:14:05 > 0:14:07If you go and ask Treasury officials,
0:14:07 > 0:14:09they'd love to take away fuel allowance.
0:14:09 > 0:14:11It would be first on their list.
0:14:11 > 0:14:13So why hasn't it been cut?
0:14:13 > 0:14:14Politics.
0:14:14 > 0:14:18Because older people vote more than younger people.
0:14:18 > 0:14:21They mobilise themselves. They want to defend their benefits.
0:14:21 > 0:14:24And, you know, it's very, very hard in those circumstances
0:14:24 > 0:14:27to confront them with the loss of a benefit,
0:14:27 > 0:14:31and so, whatever the mandarins say, whatever the number crunchers say,
0:14:31 > 0:14:35whatever policy wonks say, it comes down to a political judgement.
0:14:35 > 0:14:39In the dying hours of last year's general election campaign,
0:14:39 > 0:14:43David Cameron had to make exactly that judgement.
0:14:43 > 0:14:47Labour's election supremos were targeting him,
0:14:47 > 0:14:49claiming he'd axe benefits for the elderly.
0:14:49 > 0:14:54The question was - how would he react?
0:14:54 > 0:14:57David Cameron's whole strategy in changing the face
0:14:57 > 0:15:00of the Conservative party was to say "We're caring."
0:15:00 > 0:15:04So it's very difficult for them to repeal measures like
0:15:04 > 0:15:07the winter fuel allowance cos you can imagine not only we as the opposition,
0:15:07 > 0:15:10but many others, would come down on him like a tonne of bricks.
0:15:10 > 0:15:13Let me say very clearly to pensioners.
0:15:13 > 0:15:15If you have a Conservative government,
0:15:15 > 0:15:20your winter fuel allowance, your bus pass, your pension credit,
0:15:20 > 0:15:24your free TV licence, all these things are safe.
0:15:24 > 0:15:27You can read my lips, that is a promise from my heart.
0:15:29 > 0:15:31Can I ask you a personal question?
0:15:31 > 0:15:33Do you get the winter fuel allowance?
0:15:33 > 0:15:35I get the winter fuel allowance.
0:15:35 > 0:15:38I have a Government car, so I don't get value for money
0:15:38 > 0:15:42out of my pensioner's bus pass, but I regard them as tax rebates.
0:15:42 > 0:15:45Is it sensible giving people with a reasonable amount of money,
0:15:45 > 0:15:47tax-free sums?
0:15:47 > 0:15:50I think we have to demonstrate our commitment to pensioners
0:15:50 > 0:15:53and it's a message to pensioners that the Government
0:15:53 > 0:15:57does have regard to the fact that pensioners are entitled
0:15:57 > 0:16:00to various benefits. And we discussed it before the election,
0:16:00 > 0:16:04we announced it before the election. It's an election promise we're keeping.
0:16:07 > 0:16:11The reason that first Labour and then Conservative ministers
0:16:11 > 0:16:14carried on spending billions of pounds on a policy
0:16:14 > 0:16:17they've got doubts about is because they saw it
0:16:17 > 0:16:20as a powerful political symbol
0:16:20 > 0:16:23of how much they cared about the elderly.
0:16:23 > 0:16:26The money that's still being spent on the winter fuel allowance
0:16:26 > 0:16:29is not short of the amount that's been cut
0:16:29 > 0:16:34from the university budget forcing the trebling of tuition fees.
0:16:34 > 0:16:37Students may protest, they may even riot,
0:16:37 > 0:16:42but politicians are much more scared of their grannies.
0:16:44 > 0:16:48And if politicians daren't mess with spending on the elderly,
0:16:48 > 0:16:51just imagine how wary they are of touching
0:16:51 > 0:16:54the biggest sacred cow of them all - the NHS.
0:16:55 > 0:16:58It all goes back to a summer's day just after the war,
0:16:58 > 0:17:01in a suburb just outside Manchester.
0:17:01 > 0:17:05It's been big, bold decisions to do things together
0:17:05 > 0:17:08that have really driven up public spending.
0:17:08 > 0:17:12A little over 60 years ago, here at the Trafford General Hospital,
0:17:12 > 0:17:17the then Minister Of Health, Aneurin Bevan, launched the NHS.
0:17:17 > 0:17:21It gave Britain, he said, "the moral leadership of the world."
0:17:21 > 0:17:24It also gave Britain a mighty big bill.
0:17:27 > 0:17:31Nye Bevan and the other founders of the NHS thought we'd get healthier
0:17:31 > 0:17:35so demand would fall. In fact, spending on the health service
0:17:35 > 0:17:39has catapulted from £11 billion in today's money
0:17:39 > 0:17:46to eleven times that much now - £121 billion.
0:17:47 > 0:17:50One of the things that people often missed,
0:17:50 > 0:17:53was the way the demand to spend money would grow,
0:17:53 > 0:17:56particularly because we're so much better off than we used to be.
0:17:56 > 0:18:00In 1955 we spent 3% of national income on the health service.
0:18:00 > 0:18:02Now we spend nearly 9%
0:18:02 > 0:18:05and there's been a steady growth year after year,
0:18:05 > 0:18:06decade after decade,
0:18:06 > 0:18:10an extra 1% of national income each decade, and after a little while,
0:18:10 > 0:18:12those one percents of national income
0:18:12 > 0:18:14add up to an awful lot of money.
0:18:16 > 0:18:20Ever since that day here in Trafford in 1948,
0:18:20 > 0:18:25the NHS has been so much more than a mere way of organising healthcare.
0:18:25 > 0:18:26It's been a love affair,
0:18:26 > 0:18:29it's been, if you like, the closest this country gets
0:18:29 > 0:18:32to a national religion.
0:18:32 > 0:18:36And politicians know, therefore, they have to keep on paying
0:18:36 > 0:18:38to keep the faith.
0:18:38 > 0:18:44It's very expensive, and all wealthy states spend an ever higher
0:18:44 > 0:18:47proportion of their wealth on health care.
0:18:47 > 0:18:50Even if you're running it with iron discipline,
0:18:50 > 0:18:53it will cost you more, health.
0:18:53 > 0:18:56There's no other area at all where public spending is like that.
0:18:58 > 0:19:02In Canada, when they had a huge deficit, this is what they did.
0:19:10 > 0:19:12That used to be a hospital.
0:19:14 > 0:19:18Can you imagine them blowing one up here, in Britain?
0:19:21 > 0:19:23Health's sacred status with us voters
0:19:23 > 0:19:27means our politicians wouldn't dare.
