Conference Special Daily Politics

Morning, Foulkes. Well come to this Daily Politics special live from

the Conservative Party conference in Manchester, where ministers are

in no mood to woo voters. David Cameron has already said sorry to

half the population, although exactly what for isn't clear. This

morning he courted the keep-fit brigade by jogging around

Manchester, and has announced the return of a good old Thatcherite

policy, the right to buy your council house. Decidedly retro feel

here in Manchester today, and as always in these days, may the

economy takes centre-stage. George Osborne is hoping that his speech

will prove to the country that he is alive with ideas. He has already

announced a freeze on council tax. We carry his speech live and

uninterrupted - at least, we hope it is uninterrupted! We will be

talking to the Employment Minister Chris Grayling. And is the party

divided over Europe? Is the Pope a Would you like to vote in our poll

for Daily Politics. It is about Europe. I must admit, Liam Fox's

bodyguard looks a bit scary, so I didn't want to push him too much.

All that and much more coming up in the next 120 minutes of public

service broadcasting at its finest. We have two of her Majesty's press

corps finest. Matthew Parris and Steve Richards are here. Only one

thing to talk about this morning, the Chancellor's speech. It is

always a big moment, the Monday morning of the conference. I don't

want to downplay the excitement of all the viewers tuning in. I have

just done my best! But the reality is, although I am sure in a

curiously Gordon Brown like way, he will have little surprises in the

speech, he has made his decisions. He has made his decision that there

will be no unaffordable tax cuts, and that there will be no spending

increases beyond the odd sack of money he finds here and there. Seve

hasn't got much to spend, because his side won't pull a lever. So

this will be a holding operation. In terms of substance, the pre-

Budget Report later in the year is a bigger moment. The mood he is

going for his steadiness, reassurance, us -- the calm when

storms are breaking out all over Europe. It is the one thing he has

going for him. The Economist did say at the weekend in an overall

critical piece was that his achievement was getting our over

all get healed so low at a time of difficult market forces. He has to

strike a difficult balance, our finances are potentially precarious,

and therefore he cannot extra tax cuts of things, and yet he also

wants to suggest that our position is not precarious because he is

Chancellor, and it is a difficult line to walk. He keeps saying we

have no money, we can't afford tax cuts, we will stick to our deficit

reduction. But here and there, little bunny rabbits are being

pulled out. Where does he get the money from? I don't know. He says

some departments haven't spent as much as they planned, he was a bit

of money. It reminded me of Gordon Brown's prudence with a purpose,

but every now and then he found a bit more from curious places. He is

doing that to get some headlines which are a bit more positive. They

say that one of our political problems is mainly associated with

cuts, so they are trying to get more positive headlines. But their

associated with cuts because that is the big decision they made a

year ago. They made a big call their despite warnings from some

economists as well as people like Ed Balls that there would be no

private sector scope to take over from the areas where they were

cutting. That has proven to be right and ominous and worrying for

them. But he is clearly not going to be starting to spend much more

than the odd bauble here and there. I want to talk about the mood of

the delegates out there. This is As the Tories gather here in

Manchester, there is a massive euro crisis looming across the Channel.

Our own economy is flatlining, living standards are slumping. So

what is the Prime Minister's response? To apologise to women, of

course. To Mac female MPs in particular, for slights that are

already largely forgotten. obviously said some things in the

House of Commons that came out wrong and caused the wrong

impression, and I deeply regret that. David Cameron has seen the

polling showing that the Tories are losing some of the women's Road.

But that is not what concerns the party faithful here. They are much

more exercised about Europe. Many of them would like to come out of

the EU altogether. Most certainly want a referendum on the matter.

They hate their human -- the European inspired Human Rights Act

and want to repatriate powers from Brussels to Britain. The party

managers don't want talk about any of that. They know the government's

ability to deliver his close to zero. This seems to be a growing

feeling in the country that a referendum is needed, and they

think it would be a good idea for us to have one. But we are in

coalition with the Liberal Democrats and have to give some

ground. It would give us a chance to say yes or no, in or out.

think we need to maintain a close relationship with the the EU,

because that is important. But I definitely think we mustn't go any

further. What of other concerns about Europe, it is the economy

that will dominate events at this conference. There will be no

loosening of the diaphanous robe -- deficit reduction straitjacket, but

ministers know that they need to be this a serious sounding about

growth as the about cutting the public spending. From plans to

build more houses to plans to change the labour laws. But none of

this will add up to an extra fiscal stimulus, so whether it makes any

Steve Richards and Matthew Parris are still with me. Therein are

relatively good mood out there. They are proud of the budget

deficit reduction. They are an easy, though, there are not sure it will

all come right. And with good cause. The context is an economy that is

not growing enough, and uncertainty as to which lead -- levers to pull

to get that growth again. And even if they pull the levers, will they

get the growth because of what is happening in the eurozone? If I

were David Cameron, I would be worried about Europe resurfacing as

an issue, not because there isn't substance to that debate, but

politics is partly about symbolism, and the reminder to voters of

Europe during a period when the Tories were losing votes like there

was no tomorrow I think would worry so-called modernisers. I don't

sense an incipient of growing Tory rebellion. I sensed a lot of little

explosions. There is no particular demand that the anti- Europeans are

making except for a referendum which nobody expects will actually

happen. See you have little bursts of applause at fringes and people

saying things slightly out of order, but I do not censor big rebellion.

Of course, they do feel vindicated. They became more and more Euro-

sceptic, look at the eurozone, it is a mess, they will say. The

problem is not really an economic one, because over all, the European

debt is a fraction of America or even Britain. They have got to be

careful of moving from claiming vindication to a sort of

schadenfreude. The worries hanging over this conference are not about

the government of a coalition of the politics, the worries about the

economics. The one thing, if the Conservative Party thinks it is the

voice of Middle England, and I say England advisedly, because it is

not Middle Scotland or even Wales, it is Middle England that is

hurting at the moment. It is the squeeze on living standards, the

worse since the 1920s. Yes, and the worry for them is not because it is

hurting at the moment. They always knew that the decisions they took

early on were too great a severity, but there we go. In my view, they

knew it would hurt now, but in their assumption, by year for, in

the build-up to an election, Middle England will be starting to feel

good again, and the worry is there is no indication that in the build-

up to the election, Middle England will feel that. You make light,

Andrew, and we all do, about apologising to England, but it is a

serious worry for the Conservative Party, because they have

traditionally always got better vote from women than from men. They

are seriously worried that Cameron doesn't seem to be... My concern is

more what he is apologising for than the apology itself. Just being

a man! We are coming to the end of our time. The fundamental thing is

where the coalition came into power, they thought they could get the

economic cycle in sync with the political cycle, and all would be

well by 2014, 2015. But that is now looking out of sync. Yes, I think

they thought, like 79-83, or 83-87, people would be starting to look

good, and they would get political reward for the tough decisions

taken earlier on, and maybe they still will, but it is looking

unlikely. A Conservative Party conference cover of Iain Duncan

Smith, a slightly tepid ovation there. We will give you a flavour

of what he had to say later. Now, should we be in or out? It is a

Tory conference. How can we not talk about Europe? The only way we

could do it is to send Adam out Oh, we don't have that. Adam is

still looking for his balls. So let's see if Giles can do better.

Let's talk while we try to find out about that about the state of the

Conservative Party itself. The average Conservative Party member

spends �722 coming to conferences. That is a lot of money. It is 80

quid just to register, and they charge the media fortune,

particularly if you are late. But the delegates have no formal say in

what happens. And they don't get really to vote on anything. When

did a conference ever change party policy? So why do they do it? Why

do they bother coming? He is Giles Far from the dizzying heights and

those at the top of the party, down on ground level there are the grass

roots. They are not an official body, not even a clearly definable

group. But there are important, MEPs and MPs and the leadership

ignore them at their peril. Why? Because the party couldn't operate

without them. These are the ordinary people, the ordinary

supporters, and they come in all sorts of species and varieties, but

they don't have elected office. These are the people who are

Conservatives because they feel it in their bones, not because they

have got it from a think-tank document. A pound the pavements and

knock on doors because they think it is the right thing to do, in

almost every sense of the word. True, their power is as a

collective rather than a group of individuals, but they are the

guardians of core conservatism. And if they don't like a policy, it is

not finished, it is not dead, but it may be difficult to sell,

because these people apart from the candidates are largely the people

who go on the doorstep doing the selling.

