The Autumn Statement

The Autumn Statement

Andrew Neil presents live coverage of George Osborne's Autumn Statement, with expert analysis from Nick Robinson, Stephanie Flanders and Robert Peston.

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The nation's eyes are on George Osborne today as the Chancellor


unveiled his plans to get Britain's Good afternoon and welcome to this


BBC special on the Chancellor's Autumn Statement, broadcasting live


on BBC Two, the BBC News Channel and BBC Online. Forecasters tell us


the British economy is already back in recession. Unemployment is


rising, inflation high, living standards squeezed. Today a --


tomorrow will be the one-day nationwide strike, perhaps the


first of many. The eurozone crisis moves from the periphery to the


very core, threatening to engulf the Continent and also Britain in a


long and deep recession. Some have even spoken of a lost decade. It


would be hard to imagine a grimmer backdrop for the Chancellor, as he


prepares an Autumn Statement designed to cushion the downturn


and knows the economy back to health. Earlier this year George


Osborne talked privately about doing away with the Autumn


Statement altogether. It is a measure of the gravity of the


situation that in just a few minutes he will stand up in the


Commons to unveil something close to a full-blown Budget, the second


of the year. We will bring it to you live and uninterrupted from


12:30pm, including expert analysis from Stephanie Flanders, Nick


Robinson and Robert Paxton. And we will have reaction from Westminster,


the City and across the country. am on College Green opposite


Westminster, where we will be talking to all MPs about what the


Chancellor could and should do. am on this busy trading floor in


Canary Wharf, gauging the mood among investors as they eagerly


await the Chancellor's Autumn Statement and what it means for


business, the market and growth. And I am at Cammell Laird shipyard


in Birkenhead, where I will be finding out what it means for


business and industry on Merseyside The coalition has been in power for


only 18 months and already they are admitting that sorting out the


economy is proving much harder than they originally thought. Today will


be the Chancellor's latest response to its growing difficulties. In the


next few minutes we are expecting George Osborne to leave the


Treasury, make his way to the House of Commons. We are told he was


working on his speech late into the evening last night at Number 11,


Downing Street, as you would expect, and that it will last for about 45


minutes. Much of what we are about to here has been judiciously


announced or already leaked. Rarely has a budget or Autumn Statement


been so prematurely and intentionally and bailed. I suspect


to create the impression that the Government is doing all that it can


to tackle the dark clouds. The darkest cloud is the threat to


economic growth, which could derail the deficit reduction strategy.


Since the last Autumn Statement of 2010, the economy has weakened,


which is why so much of what the Chancellor will say today will be


about reigniting growth. With a coalition determined to stick to


deficit targets and the eurozone threatening to scupper everybody's


growth plans, it is not clear how much of the difference Mr Osborne


can make. This morning the Deputy Prime Minister Nick Clegg and the


leader of the Labour Party, Ed Miliband, well, they were at


getting their messages across. This is what they had to say. We need to


do absolutely everything we can to promote growth and support


confidence in the economy at the time when self-evidently the


economic circumstances in which we live have deteriorated compared to


what we might have anticipated a year-and-a-half ago. And that is


what we are doing. All we will see today will be a Chancellor


announcing higher unemployment, lower growth and higher borrowing.


The plans are hurting but they are not working. That is why he has to


change course today, and accept that his plan has failed. And he


has got to take action to get the economy moving. This is the age of


the politics of debt and deficit. This is what dominates the economic


exchanges between Government and opposition. There was a time when


the coalition concentrated almost solely on his deficit reduction


strategy. As growth faltered and opposition criticism began to bite,


it has had to show that they are not just a one-trick pony. I


suspect that is one of the reasons why they have been leaking like a


sieve and we know so much already about what the Chancellor will say.


The reason we know so much is simple, and that is because there


will only be one headline tonight, which is the depth of a hole that


Britain is in economically, and the depth of the pain that is still to


be suffered by people, in addition to the spending cuts and tax rises


that have already been announced. If you like, the good news, the


measure designed to get growth going, has been dribbled out over


the past week because the Chancellor knows that he simply


cannot compete with the scale of, let's be honest, the awfulness of


the economic news that we are going to get. Growth down, borrowing up,


the size of the economic hole bigger, and therefore a series of


measures, not just today but over the next months and indeed years,


and crucially beyond the next election, needed to make people get


less from the state, pay more to make the books balance. And worst


of all politically for the Chancellor, having to meet the


Prime Minister's words. He said the books would be balanced in five


years and they will not be. A lot of what we are about to here will


only be confirmation of what we already know, that Mr Osborne would


not be Mr Osborne if he had not kept something juicy up his sleeve.


He has been something of an early Father Christmas for first-time


buyers, at rail travellers, construction workers ready for


shovel-ready jobs, working mothers needing nursery care, young people


needing a job. He has been trying to sweeten the bitter pill of the


Autumn Statement. The latest economic forecast on growth, debt,


and the deficit, from the Office for budget responsibility. I do not


think there is any good news in any of that. I don't think there will


be any good news. Cast your mind back to June, 2010. At the time, it


seemed quite gloomy. We thought the coalition was talking about needing


to come together, solving an emergency in public finances. That


looks like the sunny uplands compared to the forecast we are


looking at now. Going back then, the Independent Office for Budget


Responsibility was expecting a return to growth, investment, as


that the economy would be growing by 2.3% and next year by 2.8%. That


would not actually be very high for a normal recovery, but we are not


looking at a normal recovery and they had to reflect that in the


Budget in March. Both of those went down to 1.7% for growth this year,


and 2.5% for growth next year. But we know now that even those have


turned out to be very optimistic. We do not know what the new figures


will be but if you look at what the City is betting for growth, the


average forecast is for growth this year of just 1% and next year, also


just 1%. That many years into recovery. And then your forecasts


are even gloomier than that. newer forecasts. Where does that


leave a deficit reduction target? Well, not reducing it as fast as


they wanted to. If you go back to 2010, the OBR thought that public


sector net borrowing that you would peak at 155 billion. More than 10%


of GDP and much more than we borrowed in any peacetime period.


They said under George Osborne's plans that borrowing would fall to


37 billion by the last year of the Parliament. We know that is going


to go up because the growth forecasts have gone down. If you


look at the City forecast, at the average of the forecasters surveyed


by the Treasury itself, that number is expected to go up to close to a


2 billion, 77 billion. That is an important number to remember as we


go through. -- close to 80 billion. What was wrong with Labour's plans


was that they were still going to be borrowing a 2 billion by the end


of the Parliament, which was supposed to be a sign of their


total lack of credibility. -- 80 billion. That gives a new meaning


to divergence! We will be hearing more about investment in


infrastructure projects, rails, roads, hospitals and maybe airports.


The public and private sector is supposed to come up with the money.


Will there be much of an immediate or short-term impact on growth?


cannot have much of an immediate impact. Even though there is 5


billion of spending all this Parliament on infrastructure that


has been allocated for road projects and that kind of thing,


you know that it takes a while to get these things going. And the


weakness is right now. In the best case, we are talking once before


people are hired, people start saying money in the economy. --


months before people are hired. The majority of the money that will


come from it will not come for years and years. 20 billion of it,


provided by pension funds in theory, we do not know how that will in


practice be delivered. Both sides had good intentions. Pension funds


want to provide this money. But having observed pension funds in


practice over many years, getting money out of them is not easy.


most important audience for the Chancellor today is not you, me or


the MPs in the Commons. It is the bond markets, the folks sat at home


and abroad buy and sell our Government's debt. They have been


prepared to accept very low yields and interest rates for British debt


while the cost for other countries has gone through the roof. They


will be worried that low or no growth could derail or delayed


deficit reduction. Let's get a sense of what the markets are


looking for. Maryam Moshiri is in Canary Wharf. The mood is one of


great anticipation. The markets have been quite volatile in the


last few months. They do not expect any handouts from the Chancellor


whether or not he sticks to his fiscal rules, his austerity plans,


with a plan for growth. In the last few months, we have seen gilt


yields dropping down to 2.1%, a sign if ever one was needed that


the markets are happy with what the Chancellor has filtered through


over the last few days. What is the City looking for today? As you said,


a lot of it has been leaked so that we know the Chancellor has plans


for credit easing, to create opportunities for smaller companies


to get access to credit. That has been leaked. Also the


infrastructure spending, releasing money from pension funds for


schools and hospitals and the infrastructure that the UK needs.


Lots of it has been widely leaked. I imagine there will be some tricks


up his sleeve to impress the market. We will have to wait and see what


they will be at 12:30pm. Everybody is talking about the deficit and


growth. Which is the most important to the City? Can both of them


happen at the same time? That is the big question. There is pressure


for the Government to try to stimulate growth. These are the


measures that we will hear about today but it has to be within the


confines of the deficit reduction plan. Going on in the background is


the eurozone debt crisis and the Chancellor is very wary of the fact


that the market will punish the gilt market if they move away from


deficit reduction. He does not have much room for manoeuvre, does he?


Certainly not. The markets will be watching this very closely indeed.


Thank you very much indeed. It is clear from the mood in this City,


that growth will be limited to a large degree, but they will have to


work-out if the Chancellor has a plan to offset it.


Thank you. We are also getting reactions from business men and


women in Merseyside. Judith Moritz is at the Cammell Laird shipyard on


the Mersey. If I had been speaking to you from


here one decade ago, how different things would have looked, this


place was in receivership. Now they have contracts here and plenty of


work, not just in shipbuilding but wind farm production. They have


diversified. This is a success story. I have brought some business


people from around Merseyside with made who are waiting keenly to hear


what the Chancellor has to say. We have the manager of a diesel


engines company, the sea air of the Merseyside Maritime businesses, --


and the manager of the Merseyside Maritime businesses. You have found


it very difficult over the last few years, haven't you? Absolutely.


Things have changed massively. In the last three years, there has


been a dreadful decline. I have five staff that depend on me for


What do you want George Osborne to say? You want to hear about credit


easing and help for small companies like yours? I would like him to


help with small business rates. For me employing five staff, business


rates in the centre of Liverpool are horrendous. That would make a


massive difference to me. quipped to me off air that you


stocked some of his family's wallpaper. We do. We would like


limb to maybe come to the store and purchase a few rolls. But on a


serious note you feel he's been out of touch? He should come to


Liverpool and support our businesses. Jim Teasdale, you speak


for many small businesses like Elaine's. Have they all been


finding the same problems, tough can credit and with banks helping


them out, that kind of thing is This has always been a mercantile


and maritime city. I represent 1,700 businesses and we aspire to


develop a world class cluster of businesses. We are dealing with


tough times economically and within that we have some real success


stories. Cammell Laird is just one example, where it is a dynamo for


growth, for jobs and creation. And it is diversifying. Although things


are tough at present, the prospects are excellent. We are looking


forward to building our strengths to develop and further grow this


successful cluster. So put it together, world class cluster,


world class brand and we are working together for business


growth. But is this about getting back to what we do best, and roots.


We are talking about a proud history of manufacturing and export


is. This about rebalancing that between import and export and


getting goods out overseas? We are a trading nation. 95 % of our goods


comes by sea. There'll always be an import-export imbalance but there's


a move towards more property- centric activity. There's move


towards a recognition that the north of England can be fed by a


major estuary, a major port this this part of the world. And there


is support for manufacturing and manufacturing and logistics in a


broad sense. You work for a company with a global reach but you spoke


to me about the problem you are seeing in the UK is one of skills


shortages, isn't it? What I'm looking for is real confidence,


real bravery making decisions to attract younger people into the


industry, into engineering, and incentivising employers to do that.


That's one of the key messages we hope to hear from George Osborne


later today. Like here at Cammell Laird you want to see apprentices


for the future. Exactly. The area I come from, in Stockport, we have


good connections with the education system and the council. We need to


roll that out nationally. Thank you all for your time. We'll have at


Cammell Laird a selection of business people watching what


George Osborne has to say. They have their individual needs and


requirements. We hope to speak to you later and see what they've made


of it. Thank you Judith and a special


thanks to our guests in Merseyside. They are freezing up there on the


windy Mersey in late November. The Chancellor hasn't quite left


the Treasury yet. There is the door he is expected to come through.


Remember, on Budget days he leaves from number 11 Downing Street, his


residence, with his famous red box. But on Autumn Statement days he


leaves from the Treasury itself. He's running out of time. He only


has 12 minutes. He had better get a move on! Maybe he is refusing to


come out, the news is so grim. Jon Sopel is outside Parliament today.


Andrew, thank you. As you have been mentioning, the Autumn Statement


was supposed to be a low-key affair with the Chancellor updating the


House of Commons on the latest economic forecasts. We can see now


George Osborne has finally braved it. He is not going to miss it,


Andrew. He is going to get there on time to deliver his Autumn


Statement. It is probably only a 400 yard drive. No police escort.


He leaves the Treasury. I guess he's going to be outside the Palace


of Westminster in a very short order. So instead, the task of


today has changed rather from what he originally thought. He's going


to update the Commons on the Office for Budget Responsibility forecast.


But a combination of weak growth and the crisis in the eurozone have


persuaded the Chancellor that today he has to pull out all the stops. A


reminder of the events leading to today.


Tonight at ten the spectre of a return to recession in Europe, as


growth collapses. So they're going through a


financial crisis that is scaring the world. We could run the risk of


what some commentators are already calling a lost decade. TRANSLATION:


Europe is in the middle of what may be its toughest hour since World


War II. Lower growth, higher unemployment,


the troubling state of the British economy.


The crisis in the eurozone is having a chilling effect, not just


on eurozone economies, not just on market confidence but on the


British economy, too. Britain will stick to the deficit


plan we have set out. It is the rock or stability upon which our


recovery is built, and it has delivered record low interest rates.