0:19:27 > 0:19:29Not that they wouldn't want to.
0:19:29 > 0:19:33For years the medical advice to them has been that having fewer hospitals
0:19:33 > 0:19:38would save money which could be better spent and that's not all...
0:19:38 > 0:19:40Closing hospitals is quite definitely a way
0:19:40 > 0:19:44to get better healthcare particularly with new drugs,
0:19:44 > 0:19:48with new technology and we can do operations -
0:19:48 > 0:19:52cataract operations you can do in a local GP surgery.
0:19:52 > 0:19:56No-one goes and stays in hospital to the degree they did.
0:19:58 > 0:20:02But there's one thing that stops that happening. It's you and me.
0:20:03 > 0:20:06This is the King George Hospital in Ilford, east of London.
0:20:06 > 0:20:11Local NHS bosses want to shut its maternity and A&E units
0:20:11 > 0:20:14and move them to a hospital in Romford, a few miles up the road.
0:20:15 > 0:20:17But in a local church hall,
0:20:17 > 0:20:20residents are gathering to fight the proposals.
0:20:21 > 0:20:24It's massive, it's a really big issue.
0:20:24 > 0:20:27Everyone sees it as a money saving exercise.
0:20:27 > 0:20:30Saving money first, giving good health service second.
0:20:30 > 0:20:32That's the crux of the matter really.
0:20:32 > 0:20:35I'm not going to say economical with the truth.
0:20:35 > 0:20:39They told us it's nothing to do with money. Of course it's about money.
0:20:42 > 0:20:4634,000 residents signed a petition against closing
0:20:46 > 0:20:48parts of King George Hospital.
0:20:48 > 0:20:51Many of us like our services local
0:20:51 > 0:20:53and we want to keep them that way.
0:20:53 > 0:20:56And the first proposals they came up with...
0:20:56 > 0:20:58And so do the local MPs.
0:20:58 > 0:21:01Labour and Tories are united in backing this campaign.
0:21:03 > 0:21:06And if we keep together, we keep up the campaign, we will succeed.
0:21:09 > 0:21:13In opposition, David Cameron promised a bare knuckle fight
0:21:13 > 0:21:16to save district hospitals.
0:21:16 > 0:21:18I think it's ridiculous that at a time
0:21:18 > 0:21:22when the population is growing, when more people are at A&E units,
0:21:22 > 0:21:24when more babies are being born,
0:21:24 > 0:21:26when our health needs are getting greater,
0:21:26 > 0:21:28that we're shutting down maternity units
0:21:28 > 0:21:30and accident and emergency units.
0:21:30 > 0:21:34The government says the days of the district general hospital are over.
0:21:34 > 0:21:35I completely disagree.
0:21:38 > 0:21:40But now he's in government, David Cameron
0:21:40 > 0:21:44has, in the last few weeks, approved the closure of A&E
0:21:44 > 0:21:48and maternity units not just at King George's
0:21:48 > 0:21:49but another London hospital.
0:21:49 > 0:21:53The decision there has been debated for 17 years.
0:21:53 > 0:21:55It all takes so long
0:21:55 > 0:21:59because politicians hate to be seen to close hospitals.
0:22:02 > 0:22:05I've lost count of the numbers of Members Of Parliament
0:22:05 > 0:22:06that would say to me,
0:22:06 > 0:22:09"I understand completely why you're doing this,
0:22:09 > 0:22:12"I understand all the clinical arguments and I understand
0:22:12 > 0:22:15"and sympathise with all of those but you must understand
0:22:15 > 0:22:17"publicly I have to take this position."
0:22:17 > 0:22:19I have to fight to keep my hospital open?
0:22:19 > 0:22:23I have to fight, and be seen to fight, to keep my hospital open.
0:22:27 > 0:22:29So fear of us, the voters,
0:22:29 > 0:22:34helps push up spending on the essentials like pensions and health.
0:22:34 > 0:22:38And then there are all those extra little things that are nice to have.
0:22:38 > 0:22:42Like money for culture and the arts.
0:22:49 > 0:22:53People used to all go to Margate for fun and frolics at the seaside.
0:22:58 > 0:23:02As of late, though, this bit of the Kent coast has been better
0:23:02 > 0:23:06known for its deprivation, and high rate of unemployment.
0:23:08 > 0:23:12Yet what's this? A brand new art gallery.
0:23:12 > 0:23:15The new Turner Contemporary, opened earlier this year.
0:23:15 > 0:23:20A dazzling addition to the sea front costing £14 million of public money.
0:23:23 > 0:23:27Its sparse, but striking displays have already
0:23:27 > 0:23:30pulled in over 260,000 visitors.
0:23:30 > 0:23:34And they've put Margate back on the map.
0:23:34 > 0:23:38Victoria Pomery is the gallery's director.
0:23:38 > 0:23:40What a spectacular view it is.
0:23:40 > 0:23:44You must at times see the real poverty there is here,
0:23:44 > 0:23:48how, in a sense, do you argue to yourself the reason why
0:23:48 > 0:23:51people in very low paid jobs should pay their taxes
0:23:51 > 0:23:56to build what is in a sense a real luxury?
0:23:56 > 0:23:58I don't see the Arts as a luxury,
0:23:58 > 0:24:01I see the Arts as integral to our lives,
0:24:01 > 0:24:06all of our lives, whoever we are. And, for me, it's really important
0:24:06 > 0:24:10that everyone can access fantastic art that makes them think
0:24:10 > 0:24:14in different ways about themselves and the world they live in.
0:24:14 > 0:24:16Isn't this, in the end, just a bit of fluff?
0:24:16 > 0:24:19I don't think this is fluff at all.
0:24:19 > 0:24:22I think this is serious, we are really ambitious,
0:24:22 > 0:24:26we want to be part of Margate's history and part of its future,
0:24:26 > 0:24:30and we feel we can really help and support the wider regeneration
0:24:30 > 0:24:32and renewal of this area.
0:24:32 > 0:24:37But not everyone's so sure. Some locals deeply resent the gallery.
0:24:40 > 0:24:43Dawn McLarren is a local mum,
0:24:43 > 0:24:46who thinks the money was desperately needed elsewhere.
0:24:46 > 0:24:51I've got a son, he's 17, he's about to leave college,
0:24:51 > 0:24:55he's got no work, no opportunity here whatsoever.
0:24:55 > 0:24:57And nothing to do.
0:24:57 > 0:25:01How do you feel about public money going to that new gallery?
0:25:02 > 0:25:06Very angry. Very, very, angry.