Giles then tilted to the left and rolled down that hill! Someone who

has never tilted to the left is Michael Fallon, the Conservative

deputy chairman. Welcome back to the Daily Politics. The grassroots

members get a raw deal, don't they? They pay a ton of money as they get

no power. Conferences are expensive, but it is not right that they get

no power. Ministers are here and listen to them, and they can come

to the debates. That his influence, not power. When did a conference

debate last change party policy? Party policies reflect what they

are saying. You want to get out more, get round the fringe events

and see the dialogue that is taking place. We do. But when did this

conference ever change Tory party policy? I can remember for example

on the poll tax, I can remember a party conference been told that we

should in turn -- introduce it early in Scotland, and we did. That

is what the Scots wanted, if you wanted -- if you recall. No, it is

what the Scottish Conservatives wanted. 85, 86? May be earlier than

that. Give me an example from recent history. I think that is

probably more difficult, but it think it was clear that Iain Duncan

Smith's leadership was coming to an end just before we had that change.

From this poll by Conservative home, a survey of the Tory grassroots,

the majority of these folk out there think the Lib Dems have too

much influence on the coalition. Are they right? No, they are not

right. The big thing is the Lib Dems are sticking with us on the

dealing of the deficit. There are some niggles, but we are two

different parties. A year ago, they were planning to merge the two

parties, there was another coalition order, but that hasn't

happened. David Cameron wasn't going to fight the referendum.

always knew that was rubbish. these things were said a year ago.

Although we are bound together in the bigger task of sorting out the

public finances in getting the economy to grow. You need to listen

to better people! Activists also want to see a firmer line ever

repatriating powers from Europe. I put it to you that will not happen

in this Parliament. That is because we didn't win the election outright.

We can't do that, but we have done the next best thing, which is put a

sovereignty lock so that any new powers being proposed, there has to

be a referendum here. That is now law, it is on the statute book. We

hope for an outright majority at the next election and we will

return to this issue of bringing more competent is back to

Westminster. But just for the virtue of clarity, I understand

that you would like to repatriate powers, too, and they would as well.

But the arithmetic means you cannot. It is not an issue for the agenda

That isn't practical at the moment given the shape of the coalition

that I can tell you when it comes to the election... Is there in the

European red-meat you can give them? It looks now there will be a

new treaty to deal with the mess in the eurozone and there is an

opportunity to deal with British, national interests?

We would be told that that would be the opportunity to repatriate

European powers. York irritating Lib Dem friends, as you call them,

it won't let you do that. There may be an opportunity on the new treaty

and there is also the budget renegotiation next year, another

opportunity to make sure our budget contribution is not increased.

There is an opportunity to stand up for British national interests and

we will take it. Do you agree with the chairman of the Treasury Select

Committee, Andrew Tyrie, a position you wanted, that the government's

efforts on growth are incoherent and inconsistent? No. We are all

impatient for faster growth. We want to see the economy grow. But

the government has to balance these things, we are trying to rebalance

the economy to make sure there is more emphasis on manufacturing and

private spending. That is coherent. We have fiscal and monetary policy

working together. Some of the things Andrew Tyrie has called for

you were here announced this week, like changes in employment law.

do we hear more of you, deputy chairman, than Baroness Warsi,

chairman of your party? She was speaking yesterday! But why are you

put more to represent the party than her when it comes to

programmes like this? There are different programmes. You saw

Baroness Warsi on Question Time, watched by a bigger audience than

are watching us at the moment. little while ago. No. You are right.

A If you want her next time, I will pass that on. We are grateful to

get anybody. Would you like her job? No. She is doing a fine job.

That is not what a lot of people have told me. She has only been

appointed party chairman. No, for a year. That is a long time in

politics, that is what Harold Wilson said. Would you not like to

be chairman of your party? Baroness Warsi is the chairman. When you are

a backbencher, when you were one without this title, you were

independent-minded, sometimes a little rebellious. How do you like

this, toeing the party line? Disagreeing with Andrew Tyrie, your

colleague? I bet if you were chairman of the Select Committee,

you would be saying the same. would not. He takes his own

personal view about climate change, for example. The government policy

is not incoherent. We have a very successful Chancellor taking the

economy through difficult times and ensuring that it does grow. Thank

you for being with us. We would like to see you again. Or the

baroness. We are easy. We have found Adam. Which means I can say,

should we be in or out of Europe? Let's see what he found out.

We got a new conference, which means a new set of balls. We have

got it true-blue question for delegates on the issue of Europe.

In or out? Very simple. Out. Why? We would save �48 million today.

Let's state in Europe for now. I tend to agree. It should be

economic and not political, so I say it in for now. I think we

should be in but I think there should be a repatriation of powers.

In or out? Not a second's hesitation. I felt that we are

better off with the Commonwealth and looking after our own interests

and we should go back to doing that in working with the rest of the

world rather than Europe, which is dragging us down and taking our

resources from where we need to spend them. The Norwegians just had

one word for it. No! You must be relieved that beat inbox has got

quite a lot of balls. Yes, I have seen more carefully controlled

assessments than that but it is in our national interest. Thank you,

Why do you say in? Because I think it is important for social and

economic integration, but I do not Why did you do that? Because my

father was Swiss, so he was European. I think we would be

completely mad to come out of Europe. 200 years from now, we

would be a banana republic on the edge of the Atlantic. If we had a

referendum, which we have always wanted, we would vote out. Dr Fox.

Would you like to vote in our poll? It is about Europe, one of your

favourite topics! I must admit, Liam Fox's bodyguard looked a bit

scary so I did not one to push him too much. Francis, would you like

to grab one of our balls. Europe, in or out? He just laughed!

They are going like hot cakes. EU, Who put in?! No! Who put their ball

GROANING. You are the only one going in. What is that like?

thought you were talking about belly buttons. That represents your

party. It tells me nothing at all at this stage. Very early days in

conference. The Prime Minister has set out our position very clearly

on our relationship with Europe and he has it absolutely right. Let's

see which side of the argument has one. The majority of people want

Britain to leave the EU, which is interesting, because the leadership

of the party would much prefer they put their balls in the inbox.

Adam telling us to put our balls where our thoughts are which is

usually what gets men into trouble in the first place! I am joined by

Jon Gaunt, chief executive of the UK out of the EU. I am not even

sure... It is not a title that rolls off the tongue. Our top team

have been desperately ringing around this morning to find a pro-

European Tory to take on Jon Gaunt. We failed miserably. The next task

will be to find the person in the newsroom who does not have a

hangover, because they do like a challenge. The balls showed a

majority want out. But you know and I know you are not going to get it.

What we are not given to get his it discussed at this conference. We

are living in a parallel world, as your non-scientific poll proved. We

have done a scientific poll, 2700 people, interviewed by YouGov, and

74% of Tories want a referendum. If there was a referendum, 68% want

out of Europe. But Mr Cameron says no, no, no, the country does not

want out of the EU. If he is so confident about it, let's have the

referendum! He will not because it would split his party asunder. Mr

Cameron and Mr Osborne and Mr Hague and various others would all

campaign to vote yes to stay in, whereas your polls suggest a lot of

these grassroots would say no. Why would any political leader vote for

that split? Because he is not just the leader of his party, he is the

leader of this country and he is meant to follow what the people

want. I am 50, anybody under 54 has not had a chance to vote on the EU.

That is an affront to democracy. Give me three good reasons why we

shouldn't have a referendum? Mr Cameron cannot find one. Your

highly paid researchers, maybe not, I have to be careful...! They could

not even get someone to come on to talk about it today. It is not

their fault! I know, because the Conservative hierarchy will not

talk about it! We had a referendums since 1975, we voted to stay in. We

have been a member of NATO since 1949 which has the power to send us

to war and we have never had a referendum on that! The referendum

we had before was about common market and now it is a European

superstate, the �48 million a day we pay to the EU. Why can't we have

a grown-up discussion? We had won about alternative vote which people

were not even bothered about. People are talking about this in

the coffee shops, in the bars, if they still have a job. This is what

people want to discuss. When you ask people what the most important

issue facing the country is, Europe comes 10th! It is going up that

table all the time. It is still 10th! Of course the economy will be

at the top at the moment but the EU affects everything! Immigration is

there, border control, defence. We do talk about that in our poll.