Abandoning that plan would put What is happening in the economy


now is a very large squeeze on We are trying to recover from a


deep and difficult recession. Yet growth is slow, not just in Britain


but in France and Germany too. But we are, frankly, well behind where


And just as in Birkenhead I'm the only one wearing a coat. I've been


joined by the former Conservative Chancellor, Nigel Lawson, the


former Labour City leader minor moor minor and by -- Labour City


leader Paul Myners and by Paddy Ashdown.


It is still first and foremost about reducing the deficit and


eliminating the terrible inheritance of public sector and


public finance profligacy which the previous administration left this


Government. Unfortunately because of the world economic situation,


particularly the eurozone fiasco, it is going to take longer. But it


has to be done and it will be done. And that is the core. Of course,


this these difficult times George Osborne will want to do what he can


to boost confidence. Confidence is such a, you can't measure it but it


is such an important ingredient. We'll see a number of measures


directed at that as well. Lord Myners is this just clearing up the


that Labour left behind? No, the economy was recovering strongly in


the 12 months from the third quarter of 2009 before it dipped


back into a recession. We're back in recession in major parts of the


country already. This austerity programme was meant to create space


for private sector investment, for unemployment to come down, for


inflation to come down and for growth. Hate achieved none of those.


Plan A has failed as a credible plan. What we are going to see


today is an Autumn Statement which has now become an increasingly


panicly Budget. Lord Ashdown, I would think you are rather more


comfortable about the things we've been hearing about over the past


few days, the capping of rail first, the infrastructure projects, help


for people on the housing ladder. Then you know me well. You have to


cut the deficit. Labour left behind a debt of �963 billion. Now, that


is a larger debt to GDP ratio than Italy's debt, yet we enjoy interest


rates that are lower than the Germans. Why? Because we are


serious about cutting the deficit. The idea that Labour's proposition


is having borrowed so much and got ourselves into so much trouble is


we borrow more is unbelievable. If interest rates went up by just 0.5%


because we started to borrow more, the consequence would be �4 billion


it this year. Extra on our repayments. This is nonsense. You


have to do what you can do within the strategy to get growth going


and ease the burden but you cannot break the strategy. The proposition


that the answer to too high a level of borrowing in Britain is to


borrow more is unbelievable. Lord Lawson, you've wrestled at the


Treasury, how much room for manoeuvre does George Osborne have,


given that he has said these ambitious targets in terms of the


deficit reduction? As Paddy said, provided he sticks to his guns he


does have a certain amount of room for manoeuvre, because he has


market credibility. If you forfeit market credibility you have no room


for manoeuvre at all. If I may respond to one thing ta Paul Myners


said, he said this was meant to be a cut-back in public sector and the


private sector would move ahead. That will happen. I remember this


very well. In the early '80s we had to do. This the problem was not as


great but we still had a huge deficit which was too big. It took


time before the private sector moved forward and unemployment came


down. But it did. Did Labour spend too much in Government? Labour took


the right actions with a global crisis to keep the economy growing.


We saw a smaller in all in unemployment... That wasn't the


question. We took the right action at the right time and we have a


strategy for reducing the deficit over a reasonable period of time


without damaging prospects for the economy. I'm not sure that answered


my question. Thank you all for being with us. Andrew, back to you


in the studio. Thank you Jon. American Airlines


has filed for what's called Chapter 11 bankruptcy. It sounds serious,


probably is, but it has happened before, in fact several times


before, so I wouldn't completely panic, unless you are flying on


American Airlines. Bonds hit 2.8% of a yield, down from the close


last night. The markets are looking kindly on what they think the


Chancellor is going to say so far. If you want to comment, you can do


so on our website - click on Have Your Say. If you are


tweeting the, use @bbceconomy. Ahead of the statement the


Government's been keen to get the message out. Ministers are trying


to promote growth. They've given us a battery of measures already.


Everything George Osborne said he wouldn't do, a long list of


proposals. Sounds like Gordon Brown! Exactly. We've had that �5


billion that Robert Peston mentioned, over the next three


years for infrastructure investment. They are hoping to get another �20


billion from the private sector for those schemes. That's very much


what you think is blue sky thinking at this point. There is that credit


easing plan, hoping to underwrite, guarantee, up to �20 billion of


loans to small businesses. We know that's been such arch issue. They


are saying that could rise to �40 billion and give quite a reduction


in the during costs for firms. For young people, such a big problem


the rise in youth unemployment. There is going to be a �1 billion


scheme, we are told. We've heard a lot about it except how it is going


to be paid form. And we had details as long ago as a week ago they were


talking about housing and �400 million to kick-start the housing


market to help people buy homes, and a mortgage indem nitty schemes.


Lower rail fares, and a 3p rise in fuel duty that was suppose to do so


happen in January. We are expecting that to be frozen or delayed. But


remember all of this needs to be paid for. Either that or it is


going to be off-balance sheet, it doesn't count against the during.


Even if it is off the balance sheet, we will find it, Stephanie. Let's


look into the Commons now. It is Foreign Office questions.


Nick. What is interesting about the figures is that it means that the


Chancellor will have to tell us of pain now, pain in the future, pain


beyond the election, beyond anything we've heard in his


previous Budget or Autumn Statements. He has to. He is saying


he won't increase spending, gauz would be to abandon plan A. He has


to say today who pays the bills for that. The banks might feel a bit


more pain. We might hear tax credits are going to be held down.


You always look for public sector workforce. We don't know what he is


going to do on pay in future. And the big one, what about long term,


the big pensions billing? Pain, pain, pain, and you can't even


escape on American Airlines! Gordon Brown used to go through all these


measures and the Tories used to despise it. The Tory critique of


Gordon Brown was too much meddling around the edges, and there are a


lot of micromeasures. All designed to improve the productive potential


of the British economy. I suppose, underlying the micromeasures


there's a very big and important point we have to grasp - the


British economy was run in an unsustainable way for many years


during the boom. We with consumed more than we earned. The big task


for any Government is to encourage companies to invest more and to


make them leaner and fitter so they sell more around the world and we


close that deficit, which has been at the heart of all our problems.


What will I be looking at is whether there is any sign of a


rebalancing of the economy, to use that cliche, such that we are


seeing more of a contribution in the medium term from companies


exporting and investing more. It will be interesting what the Office


for Budget Responsibility makes of We know that the borrowing will be


more than they originally thought, even more fun than Budget. -- even


more than the Budget. The markets seem to be relatively relaxed.


is difficult to read the markets... We have to go straight to the


Commons now. Let me put squarely before House of


Commons and the British public the economic situation facing our


country. Much of Europe seems to be heading into recession caused by a


chronic lack of confidence in the ability of countries to deal with


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


debt storm while doing all we can, all we can to build the foundations


of future growth. Today we set out how we will do that by


demonstrating that this country has the will to live within its means


and keep interest rates low. By acting to stimulate the supply of


money and credit, to make sure those low interest rates are passed


on to families and businesses. By matching our determination on the


deficit, with an active enterprise policy for business, and with


lasting investment in our infrastructure and education, so


that Britain can pay its way in the future. And at every opportunity,


helping families with the cost of living. The central forecasts that


we published today from the Independent Office for Budget


Responsibility do not predict recession here in Britain. But they


have done surprisingly revised down their short-term growth prospects


for our country, for Europe and for the world. They expect GDP in


Britain to grow this year by 0.9%, and by 0.7% next year. They then


forecast 2.1% gross in 2013, do 0.7% in 2014, -- 2.7% in 2014, and


3% in 2015 and in 2016. They are clear that this central forecast


assumes in their words that the euro area finds a way through the


current crisis and that the policy makers eventually find a solution


that delivers sovereign debt and sustainability. -- sovereign debt


sustainability. If not, there could be a much worse outcome for Britain


and I believe they are right. We hope this can be averted, but if


the rest of Europe heads into recession it may be hard to avoid


one here in the UK. We are now undertaking extensive contingency


planning to deal with all potential outcomes of the euro crisis. Like


the Bank of England and the OECD yesterday, instability is one of


the central reasons for the reduction in the growth forecast. I


want to thank Robert Chote, Stephen Nickell and Graham Parker and their


team for the rigorous work that they have done. I think they are


forecast today demonstrates beyond any doubt their independence. --


therefore cast. But if we accept their numbers... This is an


important point. If we accept their numbers we must also pay heed to


their analysis. In addition to the eurozone crisis, the OBR gives two


further reasons for the weaker forecast. First, what they call the


external inflation shock, the result in their words of unexpected


rises in energy prices and global agricultural commodity prices.


Their analysis, independent, is that this explains the slowdown in


growth in Britain over the past 18 months. Second, the...


statement by the Chancellor must be heard and he should not have to


fight to be heard. The Chancellor. Second, Mr Speaker, the OBR today


show new evidence that an even bigger component of the growth that


preceded the crisis was an unsustainable boom, that the bust


was deeper and had an even greater impact on our economy than was


previously thought. And the result of this analysis is that the OBR


has significantly reduced their assumptions about spare capacity in


our economy and the trend rate of growth. This increases their


estimate of the proportion of the deficit that is structural, in


other words the part of the deficit that does not disappear even when


the economy recovers. Our debt challenge is even greater than we


thought because the boom was even bigger, the bust even deeper, and


the effects will last even longer. Britain has had the highest


structural budget deficit of any major economy in the world, and the


highest deficit in the entire history of our country outside of


war, and the last Government left it to this Government to sort that


mess out. Now, Mr Speaker, this OBR analysis feeds directly through to


borrowing numbers that are falling but not at the rate that had been


forecast. In 2009-10, the last Government was borrowing �156


billion per year. During the first year of this Government that fell


to �137 billion. This year the OBR expect it to fall again to 127


billion, then 120 billion next year, 100 billion in 2013, 79 billion in


2014, then 53 billion in 2015, and 24 billion a year by 2016-17.


However, I can report that because of the lower market interest rates


that we have secured for Britain, debt interest rates over the


Parliament of forecast to be �22 billion less than predicted. -- are


forecast. Given the economic events described by the Office for Budget


Responsibility, what would have happened to borrowing without the


action this Government has taken? The Treasury estimates that


borrowing by 2014-50 would have been... The Chancellor's statement


must be heard. There are strong passions on the subject and there


will be plenty of time to people to come in on the back of the state


that but it must be heard with a degree of courtesy. -- the


statement. Borrowing by 2014-2015 it would have been running at over


�100 billion per year more and Britain would have borrowed an


additional �100 billion in total over the period. If we have pursued


that path, we would now be in the centre of the sovereign debt storm.


The crisis that we see unfolding in Europe has not undermined the case


for the difficult decisions that we have taken. It has made that case


stronger. We held our deficit reduction Budget on our terms last


year, not on the market turns this year as so many have been forced to


do. On that Budget we set out a tough fiscal mandate that we would


eliminate the debt problem. To be cautious, I said plans to meet


these Budget rules one year early. That hetero has now disappeared. I


am clear that our rules must be Ed tier two and I am taking action to


make sure that they are. As a result, the OBR's central


projection is that we will meet the fiscal mandate and the debt target.


The current structural deficit is forecast to fall from 4.6% of GDP


this year to a structural surplus of 0.5% in five years' time. The


debt to GDP ratio, which is forecast to stand at 67% this year,


is now set to peak at 68 -- 78% in 20 14th and be falling by the end


of the Parliament. So borrowing is falling and that will come down. It


is not happening as quickly as we would have wished because of damage


to our economy by the ongoing financial crisis. But we are set to


meet our budget rules and we will see Britain through the debt storm.


Mr Speaker, there is a suggestion from some in this house that if you


spend more, you will borrow less. This is something for nothing


economics. The House should know the risks that we would be running.


Last April, the absence of a credible deficit plan meant that


our credit rating was on a negative outlook and our market interest


rates were higher than Italy's. 18 months later we are the only major


Western country which has had its credit rating improve. Italy is at


7.2% and we are at less than 2.5%. Yesterday we were even borrowing


money more cheaply than Germany. And those that would put all of


that at risk by deliberately adding to our deficit must explain this.


Just a 1% rise in our market interest rates would add �10


billion to mortgage bills every year. 1% would mean the average


family with a mortgage would have to pay �1,000 more. 1% would


increase the cost of business loans by �7 billion. 1% would force


taxpayers to find an extra �21 billion in debt interest payments,


much of it going to our foreign creditors. In other words, 1%


dwarfs any extra Government spending or tax cut funded by


borrowing that people proposed today. That is the cost of just a


1% rise. Italy's rates have gone up by 3% in the last year alone. We


will not take this risk with the solvency of the British economy and


British families. Mr Speaker, the current environment requires we


take further action on debt to ensure that Britain continues to


live within its means. This is what we propose to do. First, there is


no need to adjust the overall totals set out in the spending


review, had taken all together measures that I will set out today


require no extra borrowing and require no extra savings across the


spending period. Second, I am announcing significant savings and


current spending to make the fiscal position more sustainable in the


medium and long-term. In the short term, over the next three years, we


will use the savings to fund capital investment in


infrastructure, in regional growth and education, as well as help for


young people to find work. Every �1 spent in this way will be paid for


by �1 saved permanently. This includes savings from a further


restraint on public sector pay. For some workforces, the two year pay


freeze will come to an end next spring. For most during 2013. In


the current circumstances the country cannot afford the 2% rise


assumed by some Government department thereafter. Instead we


will set public-sector pay awards at an average of 1% for each of the


two years after the pay freeze ends. Many are helped by pay progression.


