BBCAskThis: Spending Review

George Osborne has set out his spending plans for the next four

years and he scrapped plans to reduce tax credits. He said he could

afford to drop the plan because the public finances are in a better

state than expected. The economy isn't expected to

perform dramatically different to how we thought in July but we expect

the public finances to be a there's about ?27 billion, giving

the Chancellor some money to play with. There are things going up and

down within that total, the single biggest thing is that the government

is likely to have to spend less money on debt interest. The Bank of

England has also announced it will reverse quantitative easing later,

which helps as well. There has also been good news on tax, income tax

and corporation tax receipts have been coming in well, we are a bit

more optimistic on things like national insurance and we have share

prices as well moving in the opposite direction, fewer

transactions in the property market so less from stamp duty, so things

in both directions but it is more favourable for the Chancellor. So

people are saying George Osborne has just been lucky, this is not to do

with skilful stewardship, he has just had good luck today. Is that

fair? As I say a whole different things have contributed to

this, the fact that interest rates are lower maybe tells you that

people are less optimistic about the long-term outlook for the economy.

The Governor of the Bank of England has in

policy on quantitative easing as well. These policies do move a lot

from forecast forecast, which is why we keep having to do them. In a

spending review you are setting out plans which have to last for a

number of years, so any Chancellor has to do that knowing that things

will not turn out exactly as we expect them to. There is a price tag

of about ?4 billion attached to this, so where does that come out?

People watching this will be wondering, he doesn't need that,

that money he wanted to say, he doesn't need that, so

money coming from? The saving on the reversal of tax credits causes --

costs about ?3.5 billion next year that in the next few years quite a

lot less because by then people will be on the new Universal Credit which

is coming in. Over the longer term the Chancellor is only giving back

about 8% of the welfare savings he came up with in July, whereas next

year he is giving back 80% of them. The medium-term pitcher gives a lot

less room to make up than in recent years which is why his welfare cap

is breached in the near term but he is back on course to achieve it

later on. The cap overall is breached.

Joining me now to answer your questions on today's spending review

is our panel of experts - John Longworth from the British Chamber

of Commerce, Louise Cooper, a personal finance writer, Geoff Tily,

Chief Economist at the TUC, the federation of trade unions in

England and Wales, and also Rachael Badger from Citizens Advice.

It is great to have you here and hopefully we will have a stimulating

discussion based on a lot of the questions and ideas that the public

have been putting forward to us through the day. James Simmons has

the first question and says, if tax credit cuts are to be scrapped what

happens to Universal Credit, wasn't it going to replace tax credits?

Rachael. The tax credits announcement today will be a relief

for many millions of family who were expecting their incomes to drop in

April but there is a bigger picture, the Chancellor said clearly that

there will still be ?12 billion of welfare cuts, Universal Credit will

still happen and there are cuts in the pipeline there, so a mixed

picture and more cuts to come to tax credits. Louise, the fact is he can

scrap tax credits because the universal tax would be lower than

expected anyway. Universal Credit will take a few years to roll out.

There are two other things going on, the national living wage is

increasing and he is increasing the personal allowance, the amount you

can earn before you go into income tax, and he wants that to go up by

?12,500 by the end of Parliament. The idea of the Chancellor is that

you get paid more and you keep more of your earnings. That is the

theory, although what we saw with tax credits is about an increase in

wage and an increase in personal allowance didn't make up for the tax

credits being scrapped. Hence we had the House of Lords refusing to put

it into law and the big political climb down we saw today, but that is

the idea, this is a temporary relief. The welfare cuts are still

to come. The message from him is that we are moving people off

benefit into work, that is not changing is his message. Geoff Tily,

a lot of people you represent at the TUC will be concerned that the

Universal Credit is going to mean they get less money than they are

now. Absolutely. On one level we have to welcome this big climb-down

from the Chancellor, everything everybody says about Universal

Credit is right but this is the underlying theme of the Autumn

Statement, the reality is quite different from the rhetoric. The OBR

are still stressing that we looking at the biggest cuts over this ten

period in recorded history for the past century. You compare it to all

of the leading G7 economies and it is the biggest. Let's move on and

this is from Jill, what is happening to the British steel industry and

the thousands of workers out of a job? John. The Chancellor has

announced, I understand, some measures to help steal. One of the

issues is that energy costs are so high in the UK because there is such

an input into what is basically green taxes and the UK has run ahead

of the European Union in relation to the carbon tax, so one of the things

is -- it is impinging on it is the green policies of the government and

they really need to compensate for that or revise the policies. Because

all we will end up with if we go down that route is exporting jobs

because these industries will move abroad and we will export the

pollution as well, because the chances are they will not be as

constrained in other countries in relation to emissions. You are

talking about business in general there, the effective green policies.

Very briefly, what did he say about the steel industry? He picked up on

the fact that the steel industry was having problems and he mentioned

compensatory factor involved in compensatory factor involved in

trying to balance that. There is an issue about bumping as well. Other

countries of course with a high cost economy, like the Netherlands, and

high-level productivity, but nevertheless dumping is an issue.