Between 80 and 90% won control of my net fisheries, borders and

farming. -- want control of our fisheries, borders and farming.

would accept the British public are broadly Euro-sceptic. Yes. 51%.

they are not obsessed with the issue in the way you are. I am not

obsessed about it. Really? I just want to have a referendum. What is

wrong with that? Hang on. I bet your bottom dollar, Andrew, or the

euro if you fancy, I bet if we had a referendum on the EU, there would

be a bigger turnout than there was on alternative vote. Can you tell

me again, give me one good reason why we should not have a

referendum? Let me put this to you. Not only, rightly or wrongly, that

is not for me to say, you are not going to get a referendum, and you

just heard Michael Fallon, the deputy chairman of his party,

saying they won't even be able to repatriate any powers from Brussels

in this Parliament, so you are going nowhere. They will have this

debate because of the 100,000 petition. It is smoke and mirrors.

We have to keep the pressure up. The people of this country are

demanding it and if we carry on with the pressure, we will get it.

Mr Cameron once power more than anything else and he can keep on

pretending for as long as he wants that most people want to stay in

Europe, he can keep been deluded, but eventually his moment of truth

will come and there will be a referendum in this country if the

power of the people get together and start demanding yet, which is

not a far right thing, it is about British people having the right to

say whether or not we want to be in the United States of Europe.

thought the person you were up against did rather well. Absolutely

brilliant! Couldn't you get a tub of lard? I will not go there!

LAUGHTER. Iain Duncan-Smith, when he was head, head, the boss of the

Tory party, he was not really that popular. As you heard Michael

Fallon say, he was at a Conservative conference that he

then realised that he was not going to be able to continue as leader.

He has reinvented himself. He is the welfare reform man and he is

something of a conference darling as a result because his reforms are

very popular with the party, and with the country. He spoke to the

I assure you that, at a time when the British public are having to

tighten their belts because of a difficult economy, and the European

Commission comes knocking on my door to order me to open up the

benefits system to benefit tourists and pay them benefits as and when

they arrive regardless of whether they work, I have a very simple

answer to them. No, no, no. APPLAUSE because as we gather here

in Manchester, all of us should be reminded that not far from these

buildings we are in now were streets under siege just two months

ago. We sought the best and the worst of Britain. At night, a

violent minority, intent on crime. By morning, the majority, clearing

up, helping each other in their communities and leading the fight

back. There is no justification, they never can be, and they never

will be, for what happened on those nights. And that is why it is right

that punishment is decisive and swift. Yet beyond that, we should

recognise there is a depressing and familiar context to what we saw.

That is the steady rise of an underclass in Britain. A group too

often characterised by chaos and dysfunction nullity, and governed

by a perverse set of values. Yet these problems are not new. We have

been reporting on them since I founded the Centre for Social

Justice seven years ago. Every now and then they reappear. Just think

of murdered Rees Jones, Gary Newlove and Baby Peter, kidnapped

Shannon Matthews and tortured Fiona Pilkington. And many, many others,

innocent victims of a broken, damaging culture. A culture that

generates the growing pocket in each community of deprivation.

Pockets in which social housing, once the support for families

working hard to give their children a better start, has too often

become a place for Inter generational worklessness,

hopelessness and dependency. The riots serve as a reminder to us all

about the deep and clear social problems that this government

inherited when we came to power. Remember, before the recession

began, we had over 4 million people stuck on out-of-work benefits. Many

for a decade or more. We had one of the highest levels of unsecured

personal debt in Western Europe. We had widespread family breakdown,

one of the highest teenage pregnancy rates in the whole of

western Europe. Poor parenting transmitting this functionality

from one generation to the next. At the C S J, we found that half of

all children born today will experience family breakdown by the

age of 16. That is a shocking statistic. And too often, these

children attended schools where their aspirations were suffocated

within a culture of low expectations. Social mobility had

virtually ground to a halt, and the section of society on the lowest

incomes had become static and too often entrenched. Too many children

born into such communities find that at best they remain in the

same condition as their parents as they grow older. And at the same

time, almost a fifth of all households are workless, and

spending on working-age welfare rocketed by 50% before the

recession. That is a remarkable statistic. We have found that over

a million children have parents addicted to drugs or alcohol.

Imagine. What hope for those children other than to become uses

and abuses in their turn? And from there it is just a short walk to

the revolving-door criminal justice system. With income quality at the

worst for regeneration, the last government left us with a welfare

system which treated symptoms not causes. And to each person in a

sense it is said, you are financially better off out of work,

you are better off if you play the system, and if you are bringing up

children, you are better off apart. What kind of message was that to

Britain? Is it any wonder's...? APPLAUSE. Is it any wonder that we

faced a break down of this sense of entitlement, and ending that is

like turning a supertanker around, but we must and we will deliver

that change. Last year when we came to conference, I and my colleagues

promised we would tackle that problem head-on. First, as Chris

said, we promised we would confront worklessness, and our benefits

system that had been nurtured for far too long. Our work programme is

now giving new skills to people from the jobs market. The voluntary

and private sector are being engaged to play and pay only when

they get people back to work, and as they help people sustain it by

developing the work habit, they are delivering value for money. It is

not just the case of the Big Society, but it is the case of the

Big Society now getting people back to work, and major success, and

ending the something or nothing culture, promise made, promise

delivered. APPLAUSE.And second, we also

promised to deal with problem of long-term sickness benefit. Too

often abused as an excuse for being out of work. Our work capability

assessment will review 1.5 million people on incapacity benefit, many

who who had been written off and abandoned, and 115,000 have already

been through this assessment. Those genuinely unable to work will

always be supported, however those who can work will look for work and

joined the work programme, and others who could work in the future

will actually get the tailored support for once that they need,

with more and more of those once parked on permanent out-of-work

benefits seeking work or in work. Conference, that is a promise made

and a promise delivered. APPLAUSE.As David Freud said

earlier on, we promise to build the Universal Credit, the most radical

change to benefit in regeneration. And the current system, and massive

multiple benefits paid at varying rates, is open to widespread abuse.

The result is a massive error and fraud, costing our country an

almost unbelievable �5 billion wasted. Worst of all, some people

lose up to 96p of every pound earned in work because of the way

their benefits are withdrawn. Would anybody here in this hall work if

they were having to pay 90 -- 96% in taxes? Especially if they could

earn a living by doing nothing at all? No wonder people are tempted

to sit at home. Universal Credit will ensure that you will always be

better off in work that out of work, and it will mean tax crowd --

taxpayers will get value for money. At last, a system of benefits that

places work at the heart of that system. What a remarkable

turnaround, and that is what we Which is why, for those fit for

work, I have a very simple message. Work with us, to find and stay in

employment, end you will get all the support that we can muster.

However, failure to seek work, to take work, or to stay in work, and

you will lose your benefits. This is our contract with the British

people, to bring an end to the something for nothing culture, that

is a promise we made and a promise This brings me to one of the most

important issues facing our country, the role of the family. This isn't

about government into peeling off - - interfering or finger-wagging. It

is about government recognising that stable two-parent families are

vital for the creation of a strong society. It is about parents taking

responsibility for their children, and we saw the results when that

doesn't happen back in August. And it is about Government realising

that we have to create a level playing field for the decisions

people make about their families. This means reversing the biases

against stability that we have seen build up too often in the system.

Build up over recent years, including the damaging financial

discouragement to couple formation. We also need to make sure that

support is available when families need it most. That is why I intend

our welfare reforms that we have already laid out, that they will

make any impact are amongst families on the lowest incomes. And

furthermore, remember, the Prime Minister has made it clear that in

this Parliament, the Government will recognise marriage in the tax

system. That is a promise. Iain Duncan Smith speaking to the

Conservative Party conference earlier this morning. He just stuck

his head into the BBC bubble and said good morning. With me is the

employment minister Chris Grayling. The Prime Minister apologised to

women yesterday, two in particular, about having said things in the

Commons that he thought was badly phrased. Wouldn't it be better,

make more sense, if he apologised to women for the fact that

unemployment among women is now the highest since 1996? I think what

women really want us to do is to set out ways to tackle that. 18

months ago we inherited some of the most difficult economic and

financial circumstances any government has ever taken over.