The annual increases in salary great that many are entitled to


when pay is frozen. -- salary grades. It is one of the reasons


why a public sector pay has risen at twice the rate of private sector


pay over the last four years. I accept that a 1% average rise is


tough but it is also fair to those that were to pay the taxes that


fund it. -- that work to pay. I am also announcing that we are asking


the independent pay review bodies to consider how public sector pay


can be made more responsive to local labour markets, and we will


ask them to report back by July next year. This is a significant


step towards creating a more balanced economy in the regions of


our country, that does not squeeze out the private sector. Mr Speaker,


departmental... Mr Speaker, departmental budgets will, with the


exception of the NHS and the school budgets, where the money saved will


be used to protect their budgets in real terms. This will save �1


billion of spending by 2014-15. The deal we will offer on public sector


pensions is also fair to both taxpayers and public servants. The


reforms are based on the independent report of John Hutton,


He says it is hard to imagine a better deal than this. I would once


again ask the unions why they are damaging our economy at a time like


this and putting jobs at risk. Call off the strikes tomorrow, come back


to the table, complete the negotiations and let's agree


generous pensions that are affordable to the taxpayer.


Mr Speaker, let me turn to other areas of public spending, starting


with overseas aid. This Government will stick by the commitments it


has made to the poorest people in the world by increasing our


international development Budget. The whole House should be proud of


the help our country is providing to eradicate disease, save lives


and eds Kate children. But the spending plans of the Department


for International Development meant that the UK was on course to exceed


0.7% of national income in 2013. That I don't think can be justified.


Adjusting those plans so we don't overshoot the target.


Turning to welfare payments. The annual increase in the basic state


pension is protected by the triple lock introduced by this Government.


This guarantees a rise either in line with earnings, prices or 2.5%,


whichever is greater. It means that the basic state pension will next


April rise by �5.30 to �107.45, the largest ever cash rise in the basic


state pension and a commitment of fairness to those that have worked


hard all their lives. I wanted to make sure that poorer


pensioners did not see a smaller rise in their income, so I can


confirm today we will uprate the pension credit by �5.35 and pay for


this with an increase in the threshold of the savings credit. I


also want to protect those who are not able to work because of their


disabilities and those who through no fault of their own have lost


jobs. We will uprate working age benefits in line with September's


CPI inflation number of 5.2%. This will be a significant boost to the


incomes of the poorest, especially when inflation is forecast to be


considerably less than that by next April. We will also uprate with


prices the disability elements elements of tax credits and


increase the child element to have Child Tax Credit by �135 in line


with inflation. But we will not uprate the other elements of the


working tax credit this coming year. Given the size to have outrating


this year we will no longer go ahead with the additional �110 rise


of the child element over and above inflation planned. By April 2012


the Child Tax Credit will have increased by �390 sings the


coalition came into power. The best way to support low income working


people is to take them out of tax altogether.


Our increases in the income tax personal allowance this year and


next will do that for over 1 million people. Let me turn to


future public spending Mr Speaker. Today am setting spends ture totals


for the two years following the ends of the Spending Review period,


2015 -16 and 2016-17. Total managed expenditure will fall during that


period by 0.9% a year in real terms. The same rate as set out existing


period toof Spending Review, with a baseline that exlose the additional


investment in infrastructure also announced today. These are large


savings and we will set out in future how resources will will be


allocated between difficulty areas of Government. I am also announcing


a measure to control spending not for today, next year or the next


decade, but it directly addressing the long-term challenge British and


so many other countries face with an ageing population. Our


generation has been warned that the cost of providing decent state


pensions are going to become mother and more unaffordable unless we


take further action. Let us not leave it to our children to take


emergency action to rescue the public finances. Let's think ahead


and take responsible, sensible steps now. So starting in the year


2026 we will increase the state pension age from 66 to 67, so we


can go on paying a decent pension to people who are living longer.


Australia, America and Germany have all taken similar steps. This will


not affect anyone within 14 years of receiving their state pension


today. By saving a staggering �59 billion it will mean a long term


future for the basic state pension. We are showing a world sceptical


that democratic western Government can take tough decisions that


Britain will pay its way in the world.


Now, Mr Speaker. That is the first thing. The Government can do in the


current environment. Keep our interest rates low and protect our


country from if worst of the debt storm. But we need to make sure


that those low interest rates are available to families and


businesses. It is monetary and credit policy which is, in a debt


crisis, the principal and most powerful tool for stimulating


demand. Last month the Bank of England's monetary policy committee


increased quantitative easing. �275 billion. This will support demand


across the commitment we must do more to help small businesss who


can't get access to credit at an affordable price. We've extended


the last Government's enterprise finance guarantee scheme. We are


expanding it to businesses with annual turnovers of up to �44


million. This scheme is by itself not nearly ambitious enough and


never will within the constraints of state aid rules. The Government


is announcing credit easing to help small businesses. We've set a


ceiling of �40 billion. At the same time I've agreed with Mervyn King


we will reduce by �40 billion the asset purchase facility the


previous Government gave the bank to buy business loans. Only a small


proportion of that facility was ever used. I'm publishing my


exchange of letters with the Governor today. So we are launching


our national loan guarantee scheme. It will work on the simple


principle that we use the hard-won low interest rates that the


Government can borrow at to reduce the interest rates that small


businesses can borrow at. We are using the credibility we've end in


the international markets to help our domestic economy. New loans and


over drafts to business with a turnover of less than �50 million


will be eligible to the scheme, so it is focused on smaller companies.


We expect it will lead to reductions of 1 percentage point in


the rate of interest charged to these companies. A business facing


a 7% interest rate could see their rate reduced to 6%. We've developed


with the Bank of England a mechanism to allocate funding to


different banks based on how much they increase both net and gross


lending to firms. And there'll be a clear audit trail to ensure the


banks comply, for we will use the experience of the European


investment banks loans for SMEs Fulham the UK to ensure it works.


We are getting state aid approval so the national loan guarantee


scheme will be up and running in the next few months. Initially �20


billion of these guarantees will be available over the next two years.


Alongside it we are launching a �1 billion business finance


partnership. This is aimed at Britain's mid-sized companies, a


crucial part of our economy, effected for too long and now


identified by the CBI director- general and others as a source of


growth. The Government will lend droll these businesses, in


partnership with investment pension funds and insurance companies. It


will give a new source of investment outside the banks. If


the business partnership takes off I stand ready to increase its size.


We will help Britain's small and medium-sized companies no.


Government has attempted anything as ambitious as this before. We


will not get every detail perfect first time round but we don't want


to make an enmoif the Government. The important thing is the get


Croat flowing to Britain's small businesses.


Mr Speaker, the Government can use the low interest rates we've


secured to help young families too. Who want to buy a home but can't


afford the very large deposits the banks are demanding. We will use


mortgage indemities to help 100,000 such families buy newly built homes.


We will help construction firms that can't get bank finance with a


�400 million fund that will kick- start projects which already have


planning permission. And we are going to reinvigorate the right to


buy. This was one of the greatest social policies of all time. It


brought home ownership within the reach of millions of aspiring


families. It was slowly and stealthily strangled by the last


Government, as discounts were cut and cut again. We will bring it


back to life. Families in social house willing be able to buy their


own homes at a discounts of up to 50%. We will use the receipts build


for every home purchase ads new additional affordable home as well.


So new homes for families that need them. New home ownership for


families who aspire to it. New jobs in the construction industry so we


get Britain building. That's what our new right to buy will bring.


Mr Speaker, in the years leading up to the crash, our economy became


dangerously overdependent on the success of a poorly regulated City


of London. Meanwhile, employment by business in a region like the West


Midlands fell during this period. So by 2007 the previous Government


was relying on finance for one in every �8 it raised in taxation.


That left Britain completely exposed when the banks failed. I


can confirm that the next month we will publish our response to the


report we commissioned from John Vicers to protect taxpayers better.


It is there Government's policy to ensure that we remain the home of


global banks, that London is the world's pre-eminent financial


centre. That is why we will not agree to the introduction of an EU


financial transaction tax. It is not a tax on bankers. It's a


tax on people's pensions. Instead, we have introduced a permanent bank


levy so make sure the banks pay their fair share. I've always said


we wish to raise �2.5 billion each and every year from this levy. To


ensure we do that, I need to raise the rate to have levy to 0.088%.


This will be effective from the 1st January next year. And we will also


take action to stop some large firms using complex asset-backed


pension funding arrangements to claim double the amount of tax


relief that was intended. This will save the exalmost half a bill


pounds a year. Mr Speaker, financial services will


always be a very important industry for the UK. But we have to help


other parts of the private sector grow. That means uncongested roads


and railways for business to move products that cannot be reduced to


a screen on a City trading floor. It means providing secure power


sources at reasonable prices. It means creating superfast digital


networks for companies across our country. These do not exist today.


See what countries like China or Brazil are building and you will


see why we risk falling behind the rest of the world. So we are


publishing the national infrastructure plan today. For the


first time, we are identifying over 500 infrastructure projects we want


to see built over the next decade and beyond. Roads, railways,


airport compassity, power stations, waste facilities, broadband


networks, and we are mobilising the finance need to do so deliver them


too. The savings I've announced in the current but the have enabled me


today to fund pound for found �5 billion of additional public


spending on infrastructure over the next three years. New spending by


Network Rail guaranteed by the Government will bring �1 billion


more. And we are committing a further �5 billion to future


projects in the next spending period so that planning can start


now. This is public money. By exploring guarantees and letting


City mayors borrow against attach receipts we are looking at new ways


to deploy it. We need to put to work the many billions of pounds


that British people save in British pension funds and invest in British


projects. You could call it British savings for British jobs, Mr


Speaker. And the Government has goerbltded an agreement with two


groups of -- negotiated an agreement to unlock �20 billion of


private investment in modern infrastructure. We can today give


the go-ahead to 35 new road and rail schemes that support economic


development. In the North-West we will electify the TransPennine


Express between Manchester and Leeds and work with Merseyside to


turn the vision of the Atlantic gait away a reality Yorkshire and


the Humber there'll be new stations and tram capacity. We will halve


the tolls on the Humber Bridge. I want to pay tribute to the members


for Beverley and brigand ghoul and other MPs who've campaigned for


years. Under this Government it has. We are bringing forward investment


on the Tyne and Metro. In the South West, the Bristol link road and the


A380 bypass will go ahead. For families across the South West,


facing the highest water charges in Britain, the Government will pick


up the household bills of all South West Water companies by �50 a year.


In the East of England, we're going to make immediate improvements to


the A14. In the South East, we will build a new railway link between


Oxford, Milton Keynes and Bedford, to create 12,000 new jobs. We are


going to stop on a crossing of the lower Thames, and we will explore


all the options for maintaining the aviation hub status, with the


exception of a third runway at Heathrow. In London, we will work


with the Mayor for options on a new river crossing, and the extension


of the Northern Line to Battersea, which could bring 25,000 jobs to


the area. The devolved administrations will get their


share. We are working with them to improve the links between our


nations, such as the M four in South Wales and the overnight


railway services North of the border. This is a huge commitment


to overhauling the infrastructure of our nation. And we will match it


by overhauling the digital infrastructure, too. The Government


is funding plans to bring super- fast broadband to 90% of homes and


businesses across the country, and to extend mobile phone coverage to


99% of families. This will help create a living, economically


vibrant countryside. But our great cities are at the heart of our


regional economies, and we will help bring super-fast broadband


connections to 10 of them, including the capitals of all Four


Nations. We will go ahead with the 22 enterprise zones already


announced, plus two zones in the Humber and Lancashire announced


today. Capital will be available to encourage manufacturing in


Liverpool, Sheffield, the Tees Valley, the Humber and the Black


Country. Those allowances will also be available to the north-eastern


enterprise zone. And we will consider extending to create new


private sector jobs in the port of Mr Speaker, this Government's new


regional growth fund for England has already allocated �1.4 billion


to 169 projects around the country. For every �1 we are putting in, we


are attracting �6 of private sector money alongside it. I am putting in


a further �1 billion over the course of this Parliament into the


regional growth fund for England with support for the devolved


administrations as well. If we don't get the private sector to


take a greater share of economic activity in the regions, then our


economy will become more and more unbalanced, as it did over the last


10 years. Governments should not assume that this will happen by


itself. We should help businesses to grow and succeed and we can do


that at a national level, too. For example, with our commitment to


British science. At a time of difficult choices, we made hours


last year when they committed to protecting the science budget. We


are committing half a billion pounds for science projects, from


Super Computing the satellite technology and health laboratories.


We will encourage our small firms to export overseas for the first


time. We are doubling to 50,000 the number of SMEs that we are helping


and we are extending our support to British companies that are overseen


by the German counterparts. We will make it easier for UK-based firms


to compete for Government contracts. We will provide funding for smaller


technology firms in Britain who find it difficult to turn their


innovations into commercial success. And we have listened to the ideas


from business groups about encouraging innovation in larger


companies, and we will introduce a new above-the-line research and


development tax credit in 2013 which will increase in visibility


and generosity. And we will give help to our energy intensive


industries. I have not shied away from supporting sensible steps to


reduce this country's dependency on volatile oil prices and reduce our


carbon emissions. While the Chancellor who funded the first


ever Green Investment Bank. Our Green Deal will help people


insulate their homes and cut their heating bills. But I am worried


about the combined impact of the green policies adopted not just in


Britain, but also by the European Union, on some of our energy heavy


intensive industries. We will not save the planet by shutting down


our steel mills and aluminium smelters and paper manufacturers.