0:25:06 > 0:25:11But around the sea front there are a few new shops and cafes opening up.
0:25:11 > 0:25:14Just maybe the first signs of long-awaited regeneration.
0:25:14 > 0:25:19Ian Driver is a local councillor.
0:25:19 > 0:25:22I do think if you look at this in the long term -
0:25:22 > 0:25:25three, four, five years down the road,
0:25:25 > 0:25:29it will be creating more jobs and people will feel the benefit of it.
0:25:29 > 0:25:32Whether you regard the Turner Contemporary
0:25:32 > 0:25:35as a glorious gallery that can revive a town,
0:25:35 > 0:25:38or a vast and overpriced seaside shed,
0:25:38 > 0:25:42it is one symbol of what the surge in public spending
0:25:42 > 0:25:46in the New Labour years actually paid for.
0:25:46 > 0:25:49The cost of building it has been met.
0:25:49 > 0:25:52But the costs of running it, though far from vast,
0:25:52 > 0:25:56is yet one more addition to the national accounts.
0:25:58 > 0:26:04Arts spending for the whole of England is... £447 million.
0:26:04 > 0:26:06A drop in the ocean of public spending,
0:26:06 > 0:26:09and a lot less than winter fuel allowance.
0:26:09 > 0:26:12But when it comes to how governments spend your money,
0:26:12 > 0:26:16it's all the little things that add up.
0:26:16 > 0:26:20People are always coming up with innumerable small demands,
0:26:20 > 0:26:23and they say if this money was used imaginatively it does
0:26:23 > 0:26:26an immense amount of political good.
0:26:26 > 0:26:28All the time you get people saying,
0:26:28 > 0:26:31"I know money's tight but could we just spend a little?"
0:26:31 > 0:26:33Well, there's not many people coming to you saying,
0:26:33 > 0:26:35"Here's what we can stop doing."
0:26:35 > 0:26:38There's people queuing outside your door saying,
0:26:38 > 0:26:41"Here's what we can start doing, here's somewhere else to spend our money."
0:26:41 > 0:26:44If that was balanced by one queue of people saying,
0:26:44 > 0:26:47"Let's save money here," and another queue of people saying,
0:26:47 > 0:26:49"Let's spend it here,"
0:26:49 > 0:26:52it might be a bit easier to be a government minister.
0:26:53 > 0:26:56Ministers can expect a headline, a cheer even,
0:26:56 > 0:26:59when they announce a new way to spend public money.
0:26:59 > 0:27:03But there's all too often a big and rather expensive gap
0:27:03 > 0:27:07between their promises and cold, hard reality.
0:27:07 > 0:27:12Welcome to the fire control centre for the North East of England,
0:27:12 > 0:27:16built to keep us all safer in the event not just of fires,
0:27:16 > 0:27:19but floods and terrorist attacks.
0:27:19 > 0:27:23Using the latest technology, satellites even,
0:27:23 > 0:27:25to keep track of fire engines.
0:27:25 > 0:27:29And what's more, we were told, it would improve efficiency, too.
0:27:29 > 0:27:30Just one problem.
0:27:30 > 0:27:35The technology didn't work, the building behind me is empty.
0:27:35 > 0:27:41At a cost to you of £97,000 a month.
0:27:41 > 0:27:44For the next 24 years.
0:27:44 > 0:27:48And there are eight others like it around the country.
0:27:48 > 0:27:52The cost? More than England's Arts Budget.
0:27:52 > 0:27:55£469 million.
0:27:55 > 0:27:59For which you get in return... Nothing.
0:28:01 > 0:28:04It's just the most vivid example of a long list of projects
0:28:04 > 0:28:07where the original idea sounded good,
0:28:07 > 0:28:09but which have been hopelessly mismanaged.
0:28:09 > 0:28:14From the Typhoon jet which came in £3.5 billion over budget,
0:28:14 > 0:28:18to the doomed NHS IT project.
0:28:18 > 0:28:21It's cost billions of pounds of taxpayers money,
0:28:21 > 0:28:22but it doesn't work.
0:28:22 > 0:28:26It cost at least £6 billion and counting.
0:28:27 > 0:28:30You should not be afraid, as you would in your own household
0:28:30 > 0:28:34or your own business, to say do we actually need to do this?
0:28:34 > 0:28:38Is this new, exciting project or pilot that we're setting up,
0:28:38 > 0:28:42is it going to make any difference to the way people behave,
0:28:42 > 0:28:43or the way in which they live?
0:28:43 > 0:28:46Sometimes we've not asked those tough questions
0:28:46 > 0:28:47in the way that we should.
0:28:47 > 0:28:50Now whether it's avoiding waste,
0:28:50 > 0:28:54or controlling the insatiable demand for public services,
0:28:54 > 0:28:59or deciding what not to do at all requires...
0:28:59 > 0:29:01well, self control.
0:29:02 > 0:29:06There are three things which I have engaged in
0:29:06 > 0:29:08which have a remarkable lot in common.
0:29:08 > 0:29:14One of them is bringing up children, another is dieting,
0:29:14 > 0:29:18which I've also done, and the third is controlling public expenditure.
0:29:18 > 0:29:22And in each case, an important part of the art
0:29:22 > 0:29:24or the skill whatever it is,
0:29:24 > 0:29:28is the ability to say no and to stick to it.
0:29:28 > 0:29:31This is the essence of what the Treasury's about.
0:29:31 > 0:29:34If the Treasury had a motto, it would be the single word "no",
0:29:34 > 0:29:35and it needs to be.
0:29:39 > 0:29:43But the failure of governments to say no has had consequences.
0:29:43 > 0:29:47They keep spending money they haven't really got.
0:29:47 > 0:29:50It's how we've ended up with a deficit.
0:29:52 > 0:29:57Britain has got a problem, a very big problem. And it's this.
0:29:57 > 0:30:03Last year, the government raised £549 billion in tax.
0:30:03 > 0:30:07But spent £692 billion.
0:30:07 > 0:30:13Leaving a deficit, or a gap, of £143 billion.
0:30:13 > 0:30:16But now, just take a look at this.
0:30:16 > 0:30:19Here is government spending since the Second World War.
0:30:19 > 0:30:23It's measured as a percentage of the economy as whole,
0:30:23 > 0:30:25or GDP - Gross Domestic Product.
0:30:25 > 0:30:32The peaks are recessions. And you can see them here for the mid-'70s,
0:30:32 > 0:30:36for the mid-'80s, the early '90s and then finally
0:30:36 > 0:30:40for the banking crisis of three years ago,
0:30:40 > 0:30:43which helped create the largest deficit since the war.