What we have also had since then is the emergence of a eurozone

financial crisis that nobody anticipated. There are huge

economic storm clouds alive, and we are not immune to those. But why

apologise for a backbencher remarked to Nadine Dorries, and not

apologise to women who were suffering the highest unemployment

since the last Tory government? Well, I would say that we are

trying to sort that problem out. We are not going to apologise for the

appalling record of the last government. It wasn't that high

enable 2010. This has happened under you. What we have seen in the

labour market over the last few months has been ups and downs. The

last figures were a big step in the wrong direction, but the previous

two were in the right direction. What we have had over the last 12

months, in overall terms, we have had unemployment flatlining. And we

have had an increase in the number of people in private sector

employment. My concern now is to make sure that we pursue policies

that will keep unemployment on a downward curve, even in difficult

Would it not make more sense to apologise to women for scrapping

child benefit for those among the 40% tax bracket? It is not just

women in the tax bracket who might lose their child benefit in a

couple of years. All of us would rather not have come into

government to take tough decisions like these and we regret having to

take them but we are not the ones who created the biggest financial

deficit in peacetime history. We are dealing with the mess created

under the previous government in some of the most difficult economic

circumstances in living memory. you are in no mood to apologise to

women, shouldn't you apologise for the tax credit cards and higher

child care costs which means it is left economic for women to find

jobs? -- less economic. Whilst we have taken some child tax credits,

we have increased it for those at the bottom of the scale. We know

there are difficult decisions to take that will affect women and men

alike but we are doing what we can to affect the poorest in society,

either through targeted financial support or some of the measures we

discussed this morning... Do you think it would be worth apologising

to women for having more men from a single Oxford college then you have

women in the Cabinet? When you have such a good influx of women MPs,

many a suspect will become ministers in the years ahead...

have fewer women in the Cabinet then you have men from one Oxford

college. That is very much a regret that we do not have more women in

the parliamentary party but we have taken a big step to rectify that.

In the last election we had one of the biggest intake of women MPs we

have ever had, many of them making a good impact on Parliament so what

I would say is we recognise we have a problem and one of the things

David Cameron did his dart to sort that out. When you see what happens

to chart tax credits, female unemployment, child care costs, is

there any wonder your party is playing badly among female voters -

- child tax credit? It has been equal among men and women. Your

party managers are talking about how they need to get the women's

vote back. You know that. There is a problem. I would like to win at

the votes of both men and women. understand that. We need policies

to stabilise the economy, create sustained employment growth, and

then we can start, as we rebuild our financial base, to target

support in those parts of our societies. Iain Duncan-Smith spoke

about tax breaks for marriage, for example. The Chancellor in your

government and people like you keep on saying, we've got no money to do

a fiscal stimulus, we can't break out of the deficit reduction

package, and yet within the last seven days, the Chancellor has

found �800 million to freeze council tax, �250 million to get

councils to do weekly dustbin collections, �150 million to

improve mobile phone coverage, �190 million on science projects. Where

is the money from? We have set a clear downward track for the

deficit but within the budgets we have got, we will try to do

everything we can to release money and provide additional support.

you have got extra money, would it not be better to try to spend it on

efforts to improve job creation? Let's take the example of the money

that is going to be used to keep council tax down. 800 million.

effect is it will help people under pressure with cost of living rises,

increased utility bills, food prices. But that is money that then

goes back into the economy and helps create jobs because it is

extra spending power. Although councils may have to find other

ways of raising money to make up for their hit the services will

take. You off freezing council tax at a time of 5% inflation -- you of

freezing. I do not believe all councils have done everything they

can so there is best value for money for taxpayers. There is

plenty that can be done without damaging frontline services.

have caused some controversy in the 2010 election campaign when you

supported the Christian bed and breakfast owners who did not want

to admit gay guests. It is now government policy to legalise same-

sex marriage. Does that please you? I am very happy with that and with

Civil Service partnerships. I voted for those changes and I will

support them. Chris Grayling, thank you. The Chancellor's due on his

feet in about 15 minutes. In a moment, we'll be hearing from the

Director General of the CBI, John Cridland. But first let's take a

look at the economic backdrop to his speech.

David Cameron once promised that sunshine would win the day. The

economic weather has since taken a turn for the worse though and

forecasts for economic growth have become increasingly gloomy. Last

month, the IMF cut its prediction for 2012 from 2.3 per cent to a

chilly 1.6 per cent. And George's most urgent priority, deficit

reduction, looks like it might be blown off course. Borrowing for

August was the highest for 18 years. Over the weekend, the Chair of the

Treasury Select Committee, the Conservative MP, Andrew Tyrie, also

rained on George's parade, saying his piecemeal policies were in need

of radical improvement. The outlook will continue to be blustery,

yesterday 30,000 public sector workers protested on the streets

here in Manchester. And a gigantic storm is brewing on the Continent.

Currently over Athens, it is likely to spread in the next few weeks.

The Chancellor is standing firm in the gale, insisting there can be no

plan B but is the increasing talk of infrastructure investment

represent a plan A plus? To discuss these matters are enjoyed by the

director-general of the CBI, which represents businesses, particularly

big businesses. Do you believe that these piecemeal measures will make

much difference to economic growth was mad if we get the right set of

announcements this autumn, with D- Day been 29th November when the

Chancellor makes his Autumn Statement. -- with D-Day being 29th

November. How much impact do you think the �800 million freeze on

council tax, 200 million for weekly dustbin collections, the money for

science projects... What is the impact for that? Most of it is

facing the domestic consumer and the voter. I have a different

shopping-list from the one we have had announced. Are you not

impressed with the shopping list? They are not really my baby. Social

housing, home-ownership has been an important objective. Will it do

anything to improve growth? On its own we need a separate set of

measures to boost first-time home ownership, to get roads and energy

infrastructure built but the Chancellor will not stop with this

list. What do you want him to announce? The big challenge is for

government to use its purchasing power and its leverage in the

market to get the private sector investing. The fact the government

does not have a lot of money does not mean we cannot have Investment.

Energy and transport will be primarily delivered by my

membership, private sector companies, if government gives them

permission to invest. What do you want them to do? On energy

infrastructure, companies will only build a new wind turbines and power

stations if the government sorts up the planning system. The government

is trying but has not succeeded. Businesses will invest instead of

the state in new roads and rail but they need longer rail franchises

and they might need toning so they get an income stream to pay for the

new roads. But none of that will make a blind bit of difference to

the economy this year and next. That will take ages. These are

long-term projects. It makes a huge difference to confidence. Business

confidence is hanging by a thread. Signals by government that it wants

investment will produce action in 2012 but it will change confidence

this year. Why under a government that has got a grip on deficits,

has put bond yields down, why should business confidence hang by

a thread? Because of what is happening around the world. The not

what the government is doing? No. The government cannot control what

is happening around the world. is what business investment is

stagnating. People do not have confidence about the eurozone. I am

looking for the Chancellor to tell us what the road to recovery is for

the eurozone. He cannot tell us that! He might as well say what it

will be in Mars! He is in touch with international leaders and he

knows what they are trying to do to resolve the crisis and that must be

resolved to boost confidence. the real problem not what the

government is or isn't doing, it lies with your members? Your

members are sitting on billions and billions of pounds of cash and they

are not investing in this country. They will only invest when they can

get a return for their shareholders. If confidence is and there, nobody

Spence, just like we consumers do not spend if we do not have

confidence. -- nobody spends. the problem is the private sector

is not investing? Absolutely, because of a global slowdown which

has disappointed the growth we thought we would be enjoying.

any prospect of improved growth in the next 18 months -- do you see?

Even your own chief economist predictions are gloomy? When you

have growth that is around 1%, for the ordinary citizen it does not

feel like growth, but it is still a lot better than the economy

contracting. In 2012 I think we will have growth of a similar order,

if not a little bit better. Give me a figure. Something in the order of

1.5% in the UK. That is just treading water. It is. But the

Chancellor has got to recognise that the future for the economy is

not the sort of growth we lived with up to 2007. It will be slower.

