The Autumn Statement

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 - bbc.co.uk/news 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