0:30:43 > 0:30:46Now let's add a line for taxes,
0:30:46 > 0:30:50measured in exactly the same way as a share of the economy.
0:30:50 > 0:30:53Look how often spending is higher than tax.
0:30:53 > 0:30:57In other words how often the economy is in the red, in good or bad times,
0:30:57 > 0:31:01whether there's a Labour or a Conservative government.
0:31:01 > 0:31:04Deficits have been the name of the game
0:31:04 > 0:31:07for pretty much all of the past half century.
0:31:07 > 0:31:10Even so, today's deficit is a whopper.
0:31:10 > 0:31:13It may date from the banking crisis,
0:31:13 > 0:31:16but the last Labour government had been spending more
0:31:16 > 0:31:19than it got in taxes for six years running up to then.
0:31:19 > 0:31:23Gordon Brown used to say that he was borrowing to invest.
0:31:23 > 0:31:27But his critics said he should have been saving for a rainy day.
0:31:30 > 0:31:33The reason we keep running up deficits
0:31:33 > 0:31:36is not just that politicians can't say no.
0:31:36 > 0:31:40It's that sometimes they behave like every day
0:31:40 > 0:31:43will be a day when the sun is shining.
0:31:43 > 0:31:47It's a mistake that pretty much anybody really could make,
0:31:47 > 0:31:52and it's best explained perhaps by something I like to do,
0:31:52 > 0:31:55or try to do, when I'm not covering politics.
0:31:59 > 0:32:03You see, think of our politicians as sailors, just like me today.
0:32:03 > 0:32:07They've got to judge the conditions as they decide how to spend,
0:32:07 > 0:32:12and keep an eye out for storms on the horizon.
0:32:14 > 0:32:16It's beautiful out here on the water,
0:32:16 > 0:32:19and when economic conditions are this good,
0:32:19 > 0:32:23no wonder our politicians are tempted to set a course
0:32:23 > 0:32:27to carry on increasing spending, as if it will always be this way.
0:32:27 > 0:32:32After all, the sun is out, the wind is in our sails.
0:32:32 > 0:32:36But what they, and what we amateur sailors have to know,
0:32:36 > 0:32:40is it can all change incredibly fast,
0:32:40 > 0:32:44and then we're in real trouble.
0:32:46 > 0:32:49And that's what our politicians can forget -
0:32:49 > 0:32:53how fast the weather can turn, how bad the storms can be.
0:32:53 > 0:32:55And it's not just the last Labour government
0:32:55 > 0:32:57because the Tories did it too.
0:33:07 > 0:33:11- Well?- Five and 15. Working for you now, working for you now.
0:33:11 > 0:33:13Remember the late '80s?
0:33:13 > 0:33:17The economy was booming, the City was taking off,
0:33:17 > 0:33:21and the then Conservative government made a classic mistake.
0:33:21 > 0:33:25They thought it would go on forever, and increased spending.
0:33:25 > 0:33:29'The mistake they made was they thought'
0:33:29 > 0:33:32that the tax revenue that was coming from an overheated economy,
0:33:32 > 0:33:36was coming from an economy that was working extraordinarily well.
0:33:36 > 0:33:39So they thought it would always be there.
0:33:39 > 0:33:41The analogy would be a naive young adult
0:33:41 > 0:33:45who thinks that because they've had a fabulous year in their business,
0:33:45 > 0:33:47it's going to be like that forever.
0:33:47 > 0:33:51And so they take on much larger liabilities than they really should,
0:33:51 > 0:33:53and they repent at their leisure.
0:33:55 > 0:33:59By the early '90s, the Conservatives had a new Prime Minister.
0:33:59 > 0:34:03But then came a recession which pushed spending up
0:34:03 > 0:34:05and tax revenues down.
0:34:05 > 0:34:09By 1993, they had a deficit of £50 billion.
0:34:13 > 0:34:15We made a mistake in the late '80s.
0:34:15 > 0:34:18It was a tiny wobble compared with what's happened
0:34:18 > 0:34:19in the last five years,
0:34:19 > 0:34:23I have to say. A difference of degree. But a bit of the same thing.
0:34:23 > 0:34:25It's been done by many countries.
0:34:25 > 0:34:28It's been done by Britain frequently, ever since the war.
0:34:30 > 0:34:34And guess what? Barely 10 years later, the Labour Government
0:34:34 > 0:34:39would make exactly the same mistake, only in Technicolour.
0:34:39 > 0:34:42After two years restraint, spending roared away.
0:34:44 > 0:34:46We had to spend more money as a country
0:34:46 > 0:34:48because health is a matter of decency,
0:34:48 > 0:34:51education is a matter of our future.
0:34:51 > 0:34:53Now it's sometimes difficult to remember
0:34:53 > 0:34:54when you look at new hospitals,
0:34:54 > 0:34:58new schools around the country now that they had to be paid for.
0:35:00 > 0:35:03And while the economy boomed and the taxes rolled in,
0:35:03 > 0:35:05all seemed well.
0:35:07 > 0:35:10In the middle of the boom they misjudged it.
0:35:10 > 0:35:13The boom produced great tax revenues,
0:35:13 > 0:35:16any government could borrow as much money as it liked.
0:35:16 > 0:35:20People like me or Vince Cable moaning away about deficit and debt
0:35:20 > 0:35:23were regarded as old-fashioned, we were the miserables
0:35:23 > 0:35:27who didn't understand new politics, the new economic model.
0:35:29 > 0:35:32But the government had missed something crucial about where
0:35:32 > 0:35:36a hefty chunk of all that money was coming from.
0:35:40 > 0:35:42Over the last 30 years,
0:35:42 > 0:35:45the Treasury has benefited from two vast windfalls -
0:35:45 > 0:35:50not just North Sea Oil, but also the one that people often forget -
0:35:50 > 0:35:56the City of London, generating billions of pounds which the Government can spend.
0:35:56 > 0:35:58There is, of course, one major difference,
0:35:58 > 0:36:01which the last Labour Government was to discover.
0:36:01 > 0:36:04North Sea oil runs out very slowly,
0:36:04 > 0:36:09whereas the flow of cash from the City can run out just like that.
0:36:12 > 0:36:14The big problem we had is that we were
0:36:14 > 0:36:17very dependent on a flow of revenue from one particular source
0:36:17 > 0:36:20and that was the financial services industry,
0:36:20 > 0:36:23a volatile sector that when it goes wrong goes very wrong.