All we will be doing is exporting valuable jobs from this country. So


we will help them with the costs of the EU trading scheme and the


carbon price floor, increase their climate change levy relief, and


reduce the impact of reforms on these businesses. This amounts to a


�250 million package over the Parliament, and it will keep


industry and jobs here in Britain. Mr Speaker, it is a reminder to us


all that we should not price British business out of the world


economy. If we burden them up with endless social and environmental


goals, however worthy in their own right, not only will we not achieve


those goals, but the businesses will fail, jobs will be lost and


our country will be poorer. Our planning reforms strike the right


balance between protecting our countryside, while committing to


economic development which creates jobs. We need to go further to


avoid the lengthy delays of the current system, with the time limit


on applications and responsibilities for statutory


consultations. And we will make sure that the EU rules on things


like Habitat are not placing ridiculous costs on British


business. Planning laws need reform... Order. The house needs to


calm down. One honourable member has probably shouted enough for one


day. The Chancellor of the Mr Speaker, planning laws need


reforms, and so do the employment rules. We know that many firms are


afraid to hire new staff because of the cost involved. We are doubling


the period after which an employee can bring an unfair dismissal claim.


We will call for evidence on further reforms to make it easier


to hire people, including changing the cheapie regulations, reducing


delay and uncertainty and a collective redundancy process, and


introducing the idea of compensated though full dismissal for


businesses with fewer than 10 employees. -- no fault dismissal.


We will cut the burden of health and safety rules on small firms


because we have a regard for the health and safety of the British


economy. This Government has introduced flexible working


practices. We are committed to fair rights for employees, but what


about the right to get a job in the first place and the right to work


all hours running a small business and not be sued out of existence by


the cost of unemployment tribunal? -- employment tribunal? It is no


good comparing ourselves with other countries. The entire European


Continent is pricing itself out of the world economy. The same is true


on taxes on businesses. We have set as our ambition the goal of giving


this country the most competitive tax regime in the G20. Our


corporate tax rate has already fallen from 28% to 26% and I can


confirm that it will fall next April the 25%. We are undertaking


major simplification of the tax code for businesses, including


consulting on ideas for merging the administration of income tax and


national insurance. We are publishing next week rules on


foreign profits so that multinationals stop leaving Britain


and start coming here. And we will end low-value relief for goods from


the Channel Islands which is used to undercut our High Street


businesses. We will increase the generosity of the enterprise


development scheme and we will extend it to help new start-up


businesses get the investment that they need, because even at the best


of times they can struggle to get finance. In the current conditions


that struggle ends too often in failure. From April, 2012, anyone


investing up to �120,000 in a qualifying you start a business


will be eligible for income tax release of 50%, regardless of the


rate at which they pay for tax. -- new start-up business. And for one


year, we will waive tax on capital gains invested through the new


scheme. We can afford this with a freeze on the capital gains tax


threshold next year. I want to help small businesses that find the


current conditions are tough. Business rates are


disproportionately large part of fixed costs. In the Budget, I


announced the rate relief holiday and today I am extending that until


April, 2013. Over half a million small firms, including one third of


all shops, will have reduced or no rate bills for the whole of the


rest of the next financial year. And larger businesses will be


helped with the rise in business rates. I also want to help any


business seeking to employed a young person who is out of work.


The OBR forecasts that unemployment will rise by 8.1% this year to 8.7%


next year, before falling to 6.2% by the end of the forecast. Youth


unemployment has been rising for seven years and is now unacceptably


high. It is little comfort that this problem is affecting all


Western nations today. The problem is of course primarily a lack of


jobs, but it is made worse by a lack of skills. Mr Speaker, too


many children are leaving school after 11 years of compulsory


education without the basics that they need for the world of work.


Our new youth contract addresses both problems. With of of private


sector work experience for every young person unemployed for three


months, -- with the offer. We will pay for a job or apprenticeship


after nine months in a private business. As the Deputy Prime


Minister has said, this is a contract. Young people that do not


engage with this offer will be considered for mandatory work


activity. Those that drop out without good reason will lose their


benefits. Are we really going to tackle the economic performance of


this country and tackle the decade- long problems of productivity? Then


we have to transform our school system, too, so children leave


school prepared for the world of work. My honourable friend is doing


more to make that happen than anybody that has had his job before.


The last Government, Mr Speaker, took six years to create 200


academies. He has created 1200 academies in just 18 months.


Supporting his education reform as a central plank of my economic


policy. I am providing an extra 1.2 billion as part of the additional


investment in infrastructure to spend on our schools. Half of this


will go to help local authorities with the greatest basic need for


school places. The other 600 million will go to support my right


honourable friend's reforms and will support 100 additional free


schools. These schools will include new maths schools for 16 to 18


year-olds, giving our most talented young mathematicians the chance to


flourish. Like the university technical colleges, these maths


free schools are exactly what Britain needs to match our


competitors and produce more of the engineering and science graduates


so important for our long-term economic success. And to ensure


that children born into the poorest families have a real chance to


become one of those graduates, we will take further steps to improve


early education. Last year it was this coalition Government that not


only expanded free nursery education for all three and four


year olds, but also gave children from the poorest one-fifth of


families then you write to 15 hours of free nursery care per week at


the age of two. -- a new right. Thousands of children from the most


disadvantaged families will get the support in the early years.


Education, early years learning, this is how you change the life


chances of our least well off and generally live two children out of


poverty. And that is how you build an economy ready to compete in the


world. -- genuinely lift children. People know how difficult things


are, but where we can help with the rising cost of living, we will. I


have announced another freeze in council tax to help millions of


Train fares are expensive and they are set to go up well above


inflation to pay for the much- needed investment in the new rail


and the new trains we need. But RPI plus 3% is too much. The Government


will fund a reduction in the increase to RPI plus 1%. This will


apply across National Rail- regulated fares, the London tubes


and our buses. Mr Speaker, millions more use their cars to go to work


and pick up their children from school. It is not a luxury for most


people. It is a necessity. In the Budget, I cut fuel cuty by one


penny. The plan was for fuel duty to be 3p higher in January and 5


pence higher by August next year. That would be tough for working


families. So despite all the constraints upon us we are able to


cancel the increase in January. Taxes on pets roll will be a full


10p lower than it would have been without our action in the Budget


this autumn. Families will save �144 on filling


up the average family car by the end of next year. In this tough


time, we are helping where we can. Mr Speaker, all that we are doing


today, sticking to our deficit plan to keep interest rates as low as


possible, increasing the supply of credit to pass those low rates on


the families and businesses. Rebalancing our economy with an


active enterprise policy and new infrastructure. Help with the cost


of living on fuel duty and rail fares. All this takes Britain in


the right direction. It cannot... Mr Speaker, it cannot transform our


economic situation overnight. People in this country understand


the problems that Britain faces. They can watch the news any night


of the week and see for themselves the crisis in the eurozone and the


scale of the debt burden we carry. And people know, people know that


the promises of quick fixings and more spending this country can't


afford at times like this are like the promises of a quack doctor


selling a miracle cure. We do not offer that today. What we offer is


a Government that has a plan to deal with our nation's debts to


keep interest rates low. A Government determined to support


businesses and support jobs. A Government committed to take


Britain safely through the storm. Leadership for tough times. That's


what we offer and I commend this statement to the House.


STUDIO: That was the Chancellor of the Exchequer of the Exchequer


sitting down. We'll now hear from Ed Balls. Mr Speaker, let me start


by thanking the Chancellor of the Exchequer... THE SPEAKER: Order. I


ask the right honourable gentleman to resume his seat. I said very


clearly that people shouldn't shout and yell at the Charlotte. He


should be heard in respectful quiet, as the public would hope. The same


goes for the reaction to the Shadow Chancellor. Let's try to operate at


the level of events. Mr Ed Balls. Thank you Mr Speaker. Let me start


by thanking the Chancellor of the Exchequer for advance notice of his


statement. And the Office for Budget Responsibility for ensuring


that the Chancellor is today setting out to this House the truth


about the state of the British economy and the truly colossal


failure of the Chancellor's plan. Mr Speaker, let us be clear what


the OBR has told us today. The Chancellor couldn't quite bring


himself to say it himself. Growth flat lining down this year, next


year and the year after, unemployment rising, well over �100


billion more during than the Chancellor planned a year ago. More


during than the plan which the Chancellor inherited at the last


general election, Mr Speaker. And as a result, his economic and


fiscal strategy is in tatters. After 18 months in office, the


verdict is in: plan A has failed and it has failed close ally, with


prices rising, with unemployment soaring, families, pensioners and


businesses already know it is hurting. And with billions more in


borrowing to pay for rising unemployment, today we find out the


truth. It is just not working. Mr Speaker, the Prime Minister likes


to say you can't borrow your way out of a crisis. Can the Chancellor


confirm that is exactly what he has been forced to do? Higher during to


pay for the criess in growth and jobs in Britain, the higher


unemployment and the higher benefits bill that his failing plan


has delivered. Mr Speaker, the Chancellor's out of touch and


complacence hubris of a year ago now seems such a distant memory.


The Prime Minister boasted Britain was out of the danger zone. The


Chancellor claimed the UK was a safe haven. But we though the truth.


Cutting too far and too fast has backfired. And every one of the


Chancellor's claims of a year ago have completely unravelled. Mr


Speaker, it is not as if they weren't warned, including by their


coalition colleagues. Before the election, we said, like every


country after the global financial crisis, we had to get our deficit


down. And that meant tough decisions on tax and spending cuts.


The question is not if you do it but how you do it. Which is why we


on this side of the House warned if you try and cut spending and raise


taxes too far and too fast you risk choking off recovery, pushing up


unemployment and borrowing. We said the Chancellor's plan was reckless.


He was ripping out the foundations of the House leaving our economy


not safe but badly exposed to the growing storm. Let me remind the


Chancellor what the managing director of the International


Monetary Fund warned this summer. She said slamming on the brakes too


quickly will hurt the recovery and worsen job prospects. And what has


happened? Consumer and business confidence has slumped in the last


year. Our recovery was choked off over a year ago. Since last year,


slower growth than any other G7 country, than Japan. And they had


an earthquake, Mr Speaker. Unemployment at a 17-year high.


Over 1 million young people out of work. And today the news that


growth this year will in the be the 2.3% the Chancellor so confidently


predicted in the June Budget this year, but just 0.9%. And growth


lower next year than this year, Mr Speaker, and lower than forecast in


the year after. The fourth time the OBR has downgraded his growth


forecasts in just 18 months. Mr Speaker, now today we learn that


even judged by the one objective this Chancellor set himself - to


get the deficit down - he is failing. Because with lower growth


and rising unemployment, pushing up the cost of failure, can the


Chancellor confirm that compared to his Autumn Statement a year ago


borrowing is now not set to be the 46th billion pounds more than they


said it would be in March? Can he confirm, compared to his plans of a


year ago he is now going to borrow a staggering �158 billion more in


borrowing? Higher borrowing than he promised a year ago. �158 billion


more in borrowing. And can he also confirm, despite the pain of the


�40 billion of extra spending cuts and tax rises, the Chancellor


boasted about a year ago, can he confirm that compared to the plan


he inherited from the previous Government at the last election,


and commitment is higher, can he confirm that he is going to be


during more at the end of this Parliament than the balanced plan


he inherited from the Labour Government, Mr Speaker? That's a


fact. Mr Speaker, a year ago, the Prime Minister told the CBI in five


years' time we will have balanced the books. Not some kind of dodgy


rolling target but a clear commitment to eliminate the deficit


by 2015. Can the Chancellor tell the House, will he meet his fiscal


mandate to eliminate the structural deficit by 2015? Isn't the truth Mr


Speaker, with unemployment up, and borrowing up, going further and


faster has been utterly counter predictive and self defeating? It


has backfired. We've had all of the pain and none of the gain, Mr


Speaker. I have to say, these OBR forecasts show the Chancellor's


entire economic and fiscal strategy is now in complete disarray. And


yet all we get are excuses. Blaming anyone and anything, the Labour


Government, the snow, the Royal Wedding, the Japanese earthquake,


higher inflation, VAT, the eurozone, low-paid dinner ladies and teaching


assistants. Anybody but himself, Mr Speaker. When it is the Chancellor


that is to blame, it is his failing plan that has pushed up


unemployment and pushed up borrowing. It is his reckless


gamble that has made things worse in Britain, not better, Mr Speaker.


Of course, if eurozone countries continue to fail to sort out their


problems it will have an impact here. But Britain's economic


recovery was choked off a year ago, before the euro crisis. Look at the


OBR forecast. They've downgrade growth in Britain this year they've


upgraded growth in the euro area. Out of 27 countries in the European


Union only Greece, Portugal and Cyprus have grown more slowly than


Britain in the last year. Very to say, Mr Speaker, it is not only not


too late for the Chancellor to change course. The deepening euro


crisis makes it even more important that he sees sense. But instead, he


is still clinging to the fantasy that any change of course would


make things worse. And he still complains to the illiterate fantasy


that low, long-term interest rates in Britain are a sign of enhanced


credibility and not as they were in Japan in the 1990s or America today


a sign of stagnant growth in our economy. This summer the head of


the IMF warned the Chancellor, growth... THE SPEAKER: However long


it takes, the situation is very simple, the Shadow Chancellor will


be heard. That's all there is to it. Thank you Mr Speaker, they don't


like it, but in is the truth, Mr Speaker. This summer, they set up


the OBR. Maybe they should listen to their forecasts Mr Speaker. This


summer, the head of the IMF warned the Chancellor, growth is necessary


for fiscal credibility. But the Chancellor says a change in his


plans would lead to a loss of credibility, even as he is forced


today to confirm that this growth and during targets are now wildly


off track, Mr Speaker. Last month, the IMF advised the Government, and


let me quote. If activity were to undershoot current expectations and


risk aperiod of stagnation or contraction, countries that face


history ically low yields, for example Germany and the UK, should


also consider delaying some of their planned consolidation. Mr


Speaker, with the world darkening and with today's news that in


Britain we are set to see stag understand growth not just this


year but next, let me ask the Chancellor. Isn't it now time for


him to listen to the IMF? How much worse does it have to get? How many


more young people have to lose their jobs? How many more


businesses have to go bankrupt? How many more times does Select


Committee to come here and downgrade his growth forecasts and


upgrade his borrowing forecast. How many more billions in borrow doing


we need to pale for failure before this Chancellor finally sees sense?