If it is 1.5 and you come back to talk to me next year, there will be

a lot more people unemployed. unemployment I think will write a

little bit more but it shouldn't hit the sort of figures it would

have done in previous downturns -- unemployment I think will rise. We

have a more flexible labour market. We will here at this conference

that new measures can keep the economy flexible. The Marks out of

10 for the Chancellor? Deficit reduction, 10 out of 10. One growth,

it is an emerging story and we are not at the end of the Thames. So

overall, I think the government has done well. Out of 10? Seven out of

10. You are a generous man. Thank you. I am glad we had longer to

talk than we did at the Labour conference, when our deliberations

were truncated. The Chancellor is not yet on his feet but the hall is

filling up for him. But plenty of empty seats around and it is not

that big. Let's hear what is going on at the moment. We will be

speaking to Justine Greening later and she is currently taking the

stage. Let's have a listen.... Raising the issue of accountability,

one of the great flaws of the regulatory regime that we inherited

is that there was the lack of clarity as to where responsibility

lies and unless you have got clarity on that, how can you have

proper accountability? We had the situation of, who is in charge, the

Bank of England, the FSA, the Treasury? That was not clear,

particularly on spotting those systemic weaknesses in the system,

there was nobody who had responsibility to deal with that

and the reforms we have put in place address that issue...

person speaking is their tax personality of the year! I am not

sure if that means he has paid a lot of tax to get there or managed

to avoid it. The Chancellor is due to address this conference, the

second most important speech of the week. The Prime Minister on

Wednesday afternoon. But it is a very important speech from George

He will tell us... We are not quite sure. For the moment, we will hear

from another great man. Not tax personality of the year but it is

something I will aspire to! It's like being chartered accountant of

the year! Probably not that much competition. Sorry... You can deal

with the letters. I love you, chartered accountants. We have had

lead to us a number of things. Big things like a freeze on council tax.

It will things like 150 million quid for mobile phone masts. He we

know the message. On the one hand, the plan ain't changing. He will

say it again and again, the plan is the plan is the plan and we are

sticking with it. His argument is, it would be a huge risk to make

quite small changes to the plan. The risk being, an increase in

interest rates and he will put a number on that, so if a 1% increase

means �10 billion of costs for businesses... At the same time,

that does not mean the government can't do anything, which is why we

have this string of little measures. I think we will get a hint of not

measures involving more spending but maybe a bit more on the

regulation. It is about monetary activism. They have a slogan behind

the scenes, and it will stay behind the scenes because it is not catchy.

They are fiscal Conservatives in order to be Monetary activists.

They are tough on tax in order to create the room for the Bank of

England. That is a big hint that they want the Bank of England to

extend quantitative easing when it meets on Thursday. We are also been

pointed in the direction of a speech being given by Adam Posen

from the Bank of England a while ago, which said isn't there more we

can do, and one other big things he is looking at is how do you get

lending go on to small and medium- sized businesses. His idea was a

new bank. A state bank. I am told it is a good idea but takes a long

time and I think we may get hints The problem with the position way

you say we will have fiscal conservatism, because we the

government control that, to allow the Bank of England to have a loose

monetary policy, is that you have no say over that. You are entirely

dependent on the analysis of the bank to do it. You are, and there

isn't much looser it can get. At cutting interest rates is not

possible. Then we talk about quantitative easing, some people

call it printing money, and there is a debate about whether it does

the job, or whether it will stoke inflation. But the hints are that

the bank is looking at that and could do it as soon as this

Thursday. But there are a lot closer than you might think, in

that yes, the bank is independent, but at all stages, George Osborne

has effectively been quoting Mervyn King in saying that if we do this,

it allows them to do that. Can they have an open conversation? Formally,

constitutionally not. But you think they look at each other in a closed

room and say, can we do this, read each other's minutes? Of course

they do. When you look at these announcements that are coming in,

there are pretty good for party conferences. Some of them are quite

popular. But if you're looking at them from the outside, you would

say, in the grand scheme of things, they don't matter. But in a sense,

that is what is interesting. George Osborne could have felt under a

great deal of pressure. Labour started to win an argument that it

was growth of that mattered as much as the deficit, made an argument

for cutting VAT to get the economy moving. You have parts of the

business community, traditionally quite right wing, saying cut taxes

quicker. Andrew Tyrie, the chairman of the Treasury Select Committee,

said the government's growth strategy was incoherent. In the

spate of that, you get a flurry of, we are doing this, that, the other.

But you don't get a new plan, because the Chancellor's view is we

don't need a new plan, and the risk of even appearing to look like

you're looking at one is not worth it. So the die is cast. In terms of

the personality of the Chancellor, how would you assess his standing

among the Tory faithful? Extraordinarily high. When he came

to this conference a couple of years ago, the muttering,

particularly amongst the people who gave money to the Tory party,

largely people from the city of London, was, abbot of a boy doing a

man's job. Since he has got the job, he has won the praise of seeming

comfortable in it, filling his suit. Peter Mandelson said the same thing

quite recently. But the nervousness that a certain now is, my God, I

hope he is right. Because if he is not, and we find that growth is

flat next year, what does he do then? He will not have to revise

his plan in November. He will undoubtedly having to say that he

is borrowing more money than he plans. He will undoubtedly say that

the plan allows for that. But if we get to the Budget in March, the

following year's Autumn Statement, and the economy is flat, he will

have to have a new plan. conference is getting to its feet

because the Prime Minister has walked in to take his seat. This is

in anticipation of the Chancellor's speech. Remarkable given the

difficulties of going through what you and I catalogue as the

Brown/Blair years. There is no sense that you would get more than

a playing card between Mr Brown has Mr -- Mr Osborne and Mr Carron.

thing they did to avoid the Blair- Brown problem was to move George

Osborne into Number 11 almost full time. You see him around Downing

Street much more than you see them around the Treasury. He is much

more in Downing Street. He has his office there. He has an office in

the Treasury as well, but he starts his day in Downing Street and has

his advisers there. He has another strategic meeting late in the

afternoon. That is where he sees his home. Well, his home for the

next half-hour is going to be the Conservative conference here in

Manchester. The Chancellor is going up to the podium, taking the

applause of the party faithful. He will now address the conference.

Here is the Chancellor of the Today all around a country, indeed,

all round the world, people are anxious. Worried about their jobs,

their families, how they are going to pay the bills. I come to you

with words of resolve, determination, confidence and

belief. Belief that the British people will overcome this challenge

as we have overcome so many before. Together, we will ride out the

storm. I don't want any one to

underestimate the gravity of the situation facing the world economy.

But I also don't want anyone to think that the situation is

hopeless, that there is nothing we can do. Yes, the difficulties are

great. But we should be careful not to talk ourselves into something

worse. And we should never take our eyes off the prize. A British

economy freed from its debts, growing strongly, spreading

prosperity to all our people, so we can fulfil that solemn promise to

the next generation. We will leave the world a better place than we

found it. Our economic problems were not have

visited on this country by some cruel act of God or blind force of

nature. They were created by the mistakes of human beings and the

endeavour of human beings can put them right. What were those

mistakes? There were three of them. And they were all connected with

each other. First, the last government borrowed too much money.

They thought you could borrow without regard to ability to pay,

spend without regard for value for money, all on the premise the boom

would never end in bust. They saddled the country with the worst

debt crisis in our history. What a catastrophic mistake. Let us make

sure it never happens again. Economic adviser to Gordon Brown. I

am not sure I would put that on my CV if I was Ed Balls! It is like

personal trainer to Eric Pickles. Although I have to say, when it

comes to chasing down council waste, no one runs faster than our Eric.

The second mistake was made by banks who ran up staggering debts

of their own. Buying financial instruments even they couldn't

understand. The banks and those regulating them are believed that

the bubble would never stop growing, that the markets will always self-

correcting, that greed was always good, that their schemes would

never collapse, that none of the debts would ever turn bad, and the

message from this hall is clear. They let down their customers, they

let down their shareholders and they let down this country.

And there was a third mistake. Our European neighbours plunged

headlong into the euro without thinking through the consequences.