0:36:23 > 0:36:26Whenever you're quite dependent on one source,
0:36:26 > 0:36:29and this is something which had been building up for decades,
0:36:29 > 0:36:31then you do have to ask yourself what if?
0:36:31 > 0:36:33What if it stops, or what if it slows down?
0:36:33 > 0:36:35What's your fall back position?
0:36:37 > 0:36:41In the summer of 2008, his "what if" moment arrived.
0:36:41 > 0:36:45The British economy was teetering on the brink of recession.
0:36:45 > 0:36:49Alistair Darling took top Treasury civil servants away
0:36:49 > 0:36:54for the day to Dorneywood, the Chancellor's official country house.
0:36:54 > 0:36:57It's an oasis of calm, really, and I wanted us
0:36:57 > 0:36:59to sit down and take stock.
0:36:59 > 0:37:04We were sitting in an armchair overlooking these delightful gardens
0:37:04 > 0:37:07in southern England and we were talking about this,
0:37:07 > 0:37:11and the secretary said you know, borrowing could hit £100 billion.
0:37:11 > 0:37:13When you start talking about £100 billion,
0:37:13 > 0:37:15you know, that is serious money.
0:37:15 > 0:37:18That is when you think, this is bad.
0:37:18 > 0:37:21- Was there an intake of breath? - Well, there was amongst some.
0:37:21 > 0:37:25- A shaking of heads.- I'd just come back from a Leonard Cohen concert
0:37:25 > 0:37:28so actually I was in quite a gloomy frame of mind anyway!
0:37:28 > 0:37:32So I thought, fair enough, we'll just have to deal with it.
0:37:33 > 0:37:35# Dance me to your beauty
0:37:35 > 0:37:39# With a burning violin
0:37:39 > 0:37:42# Dance me through the panic
0:37:42 > 0:37:46# Till I'm gathered safely in. #
0:37:46 > 0:37:50What had looked like a downturn had became a crash.
0:37:50 > 0:37:54The deficit would grow much larger than £100 billion
0:37:54 > 0:37:58and ministers would spend even more, trying to avert disaster.
0:37:58 > 0:38:03Spend now and pay later, Labour's plan to avoid a long recession.
0:38:03 > 0:38:08The country would soon want to know how it could all be paid for.
0:38:08 > 0:38:12What happened when the financial crisis struck, is that we knew
0:38:12 > 0:38:15immediately we had to accelerate out of the storm or be buried in it.
0:38:15 > 0:38:20The public were quite frightened of those telephone number figures that
0:38:20 > 0:38:21they saw, you know, on those
0:38:21 > 0:38:24BBC News reports at 10 o'clock.
0:38:24 > 0:38:26And they thought, hold on a moment,
0:38:26 > 0:38:29we've got to do something about this,
0:38:29 > 0:38:32otherwise we're going to be saddling future generations with
0:38:32 > 0:38:35a colossal amount of debt, and that is not the responsible thing to do.
0:38:37 > 0:38:41But for many months, Gordon Brown instructed his ministers
0:38:41 > 0:38:44not to even talk about the drastic measures which were sure to
0:38:44 > 0:38:46be needed to tackle the deficit.
0:38:49 > 0:38:53Gordon's nervousness was that it would just sound like cuts.
0:38:54 > 0:38:57He didn't want to sue the "c word" at all, did he, the word cuts?
0:38:57 > 0:39:01We had so many discussions about this,
0:39:01 > 0:39:05more than I can care to remember,
0:39:05 > 0:39:10until we got to his TUC speech in September of 2009.
0:39:10 > 0:39:12And he used the word "cuts" not once,
0:39:12 > 0:39:16not twice, I think it was something like seven or eight times.
0:39:16 > 0:39:19Labour will cut costs, cut inefficiencies,
0:39:19 > 0:39:23cut unnecessary programmes and cut lower priority budgets.
0:39:23 > 0:39:26And he came back from Brighton or wherever it was
0:39:26 > 0:39:27and said, "OK, satisfied?"
0:39:29 > 0:39:30It was too late.
0:39:30 > 0:39:34By then the sheer size of the deficit had damaged
0:39:34 > 0:39:37Gordon Brown's economic credibility
0:39:37 > 0:39:39and handed the argument to his enemies.
0:39:39 > 0:39:44It was the biggest loss of control over fiscal policy and tax
0:39:44 > 0:39:46and spending that anybody now living can remember.
0:39:47 > 0:39:50By the time of the last general election,
0:39:50 > 0:39:56Britain had the biggest deficit since the war - £160 billion.
0:39:58 > 0:39:59You do need to just keep your eye
0:39:59 > 0:40:02on how much you are actually spending,
0:40:02 > 0:40:05the what if question, what if this slows down, how much margin have you got?
0:40:05 > 0:40:08But I have to say that there may have been people around
0:40:08 > 0:40:11who said spend less, but the majority, and certainly it
0:40:11 > 0:40:14was a political consensus, maybe that was a bad thing,
0:40:14 > 0:40:18but political consensus was that we should be spending more, not less.
0:40:21 > 0:40:23Not any more.
0:40:23 > 0:40:26A new government has ushered in a new age of austerity.
0:40:29 > 0:40:31Are the cuts going to hurt, Chancellor?
0:40:31 > 0:40:35This is a dramatic change of political and economic strategy,
0:40:35 > 0:40:39and, like the last Chancellor, he can only wait and watch and hope.
0:40:43 > 0:40:46We have moved from an era when choices could be avoided
0:40:46 > 0:40:48to one where they simply have to be made.
0:40:53 > 0:40:57The decisions we make will affect every single person in this country.
0:40:57 > 0:41:02And the effects of those decisions will stay with us for years.
0:41:04 > 0:41:10Every day we hear about cuts to pensions, pay, services -
0:41:10 > 0:41:11all choices about who gets what.
0:41:20 > 0:41:24But some questions are still considered too explosive to ask,
0:41:24 > 0:41:26like why if you live in some parts of Britain,
0:41:26 > 0:41:30you'll get more spent on you than people in other parts.
0:41:35 > 0:41:38Take Scotland -
0:41:38 > 0:41:43public spending is, on average, £10,212 per head.
0:41:43 > 0:41:48Whereas in England, it's £8,588.
0:41:50 > 0:41:55That's a gap of £1,624 - just under 20%.
0:41:58 > 0:42:01So what difference does that extra money make?
0:42:01 > 0:42:05Well, one possible answer can be found here at Edinburgh University.