Mr Speaker, these would be difficult times for any Chancellor.


But our fear is that, once again, the Chancellor is making a


catastrophic error of judgment. He is refusing to learn the lessons of


history or economics. He is refusing to shift to a more


balanced plan. He got it wrong 18 months ago. He is getting it wrong


again today, Mr Speaker. Repeating the mistakes he made last year will


only make things worse. Isn't it now time to listen to the IMF, to


cut taxes, to have a slower pace of spending reduction. Isn't it time


for him to change course before it is too late? What to we have


instead, Mr Speaker, a cobbled together package of growth measures


which he must know and which the OBR forecast confirms do not


address the fundamental problem that his rapid reckless and


deflationary plan is choking off recovery and pushing up during.


Mr Speaker, we've been here before. This is the third emergency growth


package in a year. The last thing our economy needs is yet another


Honourable members do not have to take my word for it. Let's look at


the OBR's own forecast. Do they think the Chancellor's plans will


boost growth? No. They have revised growth down for next year. And in


the following year it down from 2.9% to 2.1%. Does the OBR think


the Chancellor's plans will cut unemployment? Let me tell the House


two things from the OBR forecast which the Chancellor decided not to


tell us. Unemployment is not only higher next year than this year,


but higher the year after as well. And employment is expected to fall


by 100,000 next year, Mr Speaker. We were promised a game changing


statement, a great plan that would secure recovery. Instead we have a


plan for growth which leads to lower growth and higher


unemployment, Mr plan. It is not game changing, it is just more of


the same. He has announced a new youth jobs fund. But let me ask him


why did he ever abolished the Future Jobs Fund in the first


place? They abolished it in their first month in office. The new plan


will not be up and running until the middle of next year. He claims


to have increased the Bank levy. So why is the cutting taxes on banks


this year compared to last year? Down from 3.5 billion last year to


2.5 billion this year. Why doesn't he cut of the bonuses and do


something proper about youth jobs? He has announced a sensible halt to


the fuel duty rise. But can he confirm as a result of last


January's VAT rise that motorists are paying three pence per litre


more on petrol, Mr Speaker. He has relabel credit easing, but why did


you wait so long and why did he put his faith in the Project Merlin


deal which has patently failed and as the Bank of England confirms


today has seen net business lending fall over the last year? And as for


his equally belated decision to set up a new infrastructure fund, this


from the same chance or that that abolished the building schools for


the future programme. -- the same Chancellor. How much of this new


investment has been pre-announced? How much will happen this year and


next year? How much of it is actually pre-announced funding for


the next spending review after the next general election? Can he


confirm that this new of budget infrastructure fund will be subject


to a National Audit Office value for money test to make sure that


projects are not more expensive for the taxpayer than direct Government


borrowing? He has also announced a rebate for energy intensive


industries to correct the chaos caused by his botched carbon floor


price. He has reinstated just 10% of his plan for housing. As we


study the small print, despite all the bluster of the new measures,


because this Chancellor is so determined not to break from his


failing plan, is once again giving with one hand and taking with the


other. How are these new growth measures being paid for by hitting


families and savers, Mr Speaker? How much will has cut in tax


credits cost a working family on average income? -- will his cut.


And is the Chancellor still meeting the Prime Minister's pledged to


deliver real term rises in NHS spending this Parliament? Is the


Government still hitting women harder than men? Are they still


increasing Child poverty and not reducing it? Living he has already


cut childcare support by �1.5 billion, busy helping women that


want to go to work or is the making it harder? -- is he helping? If we


are all in it together, why is it always families, women and children


are paying the price? It is clear that the Chancellor's plan is not


working. The OBR knows it, the markets know it, the IMF knows it,


we know it. So increasingly did the Chancellor's coalition colleagues.


His arch-rival the Mayor of London certainly knows it. We know why the


Chancellor cannot change course. We know why he cannot accept the IMF's


advice. We all know why even as the euro crisis deepens, even as he is


borrowing �158 billion more than he planned, this cider political


Chancellor will not budge. -- so political. He knows that he has got


the economic judgments of this Parliament catastrophically wrong.


If after just 18 months, his plan is leading to falling growth,


rising unemployment, and �158 billion more in borrowing, the


country either needs a new Chancellor or any plan, a balanced


and credible plan on jobs, growth and the deficit. We need a real


plan for jobs, growth and deficit reduction. Labour's five point plan


for jobs, growth and deficit reduction. I have to say, Mr


Speaker, protecting our economy, businesses, jobs and family


finances is more important than trying to protect a failed economic


plant. For his sake, for his party's sake, and in the national


interest, the Chancellor needs to change course and he needs to do so


now. The Chancellor of the Exchequer.


Ed Balls replying to the Chancellor. We are leaving the House of Commons


now. If you would like to watch the Autumn Statement debate which now


follows, you can do so by watching BBC Parliament or going to the


Democracy Live website. Just before we continue with our Budget


coverage, there have been dramatic events in Teheran. Dozens of young


Iranian men have entered the British embassy building in the


Iranian capital, throwing rocks, petrol bombs and burning documents


looted from offices. According to Iranian news agencies, British


staff are having to flee from the back of the embassy. We will keep


you up to date with that as we go on. Back to the Autumn Statement.


Was it an Autumn Statement or a miniature Budget? Was it a full-


blown Budget? The second this year. It sounded like that, as he went


through his announcements were lower growth and more borrowing


than he had planned and more public spending cuts to come even after


the next election. And also tide continued control of public sector


pay. -- tight, continued control. It was a very busy statement indeed.


Economic growth, bringing down at the debt, and unemployment. He is


saying that the economy will grow by less than 1%, 0.9%, this year.


It will be even worse in 2012, 0.7. He said there would not be a


recession but when growth is that low, it is not far off and for many


it will feel like a recession. It begins to pick up, too 0.1% in 2013,


2.7% in 2014. -- do 0.1% in 2013. Normally growth is predicted to be


about 3% in four years time, so do not take too much notice of that.


He then taught about the part of the budget deficit which does not


go away with economic growth, which has now increased. It will take


longer to get that down. Let's move on now to what follows from that,


the borrowing forecast as a result of lower growth. He is now going to


borrow in this current financial year of �127 billion. That is about


five more than he had anticipated in the next budget. Next year it


goes down but not by much. By 2014- 15 it is down to 79 billion. Even


by 2015, these are new figures, 53 billion is still being borrowed. By


my quick calculation, by this financial year and the financial


year ending in 2016, the Chancellor will be borrowing �101 billion more


than he had planned, even in the March Budget. The Government debt


as a percentage of our GDP is expected to peak in 2014-15 at


around 70%. That is the way the British Government measures it. Lot


of announcements about infrastructure spending, as we had


expected in this Autumn Statement Budget. The Chancellor confirmed


there would be �5 billion of additional public spending on


infrastructure over the next three years. He rattled off a host of


things, new roads, the Trans Pennine railway, railway schemes,


35 of which have been given the go- ahead. There would be �1.2 billion


of additional public money for school building. This is not


additional spending. He has found money from elsewhere in the


Government's massive budget and moved it from current spending into


infrastructure. There is also relief in terms of transport. The


3p feel duty increase planned for January this coming year was


cancelled. He has said that the increase will go ahead in August,


2012, but he might change his mind in the March November -- March


Budget, I suppose. The RPR it will -- rail fares will go up but not by


as much as was planned. He will also help small businesses and


medium-sized ones. There will be a loan guarantee scheme to give more


borrowings to the SME sector. He said he would raise that ceiling if


there was a demand. There is a �1 billion business finance


partnership for mid-sized companies. And he will continue the labour


market deregulation, basically making it easier and cheaper to


fire people. More on the business side. �1 billion extra for the


regional growth fund. That only covers England, headed by Michael


Heseltine. The business rate holiday is extended from October,


2012, to April, 2013. That is relief for businesses. And tax


relief for investments in small start-up firms. If you put in


100,000, it will only cost you 50,000, even if you do not pay tax


at that higher rate. Housing is one of the main areas that the


Chancellor hopes to get some great back into the economy. He has


proposed �400 million to kick-start building projects that already have


planning permission but have not started. 300,000 homes have


planning permission but they are not being built and this is an


attempt to get that going. There is also the mortgage guarantee scheme


for first-time buyers, which will make it easier for first-time


buyers to get a mortgage for that first leg up onto the property


ladder. There will be increased discounts available under the


right-to-buy scheme, introduced many years ago by Margaret Thatcher.


How do you pay for all of that in the longer term? The Chancellor had


some savings to announce, too. The rise in the state pension age has


been brought forward to 2026. We will all have to work until 67. And


the public sector going on strike tomorrow of course, tough news for


them. They know their pay is frozen at the moment and it will only rise


by 1% per year after the current pay freeze, which essentially


knocks out collective bargaining in the public sector. And elements of


the working tax credit will be frozen. That is not all that was in


this statement, but it is what we have been able to glean as the main


headlines. Nick Robinson, I don't know where to start! This is the


statement that George Osborne never wanted to make, which he feared


making. It is a statement which is not only totally grimmer for him


because he may have to make another one in the March budget which could


be even worse. It showed us there is pain today. Tax credits are


frozen for many people. There is pain tomorrow. Public sector


workers will see that once the pay freezes over in 2012, that they


will move not to another freeze but a limit on the total public sector


pay bill of 1%. And for anybody over the age of 52, -- under the


age of 52, they will have to work until they are 67 to get the state


Ed Balls, of course, therefore had the territory to say effectively,


"We told you so and you should change course." And yet he is going


to borrow a lot more, which is what Ed Balls him to do in the first


place. Indeed, as we said with Stephanie before the speech, there


is almost a convergence between what Labour was demanding and what


Mr Osborne has now been forced to do. There is on the outturn. What I


mean by that is Ed Balls would say he wouldn't have started here, as


he wouldn't have started to fast and borrowing would will lower.


George Osborne would say if you had started where Ed Balls wanted there


would have been higher interest rates. So yes they converge but


from different routes. One fact for you, a striking one. The OBR,


Office for Budget Responsibility, estimate the number of public


sector job losses there'll be. The important thing is that the


Government have now told us that the spending cuts will go on beyond


the election into 2015 16 - to 710,000. Before that they forecast


around 400,000 going up to 2016. That's a cumulative total. And at a


time when given the growth projections, it is not exactly


clear the private sector is going to create another 750,000 jobs.


That's the worry. The expectation is that they will, the private


sector, take that in later years. But the really striking figure, the


economic number, was the big down growth in economic growth to less


than 1% for next year. Stephanie, what is striking to me, since the


Government has made such a centre of its economic strategy the


reduction every year in the amount it hat to borrow, it continues to


reduce but it is going to borrow a lot more, by my calculations over


�100 billion between this year and the end of 1015-16. Won't that


ratle the bond markets a bit? going to be an interesting test


isn't it? People were expecting to see higher borrowing numbers. It is


interesting to remember that long debate we were all watching that a


year-and-a-half ago, the debate over whether Labour's plans were


going to command the confidence of the financial markets. The exhibit


A from the Osborne side and from the Governor of the Bank of England


is you couldn't be credible about reducing a deficit this large and


still saying you are going to borrow in the region of �70 billion


to �80 billion. The belief was you had to have promised to balance the


books over the course of a Parliament, because you couldn't


commit future Governments to doing that. The symbolism of that in the


new borrowing forecasts quite significant. The world has changed.


George Osborne says borrowing would have been even higher under Labour,


and I suspect Ed Balls would say something different. And the debate


is over whether growth would have been higher with a less austere


policy. It is an interesting point about the bond market, because the


US for example has the very bad borrowing figures and it is


borrowing at a very low rate. It is finding it cheaper to borrow than


the UK is. On the other hand if you look at countries borrowing less


than news the eurozone, they are having a difficult time, because


their governments are note considered to be credible. I


suspect we'll hear more about the market reaction and whether or not


the low rate of borrowing that the Government has, the low cost that


it is paying for its borrowing, is a reflection of cost in the market


or is it a reflection that we are not expected to grow very fast and


these are worrying times for the global economy. Robert, we had �1


billion here, �1 billion there. In a sense it was budget with the


content of Gordon Brown and the delivery of Iain Duncan Smith.


harsh, Andrew. It certainly did have a lot of the flavour of the


Gordon Brown budgets and pre-Budget statements. George Osborne did say


the Autumn Statement was just supposed to be a description of


where the economy is going. But we've had loads of the


microadjustments of the economy that he used to criticise Gordon


Brown for doing every six months. This is very much a meddling mini


Budget in that sense. It is important given that Gordon Brown


and George Osborne set themselves targets, and therefore one should


hold them to account. An interesting paragraph in the Office


for Budget Responsibility's report. It says, in the absence of


additional policy measure in this the 2011 Autumn Statement, we


believe the Government would have had a less than 50% chance of


achieving its debt targets. What does that mean? The OBR is saying


that George Osborne has flunked the debt targets. It is as close as an


organisation ever gets to saying that. It's a significant critique


of his earlier Budget. Crucially what the OBR are saying is that


unless he transferred from date spending -- day-to-day spending to


capital infrastructure, he would have breached his own targets. One


of those involves dealing with current spending. So switching from


one heading to another heading made the difference of whether George


Osborne had the human imiation of saying I missed my -- humiliation


of saying, "I missed my target.". To be clear, in terms of this


difficult judgment he has to make about whether or not to press ahead


with deficit reduction, some trougling news out of America, --


troubling news out of America. Fitch is reviewing whether to


downgrade the US from AAA. The Chancellor will say look, if I


weren't taking this tough action there's a risk we would lose our


AAA and borrowing costs would go up significantly. We've been


struggling to get hold of copies of the budget book. The numbers we


need to compare is the �22 whole in interest he says he is saving by


being austere with the increase in unemployment benefit payments.