This is the big test because you talk today about industrial

strategies and at the moment we have this critical issue going on in the

country. It touches on everything we have talked about, the steel

industry contributes ?2 billion to the UK balance of trade, represents

tens of thousands of jobs, generates ?90,000 value added for every

employee in the steel industry but one in six jobs in the industry is

at risk and identity we have heard much about what we are going to do

about it. It is not the same in other countries, America, France,

Germany, they look after their steel industry, and we know the government

has things they could do. They could provide some relief for the

exorbitant rates that the steel industry forces, we could use

British Steel in projects like HS2. This is from Peter Kox, how is

replacing grants for nurses' education with loans going to

increase the number of nurses? Effectively because the government

is not paying them in advance any more. The government was paying in

advance and now it is replaced by individual personal debt. I have an

issue with this because I can see effectively between need a

world-class education system that needs to be funded, and part of that

funding is now coming from individuals, a lot of that funding,

for individuals who hopefully will earn more because of that education.

If you compare the UK to the States, you are seeing almost unheard-of

levels of personal indebtedness leading to personal bankruptcy and a

lot of that has come from student debt in America. That is the point

of the question, if you are a nurse and you are going to lose these

grants, why would you want to take out a loan to push for a job you

might not be able to get? I think you will be able to get it a go is

one of the problems we have had is the cost of agency nurses and having

to import nurses from around the world because we have not been

training enough. We absolutely need to train more nurses and for the

government this is a cheaper way of doing it, letting the nurses fund it

themselves. George Osborne is talking about ?6 billion for the NHS

upfront. Rachael, this question is from Jill, where is George

Osborne's new money for the NHS coming from? We have to go to the

OBR on this because it is a range of issues in the wider economy but it

is clear that as we have said there are still dig cuts in different

departments. As ever it is a balancing act for the Treasury. One

thing is low interest rates for longer. That is what has given him

three to four Ilium pounds a year. A lot of city experts are coming into

this project who thought his position on spending would be worse,

not yet. -- independent forecasters thought

after the bad deficit numbers last Friday he had less, not more.

Interest rates have been low for six years, he could have borrowed this

money and invested, as a lot of people suggested. Suddenly he has

decided to do it now. He has been quite fortunate in relation to the

OBR figures, they have given him some

everyone, but interest rates you are right are at an all-time low and we

have been Interest rates are starting to rise

globally, given that global debt is to half times global GDP, so Britain

needs to be in a strong position to weather that. -- interest rates

might start to rise. has actually not been very

successful in getting the deficit down. I don't

but he is looking at a deficit of 70 billion for this year when

previously his plan was for the deficit to be gone over the -- and

over the last parliament he has borrowed billions of pounds more

than he said he would. In a way your correspondent was right, he has been

very lucky. These are small changes, basically he has freed up about ?10

billion a year, half of that coming from the Bank of England statement

about what it is going to do with its monetary. The other half is an

increase in taxes which have come through in stamp duty and the

apprenticeship levy. The big backdrop is this huge increase in

borrowing compared to what he expected. Some very small changes

this year really but it has enabled... They say it is better to

be lucky than clever and we do need lucky chancellors. What he did in

the last parliament, which we always applauded and I highlighted, he

played a fantastic game of persuading the world markets that he

was a hard chancellor bearing down on the economy and he didn't end up

cutting spending that much. Next question, John says widely

pensioners get benefits that they don't need? -- why do pensioners. If

you look at all of the lines on welfare spending, they are

effectively the same number if you go from 2016 through to 2021,

essentially you get real cuts. The one line that shows huge growth is

pensions. I have forgotten the exact number because it goes from ?85

billion up to 105 Ilium pounds. A massive increase in pensions. Way

above the rate of inflation. Essentially what they did is

promised pensioners this triple lock, generous pension payments in

future, and I think is fiscally unjustifiable given the cuts

elsewhere, and pensions are a big part of our social bill. All of the

other welfare has been cut so dramatically and pensions is up

really quite fast. The cynical thing is to say that that is because

pensioners vote. Yes. I think -- I think politicians would say that is

why it is. We are talking about the universe Al-Ahly of all pensioners

are regardless of wealth, getting a certain level of benefit. -- the

universal quality of all pensioners. It is clear that there are some real

choices being made, in Citizens Advice we see two and a half million

people every year who are not feeling the financial security the

Chancellor is talking about today, and we see a real different with --

difference with pensioners. Do you have a lot of pensioners going

through your doors? Yes, questions about pension credit and people

asking about the pensionwise service. Some small announcements

today... It is not all pensioners -- some pensioners are having a

difficult time. Matt says why isn't some of the money for house building

going towards social housing? 5 million are on the waiting lists. An

excellent question. Obviously building some houses is better than

not building some houses. 400,000 over the rest of parliament. It

sounds like a lot but back in the day we built 300,000 a year or

ambition and of course, as your ambition and of course, as your

question says, these are houses for the private sector. I think the

worry is that the motivation here is more about the housing market,

looking after the builders of houses, the finances of houses,

rather than the people who need houses. -- financiers of houses.