How could they believe that countries like Germany and Greece

could share the same currency when they had vastly different economies

and no mechanism to adjust? For generations to come, for

generations to come, people will say, thank God Britain didn't join

And let us recognise the foresight and the fortitude, the street

stalls and the leaflets, the pavement pounding and the

canvassing of the people in this hall today who campaigned to keep

And there is one man here today who precisely saw the consequences,

warned of them, campaigned against them, put his reputation on the

line to oppose them, was ridiculed for it, but who stuck to his cause

and was proved right, my friend William Hague.

I have waited 10 years to say that! And it is thanks to the leadership

of someone else here today that we have kept Britain out of the

eurozone bail out of Greece, out of the permanent bail-out fund, our

Prime Minister, the country's leader, David Cameron.

And this is also my opportunity to thank my Treasury team, Mark

Holborn, Justine Greening, David Gore, who you have just been

hearing from, Greg Hands and Danny Alexander, they are diligent and

dedicated in their service to our Tomorrow morning I will travel to a

meeting of European finance ministers in Luxembourg. My

objective is Clear - the eurozone's Financial Fund needs maximum

firepower. The eurozone needs to strengthen its banks. And the

eurozone needs to end all speculation, decide what they are

going to do with Greece and then Britain is not immune to all this

instability. Indeed, the resolution of the eurozone debt crisis is the

single biggest boost to confidence that could happen to the British

economy this autumn. The time to resolve the crisis is now. They

have got to get out and fix their roof even though it is already

A debt crisis in government, a debt crisis in the banks, a debt crisis

in the euro. We in Britain are paying a high price for those

mistakes. The price of jobs lost, Korea has never started, hopes

dimmed -- career never started. Our covenant is this, we will not stand

by and let it happen. We will do anything, work with anything,

overcome every obstacle in our path to jobs and prosperity so that

together we will ride out the storm. Each day, people suggest to me

different things we should be doing. Some say borrow more for more

spending. Or they say, borrow more for temporary cut in tax. So you

would have to put taxes up even more later. I am a believer in tax

cuts, permanent tax cuts, paid for by sound public finances. Right now,

a temporary tax cuts or more spending are two sides have exactly

the same coin. A coin that has to be borrowed, more debt that has to

be paid off. I know we are asking a lot from people. And I want them to

know that when these arguments are put to me, I consider them

carefully. Don't think I haven't thought hard about what more we

could do, but I don't explore every single option. I do. But borrowing

too much is the cause of Britain's Let's say we added to the

structural deficit with more borrowing. We would be gambling

that priceless fiscal credibility that this government has turned

with the international markets on the bet that borrowing a few

billion pounds more would make all the difference. We would be

hazarding of our precious low interest rates on a change of

course that would put the rates up. In the full knowledge that any

extra billions of pounds of public spending would be wiped out by

billions of pounds more in high interest costs of families,

businesses and taxpayers. We would be abandoning the deficit plan that

has brought us the stability other nations grave for 5, 10, �20

billion more -- of a nation's craves. This is on the illusion

that such sums would transform the economy when we are already

spending three trillion pounds over the next four years. We would be

risking our nation's credit rating for a few billion pounds more. When

that amount is dwarfed, dwarfed, by the scale and the power of the

daily flows of money on international bond market, swirling

around, ready to pick of the next country that lacks the will to deal

with its debts. Conference, we will not take that risk. We are in a

debt crisis. You can't borrow your And incidentally, the fact that the

world is in the grips of the debt crisis has not undermined that

argument, it has made it stronger. For too long, Britain has been

running away from its problems. We have to face up to them, we have to

confront them, we must fix them. We must deal with our debts. Weekend

and block the banking system. We will help businesses create new

jobs. Here is howl. First we will help the Bank of England keep

interest rates at record lows while the economy is weak. It is the most

powerful stimulus that exists and nothing would be more fatal for an

economy as indebted as ours then a sharp rise in interest rates. Look

at our neighbours today. In Greece, market rates a 20%. In Portugal,

they are more than 10%. In Spain and Italy, they are now over 5%.

Our budget deficit is bigger than the lot of them. But in Britain,

our market interest rates are 2.5% today. Fiscal credibility is not

some abstract concept. It keeps families in their homes, firms in

business, people in their jobs. A 1% rise in our interest rates today

would add �10 billion to family mortgage bills alone at the worst

possible time. We have a deficit plan that commands the confidence

of world markets and has brought stability at home. It is a plan

flexible enough to respond to good times and bad, a plan independently

verified by our new Office for Budget Responsibility, backed by a

government united in delivering it and a parliament that it has

legislated for it. Very few countries can say that today. The

fact that Britain can is thanks to the resolve of his party and we are

generous enough to stay this. It is thanks to the resolve of the

Liberal Democrats, too. Working as a coalition, together, in the

Keeping interest rates as low as possible for as long as possible is

crucial for dealing with the debt crisis. It is the first part of our

plan. But because banks are damaged, they won't lend at the current low

rates. It is like putting your foot on the accelerator but because the

transition mechanism isn't working properly, the car wheels don't

respond. So this is the second part of our plan. We have got to get

credit flowing in our economy. Credit means investments,

Investment means jobs. We are making sure that the British banks

are strong enough. Holding enough capital to cover loans in an

emergency. We have expanded loan guarantees. We have struck a deal

with the high-street lenders to increase lending to small

businesses by 15% this year. But all of this may not be enough. Of

course the Bank of England, at their own independent judgment --

have their own independent judgment to make on quantitative easing. I

have said before, I will follow my predecessor and his Treasury

approval if asked. But there is more the government itself can do

to encourage investment. David Cameron and I have always said we

would be fiscal Conservatives and Monetary activists. Everyone knows

that Britain's small firms are struggling to get credit and that

banks are weak. So as part of my determination to get the economy

moving, I have set the Treasury to work on ways to inject money

directly into parts of the economy that need it such as small business.

It is known as credit easing. It is another form of monetary activism.

It is similar to the National Loan guarantee Scheme we talked about in

opposition. It could help prevent another credit crunch, provide a

real boost to British business, and overtime help solve that age-old

problem in Britain. Not enough long-term investment in small

businesses and enterprise. And if this party is anything it is the

party of Small Business & All this brings us to the question

about the kind of economy we want to see and the kind of banking

system we want to have. We all know what kind of banking system we

don't want. Let's look at what happened at the Royal Bank of

Scotland. A bank where one individual was so focused on his

own success, his own self- aggrandisement, that he put at risk

the likelihood of a 200,000 people -- of over 200,000 people who

worked at the Bank, the 15 million people who entrusted the bank with

their life savings, the 60 million taxpayers who had to bail out the

bank. That is what I mean by irresponsibility in business and it

is what I mean by irresponsibility in government, when they don't

properly regulate banks, don't control public finances and leave

our country exposed to the whims of the international money markets. So

I ask Ed Miliband, you say you would not bring back Fred Goodwin

to run our banking system, so why on earth will you bring back Ed

Balls to run our economy? There of business practices that

are irresponsible -- there are business practices. We will deal

with them with a regulatory system that works but Labour's latest

policy, that there should be two newly created tax rates, is frankly

ridiculous. One for producers, one for predators, one for companies a

Labour Chancellor likes, one for companies a Labour chancellor

doesn't like. Imagine a Labour chancellor sitting in Number 11

every morning with a copy of the Financial Times in one hand and the

Guardian in the other, weighing up corporate Britain on some home-made

scales of justice. What are completely unworkable idea! -- What

a completely unworkable idea! I think it is the moment that Labour,

as an opposition, ceased to be either a producer or a predator.

And there was a time when Labour's seemed briefly to realise that to

win elections it has to accommodate itself to their real-world, stop

being anti-business, make peace with Middle Britain. Not now. It is

over. Once they cheat Tony Blair, now they boo him. -- once they

cheered for Tony Blair. I fought three elections against Tony Blair

and an know the damage he did to our country but they were not just

booing him, they were booing the millions of voters who once turned

to Labour because they thought Labour had changed. They were

booing the business people who thought Labour wanted to work with

them. They were booing all those people who thought Labour had

finally woken up to the modern world. But to all of those people

who heard that, you realise they were aimed at them, for all those

people who want a strong society and a strong economy, to those

people abandoned by Labour today I say the Conservative Party will be

So we are repairing the damage of a major responsibility. Ending the

something for nothing society that flourished during it. Reforming

welfare, yes, so that those who work get more than those who refuse

to. But also introducing the first ever permanent bank tax. The first

ever higher levy far long-stay in non-doms, the first ever treaty

with Switzerland to get back tax owed to this country. I want people

to be successful, to create wealth and jobs, to get the most out of

society and to put something back. But I'll tell you what this

Conservative Chancellor says to rich people who invade their taxes:

We will fine you and we will find your money. -- we will fine you.