0:42:05 > 0:42:08It's Freshers Fair - where you can sign up to
0:42:08 > 0:42:12anything from tribal drumming to pole dancing -
0:42:12 > 0:42:16however much you pay to come here in tuition fees, which, of course,
0:42:16 > 0:42:18depends on where you're from.
0:42:18 > 0:42:20I'm Anna, and I'm from Yorkshire,
0:42:20 > 0:42:22and I pay at the moment about £1,700 a year.
0:42:22 > 0:42:26I'm Matthew, originally from London, and I spend the same.
0:42:26 > 0:42:29I'm Matt, I'm from Edinburgh, and I pay nothing at all.
0:42:29 > 0:42:32- And looking very pleased. - Looking very pleased!
0:42:32 > 0:42:36You have to preside over a student body where some pay and some don't.
0:42:36 > 0:42:40Yes, we have huge conflicts and we have inequalities of fee level,
0:42:40 > 0:42:43but it shouldn't result in inequalities of educational provision
0:42:43 > 0:42:46and that's what we're making sure remains frontline.
0:42:46 > 0:42:50And it's not just the difference between Scots and English people?
0:42:50 > 0:42:53Not at all, it's the difference between Scots and English,
0:42:53 > 0:42:55also Europeans still get it for free,
0:42:55 > 0:42:58even though the English are paying, because of the EU,
0:42:58 > 0:43:02and international students pay through-the-roof fees to be here.
0:43:02 > 0:43:05There are huge inequalities that I don't think should exist.
0:43:06 > 0:43:10But those inequalities are going to get starker as fees rise.
0:43:10 > 0:43:14English and Northern Irish students arriving here next year could
0:43:14 > 0:43:18face a bill up to £36,000 more overall
0:43:18 > 0:43:22than their Scottish or European friends.
0:43:22 > 0:43:27Welsh students will pay less than that, but more than the Scots.
0:43:31 > 0:43:35And tuition fees are just one example of what Scots seem to get
0:43:35 > 0:43:38which the rest of Britain doesn't - is that unfair,
0:43:38 > 0:43:40or just a consequence of devolution?
0:43:42 > 0:43:45What is your message to an English parent who says
0:43:45 > 0:43:49my child goes to Edinburgh University and pays £9,000,
0:43:49 > 0:43:53a Scot doesn't pay that, a Pole doesn't pay that, how's that fair?
0:43:53 > 0:43:55I would change your government at Westminster.
0:43:55 > 0:43:57When I was an MP at Westminster I voted
0:43:57 > 0:44:01against the Labour Government introducing tuition fees.
0:44:01 > 0:44:02If I was still an MP at Westminster,
0:44:02 > 0:44:06I'd have voted against the Tory and Liberal Government introducing it.
0:44:06 > 0:44:08I cannot dictate the politics of England.
0:44:08 > 0:44:09But the parent might say,
0:44:09 > 0:44:12it's my English taxes that are paying for Alex Salmond
0:44:12 > 0:44:15to dole out money to stop tuition fees in Scotland?
0:44:15 > 0:44:17The Scottish parent might say Scottish revenue
0:44:17 > 0:44:19keeps the United Kingdom Treasury afloat.
0:44:21 > 0:44:24In other words, North Sea oil.
0:44:24 > 0:44:28Scots, Alex Salmond is saying, pay more in as well as getting more out.
0:44:28 > 0:44:31As do, incidentally, people in London.
0:44:34 > 0:44:36The maths is more complex than it first appears.
0:44:40 > 0:44:43There is no simple fact when it comes to measuring
0:44:43 > 0:44:47the difference between spending in Scotland and in England.
0:44:47 > 0:44:50There are arguments about how to measure need,
0:44:50 > 0:44:54how to take into account geography and our old friend,
0:44:54 > 0:44:56the contribution of oil revenues.
0:44:56 > 0:45:01There is, though, one simple fact about politics in Westminster.
0:45:01 > 0:45:05For more than 30 years, politicians, Labour and Conservative,
0:45:05 > 0:45:08haven't dared look again at the numbers.
0:45:08 > 0:45:13They haven't dared ask the question because they fear the consequences.
0:45:16 > 0:45:18The amount different nations in the UK get is
0:45:18 > 0:45:23determined by a formula dreamt up in Whitehall way back in the 1970s.
0:45:23 > 0:45:26Because it was an issue then, too.
0:45:27 > 0:45:30Last year, for every £100 the state spent on every Englishman,
0:45:30 > 0:45:35it spent a much larger share, £119, on every Scot.
0:45:35 > 0:45:37TV programmes may have changed,
0:45:37 > 0:45:40but the size of the gap has stayed the same.
0:45:40 > 0:45:43So why doesn't the Treasury do anything about it?
0:45:47 > 0:45:50We haven't looked at how much Scotland gets,
0:45:50 > 0:45:51Wales gets, England gets,
0:45:51 > 0:45:53and probably we need to do so.
0:45:53 > 0:45:56Why haven't we done so over the last 20 or 30 years?
0:45:56 > 0:45:58Probably because governments
0:45:58 > 0:46:02have been very frightened about opening up this tin,
0:46:02 > 0:46:05and what would be a very complex calculation, particularly against
0:46:05 > 0:46:10a background of independence movements, most notably in Scotland.
0:46:10 > 0:46:11Couldn't you call that bribery?
0:46:11 > 0:46:14We give you money and you won't vote for independence.
0:46:14 > 0:46:17I don't think that they would necessarily call it bribery.
0:46:17 > 0:46:19They might choose to do so.
0:46:20 > 0:46:23I tell you one reason the Treasury aren't keen to re-open this.
0:46:23 > 0:46:26It's you. They think you're going to make Scotland independent,
0:46:26 > 0:46:29they think if they look at these figures that there'll be
0:46:29 > 0:46:32a break of the union, and they don't want it to happen.
0:46:32 > 0:46:35I was brought up to believe there were three great lies in life.
0:46:35 > 0:46:37One is, "The cheque's in the post."
0:46:37 > 0:46:40The second is, "Darling, I'll respect you in the morning."
0:46:40 > 0:46:43And the third is, "I'm from the London Treasury
0:46:43 > 0:46:44"and I want to help Scotland."
0:46:44 > 0:46:48We in Scotland are prepared to raise all our own money
0:46:48 > 0:46:53and govern all our own spending with no subsidies from anyone
0:46:53 > 0:46:56as long as people in England do exactly the same thing.
0:46:56 > 0:46:58And if England raises its own money,
0:46:58 > 0:47:02governs its own spending, Scotland does the same, then that is
0:47:02 > 0:47:06the essence of a happy relationship on these islands forever and a day.