There is that rhetoric that everybody should have a right to

their own home, it goes back to the policy of selling off houses, the

Conservatives just don't like social housing, is that it? There is some

politics in there I'm sure. It is hugely important that we have more

housing stock and people can move, it is important for businesses

otherwise they can't get the skilled people they need in parts of the

country with shortages. It is hugely important for the economy that we

get construction going but there are tensions in the economy because the

planning regime restricts the Department of Housing, people don't

want the new developments, so there is a tension between the need for

housing and the desire not to have housing on the green belt for

example. The Tories have changed planning laws and today Osborne said

we will ease up the planning laws but in the past but have tried and

failed. The whole question has been dogged by not putting spades in the

ground, getting on with developing infrastructure including housing, it

has been a real problem for this government. We want to see actual

action next. There is a real question about housing that works

for everyone, welcome commitment for new homes but for private renters we

see huge problems with that sector, the private renting sector not

really fit for purpose, nothing there in the announcements today and

cuts for housing benefit for those in the social sector. He has

restricted that sector in elation to tax measures. The increase in buy to

let, that could well lead to private landlords having to put up their

prices. Or exit the market, which would make things even worse. I

think his calculation was that there would be more houses for sale. We

will have to see whether that works. But there is also a need for social

rented property. You made the point about the green belt and planning

and NIMBYs and it is very easy to blame these things but

fundamentally, for the past five years, there has been a lack of

ambition about investment plans. We agree about the necessity for

investment, that now is the ideal opportunity to invest. Interest

rates have than the lowest for 5000 years or something so it would we

crazy not to borrow to do these things. We will have to move on.

Ernie says if we are hard up why isn't the government collecting all

of the tax it is owed? An entire accounting industry developed

burning a fortune helping companies avoid paying tax and there is a

strong lady. Jeremy Corbyn says a hell of a lot could be done. Jeremy

Corbyn has ?120 billion to be found down the side of the sofa, I think

that is somewhat optimistic. Osborne is trying but they have been trying

for sometime. This is a global issue, not really something that can

be sold, and the evidence is that governments around the world are

more willing to -- to incorporate than five or ten years ago. The OECD

is looking at this and already we have seen tax havens being cracked

down on. It is happening but there is an entire accounting industry

developed around avoiding tax and that will take quite some time to

change. It is up to us as individuals, shareholders, citizens,

it is said to companies, it is your job to contribute to this nation

that you are based in. Social pressure can have quite a lot of

effect, naming and shaming companies, Facebook, whatever, and

almost even a consumer boycott. That will help, plus the changes to rules

that will be slow. John, there are some of your members who would take

advantage of the way the tax laws are set up in this country, let's

put it that way, and they are making clear that if it is possible for

them to have a certain tax arrangement which means they pay

less then that is absolutely fine. Do you think the rules need to be

tightened up? You hit the nail on the head, it is about the rules. If

companies are operating within the law it

law, get on and do it. Of course it is a global issue, we have to beat

competitive in a global market, which is why we seeing constant

rises in consumption taxes and being there taxes like business rates,

because they are the ones you can actually get and there is no

escaping them. Things like corporation tax are much more

difficult to get your hands on. There is much more Eichmann to get

rid of corporation tax completely. In the Treasury's announcement

today, look at the lines, income taxes are going up by 50%, national

insurance up by 50%, corporation tax pretty much flat over the next

spending review. 18% corporation tax rate is very low. I disagree, it is

not lack in white, it is great, and there is dark and light grey, and

companies should be much further to wards the light grey. It is not that

simple and they should have a social responsibility to pay an appropriate

18%. Abolish corporation tax, a polish it. Where will that 50

billion come from? The final question, how can we be assured that

young workers will be able to get on the property ladder? Rachael, nobody

can guarantee that, can they? Know, and I don't think we have heard much

today that makes that easy. 200,000 starter homes. But a lot of people

who are struggling to make any kind of deposit, they are in households

that are not saving anything, so there are challenges here. A lot of

young people are struggling much trying to make things add up,

particularly with childcare costs costs on top of bills and rent. For

a lot of your members this is a huge problem, Jeff. It is a fundamental

issue and it takes us back to the Autumn Statement, there are some

fundamental problems with the economy, that it is not delivering

for large sections of the publication. The one thing we have

not discussed today are cuts to local government spending. The

government has signalled its intention to scrap the grants for

local authorities. The head of the LGA says even if councils stopped

filling potholes, closed all children's centres, libraries,

leisure centres, etc, they would still have a financial black hole.

There are some very difficult things in this spending review. It has been

great having you all in looking at some of the issues coming out of the

Chancellor's words today. Many, many thanks to you.

Much more on the spending review coming up but now time for the

weather news.