The days of getting away with it are absolutely over. Just as tough

on tax-evasion as benefit fraud. We are all in this together. And that

includes the banking sector. Yes, we want Britain to remain number

one, the No. 1, International Centre for finance. Employee in

thousands of people across this country. Driving at business to

Hong Kong and New York and Zurich, it would be completely self-

defeating. I understand the anger people feel about what happened. I

share it. But ramping up the populist rhetoric is not going to

stop banks failing. We have got to do their real work to ensure that

Britain's largest industry is no longer the British taxpayer's

largest risk. That is why we are abolishing Labour's failed

tripartite system and putting the Bank of England back in charge of

monitoring debt, a responsibility that should never have been taken

It is why we have committed to the principles in the vicar's report we

commissioned, to ring-fence our high-street branches, to protect

them from the risky trading floor activities. We changed our party so

we can tackle the banks without fear, so we can speak truth to

power and wealth, and so that society and economy that we build

works for everyone. Reforming finance, keeping interest rates low,

getting credit to small businesses, helping fix the eurozone crisis.

These are all essential for growth and that would be ambition enough

for most governments. But they are not enough for us. We have to help

businesses create tomorrow's jobs. My children are eight and ten years

old. I don't want them to read about how China has just built the

world's most advanced aircraft, how India is leading the globe in

computer design, and have to say to my children, that used to be

Britain. I want Britain to be the home of the greatest scientists,

the greatest engineers, the greatest businesses. A land of

innovators. And we can be! The sacrifices we make, that is what

they are for. The determination I show, that is what drives me.

Tomorrow's world is being shaped here in Manchester. Manchester. The

first city of the Industrial Revolution. The city were the first

computer was built. Where Rutherford split the atom and the

Miliband brothers split the Labour Party.

Manchester, home to the two brilliant scientists I met this

morning who have just been awarded the Nobel Prize for Physics. Their

prize was for the discovery of a substance that is the strongest,

finished, best conductive material known to science, to be used from

everything to aircraft wings to microchips. The inventors could

have gone anywhere in the world to conduct their research, but they

chose the University of Manchester. And now countries like Singapore,

Korea, America, are trying to lure them overseas, but they want to

stay here in Britain. They think it is the best country in the world

for them and their work. We have already protected the science

budget, and today I confirm that on top of that we will fund a national

research programme that will take this Nobel prize-winning discovery

from the British laboratory to the British factory floor.

And we are going to her front the forefront of computing, to give the

best computers to our designers and engineers. The letters stop

thinking that the only growth that can take place happens in one

corner of the industry. We have got to get Britain making things again.

I have never believed that Government should just stand on the

sidelines, that it had no role to play in fostering enterprise and

creating jobs. I will intervene where the market doesn't work and

set it free where it does. We have been doing a huge amount in the

past 16 months to make Britain open for business. We are cutting

business taxes to one of the lowest rates in the developed world. We

are cutting income tax bills for over 20 million people and taking

over a million of the lowest paid out of tax altogether. At a time of

deficit-reduction, we are increasing capital spending on

roads and railways. We are creating a super-fast broadband network. We

are reforming our planning laws so that they work for our economy and

our countryside. We are a foreign - - we are reforming the tax system

so that multinational companies come to Britain instead of leaving.

We are freezing rates and cutting taxes for small businesses. Don't

tell me this Government isn't going for growth. And that is not it. We

are today extending mobile phone coverage up to 6 million people.

The New Right to Buy and housing plans David Cameron announced

yesterday will build 200,000 new houses, create 400,000 new jobs. We

are launching new enterprise zones and helping unemployed people get

jobs through our work programme, helping them start businesses with

our Enterprise Allowance. We are transforming education, and we are

reforming public sector pensions so they are generous to public

servants and also fair to tax payers.

And let me say this to the unions. To go on strike at a time like this

when you are being offered pensions far more generous than other people

could ever afford will hit growth, cost jobs, it is totally

irresponsible. We have made all these changes in

the space of just 16 months. But it is not enough, and I know that. We

need to do more. We need to make it easier for businesses to hire

people. I know it is important to respect employment rights. It is

the heritage of our party. 136 years ago, it was a Conservative

politician under a Conservative government who introduced the

Chimney sweeper's act and brought an end to children becoming sweeps.

Unlike today, in their long battle, our predecessors did not always

have the good fortune of being supported by the Liberals. But we

also respect the right of the unemployed to get a job and not be

priced out of the labour market. And we respect the right over those

who have spent their whole lives are building up a business not to

see that achievement destroyed by a vexatious appeal to an employment

tribunal. So we are now going to make it much less risky for

businesses to hire people. We will double to two years the amount of

time you can employ someone before the risk of an unfair dismissal

And I can tell you today, we are going to introduce for the first

time ever a fee for taking a case to a tribunal that litigants only

We are ending the one-way bet We know that a decade of

environmental laws and regulations are piling costs on the energy

bills of households and companies. Yes, climate change is a man-made

disaster. Yes, we need international agreement to stop it.

Yes, we must have investment in green energy, and that is why I

gave the go-ahead to the world's first green investment bank. But

Britain makes up less than 2% of the world's carbon emissions, to

China and America's 40%. We are not going to save the planet by putting

our country out of business. So let's at the very least resolve

that will cut our carbon emissions no slower, but also no faster than

our fellow countries in Europe. That is what I have insisted on in

the recent carbon budget. And there is one more thing I can tell you.

We have had to make difficult decisions about public spending,

careful choices about what to protect, so by relentlessly

eliminating waste we could afford to protect funding for Conservative

rarities like the NHS and schools. -- Conservative priorities. Two

years ago I stood here and said we would cut the cost of central

bureaucracy by one-third. Some were sceptical. But we are doing it, and

we are ahead of plan. I can tell you that next year we will again

freeze the council tax. When so many bills are going up,

council tax can be the one Bill that doesn't. That is help for

families, so together we ride out that storm. Resolve, determination,

confidence and belief. Resolve that we will deal with our debts,

reshape our state to live within our means. Determination that we

will see through our policy, keep interest rates low and get credit

flowing. Confidence that there are things we can do and measures we

will take to get the economy moving again and create jobs. And belief.

We do all this because we believe. We do all this because we believe

that our country's best days lie ahead of it. We do all this because

we are optimistic for the future. We do all this because we know that

the sacrifice is our country makes will not be made in vain, that the

difficult choices we have made will not have been made for nothing. We

do all this for a better Britain and a stronger economy, to which

everyone can contribute, from which everyone will gain, an economy that

works for all. I don't pretend to you that these are not difficult

days, and that there are not difficult days ahead, but together

we will ride out the storm, and together we will move into the

calmer, brighter sees beyond. Thank you.

The Chancellor of the Exchequer finishes his speech to the

Conservative Party conference at 2011 to a standing ovation. He said

that the biggest thing that would spur growth in Britain was not

anything that the British government would do, but the

resolution of the euro-zone debt crisis, and he had some suggestions

as to how they might do that. He wasn't changing from his fiscal

deficit was up -- deficit reduction policy, he said to do that would

gamble with credibility. That standing ovation ended almost as

quickly as it started. They are all rushing out now for lunch. He said

any stimulus would be wiped out by a rise in interest rate and you

cannot borrow your way out of date, which is exactly what Jim Callaghan

was Prime Minister told a conference in 1976 in the midst of

that financial crisis. He talked about the need for more credit

easing and monetary activism. What he meant by that other than Q E

still isn't that clear. He did a bit of Labour bashing, which

probably means the Prime Minister went, and said that the public

sector unions if they went on strike would be totally

irresponsible. In a moment I would be talking to Justine Greening, but

let's hear from a Labour spokesman who is in Westminster. Mr Leslie,

give me your overall reaction to the Chancellor's remarks. The first

thing is how staggering it is that the Chancellor gave so little

attention to the growth problem that is in the economy. He has seen

now a flatlining economy for the past nine months, despite the fact

that we were coming out of difficulties, recovering quite well

just after the election. And yet his speech really seemed incredibly

complacent and quite frankly out of touch. He was out of touch with the

reality of costs ordinary people face and the difficulty of business.