0:47:11 > 0:47:15Westminster politicians may have shied away from some tough choices.
0:47:15 > 0:47:19But the ones they have made are revealing something else -
0:47:19 > 0:47:24how dependent some parts of Britain have become in recent years on
0:47:24 > 0:47:30public spending - and how much they stand to lose now it's being cut.
0:47:32 > 0:47:34My next stop is Durham.
0:47:37 > 0:47:38PIPES PLAY
0:47:47 > 0:47:49BRASS BAND PLAYS
0:47:52 > 0:47:55I've come here along with 50,000 other people
0:47:55 > 0:47:58for one of the North East's great traditions.
0:48:03 > 0:48:07The wonderful sights and sounds of the annual Durham Miners' Gala
0:48:07 > 0:48:10are meant to be much more than merely a celebration
0:48:10 > 0:48:15of Britain's industrial past, they're meant to be a campaign,
0:48:15 > 0:48:17a live one, for political causes.
0:48:17 > 0:48:21And yet what they remind us is how few industrial jobs are left
0:48:21 > 0:48:26here in the North East, how many depend directly on public spending.
0:48:33 > 0:48:38Take the Durham Miners' Association Brass Band.
0:48:38 > 0:48:41There are still a few ex-miners in it,
0:48:41 > 0:48:44but more than half are public sector workers.
0:48:44 > 0:48:46From Kevin, who works in environmental health,
0:48:46 > 0:48:50to Julie, who's in further education.
0:48:51 > 0:48:54Since the mines closed in the '80s, governments,
0:48:54 > 0:48:56first Tory then Labour,
0:48:56 > 0:49:00tried to compensate by creating public sector jobs.
0:49:00 > 0:49:02It did work for a while.
0:49:02 > 0:49:07But it's left some people here exposed now that spending is being cut.
0:49:08 > 0:49:11Ian Lavery used to be a miner.
0:49:11 > 0:49:14He's now a local MP, his constituency covers Morpeth,
0:49:14 > 0:49:18the town with more public sector workers than anywhere else in Britain.
0:49:18 > 0:49:21In my constituency we've got lots and lots,
0:49:21 > 0:49:25more than 50% work in the public sector, and, of course,
0:49:25 > 0:49:27we've got more than 50% of women
0:49:27 > 0:49:29working in the public sector as well.
0:49:29 > 0:49:32You're saying more than half your constituents
0:49:32 > 0:49:34work in the public sector.
0:49:34 > 0:49:36You must wonder sometimes,
0:49:36 > 0:49:39there can't be enough money being raised to pay for more than half
0:49:39 > 0:49:43the people to get jobs that aren't being created through wealth creation.
0:49:43 > 0:49:46These jobs are valued jobs, these are jobs are much needed,
0:49:46 > 0:49:49and they've got to be paid for by the public purse.
0:49:49 > 0:49:52- But who pays for that? - The taxpayer.
0:49:52 > 0:49:53Who pays for that?
0:49:53 > 0:49:55Me, you, everybody else.
0:49:55 > 0:49:59And who wants the public services? Me, you, and everybody else,
0:49:59 > 0:50:01we want the good public services.
0:50:01 > 0:50:04We need, to survive, we need good public services.
0:50:06 > 0:50:08The problem is that
0:50:08 > 0:50:12when the money runs out those public sector jobs go.
0:50:12 > 0:50:15Unemployment here in the North East is already higher
0:50:15 > 0:50:17and rising faster than anywhere else.
0:50:17 > 0:50:22Politicians talk of re-balancing the economy.
0:50:22 > 0:50:26It's easily said, but for the Durham Miners' Association Band,
0:50:26 > 0:50:29you're talking about their livelihoods.
0:50:31 > 0:50:35It's not really our fault that those heavy industries have gone.
0:50:35 > 0:50:38We go where the jobs are and now the jobs are in the public sector.
0:50:38 > 0:50:42And for some reason we're being told now that we're parasites,
0:50:42 > 0:50:46we're bleeding the country dry, the spin goes against us.
0:50:46 > 0:50:49I don't really know why, but as far as we're concerned,
0:50:49 > 0:50:52we just want a job to earn a living to raise our families.
0:50:54 > 0:50:58For those who lived through the closure of the pits in the 1980s,
0:50:58 > 0:51:02like one-time colliery worker Julie, painful memories are being stirred.
0:51:02 > 0:51:05Does it feel like you're going through it all again,
0:51:05 > 0:51:08you lost all these jobs in the '80s, didn't you?
0:51:08 > 0:51:11Yes, exactly the same.
0:51:11 > 0:51:14I mean, I now work in a further education college
0:51:14 > 0:51:19and the cutbacks for funding mean that the budgets for next year
0:51:19 > 0:51:23are going to be much less and as a result they've got to cut staff.
0:51:23 > 0:51:30It feels...it's friend against friend going for the same job.
0:51:33 > 0:51:35People and communities in Britain
0:51:35 > 0:51:38have built their lives around politicians' decisions
0:51:38 > 0:51:43to spend public money - no wonder cutting it hurts.
0:51:48 > 0:51:51There is, of course, a fierce debate about the speed
0:51:51 > 0:51:56and depth of spending cuts and the impact they're having
0:51:56 > 0:52:00not just on people but on Britain's stuttering recovery.
0:52:00 > 0:52:05The Government and the opposition may profoundly disagree about that,
0:52:05 > 0:52:09but they agree that we just might need
0:52:09 > 0:52:11to dig ourselves out of trouble.
0:52:13 > 0:52:16You may well think that they spend your money pouring it
0:52:16 > 0:52:19into great holes in the ground.
0:52:19 > 0:52:21Well, you know what? You'd be right.
0:52:21 > 0:52:23This, though, is no ordinary hole in the ground.
0:52:23 > 0:52:27It is the largest construction site in Europe.
0:52:27 > 0:52:31This is going to be the new Canary Wharf station
0:52:31 > 0:52:33on London's biggest train set - Crossrail.
0:52:35 > 0:52:39The cost to you? A mere £5 billion.
0:52:42 > 0:52:46And that's just a fraction of the overall cost -
0:52:46 > 0:52:48£14 billion.
0:52:48 > 0:52:53So why spend huge sums on infrastructure, rail lines, roads, bridges,
0:52:53 > 0:52:58at a time when so many in the public sector are losing their jobs?
0:52:59 > 0:53:03One fervent believer in why infrastructure matters is
0:53:03 > 0:53:07Crossrail's chairman, Terry Morgan.