Politically that will be terribly important. Most people would say


those are payments for failure. had a lot of these rail programmes,


roads wide ened, and this phrase from America, shovel-ready. When


you speak to business people is there such a thing as a shovel-


ready job? It takes weeks and months from giving aproful for


these things to happen in terms of people being employed and money go


into the economy. Business leaders all take the view the best way, if


the Government is going to do anything to stimulate growth, is


indeed to spend on infrastructure. Within the business community and


the City, if they are looking at measures to stimulate growth, what


he is doing in terms of infrastructure will receive a


degree of enthusiastic support. We'll be back to you three a lot


more to talk about yet. We are on until 3 o'clock. We've got plenty


to cover in what was a packed Autumn Statement. If you want to


comment on the Chancellor's statement you can do so by going to

:53:42.:53:45. and click on Have Your Say.


Or if you are tweeting, use the # - @bbceconomy Jon Sopel is outside


Parliament. He is going to gather political reaction to this


statement. I'm joined by Lord Ashdown, Alistair Darling, the


former Chancellor and Michael Fallon of the Conservative Party.


Michael Fallon, growth down, borrowing up. Retirement age going


up and a public sector cap on pay. Is there anything to be cheerful


about? Yes, I think what the Chancellor reassured us about was


he is still sheltering Britain from this storm that's engulfing the


rest of Europe, that he is doing his best to help families through


it at a time of rising prices and we are still on course to meet our


deficit reduction plan, just beyond the end of this Parliament we will


have got rid of the structural deficit. But borrowing a huge


amount of money. Everybody knows we had much higher inflation than was


anticipated. There is the slowdown in the eurozone. But overall we are


still going to meet our targets, our main date and get our deficit


back under controlling. Which is what they inherited from you. Night


looks like the struful deficits will disappear about the plan we


planned -- structural deficits. The growth forecast that the Chancellor


made in his budget in the summer of last year has completely fallen


away. We are talking about growth now having died at the end of last


year. It is going to flat line for another two or three years. There


is not a shred of evidence to suggest why it is going to recover


the year after. We are borrowing more, not less,s which is the one


thing the Government said it was going to balance the books by 2015.


Clearly it is not now. But isn't the reason for that nothing to do


with this Government but is to do with the eurozone itself? All of


this happened after the crisis became acute in this eurozone. The


economy grew in 2009 until the autumn of 2010, then it stopped. Of


course the eurozone crisis is going to make things very difficult for


us. Many of us have been saying for months now that unless it is sorted


out it really will have a very profound effect on us. But to blame


everything on the last Government's spending when the Government


supported that spending up until 2008 and on Europe is getting


disingenuous. A judgment was made on George Osborne 12 months ago


that. Judgment is way off course now. We are borrowing much more


than they intended to, which is completely against everything he


said only last summer. Paddy Ashdown, pick up on that. It is not


true. We all know the euro crisis started much, much earlier. You


asked what there was to be cheerful about. Thanks to Labour, we are now


running a bigger debt as a percentage of GDP than the Italians.


That's what the inheritance left behind. And we are paying interest


rates lower than the Germans. Why? Because the country and the markets


are convinced we are serious about cutting the deficit. Labour's


answer to a crisis created by borrowing is to borrow even more.


said that the Chancellor has had to borrow more than they thought he


would But Labour's answer is to borrow even more. It is un sporable.


If there is one thing the country should be grateful for is it


doesn't have a Labour Government still in power which would be


damaging more -- borrowing more and damaging hospitals. ALL TALK AT


ONCE Your party supported us until right up into the election. Unless


you get growth you can't get the borrowing down. Did you welcome


what was announced in terms of the infrastructure projects? Die, but


with the proviso that many of these things were announced I think you


will find by successive Governments. It takes a long time to get these


going. I welcome them but the present Government will have to


change the planning laws, or you won't see the new roads and the


investment which is welcome. A word of caution. It is very frustrating


but it takes a long time to see these things on the ground. We are


changing the planning laws, but there was a huge package of


infrastructure measures to bring forward spending, to help growth,


on roads on railways, on school building with. All those things,


which are good for construction, but also good for regions outside


the South East. There was also a package of measures to help


families through this era of rising prices from, for example freezing


the council tax again, stopping the increase in fuel duty which he


pence ild in year after year. And helping rate commuters, which is


important here in London and the South East. There was good finger


pointing there from Michael Fallon. ALL TALK AT ONCE Every Chancellor


has to reach a judgment on fuel dutyy, on taxes and so on.


Understandably George Osborne has said with the prices they are at


the moment he wanted to do something there. You support it?


course I support something that reduces the burden. If you look at


the squeeze on tax credits, if you look at the squeeze on people's


incomes I think most people watching this programme, most


people reading the papers tomorrow morning, will find their incomes


are going to continue to be squeezed with. Unemployment is


likely to be up. Employment is likely to go down, according to the


Office for Budget Responsibility. We are in for a grim time but it is


exacerbated by the bad decisions taken by this Government at the


start. Let me let the new Conservative


speak. We supported their spending cuts but why don't they now support


them? Here is the bottom line. support what I proposed. Hang on a


second. For every �18 the coalition is cutting in public expenditure


his plan is to cut �17. We understand the cuts that have to be


made. Labour is in a position of self denial over their own Budget


cutting. The differences that you parade are


exaggerated. That there isn't a huge difference in policy. Oh, Jon,


come on. If we risk by 0.5 a percentage point the interest rates


we are now enjoying having to pay back the debt they left behind,


kite cost you �5 billion, not the schools, hospitals and pensions but


Here's another big difference. They would increase the VAT, I'm not


sure Alistair supports that. Let's ask him. There's lots of people,


not just within the Labour Party, saying we need to boost demand,


demand is suppressed at the moment. Everyone agrees that the deficit


has to be brought down. I made that clear prior to the last election,


I've never changed my view on that, but we've got to do it in a way


that actually works. All I would say is George Osborne has had to


sit down conceding that he's borrowing �150 billion more than


what he said. You'd borrow even more. I have to call stumps. This


argument will continue. Back to the studio. A couple of headlines as we


go through this detailed paperwork. The UK Office for Budget


Responsibility has raised its estimate of public sector job


losses from 400,000 to 710,000. That's not far off a 100% increase


in its estimate. That's a lot. And also UK net debt, this is what we


used to call the national debt, by 2015/16 will now be �1.47 billion -


sorry � 1 47 billion. Call it �1.5 trillion. That will be our national


debt and that's 11 billion more, 8% more than the Chancellor forecast


only back in March. That's a lot of debt. And a lot of an increase. Now,


one of the Chancellor's key measures, of course, was that he


would stay on course for deficit reduction. He wants to show the


suspensionial money markets he's still sticking to plan A. But


although borrowing continues to fall it is at a much slower rate


and we're racking up debt. What does the City think of that. Back


to Maryam. A bit of a muted response from the


City. Largely to do with the fact that a lot of the measures were


announced over the last few days. Let's look at the markets. That is


what the FTSE has been doing. A little sell-off ones people started


digesting the figures. Earlier today we saw a drop in guilts. A


sign that the markets were convinced by the Chancellor's


arguments. But now they have risen back up more to do with the high


yields on Italian bonds. Let's bring in Louise Cooper from BCG


partners. Are you happy with what the Chancellor had to say today?


was always quite restricted on what he could announce today because


he's in coalition with the liberal democrats, so politically he's


constrained and financialcally he's constrained and we knew the figures


would be downgrated and that means the situation is far worse. A lot


of it was preannounced. There was a few extra bells and whistles in the


statement but really it's not a huge surprise and you can see that


by the financial reaction. And Jane, the important things you wanted to


see was the Chancellor sticking to his austerity plans but coming up


with fresh ideas for growth. Has he delivered? There were a few little


bits and pieces with respect to consumption on the margin, but


really this was about austerity as far as the City is concerned. And


you can see that from the guilts market. But we need to put this in


context and the context is out of the eurozone debt crisis and the


Chancellor therefore needed to reassure the markets that he wasn't


going to out step those austerity announcements he'd already


announced and from the point of view of the international markets


that really is the whole point. I suppose the muted reaction from


the City has a lot to be said for it, but the City does realise that


coming up in the coming weeks and months it is darkening prospects


for both business and finance. And that is one thing they can take


from today's statement. Thanks, we'll see how long it stays


muted. You're watching the BBC's special coverage of George


Osborne's Autumn Statement This is what he had to say. He forecast


growth of 0.9%. The Government expects to borrow �11 billion more


over the next five years, taking total borrowing to not much shy of


�1.5 trillion. Government debt as a percentage of


our national wealth is reckoned to peak at 2014/156789


Let's look at some of the costly bits of the statement to the


Treasury. The duty fuel increase of 3p has been cancelled. That was due


in January. There will be an additional �5 billion spending on


infrastructure. That's searching down every sofa in Whitehall to see


if there is any loose change. And tax relief for small start-up


firms. The state pension age is going to


go to 67, as it always was, now earlier, 2026. The public sector,


which over a certain level of income is now enduring a pay freeze.


When that's over, well, they can look forward to no more than 1%


rise after the freeze is over. And there have been elements of the


working tax credit has also been frozen. That's only part of what is


in the Budget. I call it a Budget because, in a sense, it is pretty


much a Budget. We've been joined by Danny Alexander, the Chief


Secretary to the Treasury. Welcome. This forecast for growth of 0.7%


next year, which is pretty much close to zero, does that include


taking into account all the measures the Chancellor has


announced today? Well, the observia forecast takes into account


measures that relate to further spending cuts at the end of the


period. What they're not able to take into account is the impact on


growth of many of the supply reforms we're pushing through.


That's something that economic forecasting can't reach. But it


certainly takes into account the spending decisions that we've made


and the impact. And you're right to say, of course, that is a much


lower figure than was forecast previously. It reflects, as the OBR


themselves say, the much tougher conditions faced in this country


and in the eurozone but is in line very much with growth forecasts for


France, Yemeni, Italy, the eurozone and other countries around the


world. But even after all this search for measures to boost growth,


which be -- we began to hear after your party conference, after all


these funds have been reallocated and all the assurance that this was


a Government that believed in growth and getting the economy


going, but taking all that into accounts the growth is a net effect


of 0.7%. Many of the measures announced today, the credit easing,


the investment in infrastructure and the youth jobs scheme, all


these things, the effect will be felt not just next year but in


future years as well. The effect of additional infrastructure spending


will support the economy for a very long time to come. But you must be


disappointed that that is all they're producing, surely? You were


meant to deliver a Budget for growth and all we get is 0.7%, and


if we're lucky, a big if, 2% next year. You'll find a welcome for the


investment in infrastructure and the finance packages and many other


things there that will support growth, particularly in the medium-


term. One of the things the OBR has done today, as well as telling us


about the problems in the eurozone and the high commodity price,


they've said that the economy as a whole is smaller and that's why


these sorts of supply side reforms are important to lift the economy


potential over the long-term. understand that, but whatever way


you cut it and even after all that has been announced today, the blunt


truth is that we are staring austerity in the face for the


foreseeable future? It is definitely true that we are facing


much slower growth. We're facing very tough conditions and we've


made very clear today, by setting out our spending plans for the two


years of the next Parliament, that, if you like, the pattern of


spending reductions and fiscal consolidation we've seen in this


Parliament will roll on for two years in order to mike sure we meet


our objectives. It's austerity. Particularly if you're in the


public sector. It's austerity? is further spending constraint. We


haven't set out what mix of policies we'll use in 2050/16/17.