There was no plan for growth, we had suggested a number of plans he

could take, and he didn't pick up on any of them. There are other

organisations clamouring for action on growth, and it is not there from

George Osborne. This guy is completely out of touch. What do

you say to his point that other economic commentators have made too,

that if you add to the deficit with a fiscal stimulus, increase the

amount of money on top of the huge amount we are already borrowing,

you will wipe out any game because of higher interest rates. The bond

market are also wanting to see an economy that has revenues and

money's coming in through the Exchequer, and the way to do that

is to grow and to prosper, insurer the Chancellor has to understand

that without economic growth, you're never going to solve the

deficit. It is almost beyond belief that he is not listening to those

organisations saying that. The IMF have been saying it, the CBI, the

Federation for small businesses, even conservative backbenchers are

saying that they doubt his credibility on growth. He has got

to change his tune very rapidly. you think there is no correlation

between... We are paying German levels of deals on our bombs at the

moment because the market are saying we have a credible deficit

reduction plan. If you look at Spain, Portugal, Italy, Plan, they

don't believe that and they are paying massive yield on their bonds.

Do you think there is no connection? It is as much to do

with the fact that we are not in the eurozone, we have a central

bank that can control monetary policy. I don't think if you talk

to many players in the city, they think it is because of George

Osborne's policy alone. What he has got to start delivering fairly soon

be some real growth back into the economy. Otherwise the deficit will

continue to be great. He shows no sign of realising that fundamental

economic fact. Let me ask you a couple of specifics. Would Labour

freeze the council tax in 201213? - - in 2012/13? We thought that they

were going to do this all along. It was something they pre-announced

three years ago. I am asking what you would do. What you have to

recognise with council tax is that you might be able to stop it going

up, but you certainly can't cut it. What we would do is to focus on VAT,

a temporary cut in VAT. So you wouldn't freeze council tax? There

are other mechanisms, for instant national insurance help for small

businesses. George Osborne might be saying that council tax is frozen

for one year only, but what about the fees and charges? People no

councils have a habit of piling on parking charges, charges for pest

control, cremations, all sorts of things. Councils will raise revenue

from other ways. And that is what happens, people know they will have

to pay more, just as they pay more in inflation, gas and electricity.

People are really hurting out there. I will take that as a No, you

wouldn't freeze council tax. Are you in favour of weekly been

collections? I think a lot of people would like them. What about

Labour? A lot of councils support this up and down the country. But

what is curious is that Eric Pickles is finding �250 million,

and very centralising policy that he personally was to see so much

for localism, but he is not explaining where the money is

coming from. What we need is money going into the economy, getting

Final question, it is quite specific. The Chancellor said

steady as she goes, no change in the deficit reduction, no

additional stimulus. Quantify for us, what is the total size that the

Labour Party believes the stimulus should be? We set out a package of

five different suggestions. Just give me a figure. I don't have the

precise figure because there is a complex set of changes. For example,

National Insurance support for small businesses. You don't really

know precisely how many small businesses will take up that offer.

You must have a ballpark figure. would have to be a lot more

accurate than the figures the Government put out. They set aside

a billion pounds for new businesses and only a small... I did not ask

you about the government. I asked you about Labour policy. If you

can't give me a figure for your stimulus, maybe next time we meet

you can give me a cigar? I cannot write a budget for you here. We

will have a tough fiscal policy and it is important people realise that.

Thank you Mr Leslie. I am joined now by Nick Robinson. What was

interesting was the tone. He left the stage very soon afterwards. It

was very low key. Why was there so little applause? Because he is a

fiscal Conservative, he is quite popular there. I think there was

almost a conscious effort by him to be low key and not very political,

and to appear that way. I think their aim is to say, we are running

the country and haven't got time for that party stuff. Of course

there was a massive party claimed at the heart of it, that it would

be dangerous to change the plan, that you could not have any

flexibility in either direction. The most significant announcement

was the idea of so-called credit easing, although we have no detail

on that. Can the Government find a wait to get money to small

businesses who are not getting it from the banks. Adam Posen was

someone from the Bank of England and the Monetary Policy Committee

who had argued that there should be a special new state bank. My

understanding is that the government is interested in that

idea but worried it will take too long to set up so what they are

looking at now is whether it is possible for government to

underwrite Rhones -- loans to businesses in other ways, they

could offer guarantees to banks giving loans to small businesses

for example, but in economic terms that is likely to be the most

important announcement. The Justine Greening, treasury minister, has

joined us. What does credit easing mean? Effectively it means

channelling more money through to SMEs, who are finding it much

harder than big companies to access the capital to invest in their

businesses. I understand the problem. What is the policy

mechanism? Nick has explained... want you to explain. He is a

journalist, you are the minister. We can issue bonds, for example, we

can also effectively purchased private sector assets... What do

you mean, issue bonds? At the moment in the States there is a

very vibrant market in this area where you see not just big

companies who are able to sell bonds into the market and have them

trading in a secondary market, that does not happen so much in the UK,

so we want to go beyond simply the quantitative easing that the Bank

of England is doing but to have some of that more targeted perhaps

so we are looking at a variety... know that. Give me a policy that

follows this principle. We will be setting those out over the coming

months. You must have some options. Absolutely! We can even actively

put bonds out there ourselves, we can underwrite other debts that

companies... There is a variety of different ways we can do this.

is very interesting. So the government, obviously they already

issues a lot of bonds, they are mainly being bought by the Bank of

England, printing money, but the government would issue more bonds,

so it would add to government borrowing... No. The assets you

would be purchasing are liquid so therefore it would not be part of

debt. A but you are still borrowing to produce money. No. The

government is already issuing giltss... What would you do with

the bonds to help small businesses? For the moment, government already

issues gilts. Part of that funding would then be more channel banned

it is able to be at the moment through to the small and medium-

size companies -- more channelled than it is able to be. If you are

one of the SMEs in the UK, you probably have to go to a high-

street bank to do more borrowing. What we are saying is we want to

create some new channels by which small and medium companies can go

more to the market to be able to access liquidity. So would you or

would you not be issuing more bonds to do this? Would you be borrowing

more to do it? No. We would be purchasing bonds. One of the

options... Say the government would buy bonds? No. You just said that.

I said we would be looking at a number of different ways in which

to make sure we can better get financed route... I accept the

principle and it is a very important one and the reason I am

going on it is because Mr Osborne has said there is no leeway on

fiscal policy, I am sitting to the deficit reduction plan. But he

talked about monetary activism and credit easing. We know one of the

ways of doing that is printing more money. Let's park that. You think

you have created conditions that can allow the bank to do that if it

so wishes and the implication I get is you would like the bank to do

that. What I am trying to work out is what else does it mean and in

what way it would you act to help small businesses get money? As I

have been saying it can take the form of underwriting, providing

guarantees in a way that we don't do at the moment. So if I was a

small business and I wanted to borrow money from the Bank, you

would guarantee that Det? That is one of the options that we have got.

Would that be uncovered debt or would you ask for something to

cover the guarantee? Would I have to put something up? My House?

are getting something in return in relation to what it is secured on

but it is a liquid assets and therefore it would not be part of

our debt and the other part of this is about creating a longer term

secondary market. If you are a big company in the UK, you can already

issued bonds. The point is important... The big companies do

not have to issue bonds because they are sitting on a pile of cash.

That is not the issue. The director-general of the CBI has sat

in the studio and admitted that companies are awash with money but

they are not investing. What I am trying to get to, I will stop

interrupting you, is how credit easing in your mind will help small

businesses and what you intend to do. It will mean they do not have

to rely on high street banks. what will they do? Underwriting,

providing guarantees, getting out there and making sure we work with

the Bank of England to see some of the quantitative easing going