0:53:07 > 0:53:09We are on this extraordinary site,
0:53:09 > 0:53:11that's where it will all happen soon, is it?
0:53:11 > 0:53:13It does. Late in 2012,
0:53:13 > 0:53:17we're going to see some tunnel boring machines come out through that circle
0:53:17 > 0:53:20and will appear in this fantastic new station
0:53:20 > 0:53:22called Canary Wharf.
0:53:22 > 0:53:25Sometimes it's very difficult to explain to people,
0:53:25 > 0:53:27what do you get for 14.8 billion?
0:53:27 > 0:53:29You get eight stations like this,
0:53:29 > 0:53:34you get 20 kilometres of two tubes the size you can see behind you.
0:53:34 > 0:53:37You get an awful lot of new track, new jobs,
0:53:37 > 0:53:42new trains, new stations, huge amount of investment that nobody can see.
0:53:42 > 0:53:45But I could get nurses, teachers, schools, hospitals,
0:53:45 > 0:53:47better public sector pensions.
0:53:47 > 0:53:49Why do I want a bloody great hole in the ground?
0:53:49 > 0:53:52Infrastructure investment is a long-term investment.
0:53:52 > 0:53:55There's a role for schools, there's a role for hospitals.
0:53:55 > 0:53:59It's a question of how you get the right balance about short-term decisions
0:53:59 > 0:54:03and long-term decisions that says we've invested for the future.
0:54:04 > 0:54:06In the last recession in the 1990s,
0:54:06 > 0:54:09there were drastic cuts to infrastructure spending.
0:54:09 > 0:54:14Now, on all sides, politicians want to avoid repeating that mistake.
0:54:16 > 0:54:19It's so vital that you do keep up the pressure
0:54:19 > 0:54:21for investment in infrastructure.
0:54:21 > 0:54:25At its peak, there'll be 14,000 people employed in Crossrail.
0:54:25 > 0:54:28We've got a Crossrail Academy being constructed
0:54:28 > 0:54:32which will train many, many thousands of young people
0:54:32 > 0:54:34in vital engineering skills.
0:54:34 > 0:54:38These things generate employment and employment of all kinds.
0:54:38 > 0:54:42Unless you invest in things that are going to deliver long-term growth,
0:54:42 > 0:54:43you will pay a long-term price.
0:54:44 > 0:54:46Few would disagree with that.
0:54:46 > 0:54:49Investment spending is due to be much higher
0:54:49 > 0:54:50than in the last recession,
0:54:50 > 0:54:54but it's still going be to halved over the next five years.
0:54:54 > 0:54:59Even whilst the Government protects big projects like Crossrail,
0:54:59 > 0:55:02many smaller ones have been cancelled.
0:55:05 > 0:55:09Whenever politicians run out of cash, it's mighty tempting for them
0:55:09 > 0:55:12to stop spending on infrastructure for the future so they don't
0:55:12 > 0:55:16have to cut the spending on people in the here and now.
0:55:16 > 0:55:19And the reason's pretty obvious, if you think about it.
0:55:19 > 0:55:23Whoever heard of a cancelled bridge writing to the paper to complain,
0:55:23 > 0:55:28or a road that isn't being built calling a radio phone in?
0:55:28 > 0:55:31You see, infrastructure may be important,
0:55:31 > 0:55:33but it doesn't have a vote.
0:55:37 > 0:55:39In this film, I've tried to reveal how all too often,
0:55:39 > 0:55:43raw electoral politics can determine how they spend your money.
0:55:45 > 0:55:50We've seen the impact that has on ever rising budgets,
0:55:50 > 0:55:52for pensions and for health,
0:55:52 > 0:55:58on where in Britain your money goes, and on how deficits happen.
0:56:00 > 0:56:04Though the cuts have generated sound and fury,
0:56:04 > 0:56:08they haven't made us ask the really big questions we now need to ask.
0:56:08 > 0:56:13It would be nice to think, but probably naive, that come the next election
0:56:13 > 0:56:16you could have a sensible discussion about these things.
0:56:16 > 0:56:20If you want to have top class education,
0:56:20 > 0:56:23which we need in the future, if you want a railway system that works,
0:56:23 > 0:56:27if you want to make sure that there's care for your elderly parents,
0:56:27 > 0:56:30then at some point, somewhere, it's going to have to be paid for.
0:56:30 > 0:56:33We need a more honest debate,
0:56:33 > 0:56:36because the spending pressures aren't going away.
0:56:38 > 0:56:41Politicians need to take us seriously. They need to say to us,
0:56:41 > 0:56:44we do an awful lot of things that you want us to do for you,
0:56:44 > 0:56:47but those things are things that are costing more and more.
0:56:47 > 0:56:50You're living longer, there's more that we can do with health care.
0:56:50 > 0:56:54You want better and better education so we can compete in the world.
0:56:54 > 0:56:57You want law and order that looks after you, that protects you.
0:56:57 > 0:57:01You want a defence service that can do what you want us to do in the world.
0:57:01 > 0:57:02Well, you've got to pay for it
0:57:02 > 0:57:05and these things will get more expensive.
0:57:06 > 0:57:10For years, politicians have offered us an impossible mix -
0:57:10 > 0:57:14increased spending, but lower taxes at the same time.
0:57:14 > 0:57:18It's a mix we voters tell them we want, it's a mix which
0:57:18 > 0:57:22has helped to contribute to the sort of mess we're in today.
0:57:22 > 0:57:25A more grown-up choice would be to say either you've got to do
0:57:25 > 0:57:29more for yourselves, or you're going to have to pay the bill.
0:57:29 > 0:57:34But, as we'll see next time, there's nothing politicians fear more
0:57:34 > 0:57:37than telling us our taxes are going up.
0:57:37 > 0:57:39The rich don't want to pay more.
0:57:39 > 0:57:43I think taxes are totally voluntary for the very rich.
0:57:43 > 0:57:46The rest of us feel we're taxed enough already.
0:57:46 > 0:57:48I feel we haven't got any more to give.
0:57:48 > 0:57:50Come on!
0:57:50 > 0:57:54And when politicians try to find other ways to raise tax,
0:57:54 > 0:57:55they face impossible odds.
0:57:58 > 0:58:00If someone can think of a popular tax,
0:58:00 > 0:58:02then they should phone up and let us know.
0:58:02 > 0:58:07Next time on Your Money And How They Spend It, the trouble with tax.
0:58:25 > 0:58:28Subtitles by Red Bee Media Ltd
0:58:28 > 0:58:30E-mail subtiting@bbc.co.uk