But it is right to say this country will be facing further fiscal


consolidation and austerity for two further years in order to make sure


we deal with the enormous financial problems we face as a country. But


it is important to say this is delivering real benefits to Britain


in terms of the low interest rates and we're avoiding many of the


problems people see on the television screens every single day


from Italy and Spain and many of our other competitors. But when the


Chancellor, your boss, told us last year, "Britain's economic row


coverry is on track" that wasn't true? Was it? Well, one of the


reasons, Andrew, why we set up in the first place the independent


Office for Budget Responsibility was precisely because - hold on,


let me answer the question, because we wanted those forecasts to be in


independent hands rather than the hands of ministers. So you have the


OBR's forecast of last June....He Said this in the Autumn Statement


last year, just a year ago,, "Britain's economic recovery is now


on track." And I simply ask you, that wasn't true, was it? There are


big factors going on in the economy that are affecting our ability to


grow. High commodity prices, oil prices have increased by 40% over


the last year, that slows growth. Like wise the problems in the


eurozone, in our major competitors, that is having both an effect on


our growth potential but as the on yar say in their report, the


eurozone countries still need to sort out those problems otherwise


we won't get the growth this country needs. The on yar gives you


a smoke screen. It's not a smoke screen because we have independent


figures for the first time. I'm not saying the Chancellor lied last


autumn I'm just saying he turned out, whether it was the on yar or


Uncle Tom Cobbley. What I'm saying now is, is it true? What true?


the British economy is on track? have a plan to make our economy


stronger. This Autumn Statement was about two things, about protecting


our country from the huge risks that have grown substantially from


the other economies and making our economy stronger. We have the on


yar's best efforts to work out growth forecast for the coming


years and I accept those forecasts and they are much less, you're


right to say than they forecast previously. But is the British


economy on track for recovery now? The British economy is on track to


deal with our deficit and grow in the future. So what we have is a


forecast, which is very difficult this year, it's very difficult next


year and growth picks up in the following year, so yes, we're on


track to pick up in the following years. You've announced a lot on


spending and shovel-ready jobs, and roads here and rail here, and all


the rest of it, are we all Dickensians now? I would not accuse


you of that now. I would say what we recognise as a Government, both


liberal democrats and Conservatives is one of the things that has eld


us back in recent years is the quality of our infrastructure. We


are 28th in the world. That is simply not good enough for a


country like the yubgdz. That's why investment in road and rails is the


sort of thing we need to be doing in this country. It's perfectly


clear that you've brought into the argument a bit more job ceection


and infrastructure is valuable at stage. How confident are you?


confident that the OBR forecast is the best estimate we have for what


is happening to the economy next year. I can't sit here telling you


we will definitely a void the eurozone circumstances, because


there is so much uncertainty in the economy. But the OBR's forecast is


the best estimate we have. And what I am certain of is the measures the


Government has taken in terms of investing and getting the new-build


housing sector going will help build the economy in the year to


come. Nick. Lots of people will be worried about tax credits. Have you


made an estimate of what it will cost in those circumstances?


give a big inflation-linked increase to people out of work, but


those people in work but struggling, you freeze their benefits? So we


are spending overall, this coming year, �8.3 billion on the uprating


of benefits this year. That is more than forecast when we originally


made those decisions. We've focused on protecting the poorest people in


the country, those on out of work benefits and children through the


child tax credit. People on working tax credit will principally benefit


from this. This is an e-mail from a viewer Patricia says, "Why should


people out of work be given a 5.2% pay rise? My husband works full


time and he hasn't had a penny pay rise in four years." What do you


say to her? I'd say benefits have always been uprated by inflation.


That, almost every single year falls behind earnings, which is the


other measure we could have used. We want to make sure that the


lowest incomes, people who have lost their jobs and working hard to


get back into work are protected through this. But if you were...but


if you don't work you get 5%. people on the tax credit by and


large will be recipients of other credits, 80% will be receiving


child credits and housing benefits which are upgraded in the normal


way. This seems to me to be the best way to control costs whilst


having a group, yes, it's tough. I recognise it's a tough decision,


but through other things we're doing we're also helping those


people too. Can I ask about the fiscal rules and the importance of


sticking to them. We've heard the Chancellor talking about touting


the flexibility of the rules, but it is crucial for the markets to be


seen to be meeting the rules. And the second rule is that debt has to


fall as a share of GDP and the new forecasts show that happening, but


it is minuscule it goes to 7.7% of GDP. The Chancellor himself said


the forecasts will be worse if there is a recession in the


eurozone. Many people think there is already a recession in the


eurozone and he's behind the times. In six months's time, when he has


to stand up with the Budget are you going to announce tough spending


cuts? We do attach very great importance to sticking to the


fiscal rules we've set out last you're quite right to say the debt


target is to have debt falling by the year '50/16. What we've


announced today is tougher spending in the year '50/16 and '16/17 to


make sure we get it under control. The goal for debt is a path, as you


say, rather than a level. We need to get debt coming down. We have to


leave it there. We'll let you get back to preparing


these contingency plans for the eurozone meltdown. Thank you.


has the Chancellor's statement gone down with business people,


particularly in Merseyside? That's where we are. Our reporter, Judith


Moritz is at the Cammell Laird shipyard. Yes, I am. I have the


protective glasses on because we're inside the apprentices' school here.


Some are doing a bit of pipe welding. 85 apprentices on site and


many more start. It is a successful story when it comes to-out


employment here, the kind the Chancellor would hold up. But how


did the announcements go down with business people from this region


and beyond. Natalie Hayward from a tea bar in Liverpool. And Max


Steinberg. Natalie, we'll talk to you first of all. You own a pretty


small business in Liverpool. Did the Chancellor say what you wanted


to hear? I think there were a few positive things. We have to see


whether businesses will have to jump through hoops to get credits


that he's announced. Relaxing regulations in employment law and


health and safety is obviously very good for an employer. And capping


fuel prices ultimately benefits us all. So that was quite welcome as


well. What about the extension on the business rates will that affect


you personally? No, one of the things he does need to do is make


that applicable to all businesses because I don't benefit from that


at all in any way. I know it's obviously good for small businesses


but it needs to be applied across the board in my opinion. Liverpool


wants to attract investment to this area did you hear what you wanted


to? You talk about small businesses, like Natalie's do you think the


Chancellor said the right things? There were a lot of good things in


the Budget, it turned out, in my view to be a mini Budget. In terms


of small businesses, I think small businesses are still struggling to


borrow money. And the talk is fine. What I need to see it is working on


the ground. That small businesses can go to banks and barrow. It's


the small and medium-sized enterprises that are going to


provide the jobs in the future. I was delighted to hear about the


infrastructure investment. That's good for Liverpool and the north-


west. It fits into our plans to create an intrapresentairial


atmosphere in Liverpool. We'll be celebrate ing winning the


enterprise prizes next year. But the economy is still extremely


parlous and I think will we will be going through difficult times in


the next few years. I think perhaps a year has gone by and we've missed


an opportunity. We need to invest in this economy. The Government can


help with that. Some of the money will be released now and some in a


few years' time. I hope to build on what has been announced today and


if we can create a better infrastructure in this country,


it's good for UK plc. Steve, you run a road haulage


company so presumably for you the fact that the 3p fuel duty has been


dropped must be welcome? It's welcomed but I still don't think


it's enough to stimulate the economy. If you look abroad, some


fuel prices are still 20p to 50p cheaper than in the UK.


We still need cuts on fuel. Thank you very much. To sum up. People


here saying they heard some of what they wanted to, but not everything,


but that's the thing, you can't please everybody all of the time.


Well' be back here later in the programme to speak to more business


people and see if they heard what they wanted to from the Autumn


Statement. That's the view in Merseyside. Let's go back to the


view in Westminster from Jon Sopel who is still outside Parliament.


Thank you very much. I'm joined by the shadow chief secretary to the


Treasury. The Government set the stage pretty much for what was


coming. Was there anything that surprised you? I have to say, I was


really surprised by the borrowing figures. To have to borrow an extra


�158 billion to what was previously planned that's bad news and a sign


of economic failure. Because the reason they're borrowing so much


more is because unemployment is higher than expected and growth


continues to flat line and inflation is higher as well. And we


warned the Government 18 months ago if you cut too far and too fast you


risk choking off the economic recovery and that's exactly what


we're seeing because if you have more people out of work you are


paying more in Belfast and more businesses failing. So you you're


saying that the Government are now borrowing too much? Yes, you have


to reduce the deficit but in a balanced way. But if they hadn't


cut the borrowing would have been even higher? But if you have more


people back at work you'll have more paying taxes. Yes, tax


increases and spending cuts but but have to have jobs, because unless


you have people in work paying taxes you're not going to reduce


the deficit. And that's what we're seeing now, the cost of economic


failure is more people out of work, but also higher Government


borrowing and we've seen both of those today. But the world has


changed in the past 18 months. There was not a euro crisis of the


proportions we're seeing today? that's true but we also said don't


rip out the foundations of the house. Because when a hurricane is


brewing you're not in a position to with stand a storm and that's what


we're seeing now because our economic recovery was choked off


before the euro crisis. But also, unless you've got the jobs and the


growth plan, then when a crisis does come along you're blown out of


the water and that's what we're seeing now with the increases in


borrowing, coupled with the increases in unemployment. It feels


like a hurricane here just as you started talking about it. I'll talk


about the sunshine next! Government's argument was that the


reason it is having to do so much now is that you didn't repair the


roof when the sun was shining, that there were all those years of


plenty and Labour carried on spending like crazy. Up until 2008


the Government and the liberal democrats were backing the


Government's spending plans. It was Labour's choice in 2007 to increase


our borrowing to avoid the home repossessions we saw in the early


'90s. Yes, of course, now we need to start reducing that deficit but


what the Government are finding is if you cut too far and too fast you


choke off the economic recovery and as a result you can't bring down


borrowing because you're paying more out on higher unemployment and


less coming in in taxes because more businesses are failing.


There were some announcements on investment in infrastructure, what


did you think of that? There are a number of things today that are the


right thing to do, but if you ask are they making any difference the


OBR is the arbiter of that and the OBR have assessed the Government's


plans and revised down their forecasts for this year, next year


and the year after and revised upwards the unemployment. So I


don't think they're doing enough to get the economy back on track to


create the jobs we need. If they did have a comprehensive plan I


believe we would get the economy moving again and the deficit down.


But isn't that what they've done today? No, because you've just


moved money to pay others. Rob be Peter to pay Paul.


There's no new money for any of these initiatives. They're moving


from one pot to another and as a result the OBR say that it's not


We have seen the eurozone crisis develop.


What you see in the forecast is they revised up their forecast for


growth in the eurozone this year. That tells us a lot about what the


Chancellor is doing here. So too are the Chancellor's


decisions to cut so far and deep, which has choked off the economic


recovery. If you had been in the recovery and you had been writing


this Autumn Statement it would have been higher? We called for a cut in


VAT and a tax on bankers' bonuses to fund 100,000 jobs. We have been


clear we would want to reTuesday the deficit. Halving the deficit --


reducing the deficit. Halving the deficit. That approach will ensure


we have the growth in the jobs we need, while taking tough decisions


to reduce the deficit. This Government tried to go further and


faster and they have not succeeded. Though you have complained about


the borrowing levels, if you had been writing this Autumn Statement


borrowing would have been higher? That is a yes or a no? We would


have reduced the deficit at a slower pace. We know you need


growth and jobs if we reduce the deficit in a sustainable way. What


we are finding is the Government are not able to reduce the deficit


because they don't have a plan for growths and jobs. That is why it is


coming in higher. Instead of paying for failure, paying out more in


benefits, we would support businesses to get us through the


economic turmoil, put us in a stronger position for jobs, growth


and deficit reduction as well. Andrew, back to you in the studio.


Thank you. It is 2.30pm, just gone. You are watching the special


coverage of the Chancellor's Autumn Statement. Let's bring you up-to-


Danny Alexander told this programme he could not rule out a recession


Because of these dire economic forecasts, a lot of additional


infrastructure spending, there will be �5 billion additional public


spending on infrastructure. �5 billion, not a lot in a �1.5


As we have been told on this programme, these forecasts for


growth, such as it is, already include this spending in the


outcome. They won't make things any better.


On pensions and benefits, the basic state pension will increase by


state pension will increase by D plenty of statements in this


Budget. The banking levy will be increased


to maintain revenue at �2.5 billion. Almost �1 billion for this new


Youth Contract, to tackle unemployment over the three years.


Most involving work experience, not jobs.


D Now, we are joined by the director of the Institute for


Fiscal Studies, Paul Johnson. Welcome to our special programme.


One of the things which has not yet been commented on is we've seen a


line of public spending cuts between last year, through to 2015


and the Chancellor said, there's more coming in 2016 and '17. That


is right. The consequence of the terrible growth numbers is that in


order to meet his fiscal rules, he's going to have to do two more


years of cuts, at essentially the same kind of level he is cutting


over this Parliament. We said before five years of cuts of this


scale are unprecedented. We will now get seven years of cuts in this


scale. Two years of substantial public spending cuts. And one of


the Chancellor's aims, that he made much of, was that he would get rid


of the structural deficit, that bit of borrowing that doesn't go away


even when the economy is growing. He had a target for it. We are


going to borrow more than he originally thought. Is it clear now


if and when the structural deaf silt does go away? Well, he's --


structural deficit does go away? Well, he's only on target to reach


it because he's had to do two years of extra cuts. Had he stuck to his


previous spending plans he would have missed his target. So, he's


had to cut more to meet that target? He's had to take another


�15 billion away from public spending in the years after the


next election. He has not told us how. He said in his forecast he is


taking an extra �15 billion away. That is enough to say he will meet


his targets. If he had not penciled that in the OBR would have said you


will miss your targets. On the issue of debt, often mixed up with


deficit, but it's the I kum lated deficit, the -- the accumulated


deficit, the other target was there would be a date, he would add and


add and add to debt, then it would become a smaller percentage of our


overall national wealth. That was his other goal. What has happened


there? Well, he has said he's going to meet that. Obviously the total


level is going to reach a higher amount. This was always supposed to


be a kind of... Always an odd target, to specify one year in


which you are moving to a slightly smaller number. You can muck around


with numbers to make that work. He said that will just about happen.


That is a less important target than the one we were just


describing. On the structural deficit? It means, as you said,


there are �100 million or more of extra borrowing. On your analysis


and looking at these figures, how do you think this slump compares


with previous periods of economic difficulties in terms of people's


living standards? It is extraordinary. Compared with what


the Budget three or four years ago was expecting t economy will be 13%


smaller in 2016. More than 3% smaller than we were thinking six


months ago. It is a bit smaller than before the crash? It is still


smaller. This is an extraordinary change. One of the consequences of


this, this is in the Office for Budget Responsibility figures, is


really big real earnings cuts wefplt knew there would be 1% -- we


knew there would be 1%. They think 3% this year. And continued falls


next year and the year after. People are poorer. A squeeze on


living standards. People will be no better off in 2015 than they were


in 2001. That is unprecedented. Before the


eurozone started to cause problems, one of the reasons the economy did


not grow as it was meant to was this squeeze on living standards,


that people were not spending as much and tightening their belts.


That continues. It is cause and effect, isn't it? If the economy is


doing badly then earnings go up less. It means people have less to


spend. We are stuck in that uncomfortable position, where we're


not going to get a lot driven by growing consumption in the short


run. People are still paying down accumulated debt. Not just the


Government which has a lot of debt. It is the private sector as well.


The thing that strikes me is the politics of this, because I would


suggest, Nick, that what it means is whereas this coalition started


life in 2010, thinking we'll do all the tough stuff first and the


economic cycle will be in kilter, we will hit 2015 with the job done,


we are off to the races. They are now totally out of kilter? That is


right. It has huge implications. The Chancellor was counting on,


just before the next election, saying job done, now we can give


you some goodys to reward you in the form of tax cuts. The Liberal


Democrats were counting on saying, job done, we no longer have to


stick with this coalition, we can present ourselves to the electorate


and give them a choice. There is an implication for the Labour Party as


well. I suspect, in fact I predict that day after day you will now


have George Osborne saying to Ed Balls, these figures, from the


Office for Budget Responsibility say you have cuts when you come to


power. What l you reverse these cuts and make borrowing worse? The


pressure is on. The rules, in other words of the game, have


dramatically changed. Even if the economy does not get much worse. If


it did, it would change more. That really affects the dynamics of


politics and what they say of each other and how they discuss what


their plans are for the next election. Robert, when the official


fosh cast is 0.7% -- forecast is 0.7%, we know it could be minus


0.7% in reality or more - don't you get the feeling that we are on a


knife-edge, and that if the wind blows strong from the eurozone, we


are over that edge? There's a lot that could go wrong with even this


pessimistic forecast. For example, next year the OBR expects a big


rise in business investment. Business confidence is shot to


pieces at the moment. There is a huge storm blowing in the eurozone.


If it goes as badly wrong in the eurozone as many fear it will do,


then frankly everything today will feel irrelevant. The size of the


economic shot will knock these forecasts for six. The Office for


Budget Responsibility does make it absolutely clear that, you know,


there are huge risks. What would happen in Europe and the


damage which could be done to the banking system. A final thought


from you on this? Anything to cheer us up? Not a lot. It is worse than


we expected. It is another two years of austerity. As Robert just


said, the risks are mostly on the downside.


In a way, what you are saying is this is as good as it gets, it


could be worse? That is what the OBR are saying. That is what will


happen if the eurozone does go up. You are tapping away there. She is


sending her report to the IMF! To you have a final thought for us?


will tear off because I want to hear what the Office for Budget


Responsibility says about this structural change. I think, are you


surprised Paul, just to see an independent body, that it has to be


said, no-one elected, has had a fundamental impact on this report,


it is one that George Osborne intended and many would say is a


good thing. They are just as likely to be wrong as the Treasury. The


fact they are not politicians, they can still be wrong. It allows


politicians to hide behind it. goes both ways. They can blame the


bad news on the OBR. They are also stuck with what the OBR has decided.


It has decided to be pretty gloomy about what has happened to the


economy. This feels like a good thing, actually for the way we run


the British economy. These are credible numbers. They may be wrong,


they probably will be wrong. Forecasters get it wrong. These are


credible. Had we had the Chancellor saying my forecasts are more


optimistic than this, then they would not have had that credibility.


There's a nasty outcome, but it a east a good thing that the


Chancellor is being held to -- it's a good thing that the Chancellor is


being held to account. It helps George Osborne to say, not my fault,


I am being told to do this. He will use that against Ed Balls. He feels


the OBR might be wrong, the Treasury is wrong, he has been


proved right on a series of things F he were in the Treasury in a few


years' time, he will have a big decision. Will he say, I don't want


this independent advise, because it is bad and misleading? Here's a


word, he'll keep them. Let's go back to Merseyside to join Judith


for more business reaction. Welcome back to the apprentices


school here at Cammell Laird. This is a hive of activity. They are


doing a bit of pipe welding today. 85 apprentices on site here. I have


protective googles on. -- goggles on. We will find out what real


employers have to say about the Autumn Statement. I have three


joining me. Steve Potter, you are here with business interests which


are many and varied. You are here as a solicitor. You advice on small


and medium companies and also Nick Hugh, you run a car leasing company.


If I can talk to you first. Your business interest ps vary from ship


building to funeral burials. A lot of aspects to your business. Did


you hear what you wanted to from George Osborne?


I am sorry about that, we have lost the line to Merseyside there. When


we get it back, we will go straight back up to get more business


reaction. We have, in one of our of the CBI, John Cridland and also


the General Secretary of the TUC, Brendan Barber. Welcome to both of


you. Mr Cridland, let me come to you first. You have a lot of what


business wanted - more infrastructure spending and the


rest of it. Are your members going to start investing at last? Yes, I


think they will. It was grim economic news. If it is grim


economic news we have get on with getting the country moving and


getting the country working. There is a plan A plus here. The measures


on roads, on digital, on energy, on unemployment. On helping with


energy-intensive industries, helping mid-size businesses grow. I


think they add up to a confidence- building package for the business


community. So if businesses do invest and


we'll have to wait and see, you are sitting on cash reserves of �900


billion at the moment. If you start to put that into the economy, would


we do better than the 0.7% growth which the OBR says is all we are in


I think it explains why the OBR were more optimistic about growth


in 2013 it than they were. We have made a start today. I think it is


the private sector that has the money to put to the public sector


balance sheet to get things moving when the public sector can't and


shouldn't be spending money but it does not have. Brendan Barber, it


seems like a pretty grim time if you have a job in the public sector.


You are going to lose more jobs, according to the OBR, from 400,000


losses to 700,000. You have a pay freeze as well and after all of


that you will be lucky to get a 1% rise, which is less than inflation.


It is hard pounding. It certainly is. As to say, the prospects are


looking particularly grim for their public sector. -- as you save. We


were told this pain would be compensated for by private growth,


but the forecast has turned to ashes. More heart pounding, as you


say, and a massive squeeze on the living standards of the 6 million


people working in the public services in particular. It is hard


to see what you can do with the public sector. Of course, you can


always make changes at the edges, but the fact is that there is a


hard pounding for the public sector, even though the Government is about


to borrow �111 billion more than it intended and more than Labour has


been calling on them to do, and at the end of it all we will be


indebted to the tune of 1.5 trillion pounds. These cuts that we


were seeing, we were told it would lead to private sector growth which


has simply not happened. We have been getting all the pain, with the


jobs going, the pay freeze in the public sector, all the pain has


been coming but the game has not. Surprise surprise. This is what


happened in the 1930s. The lessons of history are clear. Austerity


begets more austerity, not growth. In the 1930s we did not have a


deficit of 10% of GDP. We already have an enormous Keynesian policy


in place and it is not producing growth. But we haven't, have we? We


have had a policy of major cards. - - cuts and tax increases. What that


has led to is an economy that is virtually flat lining. Unemployment


is rising, set to rise even further, up with an even bigger squeeze on


living standards stretching into the distance. This is not all the


fault of the eurozone. Those problems do not help the situation


and they add to the risk going forward but they are not the cause


of the problems that we are enduring. One final thing. What did


the Chancellor not to today that you would have liked to see? He was


not able to wave a magic wand to solve the eurozone crisis. He did


not expect that, did you? It is the main reason why growth has been


disappointed and if we can get that storm cloud removed, we can get


back on the trajectory to growth and jobs. On the shock news that


the Chancellor did not have a magic wand, we leave it there. Back to


Jon Sopel. Let's get some nationalist reaction


from what we have heard today. I am joined by Jonathan Edwards and a


spokesperson for the SNP. Were you happy with what we heard? It was a


panic statement, a series of interventionist measures. They are


recognising that the economy is the key problem. There was a capital


reinvestment programme made up of 25 billion from pension funds and


also public money. There was Government alone is losing out by


1.5 billion. What did you think of it? I agree with him. The growth


forecast has dropped from 2.5% in 2012 to 0.7%. Much as the


infrastructure investment is welcome, it will not come on stream


until after 2012. It will not deal with the immediate problem. As far


as the Scottish Government is concerned, we do not know what the


Revenue developments will be with the departmental budgets when they


are announced. What about the impact of the public sector pay


announcements? Pay is raising its ugly head again. Labour tried to


introduce this when they were in power and it will have a massive


impact on economies like Wales and Scotland. What do you think?


Another two years of pay restraint after the current year. Plus the


issues of regional pay, which could exacerbate the differences between


the South East and other areas of the country, including Scotland,


Wales and the North West of England. This is one of the BAFTAs ideas


about the Chancellor has come out with so far. -- the most stupid


ideas. The policy of the Scottish Government is to look at the euro


when the time is right and by referendum of the people. In the


Caribbean since we would stick to the pound sterling. If -- in the


current instance. If Scotland was independent, we could make


decisions that are important to the Scottish economy, rather than


waiting for the Chancellor to make decisions. Thank you.


How has George Osborne's statement gone down across the United


Kingdom? Let's hear from the Northern Irish Economics Editor Jim


Fitzpatrick. Anything in this for Northern Ireland? The bombshell is


an announcement of a review into the possibility of regional public


sector pay. There are 230,000 public sector workers in Northern


Ireland and their average pay is currently about 40% more than the


average pay in the private sector. You can imagine the starting point


for negotiations if there is going to be a regional pay rates set in


the public sector and the kind of cuts in pay that people could see.


That is a huge issue for Northern Ireland and its economy. Elsewhere


there were fears, because of the way the infrastructure projects


were being primed with savings from other departments, that that might


mean cuts at Stormont. In fact, they will receive �130 million


extra from infrastructure spending and they will be up on departmental


spending as well. Overall it is good for Northern Ireland. On


credit easing for the banks, the situation here is complicated


because the Irish Banks are a big factor in Northern Ireland as well.


I understand from industry sources, but the detail has not been seen


yet, that the major banks in Northern Ireland, UK and Irish


banks, will be able to take part in that, which would also be good if


they can continue to lend more to businesses. That's the view from


Belfast. Let's get more reaction from people involved in business.


We are back in Merseyside and we have got rid of the gremlins.


Gremlins? I promise you that this was a real-life shipyard. It was a


crane at a -- that took us off the air. It sailed in front of our


satellite truck. I promised it was a working environment. We have some


genuine working people here, taking time out of their businesses to


talk about their response to the Autumn Statement. You represent an


enormous company with lots of different interests. From retail,


to burials, to shipping, what did you make of the state and today?


There were lots of large numbers and large programmes announced.


They are great initiative, supporting infrastructure and small


businesses, with tax relief and things like that, supporting young


people back into work. They are all good and what we are waiting for


his more detail for those programmes to see how they will


play out. We hope that will happen sooner rather than later. Growth


will be more or less flat through next year, until 2013. We are


seeing it good initiatives but we won some concrete plans. Because


your concrete is so diverse... -- Apologies for that. We have lost


you again! It is really dangerous in that factory. I hope the crane


has not fallen down. One thing that struck me, and I did not get a


chance to ask Brendan Barder this and I wish I had, the day before


the big strike, the Chancellor it - - has said there will only be a 1%


pay rise after the pay freeze. I think the Government thinks it can


fight with the unions and win. There will also be a review of


regional pay rates. I did not notice that. This was thought of in


the 80s and the 90s and every Chancellor has ducked it because it


is so controversial. Certain public sector workers do incredibly well


compared with private sector workers because they live in an


area where wages are lower. But you try changing that! You tell a


police officer in Newcastle, a civil servant in Belfast, that we


are going to cut your pay because it is not fair in relation to other


people in your area. That is hugely provocative. It suggests that the


day before the strike, they know they have got a fight. Robert, by


the end of this week, we may not be talking about the Autumn Statement.


You may be on our screens telling us about the unravelling eurozone.


I could be doing that this morning. -- this evening. Italy have record


borrowing rates, almost 8%. Several billions of three-year loans.


Borrowing for three years is not supposed to be risky. With Italy


borrowing at 8%, the markets already closed for the enormous


eurozone economy that is so important. The noises out of


Brussels is that their plan to launch a big bazooka to help this,


a bail-out fund, looks more like an air pistol. The size of his bail-


out fund is shrinking. All of this could be close to a relevant. It


may all go badly wrong in the eurozone. If it does, frankly, we


will be into emergency plans to rescue our banks and most of what


we have heard will feel like an interesting but irrelevant story.


The one thing we did not find out is what the contingency plans are.


I don't think they will be telling you. That is why I did not bother


to ask! We have been incredibly gloomy throughout the programme.


The Chancellor will say that we are not there yet, and that is the


advantage, he will argue, of his policies. Ed Balls will say it is


worse that it needed to be, but he will accept we are not in a


situation of the eurozone countries. In many ways we have better


prospects than the rest of the eurozone and we should not forget


that. It has been a pleasure to have you with us on this rocky road.


There is plenty more on the BBC News Channel throughout the day,


including coverage of the OBR press conference at 3 o'clock, coming up


now. There will be more on the latest public sector strikes


There's no Daily Politics today but Andrew will still be here in the studio, as we present a three-hour show on the Autumn Statement - live on BBC2, BBC News Channel and BBC Online.

We will start at 1200, the Chancellor speaks at 1230 and then there will be a Labour response: we will take both speeches live and in full.

Andrew will then get analysis from BBC experts Nick Robinson, Stephanie Flanders and Robert Peston, before reaction from Westminster, the City and across the UK. We are on air till 3pm.

Andrew and Jo are back tomorrow for a usual 90-minute Wednesday with PMQs, reaction to the statement and coverage of union members taking part in nationwide industrial action.

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